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Postal Services Bill
|©Parliamentary copyright||Prepared 1st December 2010|
Publications on the internet
Postal Services Bill
Postal Services Bill
The Committee consisted of the following Members:
Chris Stanton, Annette Toft, Committee Clerks
† attended the Committee
Amendment 51, in clause 35, page 19, line 35, leave out ‘may impose a designated USP condition on a universal service provider’ and insert ‘must impose a designated USP condition on all designated universal service providers’.
We are considering a large group of amendments relating to clause 27, but amendment 62 relates to clause 46. The Bill proposes a radical transformation of the regulation of the postal market by removing the mandatory licensing regime and replacing it with a system of authorisations, although persons may provide
A complete regulatory framework cannot be established without full information about provision of the postal service. Lots of discussion on the Bill has been about individual words, but they are all important. As I pointed out, where the wording has not been carried through, we want it strengthened, and as Government Members said, where “must” has suddenly appeared in a clause, there is clearly less need for amendments. Amendment 62 is one of many of our amendments that would simply change “may” to “must”, which would have a significant impact.
Amendments 65 and 66 relate to clause 50, but link into clause 27(2)(g), which relates to a consumer protection condition. Clauses 49 and 50 relate to that paragraph. Our amendments pertain to clause 50, which deals with the provision that may be made by consumer protection conditions. The purpose of our amendments is to strengthen the clause and ensure the best possible service and protection for the consumer. As I said this morning, the public in this country are impressed and pleased with their postal service. I have experienced other countries where nothing like the same level of service is provided, and where there are myriad tales of items being lost and suppositions by the public about what happened to their mail. We are fortunate in that that is extremely rare here, and that we have a good service.
We are also lucky to have a good first-class service that arrives the next day. I have been visited by friends from other countries who have been staggered that I can send a birthday card the day before the birthday. Yesterday I sent some Advent calendars full of chocolates to my nieces and nephews, expecting them to arrive today—as of course they have—ready for tomorrow. We have a good service.
I am sure that many hon. Members have tales similar to the one that I told this morning: poorly addressed envelopes are still looked after and delivered to the correct address, despite scrawly handwriting or a half-constructed address. The postmen and women do an excellent job. However, when there is a complaint, satisfaction levels with its handling are not so good. That is why we want this clause to be as robust as possible. A consumer protection condition would cover complaints handling procedures, including whether the complaint was dealt with courteously, efficiently and promptly and whether all the necessary information was made readily available to ensure a full and fair investigation into the complaint; dispute resolution and redress schemes; what the procedures are and whether they are used effectively; and the publication of information about complaint numbers and complaint handling. That is the sort of information that we want to know. The public, quite rightly, expect to know about such things.
The Bill, as currently drafted—[ Interruption.] I must congratulate my hon. Friend the Member for Ochil and South Perthshire on his safe arrival. He has had a terrible ordeal. We believe that he has been stranded in
As I was saying, when the complaint happens, that is when there is less satisfaction. It is rare for people to have a complaint, but when they have, the way in which the complaint is handled is not always ideal. The Bill, as currently drafted, suggests that Ofcom “may” impose consumer protection conditions on postal operators and “may” require the reporting and publishing of complaint numbers and compliance with complaints handling standards.
The existing licence, legislation and consumer protections ensure that consumers’ key interests around an accountable and high quality postal service are met. Without a mandatory consumer condition, postal operators will be able to operate without sufficient regard for consumers.
Postcomm’s 2009 customer survey found that of the 8% of residents and 13% of small and medium-sized enterprises that made a complaint to Royal Mail, 73% of the residents and 70% of the SMEs were not satisfied with the customer service that they received, which is obviously a very serious issue. Things do go wrong and it is not always easy to say why it has happened or whose fault it is, but nevertheless there are proper ways in which to deal with complaints. It is sad that 70% of the complaints handled were not handled to the satisfaction of the complainant. The figures indicate the problems that consumers experience, even with legal protection. Imagine how much worse the situation is likely to be if there is less protection, as there would be if the Bill were kept in its current wording.
Ofcom should be required—[Interruption.] My sincere apologies. My phone was on only to check whether my hon. Friend was on his way. I should have switched it off earlier. Technology! Let us go back to the post if we possibly can.
Ofcom should be required to impose a consumer protection condition on all postal operators providing either a universal service or a service within the scope of the universal service, as under the current system and as set out in the Postal Services (Consumer Complaints Handling Standards) Regulations 2008 and the Postal Services Regulated Providers (Redress Scheme) Order 2008.
I am sure that I do not need to tell the Committee that the force of the provision is in the word “shall”, and am sure, too, that hon. Members all know how the verbs go: one says, “I shall, you will, he will” if there is no sense that something must be done; but if one intends something to be done one says, “I will, you shall, he shall.”
Postal consumers should receive at least the same level of protection, in terms of the quality of providers’ own complaints-handling schemes, access to alternative dispute resolution, and information about ADR, as Ofcom will require from telecoms providers from July next year.
Postal operators should be required to be members of an approved redress scheme to ensure that complaints-handing standards can be monitored and independently investigated. Indeed, Consumer Focus has specified that in its written evidence to the Bill Committee. It tells us:
We should listen to Consumer Focus on this matter. It has considerable experience of dealing with consumer issues and of raising problems about provision for the customer and the way customer complaints are dealt with. It makes it clear that that is an essential part of any regulator’s job.
“From July 2011 telecoms providers will have to meet new regulatory requirements in relation to their complaints handling systems. They will have to adhere to a minimum set of standards and procedures; belong to an approved ADR scheme and adhere to its decisions; provide information on the ADR schemes on consumers’ bills; and write to consumers with unresolved complaints to inform them of their right to access ADR. The Postal Services Bill should provide postal consumers with, at least, the same level of basic protection.”
Amendment 50 relates to the same issue, and I shall not repeat all the points that have been made about it. Hon. Members will be pleased to hear that that means we have nearly finished discussing the amendments. We have covered a large number. Amendment 50 deals with the existing licensing legislation and is about protecting consumers’ key interests in relation to an accountable and high-quality postal service.
I have bad news for you, Mr Amess—I realise I have missed out amendment 70, and will come to it in a moment; it is on a separate issue. We feel that the amendments I have just been discussing are particularly important in the context of full-scale privatisation. In theory, people might say there should be no difference between a privatised and a public Royal Mail, but we are talking about a public service with a good record of service and a good reputation. Many people are all too aware of problems they have had with some privatised utilities. There is always the risk that a privatised company will put profit before people, in particular in an area in which that company has a monopoly service and so does not worry about losing custom. A privatised monopoly is likely to exert pressure on the regulator to reduce its requirements. We have, therefore, a particular reason for wanting to be absolutely certain that we are getting the strongest possible consumer protection. It is essential to get that protection and for Ofcom to have such powers.
Amendment 70 is about accounting separation and transparency of costs—in clause 38, but linked with clause 27(2)(c) on accounting conditions. Amendment 70 is pertinent to clause 38, about the universal service provider accounting conditions which Ofcom may impose on a universal service provider, in order to maintain separate accounts for different matters, as directed by Ofcom. Clause 38 also links in with European legislation—article 14 of the directive on the separation of accounts by universal service providers.
What is the intended effect of our amendment? The Bill as it stands provides that Ofcom “may” impose an accounting condition on a universal service provider, requiring a USP to provide greater transparency of its costs and accounting separation. However, Ofcom ought to be required to impose such a condition on all USPs.
“Without accounting separation and cost transparency Ofcom will not have the information required to implement effective regulation…and risks to the postal market, including a higher cost USO service than there needs to be and market foreclosure preventing lower cost providers from entering the market, will remain. The Bill should make the implementation of some form of accounting separation a feature of the minimum universal service requirement with Ofcom tasked with implementing the detail.”
“A shared understanding of costs would bring benefits for all concerned...It would improve the quality of information available to Royal Mail to manage its business operations...It would enable the regulator”—
“to monitor whether the universal service remains sustainable, and to assess the scope for efficiency savings within Royal Mail when setting price controls…Cost transparency would reassure alternative carriers that the regulator could respond effectively to any complaints about anticompetitive behaviour by Royal Mail…It would also answer the complaint often voiced that Royal Mail subsidises its competitors in relation to the access regime.”
Better and more transparent information, therefore, would be of benefit all around and could make everything clearer and more straightforward. Otherwise, there would always be some suspicion that things are not being expressed quite how they ought to be.
The whole point of bringing Ofcom in was to have a body with greater experience of regulating in other fields. If there is good practice in those fields, it seems logical to transfer it, to be continued in the good work that we hope Ofcom will do for the new Royal Mail set-up.
To have the word “may” in the clause would mean that accounting separation and cost transparency could be treated lightly and, given the practical difficulties in separating out costs, it might be an area that is conveniently given lower priority. We can imagine the scenario whereby Ofcom is not bothered about that particular matter and Royal Mail finds it a bit awful to do and does not make it a priority. Ofcom does not chase it up and, lo and behold, the tasks are not completed to the standards that we would like.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey): I have been listening to the hon. Lady, but the idea that Ofcom as a regulator would not be interested in how Royal Mail is accounting for its costs is extraordinary. Surely that would have been one of its prime tasks in taking over the work that Postcomm has already undertaken. I am surprised she thinks that Ofcom would not be bothered about such matters.
Nia Griffith: I am absolutely delighted that the Minister feels that such matters would be a priority for Ofcom. I very much hope therefore that he will consider the amendment and change the wording in the Bill so that it will refer to “must” not “may”. In that way, the self-evident priority will be in the Bill and be part of what everyone would expect Ofcom to do. If we are to be asking Ofcom to do a proper job, we must give it the proper framework within which to do it.
I have almost finished my explanation, except for one little reference to amendment 55 to schedule 8. It would simply change “may” into “must” in the information provisions and ensure that they match up with the other changes for which we have asked. On that note, I conclude my remarks.
