Westminster Hall Debate

Royal Mail in a separate Scotland Speech

10 July 2013

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Chair, it is a pleasure to serve under your chairmanship today in what is just one aspect of the most important debate that faces the people of Scotland and the rest of the United Kingdom in a generation.

I am delighted that my Hon. Friend has been able to secure this long overdue debate.• It has only taken five months to get here, despite my Hon. Friend, the Member for Inverclyde having secured the topic of this debate back in February, only to be blocked at the11th hour following complaints from Hon. Members from the Scottish National Party.

I think those tactics are indicative of how unprepared the Scottish Government are on what they envisage postal services to look like should Scotland chose to separate, but connects with a wider theme of the unplanned and ‘off-the-top-of-their-head’ approach that they have brought to this monumental debate.

So now that the arduous negotiations to determine the process of the 2014 referendum are in place, the people of Scotland, and the rest of the UK, are beginning to explore the fundamental issues which will come to determine this historic plebiscite.

Over the last couple of months since agreement was reached, as the issues are delved into, as the reality and the facts begin to rise, something quite fundamental around the question of separation has become plain to see -; that the SNP cannot answer the essential questions about Scotland’s future.

The Importance of the Postal Network to Scotland

The Royal Mail and Post Office are much-cherished national institutions, which serve all parts of the United Kingdom well.• It is as part of the UK that we have an extensive Post Office network and the Royal Mail’s “one price goes anywhere” universal postal service operates across the whole of the UK.

But they aren’t just much-loved.• The Royal Mail and Post Office are also absolutely vital to our daily lives, whether for personal or professional reasons.

From the elderly couple in Orkney who post letters to relatives in Oxford, to the small business in Peebles who need to get an order to a customer in Plymouth, the UK’s postal services oil the wheels of our economy.

Indeed, businesses are particularly reliant.• 56% of Scottish FSB members rely on the Royal Mail and post office services for between 80 and 100% of their business post.

A higher percentage (33%) of Scottish FSB members rely on Royal Mail for 100% of their business post compared with the whole of the UK (28.2%), with 16% of Scottish FSB members have no available alternative carrier in their area.• Of those who have access to alternative carriers, around 41% of Scottish members consider their services to be too expensive.

So these are just examples of the 58 million items a day to 29 million addresses across the UK that Royal Mail deliver to -; indeed of these, 4.5 million items a day are delivered to the 2.5 million addresses in Scotland.

And the community hubs which our Post Offices provide are often forgotten.• As the National Federation of Sub-postmasters (NFSP) have suggested, they are used most by the more vulnerable members of society, for example, 63% of people over 65, and 63% of disabled people in Scotland, visit a Post Office once a week or more often.

People on low incomes are also frequent users -; 54% in socioeconomic group ‘DE’ visit a Post Office at least once a week, as do 61% of those with incomes of less than £15,000 a year.

Finally, let’s raise a cheer for the 12,500 people, of which 11,600 are postmen/women, Royal Mail employs in Scotland.• The service they provide is outstanding, and I’m Members from across the House will have gone on a round with their Postie at some point, and if not, then I can highly recommend it.

So they importance of both these institutions cannot be understated.

But what has the response been from the Scottish Government to show that they understand how vital this network is and how it will be secured post-referendum?

It has been, quite frankly, extraordinary.

A Scottish Postal Service?

It is difficult to speculate at this stage where responsibility for postal services would lie in an independent Scotland as Ministers in the Scottish Government have given no indication whatsoever as to how they would operate postal services.

We can only assume a separate Scottish government would take over all functions relating to Scotland which are currently the responsibility of the Westminster parliament and, therefore, would have to provide the funds to service that network.

The Scottish Government has made numerous unsubstantiated assumptions. Firstly, that they would follow the EU Directive on postal services -; but Scotland may not be in the EU.

As has been discussed at length in this House and across Scotland, there is no guarantee that Scotland would automatically join the EU, and any entry may be subject to lengthy negotiations.

Should Scotland join the EU, it is highly likely that an independent Scottish Government would be subject to legislation regarding postal services which brings several stipulations in the form of the EU Postal Services Directive.

EU Directive 2008/6/EC which provides that EU Member States must ensure the provision of the universal service is guaranteed and must include certain minimum requirements.• These include:

  • one collection from appropriate access points every working day
  • one delivery to all addresses every working day
  • to include postal items and packages up to 20 kilograms; plus
  • a service for registered items and insured items

As it currently stands, the UK Government currently ‘gold-plates’ the EU Directive.• Under the Royal Mail, the Universal Service Obligation (USO) means:

  • that customers pay the same price regardless of where they are sending a letter to within the UK; and
  • that Royal Mail have to be able to collect and deliver mail once every working day to every address in the UK.
  • one collection from appropriate access points every working day;
  • one delivery to all addresses every working day;
  • to include postal items and packages up to 20 kilograms; plus
  • a service for registered items and insured items

It is unclear as to whether a separate Scotland would be able to meet the Directive requirements, let alone maintain the standards achieved by successive UK Governments.

