Postal Services Bill

The Committee consisted of the following Members:

Chairs: † Mr David Amess  , Miss Anne Begg  , Mr Jim Hood 

Banks, Gordon (Ochil and South Perthshire) (Lab) 

† Blenkinsop, Tom (Middlesbrough South and East Cleveland) (Lab) 

Collins, Damian (Folkestone and Hythe) (Con) 

† Davey, Mr Edward (Parliamentary Under-Secretary of State for Business, Innovation and Skills)  

† Fuller, Richard (Bedford) (Con) 

† Griffith, Nia (Llanelli) (Lab) 

† Harris, Rebecca (Castle Point) (Con) 

† McClymont, Gregg (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab) 

† Morrice, Graeme (Livingston) (Lab) 

† Newmark, Mr Brooks (Lord Commissioner of Her Majesty's Treasury)  

† Patel, Priti (Witham) (Con) 

† Stephenson, Andrew (Pendle) (Con) 

† Swinson, Jo (East Dunbartonshire) (LD) 

† Turner, Karl (Kingston upon Hull East) (Lab) 

† Vaizey, Mr Edward (Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport)  

† Walker, Mr Robin (Worcester) (Con) 

Weir, Mr Mike (Angus) (SNP) 

† Wright, David (Telford) (Lab) 

Chris Stanton, Annette Toft, Committee Clerks

† attended the Committee

Public Bill Committee 

Tuesday 7 December 2010  

(Morning)  

[Mr David Amess in the Chair] 

Postal Services Bill

Written evidence to be reported to the House

 

PS 20 Employee Share Ownership Centre 

10.30 am 

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey):  On a point of order, Mr. Amess. I wish to correct the record in respect of a statement that I made earlier in our proceedings. During discussions on an amendment to clause 3 on employee shares, I informed the Committee that the clause was explicit that all those who work for a Royal Mail company—the company providing a universal service—must be part of the employee share scheme. I wish to clarify that clause 3 does not, in fact, oblige all those who work for Royal Mail to be part of the employee share scheme. It requires that the scheme must include employees and allows the Government to make the employee share scheme available to all employees of Royal Mail. 

The provision itself does not require that all employees are part of the scheme. There is a good reason for that, as some individual employees might not wish to be part of the employee share scheme, and the Bill should not require them to do so if it is not their wish. The hon. Member for Llanelli was concerned that the employee share scheme could, for example, be used just to reward members of the management team. I absolutely assure her that that will not be the case. The scheme will not be limited to a particular group of Royal Mail employees. Our focus will be to make employee share ownership as wide as possible to help align the incentives of employees of the company. There will, of course, be transparency to Parliament on the employee share scheme. As I said when we were discussing amendments on the subject, clause 2 requires the Government to report to Parliament when they decide to transfer or issue shares in the Royal Mail company, including to the employee share scheme. I hope that my explanation has benefited members of the Committee. 

The Chair:  The Minister’s explanation has been very helpful, and it will be noted in Hansard. 

When the Committee adjourned on Thursday, all the amendments to clause 30 had been disposed of. 

Clause 30 

Minimum requirements 

Question proposed, That the clause stand part of the Bill. 

Nia Griffith (Llanelli) (Lab):  The weather has not helped this morning, and we seem to be a bit thin on the ground. Clause 30 is an extremely important part of the Bill, as it sets out the requirements for the universal service, something that is dear to our hearts and that we want to be as explicit as possible. We are pleased that the minimum requirements are more than the minimum required by the EU directive, as we are worried that some areas of the Bill could see a slipping back to providing only what is in the directive. We have talked at some length about the amendments we would have liked under requirements 1 and 2, such as Saturday delivery extending to all shapes and sizes of packets and parcels and not simply being for letters. That is a matter for regret, but I shall not spend a great deal more time on requirement 1. 

It is absolutely essential that we clarify exactly what requirement 2 means. As I understand it, it applies when there are access points. In other words, if the access points have already been established, the requirement sets out what has to happen at those points. However, it sets out nothing about a specified number of access points, such as postboxes or counters where people can take registered letters or parcels. I emphasise that matter, because reference has been made to access points as if a certain number of them had been designated during our discussions. 

Well, a certain number of access points has not been designated, which is in contrast with several providers abroad where the number of access points is specified under legislation. We have heard plenty about Germany’s 12,000 access points, but let me tell the Committee about another country that has a specific explanation on the distribution of access points and where 90% of people in urban areas are expected to have a post office-style access point within a 2.5 km radius of their home. Some 85% of people in rural areas are expected to have such access within 7.5 km of their home. I am not describing a compact, densely populated country—it is not Germany but none other than Australia. Many members of the Committee will have seen pictures or will themselves have journeyed across miles and miles of country, where a garage is a welcome landmark. I am sure that they will be astounded to note that even Australia specifies criteria for access points to the postal service. Why can we not have criteria specified in our legislation? Okay, where there is an access point, there has to be a collection—that is obvious—but there would be a specific number. Of course, we would have liked to go even further and specified post offices, but, failing that, at least if there were a minimum number, that would provide better cover than is currently the case in the legislation as it stands. 

On requirement 3, we are pleased to see that prices will be affordable and uniform. That is an extremely important addition to the EU directive, which simply refers to “affordable”. However, we are worried that there may be other parts of the Bill where that could be eroded. For us, it is important that wherever we send a first class letter, the length and breadth of the country, it should be at the same price in line with a uniform public tariff. Again, there is a difference between what we see in the Bill, which we welcome, and what the EU directive says. It is something about which I feel strongly. It is worth safeguarding, so we need to strengthen the Bill. 

We welcome the inclusion of requirements 4 and 5 on the registered and insured items services, which are in line with EU directives. Requirement 6, which is optional in the EU directive, provides for services to blind and partially sighted people. I dare say some members of the Committee will have had the privilege of recording talking newspapers, which are sent out to blind and partially sighted people, providing a valuable source of local news, gossip and all sorts of things. Certainly, it is a well-subscribed service in my local area, and a lot of hard work is put in to make it so. We welcome the opportunity for packages to be sent free of charge. 

We welcome requirement 7, which is perhaps unique to this country. It is not in the EU legislation. However, although the requirement looks acceptable on paper, there are threats elsewhere in the Bill that seem to undermine the minimum requirements. The danger is that it would be possible for Ofcom to simply pare back to what is required to comply with EU directives. I have already mentioned such threats in our discussions on clauses 28 and 29, particularly in clause 28(4), when we read of Ofcom’s duty to 

“secure the provision of sufficient access points to meet the reasonable needs of users of the…postal service.” 

That gives Ofcom an opportunity to reduce any service it deems unreasonable. That leaves it open to question, so we worry that what we see on paper in the minimum requirements may be easily eroded. It would be helpful if the Minister could offer assurances that that is not the case. 

On clause 29, we noted that Ofcom can make various assessments and consider the extent to which the market is meeting the reasonable needs of users. Again, there is an open opportunity to perhaps reduce the service in some way, so even before we reached clause 30, we found that the requirements were being undermined. 

Clause 32 sets out exceptions to the requirements. As I am sure that the hon. Member for Angus would have wanted to remind us, the exceptions relate to geographical and other conditions. He would certainly find that most unacceptable, as we do. Almost immediately after clause 30, we find a threat to its provisions. 

Mr Davey:  I am interested in what the hon. Lady is saying. Do the Opposition not support the exceptions in clause 32, which were shadowed in the EU postal services directive and in the Postal Services Bill 2009? Is she saying that the position has changed and that they are now against exceptions, and that Royal Mail employees should deliver anywhere, irrespective of geographical or other circumstances? 

Nia Griffith:  Clause 32 leaves the door open for exceptions to be made, and once more exceptions start to be made, they can grow and grow. As I have said, I will mention that in the debate on that clause, and the hon. Member for Angus would certainly have wanted to raise that matter. 

Mr Davey:  We can leave most of this dialogue until we reach clause 32, but if there is something wrong about the way in which Royal Mail runs its exceptions policy now, perhaps the hon. Lady will inform the Committee. What concerns does she have with the way in which other privatised postal services—for example, our good friend Deutsche Post—have run theirs? 

Nia Griffith:  We shall return to that dialogue when we reach clause 32. On clause 33, we will again discuss the opportunities that Ofcom has to review, revise and consider what is reasonable. All those words might be used in various ways, including possibly to undermine what we see as the good start made by clause 30. We would like that clause to remain much more secure, by removing a few mays from the Bill and by removing some of those opportunities for Ofcom to reconsider and possibly modify what is reasonable. 

