Examination of Witnesses (Questions 200-219)|
TUESDAY 16 APRIL 2002
200. As the European Commission had previously
rejected the Andersen study as its own basis for introducing competition,
why have you gone ahead with Andersens?
(Mr Corbett) I do not think it is right to say that
the European Commission has rejected those arguments.
201. I will rephrase the question. The European
Commission had previously rejected studies by Andersens as its
own basis for introducing competition into European postal services
under the proposed European Directive. They did not think they
warranted being used as good practice. Why do you find that it
is good practice to use them?
(Mr Corbett) You have caught me by surprise. I was
not aware that the Andersen studies had been rejected. Is that
saying that Andersens have not been selected?
202. They have looked at the studies by Andersens
into the postal service and they rejected them. That is my understanding.
(Mr Corbett) They rejected them or they did not use
203. Whichever way you look at it, it is a play
(Mr Stanley) If you are going to harmonise across
Europe, you have to find fairly straightforward ways of doing
it. The European Commission has always preferred to do it by weight
and price. It is probably the only practical way of doing it across
countries because countries vary so much.
204. It is a pity you did not follow that line.
Will Postcomm establish a universal service compensation fund
so that private competitors can make a contribution to the provision
of universal service?
(Mr Corbett) We have explained in our proposals document
that that is an option that we would continue to bear in mind.
The government, at the time of the creation of the Postal Services
Act, elected not to introduce into the legislation the provision
for a compensation fund, notwithstanding that it is provided for
by the EU. We hope that no such fund will be necessary because
if our view of the universal service as a net benefit rather than
a net disbenefit is correct there will never be any need for it.
If however we are wrongand we may be wrongthen there
would be plenty of time to see what was happening and at that
stage we would, if appropriate, as we said in our report, make
application to the government but it would require the consent
of certainly government, perhaps ParliamentI am not absolutely
sure about thatto be allowed to create such a fund. We
would hope that it would not be necessary.
205. If it was, you would?
(Mr Corbett) If it was, we would, but we do recognise
that any such interventionist approach like that tends to distort
the market. Therefore, we would be anxious to avoid doing it if
206. The way you introduced the proposed competition
to UK postal servicesdoes that mean that VAT will have
to be levied on postal services because of the way you have gone
(Mr Corbett) The VAT issue is an extraordinarily complex
one. As I understand it, we are governed by the EU law on this
matter which exempts universal service providers from VAT and
which requires that VAT will be levied on others. Certainly we
are not a taxing authority.
207. I did not say that.
(Mr Corbett) We would regret a distortion brought
into the market as a result of some operators being exempt and
some operators not being exempt. What we can do about that is
probably going to be pretty limited other than making representations
to the Treasury.
208. Because of the way that you are introducing
your proposals, will that lead to VAT being included? Because
everybody else is doing it in a different way and you are going
the lone ranger way, the danger may be, not deliberately, but
you could create the introduction of VAT in the mail service.
(Mr Corbett) I do not believe that to be the case.
209. Have you taken advice on that?
(Mr Corbett) No one has suggested it to us.
210. I have suggested it to you. Have you taken
(Mr Corbett) Now you have suggested it, we will take
211. What is the risk to the uniform tariff
from the proposals that you are putting before us?
(Mr Corbett) The uniform tariff is built into our
212. We have no worries about losing the uniform
(Mr Corbett) Absolutely not.
213. On the question of VAT, I imagine that
if it is wrong you will write to us. If we go down the road that
you suggest, Consignia will not be required to charge VAT?
(Mr Corbett) That is correct.
214. Competitors may?
(Mr Corbett) Yes.
(Mr Stanley) Competitors will.
215. There would be a 17.5 per cent cost advantage
for Consignia from the outset?
(Mr Corbett) To the extent that those are mail services
which are being bought by businesses which cannot recover VATand
of course most businesses can it does have a significant
effect on financial service industries and on charities who are
very big mailers and it has a very significant effect on you and
216. Yes. That would be if we were to choose
to go to a private firm rather than Consignia. If we were not
to go down that route but to go down the price and weight route,
would the other players apart from Consignia be subject to VAT?
(Mr Corbett) Yes. The conditions will be exactly the
same, subject to further inquiries we are going to conduct.
217. If the other providers were to promise
to have a universal service obligation in their licence terms,
would they be able to be free from VAT?
(Mr Stanley) Even then the Chancellor would have to
change the law. The law at the moment exempts only the Post Office,
now Consignia, so I do not think so.
Sir Robert Smith
218. Under EU laws they would be able to be
(Mr Stanley) The EU directs that governments must
exemptthere is no choice about itpublic postal services
from VAT. At the time we interpreted that in British law the only
public postal service was Consignia. The only question for the
future seems to beunless the Chancellor is going to lobby
in Europe for VAT on post, which seems unlikelywhether
to extend the exemption to other companies. At the moment it is
one reason why Consignia has a significant advantage over other
219. Maybe we should have had this hearing on
Thursday! Who knows?
(Mr Stanley) Who knows?