House of Commons

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Postal Services Bill

These notes refer to the Postal Services Bill as introduced in the House of Commons on 27th January 2000 [Bill 54] Postal Services Bill —————————— EXPLANATORY NOTES INTRODUCTION 1. These explanatory notes relate to the Postal Services Bill as introduced in the House of Commons on 27 January 2000. They have been prepared by the Department of Trade and Industry in order to assist the reader of the Bill and help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament. The notes comprise a summary of the Bill, an explanation of its background and a clause by clause commentary. 2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given. SUMMARY 3. The Postal Services Bill provides for the Post Office to be converted from a statutory corporation to a public limited company formed and registered under the Companies Act 1985, with ownership remaining with the Crown. 4. The Bill introduces a new system of licensing and regulation for postal services operators/providers operating in the area of the market currently reserved largely as a monopoly for the Post Office. This is called the reserved (or licensed) area. The Bill gives the independent regulator, the new Postal Services Commission (the Commission), new duties and powers to protect the interests of users of postal services. In particular, it enshrines the universal service obligation in primary legislation and makes it the duty of the Commission to ensure the delivery of this universal service at a uniform tariff. Subject to this duty, the Commission is required to further the interests of users, wherever appropriate by the promotion of greater competition in postal markets. The Commission will be able to promote competition through recommending changes to the scope of the reserved area and by permitting licensed competition within the reserved area. The Commission will also have responsibility for setting quality standards and regulating prices. 5. Consumers are given greater protection through replacing the Post Office Users' National Council with the Consumer Council for Postal Services. The creation of this body brings consumer representation in the postal services market into line with the provision for other utilities. BACKGROUND 6. This Bill implements measures proposed in the White Paper, Post Office Reform: a world class service for the 21st century, published on 8 July 1999. The White Paper sets out the Government's proposals to modernise the Post Office and postal services markets through a number of key reforms. The reforms are intended to: introduce a more arm's-length commercial relationship with Government, including the approval of a five year strategic plan within which the Post Office has greater freedom to develop new products and services; invest; price commercially; and borrow for growth investments; create a new independent regulator, the Postal Services Commission, to promote and protect customer interests, regulate prices, and promote competition; strengthen consumer representation through the restructuring of the Post Office Users' National Council; increase resources for the Post Office company, by more than doubling the proportion of post tax earnings which the Post Office company can use for investment; convert the Post Office to a plc to underline the commercialisation of the business; protect the universal service obligation and uniform tariff; maintain a commitment to a nationwide network of post offices with the Government for the first time setting minimum criteria for access to counters' services. 7. A number of these measures have been implemented already, through administrative action and the Postal Services Regulations 1999 (SI 1999/2107). These include giving greater commercial freedom to the Post Office Board to run the business within the terms of an agreed five-year strategic plan, increasing the proportion of profits that the Post Office can use for investment, giving the Post Office greater freedom to borrow and creating a Postal Services Commission. The aim of the Postal Services Bill is to enable Government to complete this package of reforms. The reforms are intended to comply with the requirements of the EU Postal Services Directive (97/67/EC). The Postal Services Regulations 1999 (SI 1999/2107) completed the implementation of the EU Directive into UK law. The Bill will re-enact those obligations given in the Regulations. 8. The Post Office is currently a publicly owned, statutory corporation, established under the Post Office Act 1969. That Act and the British Telecommunications Act 1981 set out the responsibilities of Government towards postal services and give the Post Office its powers and duties. Since the 1969 Act became law the postal services market has developed significantly, and the Postal Services Bill redefines the roles of the Government and the Post Office to reflect those changes. The Postal Services Bill will enable the Post Office to be transformed into a public limited company formed and registered under the Companies Act 1985 and subject to normal company law. All the shares in the new company will be owned by the Crown. There can be no disposal of shares without further primary legislation, except in the case of a share sale or swap between the Post Office company and a partner to cement a commercial alliance, which will require approval from both Houses of Parliament. Similar restrictions apply to the disposal of shares in any subsidiary company directly engaged in providing the universal postal service. 