Mr Davey: It is a real pleasure to welcome you to the debate, Mr Amess. The hon. Lady has made a long speech, albeit with a recess in the middle. Maybe she wanted to make sure that the hon. Member for Ochil and South Perthshire had arrived to find out whether he would be in charge of debating the next group of amendments. We wait with bated breath to find out. Sebastian Vettel-like, he has now come into his seat and we look forward to his contributing to this afternoon’s proceedings.
We have heard a lot about whether “may” should be “must”, and whether “may” should be “will”. We have had lots of musts and wills, and I shall deal with them in due course. However, this is the first time that I have had a chance to talk about part 3 and, before I go into detail about the group of amendments and christen them in my usual way, I shall explain briefly some of the key principles that underpin the regulatory framework in this part of the Bill.
Protecting the universal postal service collection and delivery, six days a week, at uniform affordable prices is at the heart of our Bill. The Government’s priority is to secure the future of the universal postal service. All the elements of the Bill, which must be seen as a package, are focused on that single objective. As Richard Hooper has made clear, the greatest threat to the universal service comes from falling mail volumes, and in particular the impact of digital media. The regulatory regime therefore needs to consider mail as part of a wider communications sector. To that end, the Bill transfers regulatory responsibility for the mail sector from Postcomm to Ofcom, which has a necessary overview of the whole communications sector. This was an idea first put forward by the previous Government. It was an idea with which we agreed in opposition and which we have accepted in government. The Bill ensures that Ofcom’s primary duty is to exercise its functions in relation to postal services in a way that will secure the future of the universal postal service. I want to underline the phrase “Ofcom’s primary duty” in relation to securing the future of the universal service.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab): Does the Minister agree that access points are a key part of the universal service, and why are they not put into statute in this part of the Bill?
Mr Davey: As the hon. Gentleman knows, we are looking forward to a long debate on access points and criteria later. He knows that the universal service, as defined in the legislation, mirrors what was defined in 2009, which takes its legal basis from the European postal directive. Unless he is suggesting that we are not securing the universal services demanded by the directive—indeed, as I have said before, we are gold-plating that—I am sure he will accept that we are meeting our legal obligations.
Ofcom will also need to have regard to the financial sustainability and efficiency of the universal service, which is critical to securing the service in the long term. I bring that particular duty to the Committee’s attention, because it was not in the 2009 Bill. In reflecting on whether the regulatory regime was strong enough to protect the universal service, I felt that we needed to have extra strength in it, hence the additional duties for Ofcom. So, as well as a change of regulator, the postal services sector needs a new regulatory framework. Regulation must be proportionate to the needs of the market, and the framework must allow for deregulation where there is competition. The Bill reduces the administrative burden on businesses by scrapping the licensing regime and establishing a more flexible authorisation regime modelled on that in the electronic communications sector. Indeed, the hon. Member for Llanelli welcomed the shift and understands that it is deregulatory and more flexible. Postal services operators, including Royal Mail, will consequently have more flexibility to innovate.
The Government have moved to a more flexible and deregulatory authorisation regime. The Bill sets out Ofcom’s overarching duties and gives it the tools needed to meet those duties. That will be at the heart of my response to the hon. Lady’s amendments today. Crucially, it also gives Ofcom flexibility in determining how to use the tools. As I said at the beginning, this group of amendments primarily seeks to substitute the word “may” with “must” or, in some cases, “will” in relation to Ofcom’s powers or the making of regulations.
I listened with great intent to the hon. Lady’s speech. She talked about the need to get more oomph into the clause, so I wonder whether we should call her amendments “the oomph amendments.” She also talked about getting a little more aggro in the determination of the regulatory regime, so perhaps they are “the aggro amendments.” However, I prefer to call them “the musty amendments”, because of the need that she sees to have “must” in them. I could have called them “the will ’e amendments”, but I thought “musty” was more parliamentary.
With the amendment grouping now christened, I understand the concerns of the hon. Members proposing them. They are keen to ensure that the regulatory regime imposed by the Bill is fit for purpose and can secure the future of the universal service. I share that concern and that is why, as I have already outlined, we are ensuring that the new regulator will have the necessary duties, powers and regulatory tools to regulate the postal services market effectively.
Gregg McClymont: I am listening further to what the Minister is saying, and I am quite unclear on this point: are access points not part of a universal service? If they are, why are they not in this part of the Bill?
Mr Davey: The hon. Gentleman will know that there are three effective tiers of the universal service. The first is the postal directive, which is the underlying legal directive. Then we have the minimum requirements for the universal postal service, which we will come to in clause 30. Finally, as he knows, Ofcom must by order set out a universal postal service order. I think he will find that anything that needs to be in the universal service will be there in those three parts.
Gregg McClymont: I think the Minister understands, and it is inevitable, that there is a vagueness in what he said, for the simple reason that unlike the other parts of a universal postal service, statutory criteria for post offices or access points are not going to be in the Bill. The Minister began his discussion with a kind of philosophical grounding of the Government’s position. It seems odd that although we are talking about a universal postal service, access points and counter services are not seen as worthy of statutory protection, unlike the six-days-a-week service. I just want to ask him about that again.
Mr Davey: Let me help the hon. Gentleman with one particular point: the access points that he seems to be concerned about—even though we will deal with them in due course. Clause 28(4), which mirrors the language used in the 2009 Bill and echoes in the current licence that Royal Mail has to agree with Postcomm, states:
“Ofcom’s duty under subsection (1) includes a duty to carry out their functions in relation to postal services in a way that they consider will secure the provision of sufficient access points to meet the reasonable needs of users of the universal postal service.”
Gregg McClymont: I think there are a couple of points to be made in response. The first is that the language clearly says “they consider”. The six-days-a-week service will be protected by statute, and Ofcom has to work around that. As anyone with a reasonable grasp of English can see, there is much more latitude for Ofcom vis-à-vis access points, for the simple reason that there will not be statutory protection.
The second point—I guess this anticipates something that the Minister will come to in later clauses—is that it is not good enough to compare the language to what was used in 2009, as there is a fundamental difference. It did not matter previously that there was no statutory provision for post offices because Royal Mail was not going to become a separate private entity with the right to contract with other parties. It was not going to have a legal duty to prioritise shareholder interests and profitability as its overriding concern. That seems to me a fundamental difference between any previous or putative legislation, when both were still in public ownership, and the situation that we are moving towards with a privatised Royal Mail.
I say simply to the hon. Gentleman: he is mixing up organisational structure with the law. The law under clause 28(4) will require exactly what the law required in the past. Therefore I am afraid that his point does not wash. We have had that argument before, and I am happy to have it again. However, if the hon. Gentleman can restrain himself, I would like to make some progress in answering the points made by his hon. Friend the hon. Member for Llanelli, which are germane to the amendments—his point is germane to a set of amendments that we are about to get to.
Mr Davey: I am tempted to say “Danke schön” to the hon. Gentleman. It is absolutely essential, when we are considering every single clause in part 3 of the Bill, that the primary focus of the regulatory regime imposed by the Bill—indeed, the primary focus of the Bill itself—is to secure the future of the universal service. That is clearly set out in clause 28. My hon. Friend the Member for Folkestone and Hythe put his finger on that point in an earlier intervention, and explained why the arguments put forward by the hon. Member for Llanelli in most of these “may/must” and “may/will” amendments are completely misguided and reveal a misunderstanding of the way that the Bill works. He rightly referred the hon. Lady to clause 28(1), where the duty to secure the provision of a universal postal service is a must for Ofcom.
I will read subsection (1) and subsection (3) of clause 28, so that Committee members will be absolutely clear that it is an obligation and a must in terms of the overarching framework. Subsection (1) states:
So there we are. It is absolutely clear—the word “must” is used. It is the prime, overarching duty. With the many parts of part 3 where “may” is used for Ofcom operating the different tools, rather than “must” or “will”, as the hon. Lady would like, we are leaving it up to Ofcom to
The amendments would risk constraining Ofcom and placing unnecessary duties on it. The amendments risk imposing unnecessary and excessive regulatory burdens on the postal industry. I hope that hon. Members would be against that. As I have already outlined, by shifting to a new regime based on general authorisation—one that is more aligned to a modern, liberalised market—we are seeking to reduce the bureaucratic burdens on operators. The amendments would seriously undermine that approach and could place unnecessary regulatory burdens on postal operators.
Nia Griffith: By saying that the amendments would undermine that approach, it sounds to me as though the Minister is saying that he would not expect Ofcom to carry out certain tasks. If he expects Ofcom to do those tasks, surely the word “must” would not present such a problem.
Mr Davey: There may be cases in the future with different operators where Ofcom will choose not to use particular powers. I will go through the amendments that the hon. Lady has tabled. Hopefully I will reassure her that the structure ensures that we get what both Parliament and the public want, which is a universal postal service, but with the regulators deciding how and when they use their various powers. That seems appropriate, rather than requiring them—here, in 2010 and for the foreseeable future—to use a particular power in every case, in every place. We are giving them flexibility. That is the approach that works, and the regulatory provisions in the Bill are written to reflect the provisions that Ofcom relies on in the telecommunications market, in many ways. In the same way that the Bill is drafted, those provisions are permissive, rather than directive. Ofcom finds that, in practice, that gives it—in a market as complicated as telecommunications—the flexibility that it needs to do the job, without in any way weakening it as a regulator. It is important to remember that we have a duty not to over-regulate—there has to be a balance. If we were to follow the hon. Lady’s suggestion, we would be in danger of going down the road of over-regulation.
I note something in passing that Opposition Members do not like me to say, but I shall continue to do so: on each of the clauses that are under discussion, the Bill takes exactly the same approach as that of—you guessed it—the 2009 Bill.
Nia Griffith: I shall make a point about other bodies that Ofcom regulates. The Minister will have heard that from July 2011, telecoms providers will have to meet new regulatory requirements. Therefore things are not necessarily always perfect as they are; we often need to search for better ways of doing things. The Minister commented on Ofcom’s not regulating so much, but there are some musts for it, too—and it appears that there will be some more.
The hon. Lady must understand that regulation is not necessarily the best way to run businesses and markets. Surely we would like Ofcom to decide that the universal postal service and quality services to postal customers—be they residential or business customers—can be provided through a competitive market, and then we can take off those burdens.
