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13 Jun 2007 : Column 269WH—continued

My hon. Friend the Minister has been a staunch defender of the manifesto. I was pleased that he and his ministerial colleagues defended the concept of the publicly owned Royal Mail making its decisions on Mr. Leighton’s recent proposals. I have high hopes that the review will be able to proceed without further delay. It appears to be a mechanism under which the impact of the Postal Services Act 2000 and the performance of Postcomm and Postwatch, to which the hon. Member for Orkney and Shetland referred, can be reviewed. In many circles, there is disappointment at the performance of Postwatch in comparison, for example, with Energywatch, which I would say was a stauncher defender of consumer interests. I hope that the review will proceed without delay and I would be interested in the Minister’s thoughts about how it might proceed.

It is interesting that Postcomm has made various calculations of the cost burden of the universal service obligation. A few years ago, it said that that was £80 million-plus—no doubt it has increased since then. Many things have changed in the postal market since Postcomm last looked at it. Even with bulk mail and so on, the postal market is declining for the first time in many years. Royal Mail’s share of bulk mail is also declining quite rapidly and about 40 per cent. of such mail is now in other hands. It is interesting to see how the rest of Europe is responding to the issue. Oxera, an Oxford-based research consultancy, has produced a report entitled “Funding universal service obligations in the postal sector” that considers about eight different postal services throughout Europe, including La Poste, Poste Italiane, Magyar Posta, Cyprus Post and Poczta Polska. Royal Mail did not contribute towards the study, which nevertheless provides interesting ideas, some of which the hon. Gentleman referred to.

If Royal Mail continued to lose market share, it would be possible to set up a compensation fund, as has been done to protect the universal service obligation in telecoms markets around the world. It would be possible to put a mark-up on the access charges for Royal Mail’s competitors. In Finland, a
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system of “pay or play” is already in place. In other words, competitors to the established operator contribute to the universal service obligation through delivering, or by paying towards it.

Those are many possibilities for the future. There is a feeling among Back Benchers of all parties that Postcomm is being a little complacent in its mantra that the only way to preserve the universal service obligation is to continue cost-cutting at Royal Mail—basically, that is its answer. Obviously, that is a comfortable message to give from offices in London, but ultimately it has implications for the terms and conditions of postal workers.

To be fair, Royal Mail has stripped out a lot of costs in recent years. It will be interesting to see whether Postcomm will at any stage feel the need to think about the perfectly legal measures that are being considered in other parts of the European Union.

Finally, it would be interesting to hear from the Minister about progress on other Royal Mail issues that are relevant to the pursuit of the universal service obligation. Obviously, certainty at the top is vital for any organisation. I note that Mr. Leighton has written a book entitled “On Leadership: Practical Wisdom from the People Who Know”—like the hon. Member for Orkney and Shetland, he does not believe in underselling his case. I do not know whether Mr. Leighton intends to spend more time on the lecture circuit. Incidentally, many Leeds United supporters remember his leadership while he was on the board of their club. At one stage, the Department was thinking of appointing a vice-chairman to bolster Royal Mail’s leadership, but I do not know whether that will happen.

As the Minister has often said, the Government have been generous in providing investment facilities to the Royal Mail. Are those being implemented? I hope that it is not still smarting from the rejection of some of its plans. Finally, while the universal service obligation is delivered during the summer, it would be extremely helpful if the industrial dispute could be solved. That will require both sides to talk together. I hope that, without taking sides, Ministers will encourage both parties to talk so that we can avoid an extremely damaging postal strike over the summer.

9.58 pm

Mr. Dan Rogerson (North Cornwall) (LD): I congratulate my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael) on securing this important debate. As he pointed out, it is also timely.

Recently, with my hon. Friend the Member for Truro and St. Austell (Matthew Taylor), I met Sarah Chambers, the chief executive of Postcomm, to discuss this very issue. Clearly, Postcomm remains confident for the time being that simple stamp mail will retain a uniform price. However, business bulk mail does not go only to business and it does not stay in bulk. Utility bills are sent out in batches across the entire country, but as we heard from my hon. Friend, any higher costs for delivering bills to rural areas will soon be passed on to the constituents in those areas.