Under clause 34, if Royal Mail is the universal service provider, it would have no guarantee of being so for more than three years. That might have negative impacts on its investment programme and on its decisions about investment relating to the universal service obligation network. As we move through the Bill, we will mention some other issues about which we are worried, and we have great concerns that clause 30, as it stands, is not as strong as it at first appears. 

To sum up, we are very concerned that the requirements set out in clause 30 are under so much threat from elsewhere in the Bill. In short, a privatised Royal Mail that is looking to cut corners might use the existence of what I call review-and-get-out clauses to put pressure on Ofcom to amend those minimum requirements. We are also extremely concerned that no minimum number of access points is required, and that we have no criteria for the distribution of those access points. We also do not know how many postboxes and counter services we may end up with, or whether they will be evenly distributed across the whole country. 

I place on the record our concerns about that, alongside the concerns that we mentioned earlier about our wishing, in an ideal world, to have a Monday to Saturday delivery service covering packets and parcels as well as letters. We welcome the minimum requirements above and beyond those set out in the European directive, but we have some reservations. In particular, we are concerned that the clause might be undermined elsewhere in the Bill. 

10.45 am 

Mr Davey:  I thank the hon. Lady for welcoming our overall approach in the clause. She noted—without using the phrase—that we have gold-plated the requirements of the European postal directive. I apologise to colleagues who are worried about gold-plating, but in this case they will welcome it—we have gone beyond the European directive in clause 30 by enshrining a higher level of minimum service requirements into UK legislation. 

I am pleased in particular that the hon. Lady mentioned letterboxes, because they escaped previous contributions. It is important that letterboxes are provided for the public—115,000 of them are enjoyed by Royal Mail’s customers. Letterboxes are an important part of the fabric. 

The hon. Lady again talked about access points—I experienced déjà vu at times—and was worried that their number was not specified in the requirements, and in requirement 2 in particular. We had that debate last week. I refer her to clause 28(4), in which Ofcom’s duty to secure 

“the provision of sufficient access points to meet the reasonable needs of users of the universal postal service” 

is clearly set out. 

I was pleased that the hon. Lady compared the UK with Australia, suggesting that in effect Australian requirements were stricter, because she gave me a chance to mention England’s victory by an innings and 71 runs and to pay tribute to Mr Strauss and his colleagues. The Royal Mail also wins against Australia Post. Australia Post is a fine postal administration, do not get me wrong—I had the pleasure of visiting its headquarters in Melbourne many years ago, and it is at the cutting edge of postal services. 

In disagreeing with the hon. Lady, and saying that the UK compares favourably with Australia, I do not wish to rub salt into Australian wounds. However, Postcomm’s analysis in 2007 looked at access criteria equivalents and compared Australia with the UK. It showed that our access criteria have 99% of the urban deprived population within 1.6 km and 95% of the urban population within 1.6 km, whereas the Australian requirement is 90% of the urban population within 2.5 km. The criteria for rural areas are similarly worse. 

In comparison with the UK, both urban and rural households in Australia have a weaker commitment. I hope that the hon. Lady will at least accept that. The reality—the facts on the ground—which we will take forward in our legal agreement on access criteria with Post Office Ltd is that we have more access points for both urban and rural populations. 

I am sure the hon. Lady is about to intervene to mention the difference between access points and access criteria which, in anticipation of what she will say, I accept. However, the practical reality is that we are, through the access points provisions in clause 28(4) and the access criteria in the funding contract with POL, ensuring a double protection, the result of which is more access for universal postal service users. 

Nia Griffith:  I accept that the Labour Government set out access criteria above and beyond Australia’s, reflecting our more densely populated islands. Our figure of 99% of people being within a mile of a post office is clearly much better than the Australian model, but my point is that that has nothing to do with what is in the Bill. The criteria concern how many post offices there are, but they have nothing to do with the number of access points specified in the Bill for any provider of the universal service to provide. We are still no further on with getting the number of access points specified, never mind any thought that those access points might be post offices. 

Mr Davey:  The hon. Lady is right that we have had the debate on a number of occasions, but the structure that we have for ensuring a comprehensive post office network is much more effective than any that I have looked at in any country, including Germany, Australia and France. We can continually replay the argument, but I want to return to what the Government are doing to protect the post office network, which is rather more than what the previous Government did, in terms of money, overall policy framework and the legal agreement with Post Office Ltd. 

After looking at requirement 2, the hon. Lady moved on to welcome requirement 3, with its reference to the need for services to be uniform, and I am grateful to her

for that. I agree that requirement 6, which ensures that there are services for blind and partially sighted people, is extremely important, and I confirm that I, along with friends and volunteers, have made recordings of Liberal Democrat “Focus” leaflets and of newspapers and my annual report, which have been welcomed extremely widely. I am sure that I could make them available to colleagues should they want them—I somehow doubt it. 

In the last part of her remarks, however, the hon. Lady, having welcomed the minimum service requirements, said that they were somehow under threat. She was both reprising some discussions that we had on clauses 28 and 29 and looking forward to the debate on clause 33. I do not want to anticipate that debate, beyond saying that the protections in the Bill for the minimum service levels are the strongest that this Parliament has ever been asked to agree to, and we will make that case very firmly. 

Clause 30 is very important. It enshrines, in the same way as the Postal Services Act 2000 did, the minimum service requirements. Although its wording is slightly different, the clause effectively replicates what was in the 2000 Act, and I hope, therefore, that hon. Members will support the clause. 

Question put and agreed to.  

Clause 30 accordingly ordered to stand part of the Bill.  

Clause 31 ordered to stand part of the Bill.  

Clause 32 

Exceptions to minimum requirements 

Question proposed, That the clause stand part of the Bill. 

Nia Griffith:  I wish to highlight two slightly different approaches to the clause. The hon. Member for Angus, who tabled an amendment to the clause but is not here, seeks to remove the words about geographical conditions and so on being allowed as exceptions, whereas Labour Members seek more parliamentary control over what might happen. Subsection 2 clearly states that there are circumstances in which it is not necessary to comply with requirements 1 and 2 in clause 30. Requirement 1 specifies a six-days-a-week—Monday to Saturday—delivery service for letters and a five-days-a-week delivery service for postal packets, and requirement 2 specifies the same for collection services. 

The first circumstance in which the requirements can be waived is a public holiday, which I think we all find acceptable. Paragraph (b), however, could be a get-out clause—horror of horrors—allowing Ofcom the discretion to consider as exceptional particular geographical conditions or other circumstances. I imagine that the hon. Member for Angus would have told members of the Committee something along these lines: the clause gives a lot of discretion to Ofcom—quite possibly rather too much—to decide whether an area should be left without delivery and collection, because it is exceptional due to geographical conditions or other circumstances. It would give Ofcom carte blanche to cut down the number of deliveries and collections to any area that it chooses. 

The real difference between this Bill and previous Bills is that it would create a fully privatised Royal Mail. If the clause is left as it is, a privatised Royal Mail,

totally determined to cut costs, might put pressure on Ofcom to first designate far-flung, difficult to reach areas as exceptional—the Scottish islands immediately spring to mind—and then to designate the more remote rural areas as exceptional. Before we know where we are, we will have a full scale, two-tier system, with six-day delivery in the larger cities and a poorer service in the smaller towns and rural areas. 

Mr Davey:  I would be grateful if the hon. Lady were to confirm that her criticism really is of Ofcom. This issue is unrelated to ownership; it is about whether the regulator will enforce legal issues around exceptions. Is it right to say that she does not trust Ofcom? 

Nia Griffith:  The clause leaves a lot of leeway for Ofcom. The hon. Member for Angus wants to remove the exception all together, while our approach is somewhat different. What we said in amendment 79, which was not selected but which we have debated in other contexts, was that the Secretary of State should put a regulation before Parliament before such exceptions are allowed. We want a clearer opportunity for Parliament to look at these matters, rather than just leaving them to Ofcom. It is not a matter of not trusting Ofcom; it is that there will be a lot of pressure, because it will effectively be a privatised monopoly. Consumer Focus, the Hooper report and Postcomm have all notified us that the pressures on Postcomm from the current set-up have been significant. With a privatised monopoly, even though Ofcom is much bigger and has more experience of dealing with all sorts of communications industries, there would inevitably be a temptation for Royal Mail to push hard to bend the rules and to be open to creating a two-tier system. 

In later clauses, we will look at how other providers could provide help in doing that. By introducing a number of different providers, there would be more leeway whereby this type of exception could become the norm. So, our way of circumventing that particular problem would be to suggest that the Secretary of State brought these exceptions to Parliament, giving an opportunity for scrutiny of any proposed exceptions. Whether such cases would remain as very exceptional or whether they would creep, creep, creep, creep, creep along to include other areas, that approach would at least allow us the opportunity to scrutinise what exceptions are allowed. 