The whole thrust in the DNA of Ofcom is to deregulate. It seems that the hon. Lady wants to perform some sort of surgical operation on it to take away that DNA, and replace it with some new DNA that would make it a force for more and more regulation. I assure her that that is not what this Government want; it is not what the previous Government wanted, so I am surprised that she wants to do that.
Karl Turner (Kingston upon Hull East) (Lab): Does the Minister not accept that although the measure mirrors the 2009 proposals, there is an essential difference? This measure will privatise 90% of Royal Mail, whereas the previous Government’s proposal aimed for majority state ownership.
Amendments 71 and 72 seek to substitute the word “may” with the word “will” in clause 27, which gives effect to the new authorisation regime. General authorisation is more aligned to a liberalised market of services and reduces the bureaucratic burden on postal operators. The Bill allows for certain kinds of regulatory condition to be imposed on postal operators by Ofcom. Such conditions must be targeted, proportionate and justifiable—some may apply to all postal operators, while others may apply only to those operators that supply certain types of services. Again, that is why we need flexibility. Ofcom should have discretion to impose regulatory conditions where and when appropriate, and all regulations should be proportionate, justifiable and not imposed without good cause.
Amendment 85 would delete subsection (7)(b) from clause 34. Clause 34, which we will consider in more detail in due course, concerns the designation of universal services providers. Were we to remove subsection (7)(b), Ofcom would still be able to review designations, but there would no longer be a separate express power to consider whether designated universal service provider conditions should continue to apply to a universal service provider. That would make no difference to Ofcom’s general power to revoke or modify conditions, which is set out in schedule 6 and in law generally. In
Amendments 51 to 54 relate to clause 35 and concern designated USP conditions. Amendment 51 would change “may” to “must” in subsection (1), which would mean that Ofcom would have to impose in any and every circumstance a designated USP condition on a universal service provider. The amendment would limit Ofcom’s flexibility, effectively tying the hands of the regulator, and could create needless bureaucracy and regulation.
Gordon Banks (Ochil and South Perthshire) (Lab): I apologise to the Minister for not being here earlier to take him though the amendments, but I am sure that my hon. Friend the Member for Llanelli did a sterling job. Following the comments he has just made, can he tell me what impact amendment 51 would have that would be detrimental to the Bill?
in clause 35(1) to “OFCOM must impose a designated USP condition on all designated universal service providers”. The clue is in the change in the words. It would restrict Ofcom’s flexibility. That is the general point that we are trying to make, and it is what we have learnt from the previous Government. The primary duty is set out in clause 28(1) and (3) and uses the word “must”, and that is in relation to the primary duty of securing the universal postal service. That is the overarching duty, and underneath it there are a set of tools and a set of actions that Ofcom can choose to meet that primary duty. Therefore, we have put forward an approach that ensured that we achieve that objective without imposing too many requirements and burdens that would result in too many regulations on the industry. We think that we have got the balance right, and I am afraid that the hon. Gentleman’s approach, and that of his hon. Friend, would constrain Ofcom in meeting its primary duty.
Mr Davey: I have no doubt that there will be circumstances in which Ofcom will want to impose a condition, and it will do so in order to comply with its primary obligation. I am afraid that I have to bring the hon. Gentleman back to the primary obligation. If Ofcom believes that it needs to impose a USP condition on a universal service provider in order to meet the primary duty of securing the provision of a universal service, it will no doubt do so. That ought to be clear to the Committee. That is the logic behind the Bill, and it is the same logic that was behind the 2009 Bill. It seems to me to be a sensible and proportionate way of developing the regulatory framework.
Gregg McClymont: The Minister has made a number of references to the fact that the provisions are similar to those that were in the 2009 Bill, but does he not think that it is a very different situation when the Government
Mr Davey: In terms of the regulatory framework, a little too much can be made of that distinction. Of course it is important, and I do not seek to diminish the importance of change of ownership, but the approach in the Bill and the measures we are taking are much more likely to secure the future of Royal Mail and the universal service. Therefore, this Bill is much preferable to the 2009 Bill. Let us be absolutely clear, lest the Committee is in any doubt: I fully expect that Ofcom would choose to impose a designated USP condition, which is one of the reasons that we put the power in the Bill. However, the question is, should we for every regulatory tool in part 3 require and mandate Ofcom to do it?
Mr Davey: The hon. Gentleman from a sedentary position says yes, but I am afraid that that reflects the underlying differences in philosophy—possibly not between the previous Government and this one, but certainly between the Opposition and this Government. Where possible it is much better if the regulator is enabled to deregulate and not impose regulations. I have had this debate with many people over the course of developing the Bill. I have been clear that flexibility for the regulator is a good thing. Ofcom’s duties in the Bill, alongside the duties in the Communications Act 2003—an important Act to be read alongside the Bill, which I shall come to in more detail later—can ensure that we can deregulate as much as possible when competition allows.
Gordon Banks: I am grateful to the Minister for giving way. We have taken him at his word on a number of occasions on amendments when he has said that it is the intention that x, y and z or a, b and c happen. Now he is saying that it is his understanding that Ofcom would—that is, Ofcom must—so why does he not remove all doubt by stating in the Bill that Ofcom “must” do this, not “may”?
Mr Davey: I repeat: I expect Ofcom would use the power, unless it decided that it did not need to use it, to secure the universal service—its primary duty—as set out in clause 28(1) and (3), and I should have thought that the hon. Gentleman would agree that if it was able to meet that primary duty, it should not regulate unnecessarily. That seems to be quite an obvious point. Perhaps I need to say it in another way or in another language to explain it to him. I would have thought that with his business background, he would not want a regulator to impose unnecessary regulations when they are not needed to meet the primary duty.
Gordon Banks: But the Minister just said that if Ofcom can regulate without making “may” “must”, that is what it should do. He suggests that that would be Ofcom not regulating, but that would not be the case according to the Minister’s own words.
Mr Davey: The hon. Gentleman says that I should spend a night at an airport. It is very tempting, but unfortunately, living in Surbiton and representing Kingston and Surbiton, I do not often have to use aeroplanes to fly to the House of Commons.
Let us be clear. What lies behind a lot of the hon. Gentleman’s interventions is the desire to suggest that seeking private capital and, potentially, a majority holding of private capital in Royal Mail creates a problem for the regulatory framework. The ownership of the universal service provider should have no impact on the regulatory decisions taken by an independent regulator. The postal service directive requires ownership and regulatory decisions to be kept separate. That is what the European postal directive says, and this is a regulatory framework for all postal operators, not just Royal Mail. I hope that the hon. Gentleman will also understand that point, unless he wants Ofcom, with each and every power it has, to impose regulations on the whole industry all the time. I think that if we adopted that approach, we would really see the death-knell of the postal industry in this country, because it would be hidebound with regulation, and the ability to be freed up, to innovate and to respond to consumer needs and to competitive pressures rather than regulatory pressures would be reduced, which would be very deleterious.
Gregg McClymont: The Minister is raising a really interesting philosophical distinction—if you want to call it that, which he has. As I listened to the Minister’s encomium to deregulation and what he calls an injection of private capital but is in essence a largely privatised Royal Mail, I was struck by the thought, “Do the events of 2008 and 2009 not suggest to all of us that perhaps we have to rethink in some ways our attitude to privatisation and deregulation?” Even if he does not think that the events of 2008 and 2009 would encourage such reflection, what about the evidence that has emerged in the last week about the energy utilities and about the inquiry that Ofcom is about to undertake into what seem to be massive hikes in profits and prices by energy companies operating within this kind of deregulated system that we have all been living with for 30 years?
Mr Davey: I would be surprised if Ofcom is undertaking such an investigation and I rather hope that it is Ofgem that is investigating the energy market. However, I take the hon. Gentleman’s point and, as a historian of the guild socialists, he makes it in a particularly powerful way.
I agree with some of the thrust of what the hon. Gentleman is saying, and that is that the financial meltdown—I hope I’m not straying too far from the topic of the debate, Mr Amess; I am sure that if I do you will bring me back to order, but we want some “oomph” in this debate, after all. I have reflected on those events, and on what they suggest for economic policy. They did suggest that the last Government got the regulation of the financial sector wrong and I am
However, the idea that one should learn a lesson which the hon. Gentleman seems to want us to learn—that the private sector is wrong, that privatisation is bad, that regulation and nationalisation are good, and so on, is a completely illogical conclusion to draw and I certainly do not draw it. Indeed, one of the lessons that I draw is that sometimes competition is not strong enough and sometimes we see vested interests and markets that are not working well, which need to be corrected to ensure that they are functioning properly as markets. Often that is the lesson to learn, rather than the need for yet more onerous regulation.
Gregg McClymont: I was interested to hear the Minister’s train of thought, because he began by saying that he had reflected on those events of 2008 and 2009, but everything that he subsequently said was on the privatisation and deregulation model. I was trying to make a reasonably subtle point to him. I listened to what he was saying and the language that he was using was exclusively drawn from that school of thought. There are schools of thought among those who study politics, political science and history that say that language does not just reflect the world, it shapes it; and based on the language that the Minister is using, it seems to me that we have not learned any lessons and this Bill seems to reflect the fact that we have not learned those lessons.
Mr Davey: Tempting though it is to engage in a wide-ranging debate on economic philosophy, which I am very happy to have with the hon. Gentleman and preferably with a drink in my hand, I would suggest that, yes, I am using words such as “privatisation” and “deregulation”—I make no apology for that—but we are dealing with a Bill that is about privatising the Royal Mail and introducing a more deregulatory framework, so perhaps that is why I am using those words a lot.
Lest the hon. Gentleman is in any doubt, there are cases in which the state should own organisations and in which regulation should be strengthened. If that reassures him and enables him to retain his sedentary position for a little longer, we should, I hope, be able to make some progress. In no way do I want him to go away with the impression that I am some sort of laissez-faire, let the devil take the hindmost, free-market Conservative; I am not. I have some colleagues in the Conservative party who would like that description of me, but there are differences between some people in the Conservative party and people in the Liberal Democrats; that is well known and is exhibited in the actions of different Ministers and in the coalition agreement. What is amazing—certainly in British history—is that we are putting aside differences and coming to agreed positions and taking the economy forward and dealing with the mess of the economy that was left by the Labour party.
