Examination of Witnesses (Questions 122-139)
POSTCOMM
Q122 Chairman: We have a very short hearing
to start off this afternoon on a follow-up to our 14 May hearing
with Sarah Chambers, the Chief Executive of PostComm, on Protecting
Consumers? Removing retail price controls. Ms Chambers, why
I have asked you to come back is that you were asked some very
specific questions in that hearing about the universal service,
which is obviously of particular interest to Members. You were
specifically asked questions by Mr Mitchell and by Mr Bacon on
the universal service and you gave some reassuring answers. I
for one was absolutely astonished to turn on the 10 o'clock News
that very night and to see that there was an announcement from
you, or from your Chairman, that the universal service might be
at risk unless there was more private capital brought into the
Post Office. Why on earth did you not share this information with
us at 4 o'clock in the afternoon when you were about to make an
announcement on the 10 o'clock News? Is this the way to treat
a Parliamentary Committee?
Ms Chambers: Thank you, Chairman,
and thank you for giving me the opportunity to come back on this
point. I am very sorry if I did, quite inadvertently, give you
and your Committee any offence on this. I was indeed asked some
very specific questions on 14 May and I thought I had answered
those questions very fully and very accurately. I was asked questions
specifically on Saturday deliveries and the universal service,
and I was also asked questions and points were made to me about
whether Royal Mail was in profit or in loss. What I stated was
that we had no proposals to eliminate Saturday deliveries from
the universal service and I also stated the factual position,
which was that Royal Mail Group is not at the moment making losses.
I did then go on to say that this was not necessarily the way
it was going to go in the future and that the important point
about Royal Mail going forward is that we did not feel that the
position if things did not change was sustainable. We had already
made that announcement in our submission on the first stage of
the Independent Review. We had said that unless Royal Mail was
transformed, the universal service would indeed be in difficulty.
The announcement that we made the following day, the second submission
to the independent review, was all about policy recommendations,
about how to sustain the universal service into the future, and
I did not believe at the time that that was what the Committee
was asking me on that afternoon.
Q123 Chairman: You must have known
you were going to go on the 10 o'clock News that night and say
that the universal service was at risk unless there was some private
sector capital injected. You must have known that.
Ms Chambers: Indeed, I did.
Q124 Chairman: Yet you gave us no
intimation. This is an extraordinary question. Mr Bacon asked
you about research. This is question 89. "But the work has
been done?" You said, "The research has been completed
but it is not yet published." Mr Bacon: "When do you
intend to publish it?" "We are publishing it shortly."
Mr Bacon: "Can you send us a copy in the mean time?"
You said, "We will certainly send you a copy", yet you
knew at 4 o'clock in the afternoon when you said "We will
certainly send you a copy" that you were going to make an
announcement at 10 o'clock that night.
Ms Chambers: We did send your
Committee a copy, I think the very next day.
Q125 Chairman: I am sure you did
send us a copy but you deliberately gave him the wrong impression.
Ms Chambers: I certainly did not
deliberately give any wrong impression.
Q126 Chairman: Why did you say "We
will send you a copy in the mean time" as if this was something
in consideration that had not yet been decided, "When we
decide it we will send you a copy," when you knew perfectly
well on the afternoon you were going to make an announcement that
evening? This is just treating Parliament with contempt. We are
less important than the 10 o'clock News, are we?
Ms Chambers: Absolutely not. I
do not believe I did give the impression that it was not important.
I did not give the impression that we had not made any decisions.
I think I specifically said that we had made decisions, and I
said that one of our decisions was that we were not recommending
any change on Saturday deliveries, which was what the burden of
particularly Mr Bacon's questions were directed towards. I made
it very clear that we had made those decisions already and that
we were about to publish that report.
Q127 Chairman: Mr Mitchell asked
specific questions about this. Question 78: "Are you satisfied
the price given to the Royal Mail is adequate to maintain the
universal service which you say is a major consideration?"