Karl Turner (Kingston upon Hull East) (Lab):  I do not know whether it is a matter of trust, but in evidence I recall Ofcom saying that it had a plan, but when asked whether it was prepared for this regulation, it said that it would take the plan off the shelf, dust it down and look at it again. My concern is that Ofcom’s plan was made under a different proposal, where the majority of Royal Mail was retained by the state. 

Nia Griffith:  The circumstances are different, which is why we want tighter control and tighter scrutiny of what might be proposed. If we are not careful, the words “exception” and “exceptional” could lead to a service that is two-tier or three-tier, or provided by multiple providers. A loophole in one small subsection of the Bill could destroy the entire universal service. Such a loophole would deny service users what every

household or business in the UK has the right to expect—the delivery and collection of their mail on a daily basis, six days a week. 

11 am 

If there are no Saturday deliveries in remote areas, people living there will have further to travel to collect a registered item from a postal sorting office. However, the measure affects not only the people who live in the so-called exceptional areas; it also affects those who want to send items to them. In other words, we can forget the idea that if we post an item first class on a Friday morning it will almost certainly arrive the next day, wherever in the UK it is sent. We will have no idea which rural pockets Ofcom has designated as exceptional—they could be large areas of the Scottish highlands, or much smaller areas, such as parts of mid-Wales or the west country, which are sparsely populated. 

The idea behind the amendment tabled by the hon. Member for Angus is to get rid of the mention of any exception at all. Our amendment—amendment 79—would have required the Secretary of State to put regulations before Parliament before such exceptions could be allowed, because we should not leave it to Ofcom alone to decide such matters. If there are to be any no-go areas, the Secretary of State should come before Parliament and justify why some UK citizens would find themselves being treated as second-class citizens, with a reduced service and number of deliveries and collections. 

I am not sure whether the Minister can give us satisfactory reassurances on the matter. I find it extraordinary that he might allow the Bill to proceed with the current wording, and with no strengthening of the obligations on Ofcom to come back to the Secretary of State and Parliament. I ask that he provide reassurance, without which we will find it difficult to support the clause. 

The Chair:  Ingeniously, the hon. Lady has managed to discuss not only Mr Weir’s amendment but also her own, which was not selected. 

Mr Davey:  We are all upset that the hon. Member for Angus cannot join us today, because his amendment raises important issues, even though it is unworkable. I have christened it the Milk Tray amendment. Members of the Committee may remember the Milk Tray adverts and the action man coming out of the helicopter to deliver— 

The Chair:  Order. I have been advised that we should not continue the debate. The debate is on the question that clause 32 stand part of the Bill. 

Mr Davey:  There is a lot of demand for Milk Tray, Mr Amess. 

Hon. Members will understand that, were no exceptions set out in the clause, we would be asking Royal Mail employees to deliver in impossible circumstances, which could put them in danger. I am sure the hon. Lady would not wish that to happen. 

I shall set out in some more detail what lies behind the Milk Tray comments. After doing so, I hope the hon. Lady will realise that her amendment—had it been selected—would have not have been sensible, and that

the clause is eminently sensible. Without the clause, the burdens on the universal service provider would be absolutely disproportionate. They would add huge costs and, more important, would put at risk the health and safety of hard-working postmen and postwomen. 

The clause will ensure that the regulator has discretion to determine exceptional circumstances, in which the minimum delivery and collection requirements of the universal service as set out in clause 30 need not apply. The wording, as the hon. Lady mentioned, directly replicates section 4(1)(a) of the Postal Services Act 2000 and clause 32(6) of the Opposition’s Bill from last year. It flows from the European directive’s article 3(3), which states that member states must take steps to ensure a universal service, 

“save in circumstances or geographical conditions deemed exceptional”. 

The exceptional situations we have in mind and which are deemed exceptional by Postcomm at the moment are, for example, where there is an address on a remote island to which there is only a single ferry service a week. It would be unreasonable to expect Royal Mail to deliver to that address every day, as it would be required to charter its own boat. I hope that in the hon. Lady’s opposition to the measure, she is not suggesting that Royal Mail should do that to deliver to one address on a remote island. I hope she understands that that is a reasonable exception. 

Nia Griffith:  Our amendment, which was not selected, did not suggest doing what the amendment tabled by hon. Member for Angus did, which was to take out that word completely, but would have had the Secretary of State bring back to Parliament any suggestions for exceptions. What we are saying is that we are worried about the clause’s elasticity, which is the matter the Minister has to address. 

Mr Davey:  Let me reassure the hon. Lady that the way in which the exceptions policy has been interpreted by Postcomm, and how it will be interpreted by Ofcom, is not as elastic as the way she suggests—that large areas are not being delivered to. If Ofcom did that, it would fail in its overall duty as set out in clause 28. 

It is important that the Committee understand why we need such exceptions. I could give another example: where an address has dangerous dogs and poses a genuine threat to postmen and postwomen. I am sure that all members of the Committee have, at times, delivered leaflets around their constituency at elections, and will have come across addresses with problems that are less exciting to deliver to. Sometimes such problems are temporary—for instance, where it is impossible to deliver because the calling system for a block of flats is out of action. There are also occasional increases in the number of addresses that cannot be delivered to. For example, there was an increase of 182 in the reported number of delivery points excepted from the universal delivery service between 2009 and 2010. When queried, Royal Mail explained that the increase was due mainly to 110 new exceptions in an east London postcode, where a number of tower blocks were listed as temporary health and safety exceptions because of unsafe delivery environments. 

Those are the sorts of examples where such exceptions happen, and in no way will that undermine the universal service. In many ways, it will support that service because it would be unfair to require postmen and postwomen, and the universal service provider, to deliver come what may if there are health and safety or access difficulty issues. I am sure the hon. Lady understands that. 

I know there are number of exceptions in the hon. Lady’s own constituency—I am sure she is aware of quite a number—but most of them concern access problems. She will know that where someone has exceptions to their home or business and they are not getting the universal service delivery, they can appeal. There is an appeals procedure, and Royal Mail has to defend itself to the regulator in such a case. In no way is the provision a loophole to undermine the universal service. It is what happens now and what is required by the European directive, as I hope the hon. Lady will understand. 

The hon. Member for Kingston upon Hull East said that Ofcom will just dust down its old plan in respect of such matters. The old plan that Ofcom mentioned in evidence concerned the operational merger of Postcomm and Ofcom, not regulation of the postal market. It would have been bizarre had it had a plan for that operation, because the House has not given assent for the Bill to provide that responsibility. Ofcom is rightly planning for the merger, but it certainly has not got round to thinking about how it will regulate in respect of delivery exceptions. 

I hope I have dealt with the issues that have been raised, and that the Committee will agree that the clause should stand part of the Bill. 

Question put and agreed to.  

Clause 32 accordingly ordered to stand part of the Bill.  

Clause 33 

Review of minimum requirements 

Nia Griffith:  I beg to move amendment 45, in clause 33, page 18, line 16, after ‘May’, insert ‘after five years’. 

The Chair:  With this it will be convenient to discuss the following: 

Amendment 60, in clause 33, page 18, line 18, at end inserts ‘paying particular regard to the needs of— 

(a) Vulnerable consumers,(b) Rural consumers,(c) Small and medium enterprises.’

Amendment 61, in clause 33, page 18, line 21, at end insert— 

‘(2A) When conducting any review OFCOM must consult—(a) consumer representatives, and(b) representatives of small and medium enterprises.’.

Amendment 80, in clause 33, page 18, line 30, at end insert 

‘, providing the Secretary of State has previously ensured that consultation has been undertaken with the devolved, territorial bodies of Government as are appropriate to the provision.’.

Nia Griffith:  The clause is extremely important as it deals with reviewing the minimum requirements. As I have said, we welcome the minimum requirements but we are worried that some parts of the Bill might provide

opportunities whereby the service can be eroded in an unhelpful way. Amendment 45 would add the words “after five years” to the clause so that Ofcom can review after such time whether clause 30 reflects the reasonable needs of the users of postal services provided in the United Kingdom. In the difficult times that will ensue following the privatisation of Royal Mail, when everyone is becoming used to new circumstances, it will be important to have stability. 

We also consider that the universal service obligation is of such immense importance that it needs a good five-year period to bed in with the newly privatised provider. Our worry is, why on earth would anyone want to start reviewing that universal service obligation within 12 months, 18 months or three years—periods that are referred to throughout the Bill? We want a firm assurance that there will be a proper five-year period during which the full universal obligation will be provided, and to be given an opportunity to see it operating properly in practice. We do not want anything reviewed, revised, changed or watered down before a proper, full five-year period. 