Gregg McClymont: I would not wish to test Mr Amess’s patience. My observation was less about the Minister himself as an individual and more about the language that this Bill is written in. It is very much the language that has been used by Governments on both sides. I am not making a partisan point. It just struck me as interesting when he added that he believed that the Government should own some things, which was a different position from that of Moya Greene in the evidence session. The point struck me as interesting; no more than that.
Mr Davey: Well, indeed. We did have some of these debates earlier in our proceedings, Mr Amess, when I explained why I thought that developments in postal markets meant that a change of ownership was appropriate. The hon. Gentleman can take from that the implicit point that at certain times in history it made sense for Royal Mail to be publicly owned. For example, as it moves from an extremely labour-intensive industry to a more capital-intensive industry, from an environment in which paper communication is the norm to a communications market in which paper communication will not be the norm. During such changes, it makes sense to look again at the ownership question. We are not alone in doing that; other countries are doing it.
As the “production function”—to use the proper economic phrase—of collecting and delivering physical items becomes more capital-intensive, it makes sense for the ownership to change so that the organisation undertaking this more capital-intensive industry has easier access to more readily available and deeper sources of capital. We could continue to have this debate, but I would not mind going back to amendments 52 and 53 because they are deeply interesting. I am not sure whether they would result in any meaningful change in the legislation. Clause 35(3) states:
Given that Ofcom is bound by its overarching duty to secure the provision of the universal service, it would run the risk of being in breach of its duties if it did not impose a designated USP condition if it thought it necessary to fulfil its duty. That reprises the argument I have been making for some time. These amendments are, therefore, not needed.
Amendment 54 changes “may” to “must” in clause 35(6) and it places yet again an unnecessary additional duty on the regulator, which would create a risk of needless regulatory burden. Ofcom will be best placed to determine whether and when performance targets should be imposed. Making it a statutory requirement to impose them would eliminate Ofcom’s discretion.
As with the other amendments in the group, hard-wiring the requirement into the legislation is not appropriate for a light-touch general authorisation regime, with Ofcom seeking to minimise or eliminate regulation whenever possible.
In general we believe that achieving accounting separation—the hon. Member for Llanelli spoke a little about it—and cost transparency is a priority. Postcomm recently announced that it would be taking measures to deliver that; as outlined in a joint statement published alongside the Bill, Ofcom is committed to taking over that work once the Bill comes into effect.
The Bill allows Ofcom to impose accounting conditions if it deems them necessary. I hope that the hon. Lady welcomes that. She will know from her discussions with Postcomm and others that accounting separation and cost transparency have for some time been the subject of a big debate between it and Royal Mail. At its heart, it is important to understand whether the universal service obligation for downstream access pricing, headroom and the rest of it will impose extra costs on the universal service provider. I believe that Royal Mail will work with Ofcom to make that accounting separation a reality.
Some difficult accounting principles are involved; when one is dealing with a production process that has economies of scale and of scope, it is not easy to untangle the various costs and apply them appropriately. I believe that Postcomm and Royal Mail have done a good job in that respect. They are getting to the root of the matter, but they admit that there is still some way to go. It is important to give Ofcom this power, but the fact that progress has been made shows that it is much better to have “may” not “must”. If they can agree on a process, it will enable them to go forward and possibly settle some of the long-running debates.
Amendment 62 to clause 46 seeks to substitute “may” with “must”. Once again, it would force the Secretary of State to require all postal operators to register with Ofcom before carrying out their business. The Bill acknowledges that there may be a need for a registration system at some point by allowing for the possibility, but a registration system should not be imposed without clear justification.
Ofcom has the power to require notification in other areas of the communication sector, but has never seen the need to use it. Most important, it is able to take action against rogue operators without a registration scheme. Once again, I turn to Ofcom’s practice. It has the power to take action under the Communications Act 2003, but chooses not to use it; it does not need it to meet the public policy aims that it is tasked to undertake. It is a good example of what we mean by ensuring that Ofcom uses its powers when appropriate, but not requiring or forcing it do so when it is not appropriate.
There is no evidence to suggest that moving from a licensing regime to one of general authorisation would lead to a sudden increase in cowboy postal operators, a fear that may lie behind the amendment. We have talked a great deal about declining volumes in our debates over the last few weeks, but it is hardly a market in which fly-by-night operators would set up in order to make a swift buck, ripping off consumers in the process. Hon. Members are of course right to be concerned that Ofcom has powers to require pre-notification if needed, and it is something that the Secretary of State can provide for.
Amendment 50 to clause 47 seeks to replace “may” with “must”, thus forcing Ofcom to impose “essential conditions” on postal operators. The conditions listed
We will, however, still recognise the need to cover all eventualities. That is why the Bill accounts for essential conditions that may be applied where appropriate. Those conditions must be proportionate and justifiable, in accordance with a test for any new regulatory conditions imposed by Ofcom.
Amendment 63 to clause 49 would substitute the word “must” for the word “may”, thus forcing Ofcom to impose consumer protection conditions on postal operators. Amendments 64, 65 and 66 to clause 50 would replace the word “may” with “must”, which would force Ofcom, if it set any form of consumer protection condition, to require the postal operator associated with the condition to become a member of a redress scheme and provide and publish information on complaints handing.
It is at this point that we should perhaps stand back, because the amendments are about consumer protection, and I want to stress the fact that consumer protection is an important element of the new regime. Ofcom has a principal duty to further the interests of consumers, and that will apply to its new duties with respect to post. Everything that Ofcom does is guided by that principal duty. Its duty to protect the universal service, and the Bill, give it the tools it needs to fulfil those duties.
I wrote to you, Mr Amess, and the Committee on 22 November, to remind members of more details of consumer protection in the new regulatory framework for post under the Bill. I did so because several of the concerns that have been raised by the hon. Member for Llanelli were raised by Consumer Focus when it gave evidence to the Committee. I wanted to set out why I thought those concerns were not valid, or, at least, why we should not be as concerned as Consumer Focus.
One of the key arguments of my letter was that it was almost as if Consumer Focus and, indeed, the hon. Lady, were not reading the Commucations Act 2003 alongside the Bill. It is incredibly important to do so if one is to understand the statutory duties that apply to Ofcom, because many of the statutory duties applying to it under the 2003 Act will apply as it takes on its new responsibilities for postal matters.
The 2003 Act gives Ofcom a principal duty to further the interests of consumers. It is necessary to have regard to a range of things under the Act when performing its duties, including the needs of the disabled, the elderly, people on low incomes, the opinions of consumers, members of the public in general and the different interests of people in different parts of the UK, including those in rural and urban areas.
Those are not mere warm words; they are not mays. They are statutory obligations, which Ofcom must fulfil as it addresses consumer protection issues for postal affairs, once the Bill receives Royal Assent. I hope that that explanation, following on from my letter of 22 November, will reassure the hon. Lady, because I believe that Ofcom has consumer interests hard-wired into its constitution. If one considers its record, it has gone about those duties in an exemplary way.
I agree with the sentiments behind the amendments in question, but they would require Ofcom to do things that might be unnecessary and would risk putting excessive regulatory burdens on postal operators, especially those in competitive areas of the mail market, where contracts with customers already offer adequate protection. Where consumer protection regulation is needed, the Bill gives Ofcom the power to apply and enforce it.
The Bill maintains and provides the necessary protection for consumers, and allows us to implement our obligations under the postal services directive, including extending the requirement for simple, compact handling systems to all postal operators and not just those licensed under the licensing regime. That is another point that I wanted to bring to the attention of the hon. Member for Llanelli. The Bill is implementing obligations under the postal services directive, so we are strengthening the requirement on postal operators—mostly competitors of Royal Mail—to handle complaints more effectively than under the previous regime.
The hon. Lady raised the issue of alternative dispute resolution schemes. Let me reassure hon. Members that clause 50 allows Ofcom to approve a new redress scheme—in effect, an ADR scheme—which will cover existing licence holders. Ofcom is able to do that, so I hope that the hon. Lady is reassured. Basically, the approach is an improvement on the current regime. The Bill also allows Ofcom discretion and flexibility to ensure that the sector is not over-regulated and that all regulation is appropriate and proportionate.
Amendment 55 concerns schedule 8 and the information provisions. The amendment would force Ofcom, rather than allow it, to require information from postal operators, again restricting its ability to use its regulatory tools as it sees fit and only when it needs them.
At one point, the hon. Lady said that Ofcom would not get the information that it needs because there are too many mays in the Bill. If I refer her to clause 53 and to schedule 8, however, they make it clear that Ofcom can get all the information it needs. Paragraphs 1(1) and 2 of schedule 8 enable Ofcom to enforce the information-gathering powers. It has powers to obtain the information as required to meet its primary obligation to consumers.
It is important to look at the underlying legislative framework—not just the 2003 Act, but the directive. Ofcom is obliged to carry out its duties in accordance with any relevant EU law. The Bill provides Ofcom with all the powers necessary to meet the requirements of the directive in relation to the provision of information to consumers. That is what we have tried to achieve. We have built on the work in the 2009 Bill, so I hope that the hon. Lady is reassured on that point.
Before I conclude on the musty amendments, I would like to reflect on one or two of the hon. Lady’s other points. She talked about the importance of mail integrity
It might interest the Committee to know that I once had the great privilege of going to Buenos Aires to visit Correo Argentino, in the early ’90s. The Argentine mail service was already liberalised—this will interest the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East—and there were many postal operators. In fact, I think a charge of $5 would get a licence to deliver mail in Argentina. At the time, a Bill was before the Argentine Parliament—very much ahead of us—proposing the privatisation of Correo Argentino. The Bill was controversial at the time because of the Minister sponsoring the Bill in Parliament. Unfortunately, there were not too many liberals in Argentina—
Mr Davey: The hon. Gentleman is so wrong to say that there are not many liberals here. One could say that there are not many socialists here—that is the reality. I am happy to see my actions and those of my party judged by liberalism, and compare that with his party being judged by socialist theories. That would be an interesting comparison—I know which side would come out on top. However, he tempts me from my exposition of postal politics in Argentina in the early 1990s.
