Community Postal Services

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The Chairman: If no more hon. Members wish to ask questions, we will proceed to debate the motion.

Motion made, and Question proposed,

    That the Committee takes note of European Union Document No. 10544/00, and welcomes it as a useful framework for the future liberalisation of the postal services sector in the European Union provided appropriate safeguards are in place to maintain the universal postal service at a uniform tariff.—[Mr. Johnson.]

11.10 am

Mr. Richard Page (South-West Hertfordshire): It is interesting to see how the wheel turns. Just before the May 1997 general election—at which the Conservative party was given more time with its family—I found myself in Brussels, doing the job of the Minister. Today's proposed directive is not word-for-word what we wanted, but there are some similarities.

Progress was blocked at that time primarily by Germany, much to the disgust of the Dutch. The Germans blocked it because they wanted time to ensure that their postal system did not suffer in the same way as their telecom system had. When we privatised British Telecom, we stole a huge march on many nationalised telecom systems, and the results and benefits that flowed were enormous. In 1997, the Germans were exceedingly worried that their state-owned post office system was not ready to drive forward and take advantage, while, as we discussed earlier, the Royal Mail was relatively more efficient and successful and would have been in a stronger position. However, the measure was blocked, and one reason why the directive is coming forward now, and not two or three years earlier, is because of the Germans.

Directive 97/67/EC has that background. During the delay, we have seen Deutsche Post build up into a powerful company; it has taken advantage of the time scale and driven forward into a powerful position that has enabled it to launch into a part-privatisation. It has been fairly ruthless and recently received a rap over the knuckles because some of its trading activities, particularly in the parcel sector, were unfair under competition rules.

I will not outline the main elements of the framework, as defined on page 2, but we broadly agree with its thrust. However, I want the Committee to consider the words on page 4, where it says:

    ``The postal sector, which offers a key communications infrastructure with high economic and social importance, needs to develop in harmony with the major changes taking place in these markets or it will be left behind and be seen increasingly to be dealing with the technology of yesterday.''

I say amen to that. My hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) mentioned internet trading and the effect that it will have. I can foresee that the pressure on the 60 g area and revenue stream to the Royal Mail will become much tighter and tougher, as more people move into using e-mail. Of course, with threats come opportunities; more people will be trading on the internet, and the goods that are bought must be delivered. The companies that have a good delivery service will take advantage, and it has not been surprising to see them buying parcel companies in Europe. The Dutch were the first down the line when they bought TNT about seven or eight years ago for about A$2 billion. The Germans have also been buying companies and the Royal Mail has been affected.

We could spend a long time surmising how the Post Office is likely to develop. My concern is that the Royal Mail—once a leader, if not the leader—may lose its former premier position inside Europe and become an also-ran. It is worrying that its position is slipping. The directive provides both an opportunity and a threat.

Will the Minister expand on this passage in the document? It states:

    ``The Minister confirmed that any further liberalisation of postal services would have no implication for the status of the Post Office as a public organisation.''

That sounds like a marvellously balanced phrase that will bring comfort and security to Labour Members, but I must press the Minister to spell out how that position will be sustainable as more and more competition enters the field.

The Minister mentioned the Swedish postal services and their various costings, but he knows that public ownership in the United Kingdom and public ownership in some other continental countries are two completely different things. The Swedish telecom company, Telia, has access to public funds for development and expansion without having to pass through the country's Treasury. Access to markets is immediate; there is a very different concept of public ownership.

The Minister's position is sustainable as long as the protections of the universal service are in place. In time, however, those protections may become increasingly limited and the postal directive is only a start in that process. Significant disparities are already emerging. The Minister mentioned them when he spoke about the different responses of various countries to the postal directive. The level of monopoly granted in many states is significantly below the 350 g maximum. The UK is going down the 150 g route, which we endorse and support.

Another important issue is the operational freedom of universal service providers to conclude alliances with private operators. I have already referred to TNT and DHL, and the Royal Mail has concluded alliances. It would be interesting to know how those alliances are faring. Public feedback on relative performances would be more useful than throwing it all into the Post Office pot for an overall figure on profits and operating costs. That would prevent us from seeing how individual operators were performing.

Will the Minister define the commercial rate a little more precisely? I understand that the Post Office has been given permission to borrow in the outside market, so we should know exactly what the commercial rate is. I would like to know whether the rate is suitable for my own house purchase activities or for whatever I personally wish to buy.

The document also talks about quality of service differences, particularly with regard to ordinary domestic mail and bulk mail products, which is where much of the pressure will come from. It is disappointing that some of the statistics emerging on the performance of the Royal Mail point to a slippage, rather than an improvement. Our customers will require a higher quality of service than ever before. The parcel system tracking process operated by UPS is an example of such service. It can locate a customer's parcel in the system quickly and efficiently, and is light years ahead of some of our systems.