As delivering to rural communities becomes unprofitable for mail order companies, the very sustainability of the stamped mail service will be put
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under threat. The delivery of letters between family and friends and that of bulk mail from advertising companies cannot be divorced from each other. Postcards and flyers come on the same van and one supports the other.

How long will it be until so few businesses want to pay the extra to deliver to rural areas such as Cornwall that Ministers say that rural deliveries are simply unsustainable and implore Parliament to re-evaluate how the universal service obligation is delivered? Will everybody be asked to collect their mail from their local post office, providing that it is still there? The price increases associated with zonal pricing are not clear, either. Postcomm says that there will be a small rise in the first year, but what about the second year or subsequent years? How long will it be until there is a significant increase in the price of delivery of business mail to rural areas? How long before the constituents whom hon. Members are here to represent, such as those in Cornwall, the Lake district and the highlands and islands, start to feel the pain and receive fewer deliveries?

It is worrying that Postcomm says that it does not have the final say on the proposals and that its remit is to protect the universal service obligation. As we have heard from the hon. Member for Selby (Mr. Grogan), it sees protecting the profitability of Royal Mail as the solution to how mail services will continue in the future. Bulk mail products, save for one or two, are not covered by the obligation, and so the whole service could be undermined in a piecemeal fashion.

It is seven years since the Postal Services Act 2000. As my hon. Friend the Member for Argyll and Bute (Mr. Reid) said in the Whitsun Adjournment debate, perhaps it is time to take stock and to review the universal service obligation with communities in mind, not competition. I have also recently highlighted concerns about so-called final collections. Many rural villages have found that their final collection happens shortly before the morning mail is delivered, which prevents people from responding by return and leaves the first class service with a two-day turnaround.

Royal Mail has turned its business around and, on the whole, it provides a good service. We should support it in finding solutions that can ensure its profitability without undermining its service. That is why I am pleased that my party has come forward with proposals that we believe will allow Royal Mail to be free to compete on a far fairer footing. Perhaps the Minister will be able to tell us why the Government restrict Royal Mail when it could flourish, but refuse to do so when its proposals could have a serious and deleterious effect on rural communities.

I know that other hon. Members want to speak, so I shall keep my remarks brief. It is our duty as Members of Parliament to defend the universal service, and I cannot impress on the Minister strongly enough just how important it is that we do not start to chip away at it. Our postal service was once the envy of the world. It has to change, but as that change occurs, we need to keep our country together and ensure that the service provided to rural areas is on a par with that provided to urban areas. We need to ensure that those who live in remote areas are offered the same service as those who
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live in more populous areas and that those who live in more deprived communities do not get a lesser service than those in more privileged communities.

Andrew George: The unwritten assumption behind such a move, which is often spoken of behind the scenes, is that those who live in rural areas, especially remote rural areas, choose to do so, rather than that they were living there in the first place. The assumption thus follows that this is a class issue in that the middle classes have a subsidised service so that they can live in rural areas. Does my hon. Friend agree that that assumption, which pervades a lot of views about the cost of services in rural areas, needs to be challenged? We are talking about deprived rural areas, especially those in many of the most remote parts of the United Kingdom.

Mr. Rogerson: As ever, my hon. Friend makes the point far more eloquently than I ever could. Given that there are no London Members here other than the Minister, we should draw attention to the fact that high costs for delivery have been a problem in London, too. The issue affects the whole country, and I am convinced that zonal pricing would be a retrograde step that would undermine the universal service obligation, which we should all be here to protect.

10.4 am

Mr. David Drew (Stroud) (Lab/Co-op): I am delighted to be able to speak briefly on the matter, and I congratulate the hon. Member for Orkney and Shetland (Mr. Carmichael) on raising it. I presume that it is a second choice, because its title is nice and bold on the paper that notifies us about upcoming debates.