The Minister responsible for privatising Correo Argentino had a business associate who was a well-known gunrunner and drugs baron in Argentina. It was thought that he wanted to buy Correo Argentino as another distribution mechanism for his guns and drugs. A very interesting debate was reported in the Argentinian press at the time. Although we feel we have problems with mail integrity in this country, I pay tribute to Royal Mail and particularly to its employees, who do a fantastic job. One reason why mail flows in this country are still far higher than in many other countries, such as Argentina, is because people trust Royal Mail. It is a critical point for the industry. If the public and business do not trust the mail delivery company, they send less mail. For my sins, I once did an analysis of mail flow problems in different countries, and it was clear that where the legislation and the culture with respect to mail integrity was not as strong, mail flow volumes were lower. It is a critical point, which is pretty obvious on one level, but we sometimes forget the benefits of living in our great country.
Gordon Banks: I do not disagree with what the Minister has said about mail flows and the integrity of the mail. But some members of the Committee, especially on the Opposition side, might think that the Minister is putting that whole objective in danger because of the privatisation.
Mr Davey: I was trying to provoke the hon. Gentleman, of course. The evidence is to the contrary. He is tempting me to talk about Servicio Postal Mexicano. When I visited it on the same trip, it was moving into the new
Throughout the regulatory part of the Bill, we aim to strike the right balance between ensuring proper protections and safeguards are in place in relation to the universal service and consumer protection, while at the same time freeing the sector from unnecessary burdens and regulations. The best way to achieve that is to give Ofcom clear direction through its overarching duties and then give it the tools and flexibility that it needs to do the job. The Bill allows Ofcom discretion to utilise regulation in the way that it considers most appropriate to meet its statutory duties. We feel that that is the right way to go about regulating dynamic markets. We do not believe that regulations should be made for their own sake, nor do we believe that regulations should be set in stone. The Bill strikes the right balance in terms of setting up Ofcom’s overarching duties and giving it the tools needed to meet those duties. I am delighted to have the full support of the Minister with responsibility for Ofcom.
Mr Davey: I know that the Minister welcomes the provisions. Placing statutory requirements on Ofcom to use those tools in any and every circumstance, as this group of amendments does, is totally inappropriate and at odds with the entire thrust of the new regulatory framework that we are seeking to establish. I therefore ask the hon. Lady to withdraw the amendment.
As far as I can make out, everything the Minister has said seems to reinforce the idea that we want Ofcom to do a good job. He implies that all the things that we have suggested they should do with better defined powers are desirable, which contradicts the idea that we do not put “must” in and that we stick to “may”. I find it a rather strange dialogue, to be frank. I noted the dialogue on integrity with particular interest. It seems that we have a very good service here; certainly those of us who have travelled to places where the service is not half as good understand that. The idea that anyone would want to lessen any measures that help to keep that integrity, the excellent service and the standards that we enjoy seems positively contradictory.
Mr Davey: If the hon. Lady were to conduct an analysis of the ownership of post administration vis-à-vis mail integrity and mail flow volumes, she would find that it would not support her argument. It is my contention
Nia Griffith: That is not what I am saying. What I am saying is that we have a very good service and that we should do everything we can to keep that service. One way in which we can do that is to have a proper regulatory framework and proper teeth for the regulator to use. We want the strongest possible expression of that in this Bill. Added to that, the Minister seems to think that all the things that we suggest that Ofcom should do and that are mays in the text are desirable anyway. Many of them are things that are being done, so having a “must” would simply confirm current good practice.
Let me turn to specific amendments and specific issues. For example, let us look at the issue of consumer protection in amendments 65 and 66. The Minister asked what I was referring to when I mentioned the additional requirements on Ofcom in respect of the telecommunications industry. It was precisely that area of consumer protection that interested me. From July 2011, telecoms providers will have to meet new regulatory requirements in relation to their complaints handling systems. They will have to adhere to a minimum set of standards and procedures and belong to an improved alternative dispute resolution scheme. It is precisely in the area of consumer protection that Ofcom is clearly seeking to strengthen the requirement. Our amendments on consumer protection are therefore important, and it would be helpful for Ofcom to have the “must” in there rather than the “may”.
Graeme Morrice (Livingston) (Lab): Does my hon. Friend agree that the Minister has said that he fully expects Ofcom to do many of the things that we are asking for, yet he is not prepared to accept our reasonable amendments and include them in the Bill to strengthen the whole process? At the end of the day, it is about the best interests of the consumer, which Opposition Members—and I am sure Government Members—are putting at the heart of the process.
Nia Griffith: Absolutely. The Royal Mail network has very particular circumstances. It is, in many ways, similar to other types of utility, where it is difficult to work out how much can be open to competition, because of the difficulty of the final “may” in the universal service provision. It is not quite as straightforward as other things. It involves the same sort of ideas that we have about water companies. It is not quite so easy to say
I did not spend a great deal of time discussing amendment 50, because it is mirrored by comments that I made on other clauses. Interestingly, however, there is an EU directive on essential conditions. So, again, on what we are suggesting Ofcom should do, much of it would be covered already by the instructions in that EU directive. Therefore, to say “must” rather than “may” again seems to be very sensible; it is putting everything into the same sort of context. So the EU says, “You’ve got to do this,” and we are saying likewise. That seems to be very sensible.
That brings me back to clause 27, which is entitled, “The general authorisation to provide postal services”. The initial statements are there about what Ofcom “may”—in the wording of the clause—do. It seems to me that we have looked at those different categories as we have gone through the different clauses in the Bill, and it is quite clear that they are all important. Therefore the idea that there should be a “may” in subsection (1) again seems to make nonsense of having those categories there, of having their importance explained in other clauses and of the Minister’s words about all the good work that Ofcom is doing.
Therefore, it seems to be very sensible to make this Bill look uniform and to make it look as if we mean what we say by having a “must” in clause 27, so that the fine words about what a good job Ofcom is doing and what a good job the postal services provider—Royal Mail—is doing can be put in legislation. They “must” do those various things to ensure that we continue to have a very good service and to ensure that where there are one or two problems, and we have noted that there are one or two problems—we know that there are not many, but there are some problems with complaints handling, for example—such matters can be dealt with. If there is a “must” in the wording of the clause, obviously Ofcom will carry out that work. Ofcom will find out where there are some weaknesses and, as I mentioned earlier, an action plan can be put in place to improve things. If we are to do what the Minister has clearly stated we should do, the word “must” should be put in the clause. Does the Minister want to come back on that point?
Mr Davey: Is the hon. Lady telling the Committee that, in each and every case where she wishes to change “may” to “will” or “must”, she believes that Ofcom, in every case and every circumstance for ever, will want to use those powers and will have to use them? Can she envisage no circumstances, as the market becomes more dynamic and more competitive, where the regulator may not want to use those powers? If we accept her amendments, however, Ofcom would have to use them.
Nia Griffith: Ofcom will obviously use its discretion on the methods that it actually uses, but Ofcom will want to know how the principles of accounting separation, universal service provision and consumer protection are
Gordon Banks: It seems to me, listening to the debate on this issue, that the amendment would protect the level of service by changing “may” to “must”, which the Minister is resisting. Only by changing “may” to “must” can we ensure that the service, which may be very different in the future, is protected.
Nia Griffith: This reminds me of what Moya Greene said. She gave her commitment on an inter-business agreement, but nobody knows what will happen if she gets a job somewhere else or if circumstances change. Nobody can be absolutely certain, because there will be nothing in the framework that will force that agreement between a privatised Royal Mail and Post Office Ltd. We have exactly the same situation here. We have got a lot of very fine words about what we want Ofcom to do, about how it is a jolly good thing and about how it is doing a jolly good job, but that does not match what we hear on giving it the necessary tools. For those reasons, I would like to see “must” not “may” in the clause. That is why we have tabled the amendments, and we want to press some of them to a vote.
On that note, I conclude my remarks. I will give you some indication, Mr Amess, if I may, on which amendments I want to press to a vote. Am I right in thinking that you want some guidance on our intentions on amendments relating to clauses further on in the Bill? Should I mention those amendments first, before I mention the ones relating to clause 27?
I begin by thanking my hon. Friend the Member for Llanelli for holding the fort today. I am sure that she did a sterling job, and it is my responsibility to give her a little rest—“little” being the appropriate word given amendment 40. The amendment calls for a specific insertion in the Bill to transfer Postcomm’s current funding agreement to Ofcom. In one of the Committee’s evidence sessions, Mr Brown, the chief executive of Postcomm, referred to the relationship between Postcomm and Royal Mail as being like a marriage. He said that he sees an advantage in moving regulation across to Ofcom, because it has a wider field to regulate. In the same session, Mr Richards, the chief executive of Ofcom, said that he could see a number of advantages in regulating Royal Mail in the broader regulatory regime for which Ofcom is responsible. I believe that many Committee members agree that the experience of regulating many powerful companies, as Ofcom does, means that the focus would not stagnate on the single relationship as it could do—I am not saying that it does—in the current Postcomm-Royal Mail relationship. That could be a good step forward, because there would always be something new to move on to.
Mr Richards went on to say that he can attract high-quality people to the Ofcom work force and that that is vital in arguing detailed economic and legal issues with some of the most well resourced companies in the UK, Europe and, indeed, the world. He also said that it is important to know about network industries, such as Royal Mail, and that Ofcom currently regulates network industries, such as telecoms and broadcasting. I do not necessarily disagree with any of those statements, which go some way towards assisting me in building my argument on the amendment.