The way ahead is becoming clear. The Government's response—with which the Minister is, of course, as one—again makes the point that:

    ``The Government strongly supports the further phased liberalisation of postal services in Europe, consistent with maintenance of the universal service.''

What happens when, consistent with that universal service provision, other operators are licensed and we see a drop in Royal Mail revenue? When that happens, the Minister's statement that further liberalisation of postal services will have no implication for the status of the Post Office as a public organisation will start to seem under pressure.

We can get at the reality of what will happen by unpicking some of the words in the Commission's document. We again have the statement that

    ``Experience of deregulation of postal markets shows that there is no contradiction between the maintenance and improvement of this service and the gradual introduction of competition, provided the universal service provider has the necessary commercial and pricing flexibility to respond within the bounds of competition law.''

That is fine as long as we have a market that is at least static or, preferably, expanding. What happens if it goes the other way? The hon. Member for Morecambe and Lunesdale (Miss Smith) invited the Minister to lift his eyes for a brief second to the horizon and outline what will happen beyond the first step set out in the directive, as more and more competition comes in. He fell a little short of doing so.

As my hon. Friend the Member for East Worthing and Shoreham said, we will see a market eroded by electronic communication, in which revenue for the Royal Mail will decrease because its monopoly in the area of mail under 60 g will cease and more and more competition will be licensed by the new regulator coming in and taking money. The Minister will not be quite as sanguine that there is no implication for the status of the Post Office as a public organisation. Am I right in thinking that competition will be better established and that the lead, marketability and value of the Royal Mail will be reduced? What will happen? All I can foresee is that the Government will be forced to allow continual increases in the cost of stamps. We will still have a universal service but the cost to the consumer will rise. There will be the opportunity for competition to come in, to bid in terms of the universal service provision and then to bid underneath that.

I would be grateful if the Minister could flesh out the future. We have no objection to and will not vote against the motion. I supported the proposal four years ago and we should like to see it become reality.

The change to the plc status of the Post Office will require a positive reaction from the Royal Mail, and a significant factor will be the licensing policy of the new regulator. The Minister knows that the regulator has given a sketchy preliminary outline of where and how the policy intends to operate. It would be helpful if he fleshed out some of those details, as that policy will be crucial in determining the way in which the Royal Mail shapes itself, if it is to survive.

11.25 am

Miss Geraldine Smith (Morecambe and Lunesdale): The Royal Mail provides an excellent service, and is one of the leaders in Europe. I say that despite the fact that, two weeks ago, it lost 30,000 of my Morecambe and Lunesdale Labour party Roses leaflets. I do not know how it is possible to lose 30,000 leaflets, but it did manage to reprint all of them. The incident prompts concerns about the quality of service and the need to improve it, especially for business customers.

There is a need for competition. I welcome competition, but it must be fair competition. Liberalisation is fine so long as it is consistent with maintaining a universal service at a universal tariff. I do not say that because I am a former postal worker but because I represent a large rural constituency, and I have fears and concerns. It is easy to deliver mail in town centres and cities; I can get volunteers to deliver to the terraced houses of Morecambe and Lancaster. However, they are not so keen to go out to Silverdale and Yealand, where there are large drives and it takes hours to deliver mail, compared with 20 minutes in the centre of town. We have to recognise that there are such differences.

Most importantly, we need to protect the universal service at the uniform tariff. I am pleased that PostComm recognises that fact and has, rightly, made it a priority. The second priority should be to encourage fair competition. We have heard a great deal about Sweden this morning. While I accept that full liberalisation has not damaged the dominant position of the Swedish post office, it has coincided with significant increases in the real cost for domestic consumers, compared with a fall in real terms in the United Kingdom.

We have mentioned the cost of providing the universal services in areas that are not commercially appealing. As I have said, the document mentioned 5 per cent. I think that that is an underestimate and could be much greater. We need to examine more thoroughly the cost of providing a universal service at a uniform tariff. I do not like the idea of the introduction of compensation funds. It would be awful if the competitors had to club together to pay the Royal Mail compensation for the fact that it must provide a universal postal service.

What is the definition of ``special services'' in the reserved area? I agree with the Post Office; that could be a kind of Trojan horse that comes in quickly and takes away a number of profitable services. While I do not object to the principle of full liberalisation, I am concerned about the time scales. If the measure is introduced too quickly, it could seriously damage the postal service on which many of my rural constituents greatly depend. I should like to see greater scrutiny and assurances that the Post Office still be able to provide a universal service at a uniform tariff and that there will not be a great increase in the cost to individuals if liberalisation takes place too quickly.

11.29 am

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