Commons Sense

House of Commons · Westminster Hall

Royal Mail and the Universal Service Obligation

12 January 2023 · 13 other contributors · 13,161 words

Opened by Kate Osborne Lab Jarrow and Gateshead East

Responding minister: Kevin Hollinrake

TaxationEmploymentTransport

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

Kate Osborne raised concerns about royal mail and the universal service obligation in Westminster Hall. A government minister responded.

Key points

  • The universal service obligation ensures a six-day-a-week, one-price-goes-anywhere postal service to 32 million UK addresses.
  • Royal Mail made 758 million in profit last year and awarded 567 million to shareholders instead of reducing pandemic-era revenue levels.
  • The Minister acknowledged the importance of postal services and the integral role they play in the UK economy.

Key requests to Government

Will the Minister commit to not reducing the USO? Will they condemn the inflammatory actions of Royal Mail's senior management team and confirm whether the USO is the financial burden it is being portrayed as? The Minister should respond to calls for an urgent inquiry into Royal Mail's leadership and the mismanagement that threatens to break up this historic service. The Government must consider buying back Royal Mail at a cost of £4.6 billion to save it from becoming another gig economy parcel courier.

How the debate unfolded

MPs spoke in turn to share their views and ask questions. Here's what each person said.

Opened the debate

Kate Osborne Lab Jarrow and Gateshead East

The universal service obligation ensures a six-day-a-week, one-price-goes-anywhere postal service to 32 million UK addresses. However, Royal Mail is pushing for a reduction in the USO despite making £758 million in profit last year and taking millions in pay-offs on the way out of CEO positions. During the pandemic, posties delivered covid tests and parcels, leading to an influx of cash that was used to award £567 million to shareholders instead of transitioning back to a business-as-usual level of revenue. Postal workers have been undervalued since Royal Mail's privatisation in 2012, despite their essential role during the pandemic. The company has paid out billions in dividends and millions to executives while failing to meet service targets and hiking stamp prices. In Liverpool West Derby, postal workers are facing wage cuts and insecure contracts, with many forced to food banks. CEO Simon Thompson received a £140,000 bonus amidst these struggles.

Other contributors (13)
  • Beth Winter

    Royal Mail's management is prioritising profits over workers' wages and terms, leading to industrial disputes. The company claims financial difficulties while having a £1.7 billion war chest for investment. Beth questions the Government's decision to allow Vesa Equity to acquire a controlling stake in Royal Mail and its proposal to move to a five-day delivery service.

  • Chris Stephens SNP Glasgow South West

    Chris Stephens mentioned his family connections to Royal Mail and expressed concern over the company's direction, which he believes will worsen conditions for communities, businesses, customers, and workers. He criticised Royal Mail's financial mismanagement, noting profit-to-loss transitions within a short period and comparisons with Carillion's management practices. He also raised concerns about the end of Saturday deliveries affecting various industries negatively. Expressed concerns about Royal Mail's actions and the proposed takeover by Vesa Equity, questioning whether management aims to change the six-day service despite government assurances. Asked for a response addressing these worries.

  • Clive Efford Lab Eltham and Chislehurst

    Mr Efford agreed with the view that public sector workers are often portrayed negatively by the Government and expressed concern about the impact of casualisation on postal service quality. He cited an incident where undelivered mail was found in a river due to poor identification and tracking of casual delivery staff, questioning if this is acceptable practice. Mr Efford also raised concerns over Royal Mail's profit distribution despite announcing losses shortly after privatisation by International Distributions Services (IDS), questioning the Government's scrutiny of IDS's financial claims. He asked for assurances regarding national security risks from the involvement of Daniel Křetínský, who owns Vesa Equity Investment with alleged links to Gazprom. Asked how the Minister will vote on a Bill regarding Royal Mail's obligations.

  • David Johnston

    While acknowledging hard work by postmen and women, there has been an increase in complaints from constituents about delayed deliveries of important items such as bank cards and insurance renewals. The speaker is agnostic about the number of delivery days but emphasizes the need for a reliable service regardless of the day count.

  • David Linden SNP Glasgow East

    Mr Linden highlighted the dispute between Royal Mail and CWU, emphasizing that postal workers do not want a vital service to be destroyed or their pay reduced. He criticized Simon Thompson's behaviour during the dispute as intransigent and called for his resignation if he cannot improve. Mr Linden pointed out that Royal Mail has requested changes to the universal postal service agreement and cited record-breaking profits while also seeking significant losses, justifying job cuts and excessive payouts to shareholders. He argued that these actions led postal workers to strike and demanded a renationalisation of Royal Mail to protect the Universal Service Obligation.

  • David Mundell Con Dumfriesshire, Clydesdale and Tweeddale

    Welcomed the debate on the importance of Royal Mail in rural areas with a higher elderly population and poor broadband access. Highlighted concerns about changes to delivery practices by private firms and their impact on service quality. Raised issues regarding the sustainability of both the post office network and Royal Mail, advocating for Government support.