I asked Mr Richards whether there would be adequate resources to allow Ofcom to deliver a quality regulatory service that would not only protect but, where possible, stimulate the sector. I also asked him what portion of Postcomm’s budget Ofcom would receive, how many staff Ofcom would deploy on postal matters and how that would compare with Postcomm. In response, Mr Richards stated that Ofcom has already had
“a spending settlement that is demanding and challenging… I am confident that when we get to the other side of the changes we are making we will still have a very strong capability in the organisation.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 48, Q95.]
I think that Mr Richards meant that Ofcom’s budget had been reduced by 3.6% for this financial year, after it made a £7.5 million saving in the previous financial year. The latest annual report also refers to delays in the implementation of decisions as a result of its current responsibilities, and with those delays come delays in the benefits to consumers. He also highlighted additional operational and financial challenges in defending its
Adding Royal Mail to Ofcom’s basket of responsibilities will undoubtedly place an additional burden on it, so there is a need to ensure that the organisation is funded and staffed in a way that is fit for purpose. This is not a debate about the funding of Ofcom in general, but it is a debate about the funding of Ofcom’s ability to regulate the postal sector appropriately, which is what amendment 40 is about.
“we expect that the full complement budget for Postcomm would be the starting point for a further discussion between ourselves and the Treasury”.––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 48, Q95.]
That suggests that he believes that the Treasury will be intent on reducing the £10 million budget currently enjoyed by Postcomm when responsibilities are transferred to Ofcom. I support Mr Richards in his hope that he will have the resources to do the job properly, and, although the budget is agreed with the Treasury, we all know that current Postcomm funding comes from the licensed operators, and therefore, largely from Royal Mail.
The amendment would ensure that Ofcom enjoyed the £10 million budget currently enjoyed by Postcomm when responsibilities are transferred. Perhaps we should look at some of the numbers, to put things into perspective. Postcomm, with its £10 million budget, employs approximately 66 staff to carry out its current functions on mail regulation. That includes interim staff members, external commissioners and directors. On the other hand, Ofcom has a budget of around £142 million and employs 873 staff, excluding non-executive members of the Ofcom board, content board and advisory committees, and employees seconded to Ofcom.
Seeing the comparative sizes of the operations gives me some concern. I fear that without the carry-over of Postcomm’s budget, there is a danger of future regulation in the Royal Mail sector being underfunded. If it is underfunded, it is under-resourced. Indeed, I wonder whether the Minister believes that, with the possibility of a range of players entering the market, there may be an even greater need to increase levels of funding in future. I will be happy to hear his comments on that.
The amendment provides Postcomm’s funding levels to Ofcom for the new job of mail regulation, for which it will be responsible. Accepting the amendment today will ensure that Mr Richards can get on with his job of running Ofcom, for all our benefits, instead of arguing with the Chancellor, which may be to nobody’s benefit.
Damian Collins (Folkestone and Hythe) (Con): Does the hon. Gentleman agree that, given Mr Richards’s background as a former adviser to Tony Blair, he probably has the experience to argue with a Chancellor if he has to?
The future job of regulating Royal Mail will be more complex. In the immediate future, the transfer of responsibilities will undoubtedly be complex and, potentially, more expensive; perhaps the Minister can expand on that. Such things usually happen when transfers take place. I firmly believe that Ofcom needs to be funded appropriately for its new job, and the amendment creates the opportunity for that to happen. I urge the Committee to accept it. I am not concerned that Ofcom, in theory, will not be able to do the job, but if Mr Richards’s concerns come to fruition and extended discussions take place with the Treasury, I worry that the portion of the Postcomm budget that will arrive through Ofcom’s letter box—be it first class or second class—will not be guaranteed.
If the portion is not adequate, a number of things could occur. First, Ofcom may not, as I have said, be able to regulate the mail sector appropriately, and secondly, there may be pressure on its existing budget to incorporate some or all the costs needed to regulate the mail sector. Those things may lead to greater challenges and impacts on Ofcom’s carrying out the jobs that we expect it to do here and now. Neither potential outcome is desirable, and I am sure that when the Minister gets to his feet he will tell us that neither will occur; we argue that they will not if the amendment is accepted. I am sure that he would not want to be responsible for either outcome.
The Minister can ensure that Ofcom has the funding that would allow Mr Richards to create the staffing levels necessary to carry on the work of regulating Royal Mail, clearly and precisely, by securing the funding stream that Postcomm currently enjoys. That would ensure that when Ofcom starts to regulate the sector, it is adequately funded. I look forward to the Minister’s response.
Mr Davey: As the hon. Gentleman has said, amendment 40 relates to Postcomm’s current funding agreement being transferred in its entirety to Ofcom. I should welcome the hon. Gentleman back to the Committee—I had hoped that we would hear a detailed description of his journey. It is important that we understand that Royal Mail employees have to endure a lot of inclement weather at times, which can affect their journeys, so sharing such anecdotes helps us to have a full understanding of the industry that we are discussing. I am sure, therefore, that a detailed description would be in order.
In outlining Ofcom’s 2010 spending review settlement, the Chief Secretary to the Treasury made it clear that all responsibilities and spending powers for Postcomm will transfer to Ofcom. I hope that the Chief Secretary’s commitment will reassure the hon. Gentleman. Although there is no intention to reopen the settlement, the hon. Gentleman will understand that Her Majesty’s Treasury reserves the right to do so for any settlement should that be necessary to meet the Government’s deficit reduction
It would not be sensible to try to bind the Treasury to the particular spending review settlement for Ofcom, as the amendment seeks to. Legislation is simply not a sensible and appropriate vehicle for making such spending commitments, and I am not aware of any precedent for doing so in primary legislation. It is possible that secondary legislation might be the recourse, because, as we all know, that can be changed relatively easily. I am not aware of any such primary legislation, but if the hon. Gentleman knows of any, I would like him to bring it to my attention and to that of the Committee. He did not do so in his initial remarks, which suggests that the proposal is not the usual way of going about dealing with budgets, be they for regulators or anyone else.
The hon. Gentleman was fair in his description of the position of Ed Richards, the chief executive officer of Ofcom. In my private meetings with Ed Richards, he has at no stage raised any concerns regarding the measure. In his evidence to the Committee, he was clear that he felt that some efficiencies should inevitably be found because of, for example, savings in back-office functions, which we want to see in a number of areas. He was in no doubt, however, that Ofcom would have the necessary resources to deal with its increased responsibilities in relation to post.
Gordon Banks: I am grateful for the Minister’s comments and I shall return to them when appropriate. My concern is ensuring that there is an adequate amount of funding during the transfer. Transfer stages tend to be more expensive and less productive once a system is up and running. Are the Minister and Mr Richards convinced that there will be adequate funding transfer and adequate funding within Ofcom’s current budget, which can be sucked somewhere else if there is a short-term need for some additional money?
Mr Davey: Having worked with Ed Richards and Tim Brown, who is the chief executive officer of Postcomm, I am impressed with how they manage their respective organisations. They have not raised the matter with me. Their joint statement at the time of the policy statement or the Bill—I forget which—set out their intention to work together to bring the measures in the Bill to fruition so that the transition from Postcomm to Ofcom could be as seamless as possible. It will not require the additional resources that the hon. Gentleman suggested.
Both organisations realise that we are in difficult financial circumstances. They know that they need to make the transition and realise the savings that Ed Richards said could be realised in the process. Some very talented people are in both organisations, and I take this opportunity to pay tribute to them.
For the record, it is worth my paying tribute to the chairman of Postcomm, Nigel Stapleton, who steps down at the end of this month, having served Postcomm for many years in two terms. He is extremely well regarded. He would agree that he and Tim Brown have overseen a professional approach in the past few months to ensure the transition from Postcomm and its employees under the auspices of Ofcom. I do not think that the hon. Gentleman has made the case for the need for huge extra amounts of money, which seemed to lie behind his questions.
Gordon Banks: Does the Minister agree that the amendment is about appropriate amounts of money? It is about current amounts of money. Does he also agree that the transfer of responsibilities is a particular pressure point? It could impact negatively on Ofcom. The hon. Gentleman said that Mr Richards and Mr Brown said that they will do it, but will he acknowledge that the transfer period is a potential pressure point?
Mr Davey: Organisations throughout the public sector have a degree of pressure on them at the moment. The Government have not sought to hide that. There is a need for all organisations to ensure that they are keeping their costs under control. It is fair to say, though, that the budgets of Ofcom and Postcomm have not been as severely hit as some other budgets elsewhere. There is a reason for that, of course. All of Ofcom’s work as a sectoral regulator is funded by levies on the industries that it regulates. The principle that the industry, not taxpayers, should pay for its own regulation is well established.
Under the current regime, licence holders and operators pay fees to fund Postcomm, according to the volume of mail that they handle. It is because the industry has been paying for Postcomm and Ofcom that their budgets have not been hit as hard as other parts of the public sector. The hon. Gentleman should take that into account. Those at Ofcom and Postcomm know that they still need to control their budgets even though, compared with some parts of the public sector, they have a degree of protection.
Gordon Banks: The reduction in the budget that the Minister is referring to in respect of Ofcom is about 3.6%, which takes the budget for 2010-11 down to about £127.5 million, but one of my worries concerns the pressure point at the time of the transfer. I have been in businesses and organisations when there is an influx of new responsibility. Such times are always a pressure point, and all I am saying to the hon. Gentleman is that he should recognise it. It might not require money. Grit and determination, blue-sky thinking and bright guys might solve the problem, but will he acknowledge that such a transfer period is a potential pressure point and, as he suggested, an additional pressure point?
Mr Davey: The pressures on organisations that are making such transitions are clear. Such times are particularly difficult for the staff. To be honest, management of staff is probably a bigger pressure and a bigger challenge for organisations, and those leading them, than budgets.
I pay tribute to Nigel Stapleton, Tim Brown and all senior managers and staff at Postcomm. They have had a difficult time; they were all geared up for change in relation to the 2009 Bill, but it was pulled by the last Government. Those in Postcomm who were getting ready to move to Ofcom were put on hold and had to stay in Postcomm. That created an awful lot of uncertainty for Postcomm staff. I am sure that the last Government regretted having to do that, but they nevertheless caused some pressure within Postcomm.