9. Decisions relating to the Post Office monopoly are currently taken by the Secretary of State for Trade and Industry under provisions in the British Telecommunications Act 1981. The Postal Services Regulations 1999, tabled on 26th July 1999, designated the Postal Services Commission as the new independent regulator for postal services. Provisions in the Bill replace this advisory body with a new fully independent regulatory body, along the lines of those in the privatised utility industries (e.g. Office of Telecommunications), by giving the Commission powers to issue licences, to regulate prices, to enforce the monopoly, to introduce greater competition and to maintain a universal service at a uniform tariff. 10. At present, the Post Office has the exclusive privilege of delivering mail costing less than £1 within the UK, subject only to a handful of exceptions provided through niche and class licences. The Bill makes it necessary for any person operating in the reserved area, including the Post Office company, to be licensed by the Postal Services Commission. The Commission will be responsible for recommending the level of the reserved area in future and judging how far to open up the market to further competition. It will also be given powers of investigation and enforcement, including the power to impose monetary penalties for breach of licence conditions. 11. The Post Office Users' National Council, which represents consumer interests, is replaced by the Consumer Council for Postal Services and given a central role in the new regulatory framework, monitoring service standards that users can expect and acting as a focus for consumer issues and complaints. Its powers are strengthened and it is given wider access to relevant information from the Post Office company and other licence holders. Its remit will be brought into line with consumer representation for the water, energy and telecommunications utilities. 12. The main pieces of legislation currently governing the Post Office are the Post Office Acts 1953 and 1969 and the British Telecommunications Act 1981. This Bill seeks to consolidate the postal services provisions in these Acts, by repealing or redrafting relevant sections, to provide a more simple and modern legal framework in which the Post Office company and other licensed persons can operate. COMMENTARY ON CLAUSES Part I Introductory Clause 1: The Postal Services Commission 13. Clause 1 creates the Postal Services Commission. This body will be the independent regulator of licensed postal operators and replaces the advisory body, also called the Postal Services Commission, which is abolished by the Bill. Schedule 1 is given effect by this clause. In these Notes, references to "the Commission" are to the Commission established by Clause 1. Clause 2: The Consumer Council for Postal Services 14. Clause 2 creates a new consumer body to be known as the Consumer Council for Postal Services. The existing user-representative bodies in the UK, which are limited in their scope to representing users of Post Office services, are abolished. Schedule 2 is given effect by this clause. In these notes, references to "the Council" are to this Council. Clause 3: Duty of the Commission to ensure provision of a universal postal service 15. Clause 3 sets out the primary duty of the Commission, which is to exercise its functions in a manner best calculated to ensure the provision of a universal postal service. In pursuance of this duty it has power to require a person licensed to provide postal services under Part II of the Bill ("a licence holder") to provide a universal service. This is to be read with clause 5 which sets out other duties of the Commission. Clause 4: Provision of a universal postal service: meaning 16. Clause 4 sets out the meanings of a universal postal service and of a universal service provider. These definitions comply with those required under the EU Postal Services Directive (97/67/EC). Clause 5: Other duties of the Commission in the consumer interest 17. Subject to the duty to ensure the provision of a universal postal service as set out in clause 3, clause 5 places a duty on the Commission to exercise its functions in a manner which will further the interests of users of postal services, wherever appropriate by promoting competition. 18. In performing these duties the Commission is to have regard to, amongst other things, the interests of the disabled or chronically sick, pensioners, those on low incomes, and those located in rural areas. It also provides for the Commission to have regard to the promotion of efficiency and economy on the part of postal operators; and the need to ensure that they are able to finance activities authorised or required by their licences. Part II Licences for Postal Services Clause 6: Restriction on provision of postal services 19. The Post Office currently has the exclusive privilege of delivering letters within the United Kingdom with a value of less than £1 or weighing less than 350 grams and it is an offence to infringe the privilege. 