For a good or bad reason, I was on the Committee that considered the Postal Services Act 2000 when it was a Bill, so I have some knowledge of what happened at that stage. To be fair, the Government made great play of the fact that it was not a privatising Bill. All the way through we heard the mantra of liberalisation, and that it was about ensuring that Royal Mail and the postal market were fit for purpose and were fit to compete in the UK market and further afield. It has not quite worked out that way, and that is why it is fair to ask the Minister, his team and Royal Mail to reconsider the Act. It was made clear when it was considered in Parliament that the universal service obligation was not an add-on and could not be undermined but was a key part of the Act. If it is not working properly, and if changes could threaten that universal service obligation, we should go back to the legislative process.

The then Minister for Competitiveness, now the Secretary of State for Education and Skills, made it clear that the Government would consider open-mindedly how we could maintain the universal service obligation. I reiterate the call for the Minister present to tell us whether they will consider how that is working, produce a report and talk to MPs from all parties to consider some of the implications. It is not just about Royal Mail per se. I always get a bit confused about Royal Mail’s domain, because it is made up of different elements that seem to drop in and out of what we mean by Royal Mail. Of course, it includes the parcel service, but it also included the sub-post office network.

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The Minister knows that Gloucester sorting office might close. That is about presence on the ground, so I do not dismiss it, although I know that it does not form part of the debate. However, what is part of the debate is the controversy over the 2,500 sub-post offices that are likely to be hit by the proposals. I am sure that all hon. Members have their spies in the camp, as I have, but we have just had a meeting to go through the potential process. As always with Royal Mail, it is cloak-and-dagger stuff. No one is supposed to know that the meeting has taken place, and the only thing we know is the compensation package. None of the sub-postmasters or sub-postmistresses know whether their office will be one of those notified for closure, but some areas are going more rapidly. Once a decision is taken, we will be given a month to make representations, but the opinion is that the circumstances would have to be extraordinary for the decision to close an office to be changed. It is not much of a consultation, then, is it? It stresses the point that once a decision is made it is made.

Who is doing the work to ensure that there is a rural provision and that the three-mile rule is kept to? Sub-postmasters and sub-postmistresses have been asked to give their opinions by e-mail—an interesting statement on Royal Mail’s confidence in its own network—but who will be carrying out that co-ordination? It affects the universal service obligation, because if we do not have sub-post offices, we will not have a universal service. I accept that some areas are already without post offices, and we are told that is possible to put new post offices back in place where the need is not being met. That is an interesting point on which we need to dwell.

An interesting aside that presents a dilemma is that in one respect the universal service obligation works like osmosis—it is there because it has always been there and we assume that it will continue. With zonal pricing and the potential loss of sub-post offices, that must not be taken for granted.

Royal Mail cannot have it both ways. There is an incident at the moment in my constituency, where a post office might change hands for all sorts of reasons. It is a good post office and has a future, and I imagine that it will be maintained. Royal Mail wants to micromanage it, and the sticking point is that it wants to set the opening hours. It is not about whether it opens on a Wednesday or a Thursday; it is about whether it is open at lunchtime, even though the whole town shuts at lunchtime. That may be quaint, but in some rural areas people might have something of a siesta. It has been demanded that that post office should open through the siesta, which is not a good example of localism. On one hand Royal Mail is trying to micromanage the post office, but on the other it is trying to lose its responsibilities and say “It’s nothing to do with us, guv, it is to do with the market, and if the marketplace doesn’t allow the universal service obligation to operate, we want to lose our responsibility.” It is not fair to put the decision just in the hands of Royal Mail.

I hope that the Minister will at least consider—I shall put it no more strongly—whether, as was implied in the passing of the 2000 Act, other major national
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carriers, not just companies delivering the odd piece of post here and there, should, as my hon. Friend the Member for Selby (Mr. Grogan) mentioned, pay a levy to ensure that the key part of that Act is being adhered to. Otherwise, the universal service obligation will be under attack and will one day just disappear.