When I spoke to clause 29, I reminded the Committee about a potential end of the inter-business agreement about 18 months after privatisation, depending, of course, on when privatisation takes place. So, there would be a huge amount of negotiation as to exactly what the Royal Mail wanted from any inter-business agreement, be it with post offices or other providers. There would be leeway, because there is nothing about the number of access points on which to cut down and the number of access points that it provides. At the same time, a simultaneous review by Ofcom of what is actually required in the universal service obligation leaves the door open for an enormous amount of manoeuvring by Royal Mail to put everything in order in one go, in a way that suits it, rather than the consumer. Ultimately, we are looking at the protection of the consumer, and we want to ensure that that is in mind first and foremost. 

11.15 am 

The amendment, therefore, is a sensible and easy one for the Minister to accept. One ought to do nice things at Christmas, and accepting the amendment is a nice, easy option for him. Universal service provision would be strengthened in one fell swoop and nothing too complicated would be involved, because the amendment simply extends the situation that would have existed anyway. 

Amendment 80 adds a provision towards the end of the clause, after subsection (6): 

“providing the Secretary of State has previously ensured that consultation has been undertaken with the devolved, territorial bodies of Government as are appropriate to the provision.” 

In speaking to this amendment, I want to make it absolutely clear that subsection (6) is vitally important. It is right and proper for the legislation to include the subsection, which ensures that any amending of clause 30 by the Secretary of State should not include making different provision for different places in the United Kingdom. It is important to have that universality of service across the whole UK, and such a response is likely from the devolved Administrations. 

Automatic assumptions by the Secretary of State about what those in the devolved Administrations might say would, however, be presumptuous. At the very least,

the devolved Administrations ought to be consulted about any amendment to the clause proposed by the Secretary of State—any amendment to the minimum requirements of the universal postal service. Why? The reason is that many areas in the devolved settlements involve a significant overlap in responsibilities. In real life, devolved responsibilities interlink with the responsibilities reserved to the UK Government in different ways. 

For example, the issue of economic development is important to the Welsh Assembly and the Scottish Executive, with their particular attention to the needs of small businesses in rural areas and so on—both Administrations have made significant investment in their post office networks. For those in the devolved Administrations to want any break-up of the universal service might seem extremely unlikely. Nevertheless, given their investment and how they want to support economic development, it would be important for them to be fully involved in any review, consultation or steps taken by the Secretary of State, simply as a matter of a courtesy, and because they see the interlinking of anything happening to the universal service provider and their local economies. 

Amendment 80 would provide the devolved Administrations with an opportunity to comment on proposals by the Secretary of State to amend the minimum requirements. If the Secretary of State had some mad idea, which I cannot believe, and wanted to give Ofcom powers to amend minimum requirements in an unhelpful way, consultation with those in the devolved Administrations about any such report or review might head off complete madness and any unacceptable proposals. Consultation with the devolved Administrations is practical, because of their involvement in economic development and, in particular, the sorts of investment they have made in the post office network. 

Amendments 60 and 61 are fairly self-explanatory. We are simply asking that vulnerable users, users in rural areas, and small and medium businesses be able to express their particular needs, and that those needs be considered. Clearly, there are people who can and always will speak up and shout the loudest, but the most vulnerable in society do not have that opportunity. 

There should be a duty on the regulator to take account of the needs of vulnerable users, such as the elderly, those who find it more difficult to get out and about, those who rely on items coming through the post and who want to be able to post items without having to traipse miles from their homes to do so. We all know what a joy it is for many elderly people to receive items through the post, and they are probably the best at remembering birthdays and sending the delightful things that younger family members enjoy receiving. Vulnerable users who need to be taken into account include those who, for many reasons, are housebound and people who, for one reason or another, rely more on postal deliveries than on their going out to find and buy items, as other people might. 

We have mentioned several times the concern that isolated rural communities, in which enterprising people use the postal service to help establish small businesses, should also have their needs taken into consideration. It should not just be assumed that because people live in the countryside, they want to live at a slower pace of life and therefore do not want a postal service on more than five days a week. There should not be assumptions of

that nature. We have discussed small and medium enterprises at length, and their needs and requirements from the universal service are all-important. They use the postal service in many ways, and Ofcom should take great note of the ways in which they want it to be run, and of the provisions they would like for facilitating economic growth and for helping to increase the number of jobs, particularly in rural areas. 

Amendment 61 would insert proposed new subsection (2A) relating to 

“consumer representatives, and…representatives of small and medium enterprises.” 

It is self-explanatory that we would want such representatives to be consulted. Ofcom has a responsibility to consumers, who may be members of the public or businesses, and those groups are represented by different organisations. We hope that the present Government will not try, in any Bills that might be around the corner, to get rid of any groups that look after consumers’ needs. It is important that consumer representatives be kept in mind and in the loop about how the universal postal service might be developed and about the review that Ofcom might want to make of the requirements, so that they can state their needs and priorities. 

In earlier sittings, we heard several references to surveys that have been carried out among business users and the general public about what they would like to see. We want those types of information and opinion to be considered. We are asking for amendments 60 and 61 to be made to subsections (1) and (2), so that we can be assured that such needs will be looked after when Ofcom reviews the minimum requirements. 

To sum up on clause 33, we are concerned that such a review will take place so quickly. It leaves a door open, very early on, for the service to be reshaped in a way that might be detrimental to the consumer, particularly the more vulnerable users, those in rural areas, and small and medium enterprises. We worry that the negotiations that the privatised Royal Mail will have, probably simultaneously, on any inter-business agreement on access points, will put pressure on Ofcom to water down the minimum requirements. For those reasons, we have tabled the amendments. 

Karl Turner:  I do not intend to speak for long; I know that the Government will want to make progress as the Committee stage nears its end. Nevertheless, I intend to place on record my support for the amendments, along with an explanation of why they are of particular benefit. 

I was not a Member in the previous Parliament but there is no doubt that, had I been, I would have opposed the privatisation of Royal Mail. I make no secret of that, but I accept that some investment is required. In my previous contribution to the Committee, I emphasised the need for the Bill to be absolutely watertight in its instructions to Ofcom in its role as the postal service regulator. My reasons were twofold, and I wish to reiterate them. First, as I have said time and again, the Bill goes much further on privatisation than any previous proposal. It has also been seen through the House at startling speed. It is essential to ensure that Ofcom has the powers to regulate a privatised Royal Mail effectively and in the public interest, so I again urge the Minister to slow down and be more considered in his approach. 

Secondly, watertight legislation is required not least because the handover from Postcomm to Ofcom will have its difficulties. I take the point that the Minister touched on in his closing remarks in the previous discussion. Although I have confidence in the professionalism of both bodies, the task is large, and the Bill should be specific in its instructions to ensure that the universal service obligation and the post office network are protected, despite any handover issues. 

Amendment 45 is a reasoned amendment that turns on the issue of speed versus proper consideration. It ensures that Ofcom is prevented from undertaking a review of the minimum universal postal service until five years have elapsed, which is helpful for two reasons. First, the amendment protects the minimum requirements for an extended period, ensuring that Royal Mail’s new owner or owners are unable to exert any pressure on Ofcom to re-examine the minimum requirements straight after a sale. Secondly, it prevents Ofcom from undertaking a hasty review, so that when and if a review is undertaken the full effects of privatisation will be understood, modernisation will be complete, and the pension deficit will be far from people’s minds. In short, the amendment ensures that the regulator will not be able to do what the Government are attempting. Ofcom will be able to look at the long-term effects of privatisation and modernisation, rather than making short-term decisions that might themselves have negative long-term effects. 

On amendment 60, I welcome any change that tightens the regulatory framework. I see no reason why Ofcom should not pay particular attention to vulnerable consumers, rural consumers and small and medium-sized enterprises when it undertakes a review of the minimum requirements. Those groups are heavily reliant on Royal Mail’s universal service. Any review that results in a watered-down service would affect those groups more than any other, so it seems only right and proper that particular attention be focused on them. 

11.30 am 

Amendment 61 would ensure that consumer groups and representatives of small and medium-sized businesses are consulted as part of any review of the universal service undertaken by Ofcom. If a privatised Royal Mail is to be regulated effectively and fairly, the affected groups should be given a voice in that process. The fact that those groups will represent people who rely heavily on Royal Mail services would surely enhance the review rather than work to its detriment. It would ensure that people—as well as balance sheets—are included as an important consideration 

Amendment 80 seems perfectly reasonable. I would be surprised to hear any objection to it. The Secretary of State is to agree to a change to the universal postal service that affects the whole of the UK. It seems only reasonable that consultation should occur with those devolved and territorial bodies. We should do this in a spirit of co-operative government to ensure that all parts of the unitary state are effectively consulted. 

