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Clause 13

Licences: conditions and other provisions


Lords amendment: No. 3, in page 9, line 26, after ("lie") insert
("or, in Scotland, be competent").

Mr. Alan Johnson: I beg to move, That this House agrees with the Lords in the said amendment.

Mr. Deputy Speaker (Mr. Michael Lord): With this it will be convenient to discuss Lords amendments Nos. 4, 5, 8, 9, 11, 12, 15 to 19, 21, 23 to 26, 32, 41 to 43, 47, 48, 55, 56, 87 to 90, 93, 95 to 98, 100 and 141 to 144.

Mr. Johnson: These are all drafting and consequential amendments intended either to clarify various references or to ensure consistency within the Bill. On that basis, I ask the House to accept the amendments.

Lords amendment agreed to.

Lords amendments Nos. 4 and 5 agreed to.

Clause 30

Financial penalties


Lords amendment: No. 6, in page 21, line 6, at end insert--
("(1A) No such penalty shall exceed 10 per cent. of the turnover of the licence holder (determined in accordance with provisions specified in an order made by the Secretary of State).").

Mr. Alan Johnson: I beg to move, That this House agrees with the Lords in the said amendment.

Mr. Deputy Speaker: With this it will be convenient to take amendment (a) to the Lords amendment, Lords amendments Nos. 7, 10, 13 and amendment (a) thereto, No. 14 and amendment (a) thereto, and Nos. 51, 52 and 83.

Mr. Johnson: This group of amendments deals with a number of issues relating to the Postal Services Commission's duties and powers. It will place a cap on the financial penalties that can be imposed on licence holders for contravening a licence condition.

Mr. Bercow: I shall focus my remarks on our amendment to Lords amendment No. 6 and other Lords amendments in the group, especially amendments Nos. 13 and 14.

The purpose of amendment (a) to Lords amendment No. 6 is to restrict any fine that is levied under the Bill to 10 per cent. of turnover. We are concerned that the period in which turnover is taken into account should be a period of only one year, or certainly not exceeding one year.

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It is at least arguable and it has been argued in other contexts, not least by my right hon. and hon. Friends, that a 10 per cent. fine is excessive. We contend that one such fine imposed on a company in respect of three years of its turnover would be extortionate. The Conservative Opposition moved a similar amendment, as the Minister will be aware, in Committee in another place. It was flagged up and eloquently argued for by Baroness Miller of Hendon on 8 June. She objected to what she thought was the potential for grossly excessive fines. It is interesting that on that occasion the Minister rejected the amendment tabled by my noble Friend on the grounds that the clause stated that any fine that was imposed would have to be reasonable.

I observe, almost in parenthesis, that it was a slightly curious line of argument for the noble Lord representing the Government to deploy. On several instances during the other House's consideration of the Bill, my noble Friends argued for the insertion of the word "reasonable" in respect of other clauses and amendments. They were swiftly rebutted on each and every occasion by the noble Lord on the ground that reasonableness was implicit in all the clauses and amendments to the Bill. It would thus be otiose to insert the word in the Bill. However, when it suited the Government to argue that their plans were reasonable and did not require our amendment, that is what Lord Sainsbury did.

As the Minister knows, I am a fairminded chap and, in continuing my description of the chronological sequence of events, I must tell the House that, by Third Reading, the Government had had a change of heart. I am sure that that was the result not only of the intellectual ferocity but of the personal charm of my noble Friend Baroness Miller of Hendon, which I could not possibly hope to emulate. Nevertheless the Government changed their mind and tabled an amendment.

The draft Competition Act 1998 (Determination of Turnover for Penalties) Order 2000 was made on 10 February and it implemented section 36 of the Competition Act 1998. Although the order owes its origin to section 36(8) of the Act, that section says:


Therein lies the reason for the continuing dissatisfaction of Conservative Members. The Government have shifted their position and that is welcome. However, it would help if they changed their position somewhat further so as to recognise the force of the argument, made not least by commercial undertakings, that it is unfair and excessive for the fine to be able to apply to three years of turnover. There is nothing in what the Government have so far provided for to suggest that the period could exceed one year but equally, there is nothing to say that a limit of one year will be observed.