What about Post Offices?

In addition to the Royal Mail obligations, there is also ensuring high levels of access to Post Office branches.

These include requirements that 99 per cent of the UK population be within 3 miles and 90 per cent within 1 mile of their nearest Post Office outlet. In addition, 95 per cent of the total rural population should be within 3 miles, and 95 per cent of the population in every postcode district should be within 6 miles of their nearest Post Office outlet.

The consequence of maintaining such high levels of access is that not all branches are commercially viable. Therefore, to support this policy, the UK Government makes an annual network subsidy payment to POL to maintain branches which are not commercially viable but play an important social and economic role in the communities they serve. It is estimated that around 7,000 branches fall into the non-commercial category and these are predominantly small and rural branches.

A significant proportion of Post Offices in Scotland are non-commercial.

This subsidy is paid to POL as a single annual sum (£210 million in 2012-13; £180 million in 2011-12; £150 million in 2010-11).

There is currently no mechanism for allocating the subsidy down to individual non-commercial branches.

In the event of a vote for independence, an independent Scottish state would have to consider how to fund the significant non-commercial elements of their Post Office network if it wished to maintain the current level of service.

It would be unlikely to achieve the economies of scale of the current UK-wide network, which helps support the provision of services to remote areas.

Stamp Prices/Cross Border Mail

As the Royal Mail confirmed to me in response to my FOI request:

Given the low population density across the Highlands and Islands, the number of remote populations with limited transport links and, in particular, the number of islands populations we must reach, it is likely that the costs of providing Royal Mail’s services in Scotland are above the average for the UK.”

CWU evidence on stamp prices

The cost of delivery to these areas is currently subsidised by customers elsewhere in the UK so that a single price applies regardless of geographic location. However, this would not apply in an independent Scotland and the result may be significantly higher stamp prices for customers in Scotland,”

Royal Mail Pensions

As I mentioned, we owe a debt of gratitude to postal workers and the Communications Workers Union (CWU) for the task they undertake.

And like us all, with a hard day’s work they expected to be rewarded with something at the end of career.

This is in the form of the The Royal Mail Pension Plan (RMPP), which is an occupational pension scheme for employees of Royal Mail Group (RMG) Limited.

However, it closed to new entrants on 1 April 2008 and a new defined contribution (or money purchase) scheme was introduced for new entrants from that date.

Furthermore, membership is not compulsory -; employees can choose to opt out. Those who do so after 1 April 2008 are not able to rejoin.

On 21 March 2012, the UK Government announced that historic pensions liabilities of £37.5 billion would be transferred to a newly established unfunded public pension scheme -; the Royal Mail Statutory Pension Scheme -; which is responsible for paying the benefits that members of RMPP had built up to the end of 31 March 2012.

An estimated £28 billion of assets would be transferred to government.• The RMPP remains responsible for all pension benefits earned by members on and after 1 April 2012.

There are therefore major separation raises issues around the responsibility of the Scottish Government to maintain the pensions of Scottish members of the RMPP, should Scotland chose to separate.

But again, where are the answers from the SNP?

It could be anticipated that they would have to accept a percentage of the scheme members in Scotland as part of any negotiation between the UK and Scottish Governments on financial liabilities.

However, the SNP Government have so far given no such assurances that the pensions of hard-working Royal Mail staff will be paid should Scotland and the•UK separate.



To conclude, Mr Hood, I’m sure the Scottish Government and SNP will merely do what they always do in these circumstances.• Rather than answering basic questions of concern they will throw around accusations of scaremongering.• Well, lets just put an end to that now.• If the Scottish Government can tell us how much a stamp will cost both internally and externally posting from and to Scotland, how will they take care of the pension liabilities, how much subsidy they will put into both PO and Royal Mail, how many staff will be employed in our postal services, what the long term USO will look like and what is the benefit to Scotland of a separate Royal Mail then we will no longer pose these questions.• However, whilst they obviscate and duck the answer to some pretty simple but important questions I will continue to ask them.

There are complicated issues but the simple fact of the matter is that Scotland geographical layout requires more resources to service than other parts of the UK.

It is clear, that Labour are the only party able to maintain the USO as it is at the moment.• The Tories and Lib Dems want to put the USO at risk by a fire sale privatisation of the Royal Mail and the SNP can’t even tell businesses and pensioners in Scotland how much a stamp will cost and how much it will cost tax payers to maintain the current services.

Is it not the case that the Royal Mail and Post Office are• prime examples in the Uk context of shared services with shared rewards where risks are shared and spread over 65 million rather than 5 million.

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