The amendments to clause 33 would mean that any regulatory review was undertaken no sooner than in five years’ time, ensuring that, following the sale, Royal Mail’s new owners would have no incentive to increase pressure on Ofcom to dilute the universal service requirement. They would also allow them to take a wider view of the state of the universal service provision

when undertaking a review. The amendments would ensure that the public interest is a large consideration in any change to the universal service. They would put those groups that most rely on the postal service at the heart of Ofcom’s review and draw representatives of business and consumers into the process, ensuring that they are fully consulted. 

I do not believe that the amendments alter the substance of the Bill too radically. For that reason, the Minister could perhaps concede them. In my respectful submission, they are reasonable amendments. They seek to change the Bill for the better to ensure a strong and effective regulatory framework is in place to protect the universal service for all who rely on it. For those reasons, I support the amendments. I urge all members of the Committee to do the same. 

Mr Davey:  The hon. Lady introduced her amendments, which I am afraid I will not be able to accept. I will explain to the Committee why. I think they should be called the lucky amendments, because the hon. Lady asked for nice things at Christmas, not because we are going to accept them. She may not think this is a nice thing. I am sure I can find the picture that was taken of me at the weekend as the eighth dwarf, named Lucky. Unfortunately, there is no recording of the jokes that I told, which is probably just as well. 

The point to get across is that the Bill is about protecting the universal service. That is the starting point. Clause 30 enshrines the minimum requirements for that. Clause 33 tries to show that those minimum requirements can be reviewed, but the powers in clause 33 enhance the safeguards against changes to the minimum requirements. I want to explain that in detail, because people need to understand this. Under the European Communities Act 1972, the Government already have the power to change the minimum requirements of the universal service to the level required by the directive, which is five days a week. There is no requirement under that directive for there to be uniformity in the service. That change could be made by negative resolution. That is not acceptable. We talk a lot—I certainly do—about what was in the 2009 Bill, and it is interesting that there was no protection for the minimum service. The previous Government were happy to keep the powers that they had under the 1972 Act. 

Nia Griffith:  Does the Minister think that there might be more pressure from a privatised Royal Mail than there would have been from a Royal Mail in majority public ownership? 

Mr Davey:  That goes back to whether one trusts Ofcom. Ofcom has a record of being a good regulator. Across Europe, it is seen as one of the continent’s finest regulators. I thank the hon. Lady for her intervention, but she was not able to explain why the previous Government did not want to enhance the safeguards for the minimum service requirement, which this Government are doing. If we had kept to the previous Government’s policy, we might have seen a Minister, having been lobbied by a partially privatised Royal Mail, coming to the House and seeking a reduction in the minimum service on a negative resolution. What protection was that? We have gone further in clause 33. 

Mr Turner:  The Minister is skilful at avoiding the issue, which is that the 2009 Bill was different. It proposed selling Royal Mail, but with the state retaining the majority shareholding. He seems unable to accept that there is a big difference. 

Mr Davey:  Let me help the hon. Gentleman: I completely accept that there is a big difference between this Bill and the 2009 Bill, particularly on ownership. I hope that he will accept that there was no protection—as there is under clause 33—in the 2009 Bill. It would have left the Secretary of State with the power to reduce the minimum requirement by negative resolution. 

When I looked at that issue, I could not see how that was acceptable. Clause 33 has been deliberately inserted, because it introduces three additional safeguards. First, before any change to the minimum requirements can even be contemplated, Ofcom must have conducted a review of users’ needs. That seems to be a reasonable thing to do. Secondly, subsection (6) guarantees—I am glad the hon. Lady welcomes this—that no change can result in a different minimum level of service for different parts of the country. The Bill is absolutely clear: it does not permit the minimum service requirement in London to be different from that required in Llanelli, Kingston upon Thames or Kingston upon Hull or any other constituency in the country. That is to be welcomed. The third extra safeguard that it creates is that any change would have to be made by affirmative, not negative, resolution. There would have to be a debate and vote in both Houses to make that change. That means that if the Secretary of State accepts Ofcom’s review recommendations, he has to bring it to Parliament for it to give its assent or not. Those are extremely strong safeguards. 

When one considers those safeguards and then looks at the amendments, one sees that the amendments are not needed, in particular amendment 45, which would prevent Ofcom from initiating a review of the minimum requirements until at least five years after Royal Assent. It is important that the regulator can review the market and user needs as and when it sees fit. As a result of getting good information and evidence, Ofcom will be able to make the best regulatory decisions. I therefore see absolutely no value in tying the regulator’s hands in this particular regard. 

More importantly, hon. Members will note that Ofcom will merely conduct a review under the clause. There is no imperative to act—indeed, Ofcom cannot act on its findings. The Secretary of State is the person who will make the order if he feels it to be necessary, and it will be for Parliament to debate and approve the order. I think that that is the right approach in an incredibly important area. 

David Wright (Telford) (Lab):  Regarding the review by Parliament, is it the five-year fixed-term Parliament? 

Mr Davey:  That was a good attempt by the Whip. I assure him that the service in Telford will be protected under subsection (6). There is no time limit, be it five years or any other term. We have kept flexibility to ensure that user needs can best be reflected as and when they change. We have the safeguard, but I do not expect it to be needed in this Parliament, so I do not think the

fixed term issue comes into play. However, it will give long-term assurance to colleagues that there is no desire to undermine the minimum requirements. 

Although the intention behind amendment 60 is commendable, Ofcom already has duties to that end. Indeed, its duties go far wider than the amendment, and I would not want them restricted. Section 3(4) of the Communications Act 2003 requires Ofcom, in performing any of its functions, which will now include its postal services role, and therefore any review that it conducts under clause 33(2), to have regard to 

“the vulnerability of children and of others whose circumstances appear to Ofcom to put them in need of special protection; the needs of persons with disabilities, of the elderly and of those on low incomes…the different interests of persons in the different parts of the United Kingdom, of the different ethnic communities within the United Kingdom and of persons living in rural and in urban areas”. 

That is quite a strong list of protections. 

Of course, one of the principal duties of Ofcom is to further the interests of consumers in relevant markets. An SME using postal services would undoubtedly be seen as a consumer under the powers. Therefore, we are in agreement about the importance of the groups named in the amendment, and we are also concerned about others. The 2003 Act already caters for the groups set out in the amendment, so I hope the hon. Lady will withdraw it. 

The same arguments apply to amendments 61 and 80. Section 16 of the 2003 Act gives Ofcom a duty to have 

“effective arrangements for consultation about the carrying out of their functions with…consumers in the markets for the services and facilities in relation to which Ofcom have functions”. 

The Bill gives Ofcom a new function in respect of postal services, and the requirement to have a mechanism for consultation will extend to its new role, including any review of minimum requirements. There is no need to specifically name representatives of either consumers or SMEs. The 2003 Act already requires Ofcom to have regard to that range of groups in carrying out of all of its duties and furthering the interests of consumers. I think those duties cover what the amendment seeks to achieve. 

Regarding amendment 80, once again Ofcom has duties to consult, and must have regard to, the interests of persons in different parts of the United Kingdom. Thus we do not need a new requirement to consult devolved or territorial bodies of Government as set out in amendment 80. The needs and views across the whole of the UK are key, and Ofcom will know them better than the Government. 

The hon. Member for Llanelli rightly described subsection (6) as vital, as it will prevent the Secretary of State from making an order that results in non- uniform minimum requirements across the United Kingdom. Hon. Members will appreciate that any order made under clause 33 will have strong parliamentary accountability. Members representing constituencies in Scotland, Wales and Northern Ireland and in all the regions of the United Kingdom will have a chance to make their views known. I do not think her amendment will add to those protections. I hope that she feels able to withdraw her lucky amendments. 

11.45 am 

Nia Griffith:  Let us reflect on what the Minister has said. I still think it important for there to be a settling-in period and a period of immense stability, so I am minded to press amendment 45 to a vote. 

I listened carefully to what the Minister said about the other groups. Indeed, there are specifications that Ofcom consult with a number of different groups and perhaps the consumer umbrella could be used to cover some of those. I am glad that he regards that as part of its role when its duties include the mail services. On that note, I shall not press amendments 60 and 61. 

I appreciate that the Minister understands the important nature of the devolved Administrations and their role. Again, we have indicated that it would be usual for Ofcom to consult and have dialogue with them, so, on balance, I shall not press amendment 80. 