You might have said, "This is a very interesting question.
I'm not sure the whole thing may be ... I understand this is important
to Members but we may have to reconsider it. We are making an
announcement this evening that we may have to consider private
capital," yet you do not say that at all. You say, "Our
major consideration is to preserve a valued high quality universal
service"—we all agree with that—"and one
of the things to which we must have regard is the ability of Royal
Mail to finance it." You can hardly disagree with that. It
is an obvious statement, is it not? "That is what preoccupies
us." So you said the absolute bare minimum to Mr Mitchell.
Of course, you did not tell a lie to the Committee but you deliberately
did not let us into your confidence. This is all part of that
people can attend a Parliamentary Committee, say as little as
possible, view it as a game, and view the media with much more
importance than Parliament.
Ms Chambers: I can assure you
that I was not viewing it as a game and I believe I did answer
the questions both in spirit and in letter as fully as I could.
I believed what Mr Mitchell was asking me about in that question
was about whether we believed that access prices were sufficient
to cover the costs of delivery. I believed at the time and I still
believe that the access prices fully cover the cost of delivery,
including a contribution to pension deficit and a contribution
to profit. Indeed, Royal Mail have even acknowledged on their
latest costing methodology that that does make a profit. I thought
that was what Mr Mitchell was asking me about in that question
and I think I answered it pretty fully.
Q128 Mr Mitchell: I just wonder if
you and the Chairman do not get on particularly well or whether
you are just trying to outdo each other in a frenzied ideological
attempt to do down the Royal Mail. It is an incredible situation
to me that the regulator has such a great distaste for the Royal
Mail. The first indication is this proposal that its VAT exemption
should be removed. How do you hope is to sustain a body which
has got to deliver the universal service by penalising it? Secondly,
you say that competition is better than regulation, which I would
have thought is possibly barmy, perhaps totally barmy. How do
you hope to get an effective service when you keep on taking more
and more of its business away from it and leaving it only with
the dirty end of the delivery system and no subsidy from the incomers
towards maintaining a universal service? How does competition
provide the best regulator?
Ms Chambers: There are a lot of
questions in that one.
Q129 Mr Mitchell: It was a composite
question. We are only allowed one.
Ms Chambers: I will try and answer
all of them. Firstly, I can assure you that there is no frenzied
ideological pursuit of Royal Mail. We have absolutely not in mind
to do down Royal Mail. We have no distaste for them.
Q130 Mr Mitchell: You do not seem
to be helping them much.
Ms Chambers: We are trying our
hardest to sustain a universal service, which at the moment only
they are capable of providing, so it is absolutely not true to
say that we are trying to do them down. On the question of VAT
exemption, we have not said simply that the VAT exemption should
be removed from Royal Mail. What we have said is that we think
there should be a level playing field in VAT as between the different
postal operators. That does not necessarily mean removing the
VAT exemption. If there is exemption for one, there should be
an exemption for all.
Q131 Mr Mitchell: You do not want
to abolish it?
Ms Chambers: Maybe there should
be an exception for certain types of mail which applies to all
operators but not to one operator at the expense of the others.
It is not the same as saying that something should be taken away
from Royal Mail in some way that is unfair; precisely the opposite.
What we are saying is that it should be made fair.
Q132 Mr Mitchell: That would be of
benefit to Royal Mail?
Ms Chambers: We feel that would
be of benefit to the mail service generally if the position on
VAT were restored to one of balance, which could mean that all
mail operators' business is exempt from VAT. That would equally
do the job. Your next question was about whether competition is
better than regulation in terms of securing customer interests
and universal service. I think this is one issue on which Royal
Mail and we are very much in agreement. If we can get a fair,
sustainable, competitive market, and that does away with the need
for the sort of very interventionist regulation which we have
needed for as long as Royal Mail is a complete monopoly, I think
that would indeed be better for the market. I think it would indeed
be better for customers, and Royal Mail agree with us on that.