20. Under the Bill, the monopoly will be replaced by a system of licensing. Licence holders will be able to convey in accordance with the terms of their licence, letters worth less than £1 or weighing less than 350 grams (see clause 7). Subsection (2) makes it an offence to convey letters without the necessary licence. 21. Subsection (1) establishes that no person shall convey a letter without a licence granted by the Commission. Exceptions to this prohibition are set out at clause 7. 22. Subsections (2) to (5) create two methods of enforcing the prohibition in subsection (1). The first is to bring criminal proceedings for an offence under subsection (2). The second is to bring civil proceedings for an injunction interdict or other appropriate relief or remedy under subsection (4). Prosecutions can only be controlled by or on behalf of the Commission or the Secretary of State or, in Scotland, will be dealt with by the Lord Advocate. (The Lord Advocate generally controls prosecutions in Scotland.) Civil proceedings under subsection (4) may be brought by, or on behalf of, the Commission or the Secretary of State. There is also provision in subsection (5) enabling civil proceedings to be brought by any person who suffers loss or damage. 23. Subsection (6) makes clear that conveyance for the purposes of clause 6 and clause 7 includes the incidental acts of receiving the letter, collecting or delivering it. Clause 7: Exceptions from section 6 24. Clause 7 sets out exceptions from the general prohibition in clause 6(1). 25. Subsection (1) exempts letters conveyed for a payment of not less than £1 or weighing not less than 350 grams. 26. Subsection (2) sets out further detailed exceptions. They include activities currently exempted as "class licences", such as the document exchange system used by lawyers and other professionals. The clause then defines exactly what is meant by these exceptions. Clause 8: Power to modify section 7 by order 27. Clause 8 allows the Secretary of State acting on the recommendation of the Commission to modify by order clause 7. This could be used to add a further exception to the general prohibition or modify the value or weight specified at clause 7(1)(a) and (b). Such an order would be subject to approval by a resolution of both Houses of Parliament. Where the Secretary of State has received a recommendation from the Commission to amend the reserved area and the Secretary of State does not act upon it, he must place a report containing his reasons before Parliament. Clause 9: General power to suspend the restriction 28. Under clause 9 the Secretary of State may, on the recommendation of the Commission, suspend the operation of clause 6 and allow any person to convey letters. Clause 10: Emergency power to suspend the restriction 29. Under clause 10 the Secretary of State may in the national interest suspend by order the licensing regime for a time-limited period not exceeding six months. Non-licensed persons would then be able to convey letters within the reserved area without penalty. Clause 11: Licences: general 30. Clause 11 allows the Commission to grant licences authorising the licence holder to carry out the activities described by the licence. To that extent the general prohibition in clause 6(1) does not apply to him. Clause 12: Licences: grant 31. Clause 12 details the procedures must be followed before a licence is issued including provisions about giving notice and receiving representations. Clause 13: Licences: conditions and other provisions 32. Clause 13 gives the Commission the authority to include in a licence such provisions as it considers appropriate, including provisions which do not relate to anything authorised by the licence (including, for example, the provision of all or part of a universal postal service). Under subsection (4) the Commission must consult a person who is to be granted a licence about the conditions it intends to include in their licence. Clauses 14, 15, 16, 17, 18, 19 and 20: Enforcement orders 33. Clauses 14-20 lay down the powers of the Commission to make final and provisional enforcement orders in relation to breaches of licence conditions, and the procedures to be followed. 34. Final orders may be issued where the Commission is satisfied that a licence holder is contravening any condition of his licence or is likely to do so. Where the Commission is not satisfied, but nonetheless it appears to the Commission that there is or is likely to be a contravention and that an order should be made, it may impose a provisional order lasting up to 3 months. Provisions for notices to be given and representations to be made are also included. 35. Clause 20(1) makes it a duty of licence holders to comply with a final or provisional order. 