We are concerned, however, about rushing along into review and change, and watering down. Who knows what might happen if we rush into such things? We would like a proper five-year period, which is why we will press amendment 45 to a vote. 

Question put, That the amendment be made. 

The Committee divided: Ayes 6, Noes 9. 

Division No. 20 ]  

AYES

Blenkinsop, Tom   

Griffith, Nia   

McClymont, Gregg   

Morrice, Graeme (Livingston)    

Turner, Karl   

Wright, David   

NOES

Davey, Mr Edward   

Fuller, Richard   

Harris, Rebecca   

Newmark, Mr Brooks   

Patel, Priti   

Stephenson, Andrew   

Swinson, Jo   

Vaizey, Mr Edward   

Walker, Mr Robin   

Question accordingly negatived.  

Clause 33 ordered to stand part of the Bill.  

Clause 34 

Designation of universal service providers 

Nia Griffith:  I beg to move amendment 81, in clause 34, page 18, line 38, leave out 

‘may designate one or more postal operators’ 

and insert 

‘must designate a postal operator’. 

The Chair:  With this it will be convenient to discuss the following: 

Amendment 82, in clause 34, page 18, line 40, leave out subsection (2). 

Amendment 83, in clause 34, page 18, line 42, leave out subsection (3). 

Amendment 84, in clause 34, page 19, line 6, leave out subsection (4). 

Amendment 87, in clause 35, page 19, line 39, leave out 

‘or part of a universal postal service’.

Amendment 91, in clause 35, page 20, line 24, leave out subsection (7). 

Amendment 93, in clause 36, page 20, line 43, leave out from ‘accuracy’ to end of line 45. 

Nia Griffith:  The amendments concern one theme. Amendment 81 seeks to leave out 

“may designate one or more postal operators” 

and insert 

“must designate a postal operator” 

in clause 34(1), and I shall explain why we feel that that is so important. All the amendments in the group refer to that concern in all the different clauses to which they are pertinent. 

We suggest that there could be massive fragmentation, and cherry-picking—here, there and everywhere—of different providers providing different parts of the service. Some of our experiences of that to date have not been happy. Providers might have a real interest in compact, densely populated areas, in which they might be willing to do all sorts of things to obtain franchises or services to run, but they might have little interest in providing a service to more sparsely populated areas. It is not difficult to imagine Royal Mail being left with a disproportionate burden of areas that are expensive to service and a loss of income from more profitable areas, which had previously allowed for cross-subsidisation. The difficulty is that there would be a lot of pressure to reduce costs in rural areas by reducing provision, which could easily lead to fewer deliveries or collections of mail, or fewer access points, all as a result of the splitting of the universal service obligation among the different providers. 

Among the parallels is the water service. If we look at water providers in this country, the south-west has a reputation for expensive water and sewerage services. The reason is fairly easy to understand: it is a fairly large, sparsely populated rural area, with many kilometres of water and sewerage pipes to and from people’s homes. Providing such a service in that area is expensive. Contrast that with water charges in the south-east, such as those by Thames Water: the area is more compact and densely populated, so it is easier to keep the cost to the consumer down. 

Welsh Water, for example, is not far behind South West Water in the league tables of high water prices. Welsh Water has the constant dilemma of how to keep the price down for consumers, when it has high costs in a more sparsely populated area, while making the investment that we are all desperate for—in my area in particular, where we have a precious inlet, with a lot of letters after its name. 

Richard Fuller (Bedford) (Con):  The hon. Lady is using the water industry as an analogy. Can she confirm that different prices can be charged in different areas in the water services sector, whereas postage will still have a universal price? 

Nia Griffith :   That is the issue, is it not? My example concerns the costs incurred by the companies. The problem is that those costs are different because of the different nature of the areas. The companies charging at the high end—Ofwat obviously tries to keep the prices down—have a huge dilemma, because they need the money to invest in infrastructure. Areas such as mine

need the investment to stop sewage going out into the sea. However, the companies cannot charge all that much because consumers, and Ofwat on their behalf, will say, “This is outrageous.” The companies have a difficult situation and no opportunity for cross-subsidy. 

With the Bill, we could end up with a number of different providers, but the opportunity for cross-subsidy being taken away. Therefore, a lot of interest in the more profitable areas would be likely—the cherry-picking syndrome, with providers rushing in to take the easy ones, wanting to do a nice little compact service for the cities of Birmingham or Manchester, or wherever. They would not be interested in the less profitable parts of the service. The cross-subsidy would therefore be lost, with a knock-on effect in rural areas. If a universal price was kept, the only other way we could end up is with the service being diminished in some way. 

Richard Fuller:  I am not sure I am buying the analogy or the fears. We can understand the possible entry of an alternative universal service provider in some areas, but when the last-mile collection prices in those areas go down, we might see an increase in volume and capacity, which would generate more revenue. Moreover, even if the hon. Lady’s fears were fulfilled, does she not accept that the “financially sustainable” provision would mean that the service is maintained by all operators in all areas under a universal service provision? 

Nia Griffith:  With a universal service covering the whole UK, the opportunity for cross-subsidy is there de facto, because it is already built into the provider company. If, however, there are different companies providing effectively different services, and some services are much cheaper than others, we have to bring in the clause that we will discuss later, in which compensatory money has to come from the providers in the cheaper areas with the lower infrastructure, to cross-subsidise a provider of a universal service in a rural area. That seems to be a rather more complicated mechanism than that of one company providing the service across the whole country. The minute we start breaking things up, we add a lot of complications and take away the opportunity for economies of scale and for cross-subsidy. 

I do not know whether my hon. Friend the Member for Kingston upon Hull East recalls the cream and green telephone boxes that there were once upon a time in his area, but he probably does not remember the time when a thruppenny piece was all that was needed to make a phone call there, when a sixpenny piece was required in the rest of the UK. We all can give examples of where services have operated differently, but our real fear is that once we start to have a number of different providers, the door is opened for some to do the easy bits and make quick profits. And what do we do in areas that are more expensive to service? We have to close down access points, because their number is flexible: the Bill does not specify how many there should be. If there is a lot of expense in a rural area, that can be cut by closing down access points, deciding not to collect from a few postboxes or not to use a few post office outlets. 

Fragmenting the service between a number of service providers creates a problem, and Royal Mail, because it is the body that currently provides the service, possibly gets left with all the less desirable areas. Other companies come in like vultures, pick up the best bits and make money out of them, leaving Royal Mail to struggle.

We hope that there would not be any overlap, because it is specified elsewhere in the Bill that there should be none, but it is difficult to envisage no overlap if there are several companies all having to do collections and presumably bringing their lorries to various depots where they swap the bits and pieces. That is a recipe for some overlap, in spite of the fact that Ofcom is not supposed to allow any. Having more than one provider is a problem, because from one end of the country to the other several providers might have to handle the items before they get to where they are going. 

Richard Fuller:  We are hearing again an argument that I have heard in economics a number of times over the years: one provider is best, and the big provider achieves the economies of scale. I think that that was one of the arguments in the 1930s that led Ford Motor Company to try to run its own steel mills as well as making cars and brought it almost to the point of bankruptcy. Is not the truth that the hon. Lady misses that in many instances competition provides benefits to the universal service obligation? The spur of competition could end up in prices for the universal service, and costs, going down. It would spur innovation in different forms of last-mile delivery. Does she not omit those benefits of competition as she paints her rather grey picture of the future? 

12 noon 

Nia Griffith:  In the present situation, different companies can access the universal service provider so that they can use the last mile, provide the bulk services and so on. I understand from the Hooper report that such a service has had some degree of success. It has provided an opportunity for innovation and competition and enabled people to see how others can do things better. 

No one would really want overlap. It would not make sense for two people to walk the last mile. However, if we have more than one universal service provider, we would inevitably end up with each one being a monopoly in its own area. We would not get the consumer choice that we had thought we would have, but a fragmentation of services and a different level of standards and ways of doing things in different areas. 

Richard Fuller:  That is an interesting hypothesis, but it is a hypothesis only, and if the hon. Lady is conceding the benefits of competition in upstream services, why is she so scared about competition in downstream services? Why will they not bring the same benefits? I am not hearing her argument about the overlapping delivery routes. There are many instances when people deliver down streets and follow each other. Such a service can be effective and end up in lower prices overall. 

Nia Griffith:  I am worried that there will not be the sort of choice that is supposed to make the competition system work whereby there will be a genuine free choice and people can choose whatever way they want to do something, such as their choice when buying a new kind of washing machine. With a universal service provision, many people would regard the last mile as part of the infrastructure, such as happens with the water or rail network. As the hon. Gentleman says, sometimes there will be competition. 