In discussion with Tim Brown and Ed Richards, I tried to ensure that we did not add to those pressures, which had been there for some time. We were aware of the difficulties that some talented individuals had in
First, we had to ensure that the transition happened as soon as possible. However, to get a transaction—we are trying to achieve it to secure the universal postal service—we needed to ensure regulatory certainty. We needed to ensure that Ofcom would be able to regulate the new Royal Mail after the transaction. We therefore had to make decisions about the time and speed of the transaction. We did that in consultation with Postcomm and Ofcom, and the Bill sets out a speedy transition.
It is important not only to get regulatory certainty for the transaction; we also need to give a clear path for employees who have had to live under a cloud of uncertainty for some time. Those are the real pressure points in this transition. When talking about merging quangos and abolishing one of them, we should remember that we are talking about people’s lives and jobs. Many talented people have given their time to this public service; it is they who are under the real pressure, and I have been mindful of that in respect of the change.
Again, I make it clear that the Bill provides for the costs of transfer to be recovered under the normal procedure for setting charges. Sub-paragraphs 2(3) and (4) of schedule 4 make provision for the costs of transfer to be recovered. I hope that I have dealt with the specific point, but I do not wish my answer to deflect from the overall point that it is the staff of the organisation that we should be thinking of, as it is they who are under pressure. Through the legislation and how we have worked with the organisations and encouraged them to work together, I believe that we have reduced that pressure. However, I realise that it is real.
Gordon Banks: If you do not mind, Mr Amess, I shall regale the Committee a little with my journey, seeing as the Minister enticed me to do so. It started at 10 o’clock yesterday morning and finished at 3.30 this afternoon, when I arrived here. I am extremely grateful to the captain and crew of BA2391 from Edinburgh to Gatwick; it was the only flight to leave Edinburgh today or yesterday. The flight was excellent, although I am not so happy about the other three flights that did not leave. But that is enough about my journey.
I pick up on some of the Minister’s opening remarks. Perhaps I should have intervened on him earlier. Did he say that the funding of Postcomm was being transferred in its entirety, or did he say that all responsibilities will be transferred? It was not clear to me, but perhaps being up for 36 or 40 hours stopped my ears from working properly.
Mr Davey: I feel that I ought to give the hon. Gentleman a moment’s pause after his arduous journey. I made it clear—indeed, the Chief Secretary to the Treasury did so—that all the responsibilities and spending powers of Postcomm will transfer to Ofcom.
I want to go back to the issue of a pressure point during transfers. I support wholeheartedly the Minister’s view that the pressure is on individuals. It is always the pressures on individuals, because individuals make organisations—without individuals, we have nothing. We need individuals to be creative and to have a work environment that allows them to be creative.
My worry about pressure points remains, although it might be unfounded. The Minister has already alluded to a lot of existing pressures on organisations such as Ofcom, and the initial transfer period might be one of those pressure points that I keep describing. Something might be needed to make the transition go as smoothly as we want it to. That something might not be pounds, shillings and pence. I am not asking for the Minister to say that if Mr Richards comes along needing another £1 million that he will be given it. I just want to be sure that the Minister recognises that such transfer periods are potential pressure points—on individuals. The Minister alluded to the impact on individuals, and that is what is driving this, because we want to ensure that the individuals responsible within Ofcom for regulating Royal Mail will have the resources to do the work. If they do not have the resources, they will not be fulfilled, they will not be able to do their jobs and they will probably not stay in Ofcom doing those jobs. [ Interruption. ]
Mr Davey: I am trying to assist the hon. Gentleman. I refer him specifically to schedule 4, on page 70, which is entitled “Recovery of administrative charges incurred by OFCOM”, and to sub-paragraphs (3) and (4) of paragraph 2. In particular, paragraph 2(3) says, effectively, that Ofcom can take steps to cover, through charges, the necessary amount
Gordon Banks: I am grateful to the Minister for pointing that out, but the discussion has been useful in getting the information out in the open, not hidden away in the Bill, and in getting people’s understanding of some of the challenges that might be faced during the transfer of the responsibility from one organisation to the other.
I have not had guidance about amendment 6, which stands in the name of Mr Weir, who has also been unavoidably detained. I do not know whether the hon. Lady will speak to his amendment or whether it will just not be moved.
I think that it would be very sensible to look, first, at the title of the clause: “Duty to secure provision of universal postal service”. That is extremely important, of course. We know that it is going to be taken over by Ofcom and we obviously know of Ofcom’s current role as a regulator, regulating the TV and radio sectors, the fixed-line telecommunications and mobiles, and the airwaves over which wireless devices operate. Moreover, we know that Ofcom has a reputation for ensuring that people in the UK receive the very best in their telecommunications service and are protected from scams and sharp practices. Indeed, that is Ofcom’s aim.
“It should be the principal duty of Ofcom, in carrying out their functions…to further the interests of citizens in relation to communications matters; and…to further the interests of consumers in relevant markets and where appropriate, by promoting competition.”
Accountable to Parliament, Ofcom is often involved in advising and setting some of the more technical aspects of regulation, in protecting and enforcing the law. It is particularly pertinent here to emphasise Ofcom’s concern with the “interests of citizens” and the “interests of consumers”, because that is very much the role that we want Ofcom to play when it takes over regulation of the mail services. It is one of the reasons why we are particularly keen to push amendment 73, which would amend subsection (3).
Of course, we all appreciate what the universal postal service is and how important it is to us in this country. People value that six-days-a-week service and they appreciate the uniform affordable price. I think that people would be quite horrified at the thought that there could be variable pricing according to how far they were going to send their letter, because they are so used to the idea that that is not the case and that, from the south-west of Wales to the north of Scotland, they can send a letter for exactly the same price that it costs to send a letter three streets from their home. So they are very much attached to the idea of that uniform price and to the six-days-a-week service.
Of course, the difficulty with trying to cut that service down is that, although businesses might like the Monday to Friday service, the home consumer service likes the Saturday service, because that is the day that they are at home. So there is really no way of pleasing people if we were to say that we should just use the European directive of a five-day service. That is not what we want; we want a proper six-days-a-week delivery service.
Gordon Banks: I do not know whether my hon. Friend recalls our evidence sessions, but one of the witnesses—a representative from a mail forum or something of that nature—made that very point. If we were to go to five days, there is a real issue about who is appeased, whether it is individuals or businesses.
Nia Griffith: Absolutely. So, quite clearly, what we want is a six-day system. We do not want a system where we are talking about five days, because we would not please everybody and both sectors are extremely important: businesses that depend on the service, and consumers, of course.
“The ability to deliver letters, packets, parcels and other items to all 28 million business and residential addresses in the UK six days a week, at uniform one-price-goes-anywhere tariffs, is part of the country’s social and economic glue.”
Hooper stressed that it is important for business that people can use the same price, however far they are sending something. It is also, however, important from a social point of view. We still enjoy sending things socially, and we expect to be able to do so. Clearly, there have been all sorts of innovative things, such as internet trading, which mean that some people who had previously stopped using postal services have returned. Personal things are still sent. While we may not get that weekly letter from family members—some of us will remember that from our youth when we first went away from home—we find that people are sending all sorts of greeting cards through the post. There has been a decline in things such as bills being paid through the post, but that is because there are so many other ways to do that. Nevertheless, keeping the universal service is crucial.
Some people may be confused and think that it is odd that we are proposing to remove subsection (3), so it merits some explanation. We are not saying that, because it was not in our 2009 Bill, it cannot be in this one. There is an important underlying principle behind why it was not in our Bill. The clause suggests that when Ofcom is considering how to regulate and influence the universal service provider, it needs to factor in financial sustainability and efficiency. That sounds absolutely fine—of course we want everything to be efficient and financially sustainable—but the difficulty is that that is the opposite of what a universal service is. If something is to be operated in as cost-effective a way as possible, post should not be taken to some of the UK’s remotest areas every day—certainly not to an island. If every bit of a service needs to be financially sustainable, the company will not want to pay for the hours and the fuel of somebody who is delivering a small amount of mail every day to a remote area. The company would say that it would be better to switch those areas to fewer services a week, as they do in Canada. That would make it more financially sustainable.
Mr Davey: I draw the hon. Lady’s attention to the words in clause 28(3). That subsection discusses the need for a universal postal service to be efficient. It does not discuss a postal service being efficient. If those words had been in the Bill, the hon. Lady may have had a point. I am sure that she would agree that it is necessary for the universal postal service, delivering to all parts of the UK at a uniform price, to be efficient.
Mr Davey: Does the hon. Lady not agree that the universal postal service is set out elsewhere in the Bill? This measure is about the duty to secure the provision of the universal postal service, which is set out in other clauses—for example, clauses 29 and 30.
Nia Griffith: The difficulty that I have is that this clause has been included specifically to indicate that those factors will be considered to be more and more important. In other words, will the service be viable? Will it be cost-efficient? Will it be financially sustainable to continue providing it at the current level? Obviously, we would like to see that important service at the affordable uniform price continue across the whole UK and every one of its 28 million doorsteps. The worry is that the clause will open the door to a different type of thinking, such as “That’s a bit expensive; we won’t bother with that. We won’t bother ensuring that the service runs for that many days per week and goes to remote areas.” If that idea is first and foremost in the regulator’s mind, the worry is that it may drive a different type of agenda from the one that we would like to see in order to safeguard the universal postal service.
The Minister may try to argue that the whole service will be taken into consideration and that it will all be financially sustainable and efficient. We would not argue with efficiency—any business would want to make itself efficient. The regulator’s role would concern what an affordable price to charge for the service would be. We want definite reassurances that this measure does not seek to drive some sort of agenda where cost is always the most important issue. There is more to universal service provision than cost. The whole idea is that it is universal, and we must accept that the service will not be cost-effective in some areas of the country and that higher volumes of usage in certain areas will help to cross-subsidise some of the more expensive routes.