Q133 Mr Mitchell: So taking business
away from them is helpful to them?
Ms Chambers: There is nothing
that we do that takes business away from Royal Mail.
Q134 Mr Mitchell: Competition does
that.
Ms Chambers: We are opening up
the market so that if other people are able to do business in
a way which is more efficient or which serves customers better,
then they should be free to do so. That is the point of taking
away monopolies; that is the point of anti-trust law and liberalisations
everywhere. You may not believe it. Our experience suggests that
competition, choice, letting markets work, as long as it is on
a fair basis, does tend to be better for customers than insisting
on statutory monopolies, and that is what I believe Parliament
decided when it introduced the Postal Services Act in 2000.
Q135 Mr Bacon: Ms Chambers, at the
last Committee hearing one of my questions to you was whether
a particular quote was an accurate quote or not. This was a quote
from you from a newspaper, but we all know only half of what you
read in the newspapers is accurate so the problem is telling which
half. "`If people see a rise in the cost of stamps to preserve
the present universal service obligation they may wish to look
at the options,' she said. `There are other ways to deliver a
service to customers in far-flung areas than insisting on a six-day-a-week
service.'" My question is: "Is that an accurate quote?"
and it is still my question. I asked that question and you replied,
"It was not a direct quote." I said, "It is in
quotation marks. Is it an accurate quote?" and you said,
"It was taken completely out of context." I said, "Were
they the words that came out of your mouth and are they the same
words that you used?" You replied, "I honestly cannot
remember." Since you have now doubtless had a chance to check,
were they the words you used?
Ms Chambers: There was no transcript.
This was an informal question and answer session at the end of
a conference and, as far as I know and am aware, there is no transcript
so I know no more now than I did then about whether they were
the exact words. The meaning that I was trying to get across is
that there is inevitably a tension between the price of stamps
if Royal Mail are not going to become more efficient and the quality
of service. One of the things that we were trying to do when we
commissioned all that research, both into the cost of the universal
service and into the value that customers attach to different
elements of it, was to see how people view these tensions and
these conflicts between prices and the universal service.
Q136 Mr Bacon: To get to the specific
point, which was about the six days—and I understand those
tensions—the specific point was about the six-day service
and you were quoted or pre«cis'd—it was in quotes—as
saying "There are other ways to deliver a service to customers
in far-flung areas than insisting on a six-day-a-week service."
You presumably agree with that; you assent to that proposition?
Ms Chambers: That is by definition
true, and there are other countries that do not do six days.
Q137 Mr Bacon: Therefore the question
is how far in your thinking is it that you might stop insisting
on the six days?
Ms Chambers: It was about a year
ago that that conference was held, and since then we have commissioned
research both into what customers value and what the universal
service costs. It is quite clear from the customer research survey
that customers regard six-day delivery very highly indeed. They
value it, they treasure it and, even though other parts of Europe
do not have it, in the UK we have had it for a very long time
and nobody wants to see it removed. That is absolutely—
Q138 Mr Bacon: Any direct mailer
will tell you the best time to send something is when it lands
on the mat on a Saturday, because people have more time.
Ms Chambers: Actually, a lot of
the direct mailers say that Friday afternoon and Saturday makes
not much difference, but the point is that the receiving customers
say, and they say quite consistently, that they do value it. That
is part of the research that we have done since then. We have
also done research into the cost. The cost is quite significant,
but we have to balance the cost against what customers want and,
on the basis of all that research, we then determined that we
are not going to recommend any change to the six-day-a-week universal
service.
Q139 Mr Bacon: One more question.
We were asking you questions at the time about the future of the
universal service obligation. Why did you not just tell this Committee
that you were planning to publish important documents on these
matters immediately after our Committee hearing? Why could you
not just say that?
Ms Chambers: I did not think it
was relevant either to the question of Saturday delivery—
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