We can all think of the urban areas that receive lots of leaflets from their local supermarkets. We also know that those who deliver such leaflets do not visit many rural areas—probably to the great relief of many who live there. If we are to have a universal service throughout the country, there will probably be little interest in certain areas. We will always be left with that position. If that is the case, will the burden be shared fairly if it is dealt out among various providers? If not, what mechanism will be in place to look after the areas that are least well served, to protect them and not lead to a deterioration in service? 

Richard Fuller:  I am trying to follow the hon. Lady closely so that we can tease out her particular areas of concern. I think she has conceded that competition in upstream areas has been of benefit to consumers. I think she is conceding the possibility that, downstream, competition can exist and bring some merit. I think her concern is that, in some areas, that service will be offered but, as a consequence of competition in the last- mile delivery in, say, urban areas, there may be some detriment in other areas of universal service provision. But does she accept that, even if that were the case, there are plenty of provisions in the Bill to protect the universal service obligation in all areas of the country? 

Nia Griffith:  If one company provides the service from one end of the country to the other, there will obviously be more of a uniform service, but if that is not the case, the mechanisms of compensatory-type payments and so on would have to be used to put things right. My fear is that we would end up with a fragmented service, with different types of service being provided in different areas, and I do not think that that is what the British public want. I think they want a proper, unified service. When one is contemplating such matters for 45 minutes on a freezing station on a Thursday night because there are different train companies that do not talk to each other and thus do not keep one’s connection, and that is a regular occurrence, I can assure the hon. Gentleman that one has very strong views about whether there might be more joined-up thinking if there were one provider rather than a number of providers. However, perhaps mail does not mind sitting around and waiting for its next bit of onward transport. 

The existence of several different companies providing the universal service in different areas of the United Kingdom would raise complicated issues of logistics. We are not just talking about a bit of upstream sorting and taking the mail to the local access point to let the Royal Mail carry on; we are talking about a different provider in Cornwall passing mail through several other areas before it arrives in Scotland, with each provider having their own different way of doing things. That raises considerable issues. 

That is the background to the amendments. They are obviously grouped for a very simple reason. Amendments 82, 83 and 84 would omit the subsections in clause 34 that are relevant to having a number of different providers. The reason for removing them en bloc is, quite frankly, to avoid the possibility of having a number of different providers of the universal service obligation. The amendments follow logically from amendment 81; if we take one out, we need to take the others out. 

Amendment 87 is relevant to clause 35, which is about designated USP conditions. The purpose of the amendment is to prevent cherry-picking, which would see some of the nice, easy bits in highly populated areas being picked off by people who would like to provide those services, making it more difficult for those who pick up the more sparsely populated areas. We want to amend clause 35 so that it matches what we are proposing in the amendments to clause 34. 

Amendment 91 also relates to clause 35. It is about taking out subsection (7), which states: 

“If there are two or more universal service providers— 

(a) OFCOM must secure that there is no overlap in the universal service obligations imposed on the providers, and 

(b) designated USP conditions may require the providers to make arrangements for securing that a universal postal service operates uniformly and effectively throughout the United Kingdom.” 

The reason for those requirements is the significant worry if the universal service is provided by more than one provider. The clause is obviously intended to safeguard that situation. We feel that the problem would not arise in the first place if there were one provider of the universal service. Amendment 91 complements our amendments to clause 34. 

Lastly, we have amendment 93, which relates to clause 36. It takes out the reference to two or more providers of universal service provision. Our amendments relate to the same idea—we feel very strongly that there should be one provider of the universal service, and we should keep uniformity so that people have one service serving them across the whole country. For that reason, we have proposed the amendments. 

Mr Davey:  This group of amendments concerns removing from the Bill the ability of Ofcom to designate in very limited circumstances more than one universal service provider. My hon. Friend the Member for Bedford and the hon. Member for Llanelli had an interesting debate on that subject, but at many points the debate became muddled between two issues. One issue is whether more than one universal service provider can be designated, with all the conditions that apply to a USP, and the other is whether there can be competition in end-to-end delivery, because nothing in current law, regulation or the Bill prevents end-to-end competition. If a postal company operating within the scope of the universal service wished to provide end-to-end deliveries, in the way that I think my hon. Friend contemplated, it can go ahead and provide that. 

We will talk about how such operators would be regulated and what conditions Ofcom might chose to put on them when we discuss clauses 39 onwards, particularly clause 40(2). We can then debate issues of concern to the hon. Lady, who has raised the potential for cherry-picking. However, that debate is not relevant to this group of amendments. The amendments seek to change clauses 34, 35 and 36, which are part of a group of clauses under the heading “Universal service providers.” What is at stake is whether more than one company can be designated as a USP. 

The intention of the group of clauses is to give Ofcom the power to designate one or, in two specific circumstances, more than one USP to ensure the provision of a universal service. I come back to the fact that the Bill is about providing a universal service, and the special circumstances relate to concerns about whether

that universal service can be provided. In the two circumstances, Ofcom would have the ability to designate more than one USP. The designated operator or operators would be obliged to comply with conditions, including the requirement to provide a universal service throughout the United Kingdom, presumably—as we will come on to—working with the other USP. 

The group of clauses provides an essential part of the regulatory framework. It is different from the 2009 Bill, but that is because it is an improvement, and it relates to options that are available to us under the European postal services directive. As with other elements of the Bill, the intention is to ensure that it is future-proofed—in other words, to enable the regulatory regime to adapt, when it needs to, to ensure the continued and long-term provision of a universal service. Personally, I think it is inconceivable that Royal Mail will not be the sole provider of a universal service for the foreseeable future. However, it makes sense, as part of future-proofing, to provide for a situation in which that might not be the case. As we will discuss when we come on to the special administration regime, legislation has to provide for the unforeseen or for unlikely situations. That is what Parliament needs to do in making the law, even if we think it unlikely that such provisions might be needed. 

Clause 34 allows Ofcom to designate more than one provider under two circumstances. The first is where 

“OFCOM have made a procurement determination under section 43”. 

Members of the Committee will know that clause 43 deals with the fairness of bearing the burden of the universal service obligation by the incumbent USP, and we will reach the clauses relating to that particular issue in due course. The second circumstance is where 

“a postal administration order has been made under Part 4” 

and Ofcom considers it necessary to increase the number of USPs to secure the universal service and bring about the end of the administration. 

If we have to use the clauses in part 4 in the future, we will be in a difficult position. As the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Wantage, will explain when we discuss part 4, the clauses under “Postal administration orders” mirror similar arrangements, particularly on energy and water, in other legislation. Their role is to be a last safeguard, and the second circumstance under which Ofcom might designate two or more USPs is only an extreme example. I hope that, in respect of these clauses, the hon. Member for Llanelli will realise that that is not likely to happen. We hope that we never find ourselves in either of those scenarios, and we do not expect that we will. Both procurement determination and the special administration provisions are genuine backstops, only to be used if the future of the universal service is at risk. 

12.15 pm 

At times, the hon. Lady talked as though Ofcom could designate alternative providers in profitable areas under these provisions, but that is simply not the case. Clause 34 only allows for the designation of more than one universal service provider if it is necessary to do so in the event of a special administration, or if Ofcom has found that there is an unfair burden on the universal service provider. In the latter case, an alternative provider can only be designated where it can provide the relevant part of the universal service with less of a burden—not in the profitable areas where there is no burden. The

fragmentation risk, which she discussed at length, does not exist. I hope that she will be reassured by those points. 

As I have mentioned, having the ability to make multiple designations in specific, albeit unlikely, cases is simply a sensible and pragmatic fall-back provision. It is also important to make it clear that having more than one designated universal service provider in no way provides for or permits varying levels of minimum service across the country—at one point, the hon. Lady suggested that it might. Provisions elsewhere in part 3 of the Bill guarantee that the minimum requirements of the universal service must remain uniform. Having given those assurances, and having explained the sensible rationale behind the policy, I hope that the hon. Lady will withdraw the amendment. 

Nia Griffith:  These are very important amendments, because it is fundamental to us that there is a united, universal service obligation provided by one provider. Although I have listened to the Minister trying to reassure us that there are only certain circumstances where these provisions might be used, we feel that the emphasis in a number of clauses—beginning with this clause and continued throughout the Bill—is that there may be more than one provider. I sense that there is a slight difference of approach between the Minister and the hon. Member for Bedford, who was perhaps more enthusiastic about seeing a number of different providers. 

On that note of caution I want to press our amendment to a vote, so that we are clear that there should be only one provider of the universal service obligation. 

Question put, That the amendment be made. 

The Committee divided: Ayes 6, Noes 9. 