That, therefore, is the problem with the provision. The Secretary of State could issue an order that would triple the figure from 10 per cent. to 30 per cent. There was no mention in Committee or on Second Reading that turnover would exceed one year, but out of the blue last August, the Department of Trade and Industry issued a press release that said that


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It beggars belief, but the Minister and his colleagues in the Department of Trade and Industry were not merely acknowledging that they were providing for the application of a fine on three years' turnover, but were bragging about it as though it was something of which to be proud. First, the Government gave no sign that they would do that and then they did it. They then talked about an amendment in the Lords Committee, assuaging, in some way, the Opposition's legitimate concerns. However, at heart, the Government still want there to be a punitive fine regime.

Although there is indubitably a case for a fine regime, that regime should be fair. It should not be punitive or extortionate and it should assuredly not be used as a source of revenue for application elsewhere. The suspicion exists--my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) will confirm it after three years of this Government--that such moneys can be regarded as stealth taxes. In this case, those stealth taxes are imposed not on individuals, but on businesses.

8 pm

As the Minister will acknowledge, consultation revealed a long hostility towards the new penalty regime. The Confederation of British Industry is especially critical of the order. A Government who pride themselves on their apparently close relations with at least some representatives of business, and with the CBI in particular, should at least have taken on board those comments and changed the order accordingly.

The CBI said:


It went on to say:


It continued:


My next concern relates to paragraph 4 of the Competition Act 1998 (Determination of Turnover for Penalties) Order 2000, to which I direct the Minister's attention. It reads:


That seems further to emphasise the punitive character of the fine regime. One can have a substantial number of companies only indirectly and tangentially involved with the main culprit, whose turnover is contributing to the sum on which the 10 per cent. fine over three years is levied. That does not seem fair.

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The Minister is an immensely reasonable specimen. He is the closest approximation to reasonableness that one can expect in this Government.

Mr. Patrick McLoughlin (West Derbyshire): He never used to be.

Mr. Bercow: As my hon. Friend points out from a sedentary position, the Minister used not to be reasonable, but that was when he was representing the forces of organised labour--he was veritably an old-fashioned trade unionist in those days. Of course, he has since made the transition to new Labour, and he is an aspiring and rising Minister. His tune has changed, but we will dig out what he has said on previous occasions. If he can persuade us that the provision is reasonable, we will be interested to hear how that can be so.

This is a matter of particular concern at a time when the Post Office is trying to expand. It has recently made several acquisitions--German Parcel being the most notable example--and it is in the process of forming important and potentially profitable strategic alliances. When it is getting bigger, the scope for hefty fines to be imposed is a legitimate source of anxiety, and I hope that the Minister will at least reflect on that point.

In the DTI press release to which I alluded earlier, which was issued on 9 August last year, the Government proudly flagged up the fact that they were providing for tough penalties. If memory serves me correctly, in 1996, when my right hon. and hon. Friends were considering proposed reforms to competition law, there was consideration of a new fine regime, which was to be determinable by, or at least capable of being heard by, a tribunal. The idea was to impose a maximum limit on a fine of about £1.5 million. Here we have a proposal that could result in extortionate sums of money being taken from companies. On the principle of reasonableness and proportionality, I hope that the Minister will reconsider.

I turn now to Lords amendment No. 13, which is also a matter of legitimate concern to the House, and the Opposition seek to amend it. This amendment is intended to place the commission under an obligation to conduct benchmarking operations with other postal operators in order to ensure a competitive market place. The present commission has indicated a willingness to do that, but the commission should be under an obligation to do something, rather than simply consider whether it is practicable.

The Government have talked about the prospect of benchmarking where it is "practicable" to engage in it. We think that that is not a persuasive case. If benchmarking is a good idea--if it is in the national and commercial interest to be able to compare the performances of different service providers, it is not clear, given that there is to be a regulatory structure, why this should be only an opportunity and not a formal obligation.