  • Ian Lavery Lab Blyth and Ashington

    Ian Lavery expressed his support for striking Royal Mail workers who are determined to keep a viable, modern organisation rather than being managed by individuals focused on personal gain. He criticised the chief executive's high salary relative to median worker wages and the current management's plans to sell off Royal Mail to Vesa Equity. Lavery highlighted that 115,000 posties were on strike due to concerns about transitioning to a gig economy model. Asked a brief yes or no question.

  • Matt Rodda Lab Reading Central

    Emphasised the importance of the Saturday postal service for older and isolated individuals, highlighting how it provides a sense of connection and value. Also stressed the significance of the service to small businesses as an essential form of advertising and pointed out that removing the Saturday service would reduce opportunities for reaching customers by one sixth.

  • Rachel Hopkins Lab Luton South and South Bedfordshire

    Royal Mail workers are proud of their job but face substantial pay cuts and attacks on terms and conditions. The company announced record-breaking profits in May 2022, followed by significant losses and a request to reduce the universal service obligation from six days to five days. There is concern over Royal Mail's management and potential impact on postal workers' jobs and regional inequalities. Postal services are critical during the pandemic and must be protected.

  • Sam Tarry Lab Ilford South

    Expressed solidarity with Royal Mail workers taking industrial action and criticised the company's profit-taking while seeking to reduce its universal service obligation. Highlighted record-breaking profits of £758 million followed by announced losses of over £1 million a day, leading to proposed reduction in services from six days to five days a week. Emphasised the importance of maintaining the quality of service and called for action against Royal Mail's poor management practices, including job cuts and low pay rises.

  • Seema Malhotra Lab Co-op Feltham and Heston

    Posties are a lifeline; Royal Mail faces commercial challenges but must manage the USO effectively. Labour will ensure the USO is secure, affordable, accessible and financially sustainable for the future.

  • Stephen Hammond Con Wimbledon

    Mr Hammond highlighted ongoing issues with Royal Mail's service in Wimbledon, noting that problems persist from previous years. He mentioned meetings with constituents and the CWU union, expressing concerns about a confrontational attitude between management and unions leading to poor service. He questioned the Government's commitment to the universal service obligation set out in the Postal Services Act 2011 and urged Ofcom to take action against Royal Mail for failing to meet its obligations.

  • Zarah Sultana Your Party Coventry South

    Royal Mail bosses paid £567 million to shareholders in 2021, despite claiming financial difficulties later. The MP criticised management for threatening jobs and worsening the service while seeking a fair pay rise for workers. She also condemned union-busting tactics by Royal Mail management. Strikes are disruptive but necessary when living costs soar and wages stagnate, she argued. Since privatisation in 2013, £2 billion has been paid to shareholders and services have declined. The MP urged the Government not to allow mismanagement and greed to destroy a vital service.

Government Response

Kevin Hollinrake

It is a pleasure to speak with you in the Chair, Ms Ali. I congratulate Kate Osborne on securing this debate about Royal Mail and the future of the universal postal service, acknowledging her experience and expertise. Postal services are an integral part of the modern economy, facilitating connections for businesses and consumers across the UK. In the last financial year, all postal operators delivered around 3.8 billion parcels, with Royal Mail delivering approximately 8 billion addressed letters—a figure that has halved since 2013 due to declining letter volumes. However, during the COVID-19 pandemic, the importance of postal services in keeping people connected was never more apparent. Post offices play a unique and vital role, with at least 11,500 branches throughout the UK ensuring that 99% of the population is within three miles of one. Over the last ten years, £2.5 billion has been invested in the post office network. I addressed concerns about postal workers being viewed as enemies by reiterating my respect for public service workers and their contributions. Regarding the universal postal service, our objective remains a financially sustainable and efficient service within an open and competitive market. The six-day-a-week, one-price-goes-anywhere service is at the heart of the regulatory regime, with Ofcom ensuring its provision through clear regulatory responsibilities. Any changes to statutory minimum requirements would need to be made via secondary legislation agreed by Parliament after stakeholder consultations. Royal Mail faces challenges due to declining letter volumes and economic pressures but has committed to restoring quality of service as soon as possible under close monitoring by Ofcom. We urge Royal Mail and the Communication Workers Union to reach a resolution, with ACAS talks currently underway until January 20th. Financial performance issues have been attributed to strikes, lack of productivity improvements, and macroeconomic factors. Royal Mail has invested more than £2 billion since privatisation, including £900 million over the last three years and £441 million in the previous financial year for electric vans, parcel hubs, automation, and office improvements. The investment is transforming how Royal Mail operates, with parcel automation increasing from 12% to 65%. We remain committed to securing a financially sustainable universal postal service accessible and affordable throughout the UK.

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