10.11 am

Mr. Alan Reid (Argyll and Bute) (LD): It is a pleasure to serve under your chairmanship this morning, Mr. Caton. I add my congratulations to my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael) on securing this debate on an item that is of particular importance to both our constituencies, particularly on the islands, and on the powerful case that he made against the proposals for zonal pricing and the problems that it will cause.

One of the basic principles of Royal Mail has always been that whatever part of the country someone lives in, the cost of sending a letter to any other part of the country is exactly the same. That is an important principle for sustaining rural communities and the small businesses in them. The universal service obligation means that anyone in the UK can post letters and parcels to any other part of the country at the same rate, and it guarantees at least one delivery and one collection of mail throughout the country six days a week, excluding public holidays.

However, I have concerns that the USO is slowly being chipped away at. My hon. Friend the Member for Orkney and Shetland mentioned the case of Parcelforce, which shows the danger of what can happen in an entirely free market, free from the safeguards of the USO. Parcelforce has divided the country into three zones. Zone 1 is the vast bulk of the country, zone 2 is the highlands and islands and zone 3 is Northern Ireland, the Isles of Scilly and the Isle of Man. It costs far more to send a parcel from zone 1 to zone 2 or 3 than to send it to another part of zone 1. That means that some small parts of the country get a far worse service than the rest of the country. The pricing structure is complicated, but sending a parcel to the highlands and islands costs roughly double what it costs to send one anywhere else in the country. That is an indication of what would happen to postal services in the highlands and islands without the USO.

There are, of course, private companies in the parcel delivery market, but Parcelforce is a big player and the rates that it sets are largely the charges that others have to compete with. Parcelforce charging more to deliver to the highlands and islands makes it easier for private parcel companies to do the same. Parcelforce is an unelected quango and has the important job of deciding what is and is not covered by the USO.

We have heard from other speakers about the threat to the USO from Royal Mail’s application to introduce zonal pricing for certain types of bulk mail, which is a large part of the postal market these days. That means that organisations such as utility companies and magazine delivery companies will be charged more for sending bills or magazines to customers in remote areas. The initial proposal from Royal Mail is to increase the charges by 4.8 per cent. for postage to what are called low-density areas, such as my constituency
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and, I suspect, those of most hon. Members who have spoken, compared with a 2 per cent. fall for sending to a high-density area. That would mean a price differential of about 7 per cent. between living in a remote rural area and in a large town or city. We all suspect that that is only the thin end of the wedge. If the principle is established that Royal Mail can charge more for deliveries to remote rural areas, we will all expect the differential to increase greatly. In its submission to Postcomm, Royal Mail claimed that it costs about 11 per cent. extra to deliver to a remote rural area, which is perhaps an indication of what we will be faced with if the proposals are accepted.

The proposals would clearly have an unfair impact on recipients of mail who live in remote rural areas. Although they would perhaps not be buying the stamps, it is quite obvious that utility companies, banks and magazine distributors are likely to increase their charges to those customers, as they will want to recover the charges. There would also be an unfair impact on companies that regularly send bulk mail to residents of rural areas. The most obvious example that springs to mind is publishers of farming magazines. There would also be an impact on councils in rural areas, because when they sent rent or council tax notices they would have to pay more than they currently do or than a council in a big city would have to. I hope that Postcomm will reject Royal Mail’s application, mainly because it would impact unfairly on people living in rural areas but also because it would mean costs to big organisations such as utility companies and banks, as they would have to change their computer systems to be able to cope with the extra cost of mailing customers in remote areas.

Another example of Postcomm not properly protecting the USO is the 15-minute rule, which it has allowed Royal Mail to introduce from 1 July this year. It will extend the current 15-minute exclusion rule, which until now has applied only to individual premises accessed by a private track to which it would take the postman more than 15 minutes to carry out a round trip. The rule applies mainly to a single house at the end of a private track. Royal Mail has applied to Postcomm to extend that exception from a single house to a group of houses, and Postcomm has accepted the application.

I shall quote from Postcomm’s decision document and direction, “Policy Review of Exceptions to Royal Mail’s Universal Delivery Service”, which was published in April. Ruling 11(c) introduces a new long-term exception in the case of

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