We welcome the Lords amendment based on the amendment tabled by my hon. Friends the Members for Rutland and Melton (Mr. Duncan) and for Banbury (Mr. Baldry) in Committee in the Commons, but we want to strengthen it. In doing so, we would be meeting a function of the commission under clause 5(3), requiring that the commission


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Thus the amendment that we commend is similar to that tabled by my hon. Friend the Member for Banbury in Committee, and I ought properly to add that it is supported by the Periodical Publishers Association. It is designed to ensure that the Post Office make efficiency savings and offer a competitive service. When a similar amendment was tabled in Committee, the Minister rejected it, as it would have required licence holders to arrange and fund the carrying out of annual independent reviews of the efficiency and economy of its operations.

Our contention is that the amendment seeks the same ends, but the commission will be responsible. Because the Post Office is, for the time being, the only realistic carrier of magazines, PPA members want it to operate in a manner calculated to promote efficiency and economy.

I shall detain the House only briefly to say something about the amendment to Lords amendment No. 14--[Interruption.] The Minister for Trade is a distinguished denizen of this place. He has detained this House on many occasions. I have listened with wide-eyed enthusiasm to the sheer power of the hon. Gentleman's oratory, so I hope that he will forgive me if, in performing my duty on behalf of the Opposition, I briefly detain the House on the amendment to Lords amendment No. 14. If the hon. Gentleman knows me well, he will know that it is much better for him to keep quiet and not provoke me. If he insists on provoking me, it will take a great deal longer, and the blame and responsibility for that will be his, not mine.

The amendment to Lords amendment No. 14 is designed to ensure that a reference to transparency and accounting appears in the Bill. It would ensure that the commission considers any potential cross-subsidy and reports on it each year to ensure fair competition. The Government amendment was tabled in response to concerns expressed by my noble Friend Baroness Miller on 15 June. It seeks to highlight how the commission is performing its functions under the European directive. I emphasise to the Minister that this is a welcome concession from the Government, but we would like to see in the Bill a direct reference to transparency in accounts.

It might be helpful if I explain to the House that the wording of the amendment is taken directly from article 14 of EU Postal Services Directive 97/67/EC. The Minister will understand that the background is the July 1999 White Paper "Post Office Reform: A world class service for the 21st century", which emphasised the importance of transparent accounting and limiting cross-subsidies to a level necessary for the preservation of essential services. It stated that the regulator would need to ensure that the necessary accounting transparency was in place to give credible assurance that there was no

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undue cross-subsidy from the business units operating in the monopoly area to those competing in other market sectors. That point was expanded upon at page 25, paragraphs 25 to 26, which no doubt the Minister could reproduce off the top of his head and with which I will not therefore weary the House.

The White Paper made it clear that, until the regulator was established, responsibility for ensuring transparent accounting and for monitoring cross-subsidies rested with the Government. The Select Committee on Trade and Industry in its 12th report reached a similar conclusion. Transparency of accounting and the limiting of cross-subsidies are central themes of the European postal services directive. That is clear from recitals from that directive. In article 14, there is an express requirement to keep separate accounts and to allocate costs to each of the non-reserved and reserved services.

The amendment would ensure that the Bill gives appropriate weight to the stated aim of the directive, of the White Paper and of the Select Committee report, that competition should be fair and cross-subsidies be limited to cases where they are necessary to maintain the universal service obligation, and necessary to the transparency of accounts. The amendment seeks to enhance, rather than to detract from, the existing provisions of the Bill.

On 14 March, in Committee, the Minister said that the Government had considerable sympathy with our aims. I hope that he will accept that our amendment is a robust means by which to achieve them. It would have the advantage of transparency and predictability for commercial operators, which have long complained about unfair cross-subsidies to the Post Office's Parcelforce.

It is a powerful case. I hope that the Minister will reflect on it on his feet, if I may put it that way, and accept the wisdom of our arguments.


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