36. Clause 20(6) makes it clear that if the Commission brings civil proceedings to enforce a final or provisional order, it shall not prevent others with a right to claim from bringing their own actions against the licence holder. Clause 21: Financial penalties 37. Clause 21 gives the Commission power, where it is satisfied that a licence holder has contravened or is contravening a condition of his licence, to impose a penalty on the licence holder. Clause 22: Statement of policy in relation to penalties 38. Clause 22 provides that the Commission shall after consulting the Council and others prepare and publish a statement of their policy in relation to the imposition of penalties and the determination of their amount. Clause 23 and Clause 24: Penalties 39. Clauses 23 and 24 lay down the procedures the Commission must follow before imposing a financial penalty including giving notice and allowing for representations, and procedures that may follow from the notice including variation of penalties. Clause 25: Time-limits on the imposition of penalties 40. Clause 25 sets out time limits on the Commission's ability to impose financial penalties. Clause 26 and Clause 28: Interest and payments by instalments; recovery of penalties 41. Clauses 26 and 28 cover the payment of interest on unpaid penalties and the recovery of unpaid penalty payments. Clause 27: Appeals 42. Clause 27 allows licence holders to appeal against penalties to the courts (the High Court in England and Wales or Northern Ireland or the Court of Session in Scotland). The court may quash the penalty or order a reduction in the penalty or in certain cases substitute a different date for payment of the penalty. Clause 29: Register 43. Clause 29 requires the Commission to keep a register of licences, licence variations, revocations and surrenders, directions, determinations, consents and approvals given under a licence, the terms of final and provisional orders and revocations, and penalties imposed. Safeguards are provided to ensure that as far as practicable matters relating to the affairs of a person are not entered in the register if that could be seriously prejudicial to that person's interests. In addition, the Secretary of State may direct the Commission not to make an entry where it would in his view be against the public interest or a person's commercial interests to do so. The register is to be available to public inspection, and copies may be obtained, subject to a reasonable fee. Clause 30: Free services for the blind and partially sighted 44. Clause 30 gives the Secretary of State powers to direct the Commission to impose a licence condition requiring the licensee to provide free postal services for blind and partially sighted people. The clause is designed to ensure the continuation of existing non-statutory practice by the Post Office who convey certain items, known as Articles for the Blind, free of charge for registered blind and partially sighted people. Part III Other Functions of the Commission and the Council Clause 31: Duties in relation to public post offices 45. Clause 31 imposes a duty on the Commission, in consultation with the Council, to provide advice and information to the Secretary of State about the number and location of public post offices and their accessibility to users. Clause 32: Duties in relation to social and environmental matters 46. Clause 32 provides that the Commission, in exercising its functions, should have regard to any guidance issued by the Secretary of State issued under this clause. Such guidance, which will need to be laid before each House of Parliament and subsequently published, will be concerned with social and environmental policies which may include criteria for access to postal and other services. Clause 33: Review and information 47. Clause 33 requires the Commission to keep under review and collect information about the provision of postal services in the United Kingdom and elsewhere in order to facilitate the exercise of its functions. 48. It also provides for the provision of information, advice and help to the Secretary of State regarding any matter in relation to which the Commission has a function; and for the collection of such information as is necessary for it to comply with a requirement of the Council under clause 47(1). Clause 34: Annual and other reports: the Commission 49. The Commission is required to make an annual report to be sent to the Secretary of State and published. Clause 34 specifies what the report should include. The Commission also has the power to make other reports in respect of its functions. Clause 35: Publication of information and advice: the Commission 50. Clause 35 allows the Commission to publish information and advice to licence holders and users of postal services. The Commission is required, so far as practicable, to ensure that any such publication does not seriously and prejudicially affect a person's interests or, if it does, that publication is in the public interest. Clause 36: Power of the Commission to require information 51. Clause 36 provides powers for the Commission to require information and documents for any relevant purpose, as defined in subsection (6). But no person may be required to provide information or documents which he could not be compelled to produce or supply in evidence in civil proceedings before the court. Clause 37: Information powers: enforcement 52. Clause 37 makes it an offence for a person, without reasonable excuse, to fail to provide information and documents required by a notice under clause 36. An offender is liable on summary conviction to a fine not exceeding level 5 on the standard scale. Under subsection (4) it is an offence for a person to alter, suppress or destroy documents which he has been required to produce, or knowingly or recklessly to make a false statement. Clause 38: Powers of entry and seizure 53. Clause 38 provides a power