Contribution
My Lords, I welcome the Minister. He has entered the House today. I cannot recall a moment when a noble Lord—particularly a Minister—has made a maiden speech on the very day of entry. We can hardly bear the wait. Who is going to pay tribute on this wonderful occasion? I hope the Chief Whip will find some way of ensuring that happens.
The noble Lord’s transition from the leadership role that he held in Scotland to the Front Bench here serves as a reminder of the great value of the union between Scotland and the rest of the United Kingdom. As a Liverpudlian, I welcome this one-way traffic down the M1. In many ways, the noble Lord shares a lot with our new Prime Minister. They were both Members of the House of Commons. They both held prominent positions as leaders of the north. They are both now back in Parliament. I wish the noble Lord well in his role.
I thank the noble Lord, Lord Pack, for this great opportunity to debate the question of a reliable postal and parcel service. As the noble Lord said, it is a vital lifeline. These services remain essential to households and businesses across the country. As several of my colleagues have just pointed out, since taking office the Government have placed substantial additional costs on Royal Mail, as they have on all businesses across the UK. As my noble friend Lord Effingham pointed out, Royal Mail has estimated that it will face an additional tax burden of approximately £120 million every year from 2025-26 as a result of the Government’s decision to increase employer national insurance contributions. Royal Mail warned that these increased costs impinge on its ability to deliver change. This £120 million has to be found from the same business that needs urgently to invest in its network, improve pay and conditions, recruit and retain its workforce, improve productivity and ultimately deliver a faster and more reliable service to its customers.
As my noble friend Lord Redwood pointed out, industrial relations is another part of the same picture. Royal Mail, sadly, has a long and difficult history of industrial disputes. Of course, the major national industrial action of recent years pre-dated this Government. Surely, the lesson from that experience should have been that we needed a sensible balance between the rights of trade unions and the ability of employers to continue operating and restructuring their businesses. Instead, through the Employment Rights Act 2025, the Government have moved substantially in the opposite direction. They have legislated to abolish the 50% turnout requirement for industrial action ballots. They have reduced the notice that unions must give employers before industrial action from 14 days to 10 and doubled the duration of an industrial action mandate from six to 12 months.
Taken together, these measures all serve to constrain employers precisely when the Royal Mail needs flexibility to transform its operations—which brings me to the universal service obligation. In July 2025, Ofcom gave Royal Mail greater flexibility, including allowing second-class letters to be delivered on alternate weekdays. However, those changes could simply not be put into practice because implementation of Royal Mail’s new operational model became caught up in its industrial dispute with the CWU. Ofcom itself subsequently said that progress had been constrained by the ongoing industrial dispute, and agreement was not reached until April this year. Against that background, I question whether the Government’s decision to remove still more safeguards around industrial action will make future transformation easier or harder.
Then there is the approach taken by Ofcom, which the noble Lord referred to. Royal Mail was fined £10.5 million in December 2024 for its previous performance. It was then fined a further £21 million in October 2025. Together, that is £31.5 million in penalties imposed since this Government took office, and more than £37 million in recent years. These fines do not go towards recruiting more postmen and women; they do not finance better sorting equipment; they do not fund new vehicles, technology or improved delivery offices—they are paid into the Consolidated Fund. At some point, surely, we must question whether the crude act of simply imposing larger and larger fines on a business already struggling with mounting costs is creating the right incentives and improving matters in any way at all.
What evidence do the Government have that this repeated cycle of financial penalties is actually producing better outcomes for customers? What discussions are the Government having with Ofcom about whether its regulatory approach is actually working? Also, what assessment have Ministers and Ofcom made of the underlying productivity problem within Royal Mail?
The measure of successful regulation should not be how much money Ofcom can extract from Royal Mail. My noble friend Lord Mott pointed out the advantages of new technology. Let us make sure we take every opportunity to take advantage of this new technology. It should all be about whether letters and parcels arrive reliably, whether productivity improves and whether we retain a financially sustainable universal postal service for the future, a system of which we can rightly be proud.