Community Postal Services

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Mr. David Heath (Somerton and Frome): I can assure the hon. Member for Morecambe and Lunesdale that the Post Office behaves in a scrupulously apolitical way; it lost 40,000 of my leaflets two weeks ago as well. They were finally located in a warehouse in Avonmouth, but only after extensive searches. I applaud the way in which it interprets its responsibility to maintain political impartiality.

The measure is important, because it has often been argued that there is an inevitability about liberalisation and the introduction of competition in services of all sorts, including postal services. Many of us have argued and will continue to argue that liberalisation and competition are often motors for improvement in services, and that they are very important. In this instance, however, the merits or otherwise of liberalisation come into conflict with social policy. It is important to achieve a balance between the policy of liberalisation and the social policy that is underpinned by the Post Office in its present form.

We must keep three clear objectives in our sights. The Minister has already to some extent dealt with them. First, the universal service is essential, particularly to those of us who represent rural areas who recognise only too well that those areas are the loss-making part of the operation. It is an enormous burden to operate a universal service in very rural areas. No commercial operator would countenance providing such a service, unless forced to do so. To attempt to provide such a service is not a sensible way of doing business.

Picking up the point made by the hon. Member for Upminster (Mr. Darvill), it is not only a matter of the domestic letter of even the business letter; it is also a matter of the services provided to small businesses in rural areas. Those businesses need a universal service at the same level of provision as that operated in the towns; otherwise, they are innately uncompetitive. That is a serious concern for many of us.

Secondly, there is the matter of the uniform tariff. It is more than uniform; it is affordable. It is no good boasting of a uniform tariff if, by virtue of the introduction of competition and the removal of profitable areas of the Post Office's business, the public cannot afford that tariff. Universality and affordability must go together.

Thirdly, we must keep our sights on the quality of service. If the universal provider does not provide a reasonable level of service, it is not fulfilling its social function. There is concern that if competition is introduced to those areas that are most susceptible to it, the quality of service provided across the whole sector other than in those areas will deteriorate. The introduction of competition drives improvements in the level of service in areas where it there is direct competition, but it diverts resources from those areas where there is no direct competition and reduces the quality of service in those areas.

We have heard much about the experience in Sweden, and what has happened there is instructive. The hon. Member for Vale of York (Miss McIntosh) is right that the pattern of settlement in Sweden is very different from that in the United Kingdom. If one drew a circle around the Stockholm archipelago, Malmo and Gothenburg, it would take in most of the population of Sweden. There is a large, empty space in the north of Sweden, for which it is difficult effectively to provide services. There is a limit to how far we can compare the British experience to the Swedish experience. However, the introduction of competition there does not appear to have greatly improved the quality of the service. There are serious concerns there.

I share the view that special services ought to be defined better. I can imagine a definition of the term that included direct marketing. I have other quarrels with the Post Office about direct mail and how its content is policed, but it makes a substantial contribution to the profitability of the network. If it were to be opened up to direct competition, there would be questions about the economic effect on the rest of the service. I agree that the compensation fund is not the right mechanism to protect the services.

There is an unfortunate environmental effect in over-extending competition. Few people drive through many of our villages during the day, with the exception of a succession of vans from various organisations that deliver one small parcel each. In environmental terms, that is nonsense. In terms of sustainable development, it is not sensible to have many lorries and delivery vans going to each small settlement, each with one item of post to deliver. That system is beginning to develop for packages, and I can see it doing so for mail as well. We have seen nonsense result from the uncontrolled competition of city-centre bus services. I would not want the same to happen for postal services.

The Government are right to be cautious. I am pleased that a compromise has finally emerged, as colleagues in the European sphere have fought long and hard for one, in direct competition with other countries that see total liberalisation as the answer. I hope that the Minister will maintain a position of festine lente, hastening slowly towards competition, and introducing as much competition as is consistent with the maintenance of the universal service, the uniform tariff and the quality of service that we presently enjoy and would like consistently improved.

11.37 am

Mr. Michael Connarty (Falkirk, East): I am pleased to be called in the debate. As a member of the Select Committee on European Scrutiny that referred the directive for debate, I was keen to take part, especially as the Minister probably knows more about postal services in the United Kingdom and Europe than anyone else, notwithstanding the good work that I am sure was done by the previous Minister in the previous Government.

The Post Office—we should now call it Consignia—is keen, lean and fit to compete, but it must be allowed to compete on a level playing field and in a fair way. I especially welcome the fact that we have decided to retain a wholly publicly owned Post Office. That is the single biggest protection for the UK consumer, not only because we do not pay VAT of 25 per cent., as is paid in Sweden, but because we approach the Post Office in the European and world market on a basis that links the public responsibility of the Government and the consumer. In the end, that consumer will receive a better service. I hope that the Post Office would be a better player for UK plc under public ownership than it would have been if the previous Government had privatised it.

There were attempts under the previous Government to convince some of the senior executives to support a privatised model. They were probably swooning at the idea of the smell from the aviation jet fuel that they thought that they would use in flying about the world, and slightly mesmerised by the share options that they thought would roll into their pockets. I do not think that public interests were considered so much as personal interests. The BT experience suggests that if we had gone down the road of privatisation we might not, after a few years, feel like applauding. It looks as if BT has got into trouble by trying to play in the big boys' world without having big boys' management skills.

I have attended the Committee because I share some concerns that the Rural Affairs Committee of the Scottish Parliament has expressed. Those concerns were also set out in a letter from Committee Chairman Hugh Henry to the European Commission. I want to underscore the point that postal services are a reserved matter. I have every confidence in Parliament and the present ministerial team to fight for the rights of all the UK, as we are charged to do. I do not disparage the Scottish Parliament for expressing its concerns, but we were already on the case. The explanatory memorandum from the European Scrutiny Committee shows that we have covered all the bases. However, since Scotland has a small population dispersed over a large area, like other peripheral areas of the UK, the Scottish Parliament was probably right to express its views.

I welcome the £30 million cross-subsidy to the rural post office network, which has clearly sustained rural post offices. My constituency has lost a few, perhaps because of the practice, which my hon. Friend the Minister now tells us has been done away with, of demanding 25 per cent. of the first year's profits from anyone taking over a rural post office. That would be a very good reason for not taking on the burden of what would probably be a small shop in a small village, with a post office attached. Abolishing the requirement may help to persuade people to take on post offices when they become available in rural communities.

I hope that the Minister will, through the Post Office Commission, engage in serious debate with Post Office senior management. Relevant issues would include the decision by the Post Office not to allow post offices in Scotland to sell power cards from Scottish Power—not because their sale did not involve a proper fee to the local post office but because the Post Office nationally was not getting a big enough cut from Scottish Power. Though the cards were a vital source of income and brought many people into post offices in Scotland, post offices were no longer allowed to sell them. We need to examine some of the central impositions that deals involve, which may negatively affect the network that we want to protect.

Among my worries is the cost to individual consumers. The Swedish model is sometimes alluded to. Swedish models have always been expensive, they say, but I have never tried to study that market and I must take others' word for it. The European Scrutiny Committee recently visited Sweden for meetings when it was taking on the presidency, and it was clear that its decision to liberalise had been made in an environment different from ours. More than 50 per cent. of its GDP is still in the public sector. Sweden has a large, protected public sector, which has not been liberalised, and its Post Office has been liberalised. That is a different environment, and perhaps the social structures that support people in Sweden allow such a course to be taken without the public feeling put upon. I do not think that it would work in this country.

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Prepared 4 April 2001