of entry and seizure where, on an application by a constable or the Commission, a justice of the peace or sheriff is satisfied that there are reasonable grounds for suspecting that a person has committed an offence by providing a postal service when they are neither licensed nor permitted to do so. A warrant may be issued for an appointed person to enter premises, search for articles or documents, and seize and remove items. In order to respect the principle of the inviolability of the mail, the power to seize documents does not extend to items of mail. The clause also sets out procedures and powers in relation to the use of a warrant. Clause 39: Codes of practice 54. Clause 39 provides that the Commission shall prepare, and may revise, a code of practice governing the discharge of its functions. In preparing or revising the code the Commission shall consult the Secretary of State, the Council, licence holders, and such other persons as the Commission considers appropriate. The code and any revisions must also be published. Clause 40: Relevant postal issues 55. Clause 40 lays the foundations for setting out the functions of the Consumer Council for Postal Services by defining the postal issues and services that are to be covered. Relevant postal issues are defined by reference to relevant postal services. Relevant postal services are confined to those provided by universal service providers in connection with the provision of a universal postal service or services provided by licence holders in accordance with a licence under Part II. Clause 41: Provision of advice and information to public authorities and licence holders 56. Clause 41 gives the Council the duty of providing advice and information, representing the views of users in relation to relevant postal issues and making proposals on relevant postal issues to the Secretary of State, the Commission, the Competition Commission, other public authorities, licence holders and any person whose activities may affect the interests of users. Subsection (3) requires the Council to secure as far as practicable that no information is disclosed to a licence holder or person whose activities may affect the interests of users under this clause which might seriously or prejudicially affect the interests of the person to whom it relates (unless that person consents). Clause 42: Publication of information to users 57. Clause 42 requires the Council to make available and gives it power to publish information for users of postal services about relevant postal issues and services, and the Council itself and its functions. It includes a similar provision about disclosure of information to that in clause 41. Clause 43: Exercise of functions: general 58. Clause 43(1) requires the Council to have regard to the interests of different users of relevant postal services from different areas and matters affecting their different interests. 59. Subsection (2) requires the Council, so far as it considers practicable, with a view to facilitating the exercise of its functions, to obtain and keep under review information about the provision of 'relevant postal issues' (these are defined in clause 40) and the views of users about relevant postal issues. 60. Subsection (3) requires or allows the Council to set up certain committees. It requires committees to be set up for each of Wales, Scotland, and Northern Ireland and allows for committees to be set up for England and areas within England, Wales, Scotland, and Northern Ireland. 61. Subsection (4) sets out the purposes of a committee established under subsection (3), which are to provide advice and information to the Council about relevant postal issues affecting the area for which it is established and such other purposes as the Council may determine. 62. Subsection (5) requires the Council to maintain in each of England, Wales, Scotland, and Northern Ireland at least one office where users can apply for information. Clause 44: Annual and other reports: the Council 63. Clause 44 requires the Council to make an annual report to be sent to the Secretary of State and published. The Commission also has the power to make other reports in respect of its functions. So far as practicable, the Council should exclude from the report information about a person which might seriously and prejudicially affect that person's interest (unless that person consent). Clause 45: Complaints referred to the Council 64. Clause 45(1) provides that the Council shall investigate complaints by or on behalf of users of relevant postal services as it thinks appropriate if: the matter has previously been the subject of a complaint to a person providing the services concerned and has not been satisfactorily resolved, and it does not appear to the Council to be of a frivolous or vexatious nature. 65. Subsection (2) requires the Council to refer any complaint to the Commission if, as a result of an investigation under clause 45(1) it considers that: a licence condition may have been contravened the matter is a referable matter (as defined in subsection (3) of clause 45) it is appropriate to do so. 66. Subsection (3) requires the Council to agree with the Commission what are referable matters for the purposes of subsection (2)(b) above.

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Prepared: 31 January 2000