The hon. Member for Angus has tabled an amendment in which he confronts the same problem from the other way round. We would remove clause 3 altogether, but he suggests adding another line to the legislation. The clause states that Ofcom “must have regard to”, and his amendment would add the interests of rural and remote communities, which are clearly the types of community that he represents and understands. He would strengthen the obligation on Ofcom to ensure that whatever it does, it will not be detrimental to businesses that operate in remote and rural areas. As I have mentioned, it is often difficult to attract big industries to the more far-flung corners of the UK, because they have to compete with companies that have lower transport costs.
A large number of small businesses in the more remote areas use the post. In my area, I know of a number of vibrant small companies that do a lot of business through the internet and make considerable use of the postal service. They often bring a fair amount
Gordon Banks: My hon. Friend has mentioned businesses, such as internet businesses in her constituency, that have a positive impact on the post. In many rural constituencies, such as that of the hon. Member for Angus, some areas have a challenge to receive internet access, and the mail is the business lifeline.
Nia Griffith: Indeed. The “not spots”, as such places are called, are a problem in some areas of rural Wales. I am sorry to hear that they are also a problem in some areas of rural Scotland. We hope that such matters will be resolved at some stage. Yes, absolutely, there are difficulties for some people operating in these circumstances, and the post, therefore, is even more important for them to sustain their businesses.
My hon. Friend the Member for Angus is trying to say that if Ofcom has to have regard to financial sustainability and efficiency, we need an additional line in that subsection to say that it must not be at the expense of small businesses in rural areas. In other words, Ofcom must have regard to the interests of small businesses in rural areas, if there were any move to fragment and have a non-uniform price that would allow prices to develop in all sorts of different ways across the country. We must remember that the EU directive does not prescribe a uniform price—it talks about an affordable price. Therefore, if we are to ensure that the universal service provision is properly protected and that there is a uniform price, that would be another way in which to strengthen that particular requirement.
Nia Griffith: We welcome everything that strengthens the notion of a uniform price in the same way in which we welcome anything that strengthens the role of the regulator. We do not want to end up with what is a strength in one part of the Bill being undermined by what is a weakness in another part of the Bill. Two strengths are a good thing. There is no reason why that should not be defined elsewhere. We are afraid that this measure is introducing a completely new concept which has not been in the Bill before and which suggests that there could be a greater emphasis by Ofcom on obtaining maximum efficiency and financial sustainability at the expense of a commitment to a proper universal postal service. It is for that reason that we tabled amendment 73.
Mr Davey: Before turning to these two amendments, I want to make it clear that clause 28 has a central role in underpinning the entire regulatory framework in part 3 of the Bill. Clause 28 is essential in securing the long-term provision of a strong universal postal service. It gives Ofcom a primary duty in subsection (1) to ensure that when Ofcom carries out its functions in relation to post, it does so in a way that it considers will secure provision of a universal postal service. All Ofcom’s other powers in relation to post will be subject to this
Subsection (3) ensures that in performing its primary duty, Ofcom must have regard to the need for the provision of a universal postal service to be both financially sustainable and efficient. Ofcom will have to take those two facts into account at all times. As the hon. Lady has said, that requirement was not included in the 2009 Bill. I am glad that she is not moving her amendment simply because these extra duties were not in the 2009 Bill. However, it is important to recognise that there will sometimes be a tension in regulatory terms between encouraging competition and supporting the provision of a universal service. I want to emphasis that point to the hon. Lady and to Opposition Members. The duties for the provision of the universal postal service need to be strengthened, which is the reason why subsection (3) has been included. There is no other reason, so I hope that the hon. Lady is reassured.
which means that, when Ofcom regulates the different markets within the postal sector, it will need to make sure that the way in which the regulatory framework operates enables the universal service provider to be financially sustainable. That is an important additional element for Ofcom to think about. I think that it is common ground that Ofcom has to secure the universal postal service, because it was in the previous Bill. However, I want to ensure that, when it thinks about how to do that, it has to ensure that the universal service provider is financially sustainable. That is an important development and I would have thought that Opposition Members would welcome it.
Mr Davey: The universal service provider is, of course, the provider of the universal postal service. We are in danger of lapsing into tautology, but, if the hon. Gentleman has anything else to say, I am happy to give way.
Mr Davey: The hon. Gentleman says that it is not great. I do not know how many universal postal service providers he wants to introduce. We will talk about the potential for more than one universal postal service provider in a future clause and, when we come to it, the hon. Gentleman will note that it is extremely restricted. I do not, therefore, think that he will want to push his point any further.
It is important for the long-term sustainability of the universal postal service that it is efficient. The hon. Lady spent some time trying to suggest that our introduction of the notion of efficiency is somehow a threat to the universal postal service when, in fact, the reverse is the case. I accept that it is likely that some elements of the universal postal service will cost more to provide than the revenue they bring in. That is a common finding in the analysis of postal markets. It is essential, however, that in meeting the standards of the universal service, the universal service provider should be as efficient as possible so as to avoid unnecessary cost to consumers and prevent yet more users from moving from post to other forms of communication. I would have thought that the hon. Lady would understand that a requirement for Ofcom to ensure that the provision of a universal postal service is efficient is actually in favour of the provision of the universal postal service and in favour of the sorts of things for which she has been arguing.
Nia Griffith: Will the Minister give an example of how Ofcom would pursue its business in a way that it would not if the clause was not included in the Bill? In other words, what would Ofcom require from the provider under the clause? What would it say and do?
Mr Davey: The whole point of having a regulator in the market is to ensure that the balance between the universal service provider and competitors in the market, who will no doubt want to have access to the downstream provision of the universal service—the last mile—is properly regulated. Regulating that will be a core task for Ofcom, as it has been for Postcomm. Ofcom will have to balance the interest between the competitors and the universal service provider. That is what happens now; it is what Postcomm has to do. In the 2009 Bill, certain duties were placed on Ofcom, as a new regulator, regarding how it should go about achieving that balance. When I looked at that Bill and asked myself whether we need to refresh or change it in any way, I thought that the balance in terms of the manner in which Ofcom was being asked to go about that duty was not sufficiently correct. I wanted to ensure that when it thought about the balance of those difficult judgments, which it must achieve on many things, one of the factors it took into account was the financial sustainability of providing the universal postal service. One could give almost any example of anything that the regulator must make judgments on in making that balance.
Mr Davey: It will, of course, be for Ofcom to make that final decision. If I give a concrete example, what I do not want to do is to imply by my words in Hansard that that is what Ofcom should or ought to do. I want to make it absolutely clear, by those preliminary remarks, that in giving an example, I am not in any way saying that that is intention of the clause.
Hypothetically—again, this is not necessarily the intention behind the measures, but it may be the way that it chooses to use the powers—Ofcom might decide, in a decision on prices, that if it held the price down too much, it could create financial problems for the universal service, and hence it might not be financially sustainable. In making these fine balances, Ofcom might decide that it has a duty under subsection (3)(a) to ensure that the universal postal service is financial sustainable. It might—this is not a suggestion of what it should do—decide that the price that the universal service provider, Royal Mail, can charge to competitors accessing its downstream service could be a little bit higher to ensure that the universal service was financially sustainable. I hope that that is quite a central example and gives the hon. Lady some comfort.
Gordon Banks: The Minister has just given an example of how the universal postal service, as it is written in the Bill, would be financially sustainable, and I thank him for that. However, I must take him back to his earlier remarks. He was talking about the universal service provider. Even if the service is financially sustainable, it does not mean that the provider is sustainable.
Mr Davey: If there is a universal postal service, it has to be provided; I think we can agree on that part of the argument. Therefore, there has to be a provider, or providers. If we are trying to make sure that the universal postal service is financially sustainable, we have to be sure that those providing that service are financially sustainable. I think there is a degree of logic in my argument; I am not quite sure how I am failing to get my point across to the hon. Gentleman.
Mr Davey: The clause focuses on the universal postal service. The hon. Gentleman seems to be suggesting that the universal service provider would be cross-subsidising in some way, from another activity unrelated to the universal postal service. He is, therefore, strengthening my argument that we should specify in the Bill in terms of the universal postal service and not in terms of the universal postal service provider. If we had done what he is arguing, Ofcom could look at a particular company that was providing the universal service and say, “Well, it is financially sustainable, because it is in offshore banking somewhere in the Caribbean, and it is cross-subsidising. Therefore, we should not worry.” That is not what the regulator should be doing; it should be focusing on the universal postal service and whether that is financially sustainable.
Mr Davey: The hon. Gentleman is seeking to say that clause 28(3) should contain the phrase “universal postal service provider.” He is questioning why it contains “universal postal service.” I thought that I had answered that question. Reading Hansard tomorrow will be even more interesting than it normally is.
and efficient when carrying out its functions in relation to post, we would strongly resist such a proposal, and I hope that that is self-evident. As I have already outlined, that requirement will ensure that, as it approaches regulatory decisions, Ofcom will look beyond the immediate term. The clause, as drafted, ensures that Ofcom considers the impact that it could have on the long-term sustainability of the universal service and ensures that it does not support the development of the market in a way that would undermine the long-term viability of the universal service.
It is common ground that Royal Mail needs to modernise and to become more efficient. I would not want the Bill to require Ofcom to use its regulatory tools to entrench inefficiencies in the USP. That is in no one’s interest, least of all that of the users of the postal service. The Bill strikes the right balance in ensuring that Ofcom has regard to
Let me move on to amendment 6. I hope that the hon. Member for Angus will join us in due course. Perhaps we shall see him later in the week, although his part of Scotland might be difficult to leave at the moment. The aim of his amendment is laudable. He wants to ensure that the needs of small business in rural and remote areas continue to be met, no doubt come
In that context, persons can also mean businesses. We are extending the duties to the functions of Ofcom in respect of communications matters under section 3(1)(a) of the Act to include postal matters. Amendment 6 would therefore offer no new protection. Such protection already exists. The clause and subsection (3), in particular, provides the appropriate balance between protecting the long-term sustainability of a universal service, while ensuring that the regime promotes efficiency. The clause also ensures that the needs of small business in rural and remote areas continue to be met and provides ample protection. I therefore ask that the amendment be withdrawn.
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