Division No. 21 ]  

AYES

Blenkinsop, Tom   

Griffith, Nia   

McClymont, Gregg   

Morrice, Graeme (Livingston)    

Turner, Karl   

Wright, David   

NOES

Davey, Mr Edward   

Fuller, Richard   

Harris, Rebecca   

Newmark, Mr Brooks   

Patel, Priti   

Stephenson, Andrew   

Swinson, Jo   

Vaizey, Mr Edward   

Walker, Mr Robin   

Question accordingly negatived.  

Nia Griffith:  I beg to move amendment 86, in clause 34, page 19, line 20, at end insert ‘, subject to the Secretary of State placing these regulations before Parliament for approval.’. 

The amendment requests that the procedures to be followed on a review must be provided for in regulations made by Ofcom, subject to those regulations being placed, by the Secretary of State, before Parliament for approval. This is simply a way of strengthening the Bill and strengthening the opportunity for parliamentary approval and scrutiny. We are suggesting that the procedure to be followed on a review must be provided for in regulations made by Ofcom, subject to the placing of those regulations before Parliament. I think it is self-explanatory. We have debated before why we think it is important to have parliamentary scrutiny for such matters,

and that is what our amendment seeks to include. 

Mr Davey:  We feel that the amendment would place an unnecessary, inappropriate and cumbersome burden on the making of such regulations. I apologise to the hon. Lady, but her amendment did not feature in the 2009 Bill. In this particular aspect, we have used the same wording as that Bill here. Before the hon. Member for Kingston upon Hull East stands up, let me say that the matter is about the regulatory powers, and I do not think it has anything to do with ownership. 

I think the previous Government realised that the amendment would be unnecessary. It concerns the procedure that Ofcom will have to follow in a review of designations under the clause. The procedure will be provided for in regulations made by Ofcom, and such procedures are highly technical and detailed. I think it is for the independent regulator, who will have the details, to determine the procedure. That is a far better place than Parliament to have a review of the process. The amendment would be quite cumbersome, and I can only imagine members of the Statutory Instrument Committee reviewing a set of procedures scratching their heads, wondering why they were there and why Ofcom was not just getting on and publishing the procedures. I do not think there is a big issue here with parliamentary accountability, so I hope the hon. Lady will withdraw her amendment. 

Nia Griffith:  Well, I do not think there is ever a matter that Parliament cannot consider. I always think it is important for Parliament to have the maximum opportunity for scrutiny. When we are setting up something new—Ofcom is going into a new area—there is every reason for a proper scrutiny of the procedures. I will therefore press the amendment to a vote. 

Question put, That the amendment be made:— 

The Committee divided: Ayes 6, Noes 9. 

Division No. 22 ]  

AYES

Blenkinsop, Tom   

Griffith, Nia   

McClymont, Gregg   

Morrice, Graeme (Livingston)    

Turner, Karl   

Wright, David   

NOES

Davey, Mr Edward   

Fuller, Richard   

Harris, Rebecca   

Newmark, Mr Brooks   

Patel, Priti   

Stephenson, Andrew   

Swinson, Jo   

Vaizey, Mr Edward   

Walker, Mr Robin   

Question accordingly negatived.  

Clause 34 ordered to stand part of the Bill.  

Clause 35 

Designated USP conditions 

Amendment proposed: 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’.—(Nia Griffith.)  

Question put, That the amendment be made:— 

The Committee divided: Ayes 6, Noes 9. 

Division No. 23 ]  

AYES

Blenkinsop, Tom   

Griffith, Nia   

McClymont, Gregg   

Morrice, Graeme (Livingston)    

Turner, Karl   

Wright, David   

NOES

Davey, Mr Edward   

Fuller, Richard   

Harris, Rebecca   

Newmark, Mr Brooks   

Patel, Priti   

Stephenson, Andrew   

Swinson, Jo   

Vaizey, Mr Edward   

Walker, Mr Robin   

Question accordingly negatived.  

The Chair:  I am afraid that we cannot move amendment 10 because Mr Weir is not here, so we shall proceed to amendment 11. 

Nia Griffith:  I beg to move amendment 11, in clause 35, page 20, line 16, leave out ‘seek to’. 

The Chair:  With this it will be convenient to discuss amendment 90, in clause 35, page 20, line 22, at end insert ‘including the need for future investment and service provision.’. 

Nia Griffith:  The purpose of amendment 11, which was tabled in the name of the hon. Member for Angus, is to strengthen the role of Ofcom by deleting the words “seek to” and leaving “must”. Amendment 90 would require Ofcom to ensure that the prices that it imposes take into account the universal provider’s money for future investment and service provision. We agree with the hon. Member for Angus that the measures under paragraphs (a) and (b) should be strengthened. We have more to say about paragraph (c), however, which I shall discuss shortly. 

On paragraph (a), we agree that Ofcom must ensure that prices are affordable; how we define affordable, however, is problematic. Furthermore, the EU directive does not specify uniform, and the way in which the Bill is worded at present affords Ofcom opportunity to modify the universal service requirements and, therefore, scrap uniform price for delivery across the UK. Therefore, the need to keep prices affordable assumes even greater importance. 

We would rather the prices always be kept uniform, because that is a vital part of our understanding of the universal postal service. A uniform price would ensure that we all share the actual cost of delivering a letter to the most costly places. However, even if the prices are not uniform they should be affordable, so we very much concur that “seek to” should be deleted to leave “must” in paragraph (a). It is also perfectly reasonable that Ofcom should have to ensure that 

“the prices take account of the costs of providing the service or part of a service”. 

That it should do so, seems self-evident. 

Amendment 90, which is in my name and that of my hon. Friend the Member for Ochil and South Perthshire, who is probably still stuck in Edinburgh airport, would insert 

“including the need for future investment and service provision” 

at the end of clause 35(5)(c). We know that there has been a drop in the number of items being sent through the post, with an average day’s total being some 71 million letters, packets and parcels, following a peak of 84 million in 2005. We understand, therefore, that there are significant pressures and that the way in which people use postal services may be changing. Therefore, in reaching any decision about pricing, account must be taken of the costs incurred in providing the service. 

Before such costs can be calculated, the resources needed to provide the service must be identified. The total cost of resources used to provide the service is made up of a number of different costs including labour, supplies, equipment, facilities and purchased services. 

As with any industry—manufacturing or service—investment is required to keep abreast with developments. Five years ago, only half of all mail was being sorted automatically; now more than 80% of it is sorted in that way—right down to the level of the individual postal worker’s walk. 

12.30 pm 

Mr Davey:  I think I am right in saying that that is not quite true—there has been a big increase in the amount of mail that is machine-sorted, but not right down to the walk order for the individual Royal Mail employee. That is where there needs to be an awful lot more automation, so that Royal Mail can get to that fine level of sorting and save time in the delivery office, and postmen and women do not have to do the final sort, which can sometimes take several hours. 

Nia Griffith:  I am sure that the Minister will enlighten us further on that point. However, the important point that he is making, which is the one that I would make, is about the need for continuing modernisation and, therefore, investment. We heard from Moya Greene excellent stories about wonderful places that she would like to take us to, but she also mentioned places where there is still a huge need for more modern equipment. Progress is certainly being made, and I think we now find that a lot of the A4-sized mail, including magazines and catalogues, is being sorted automatically. 

We have talked quite a lot about how Royal Mail has continued to modernise its operations with a considerable amount of investment. However, as with any industry, manufacturing or service, investment is required to keep abreast of developments. It is not just a matter of what has been done, but a matter of looking to the future. It is not just a matter of new equipment and innovations, but a matter of investment in replacing older equipment, particularly in an industry such as Royal Mail, which has a large number of vehicles. All those are cost items. 

Through the amendment, we are saying that we think it is important that Ofcom is aware of the matter and takes into account the need for future investment and service provision. That is why we would include, at the end of subsection (5)(c), 

“the need for future investment and service provision.” 

We think it is important that that is taken in conjunction with the need to provide a service or part of a service efficiently. We have had a long debate on what we meant by “efficiently” and whether it was a good thing to

include it in the legislation. Here we want to amend the clause so that efficiency does not stand there on its own, but stands with our amendment, so that Ofcom can take a more realistic look, is not in a situation of simply being driven by the need to maximise profits and looks at the need for future investment to continue to provide the best service. That is where amendment 90 stands. It is difficult for us to support amendment 11 tabled by the hon. Member for Angus because it slightly cuts across what we have proposed. However, before I press any amendment to a vote, I would like to hear what the Minister has to say to our suggestions. 

Mr Davey:  I understand the intention behind the amendments, but I think they are unnecessary and, in the case of amendment 11, unworkable. 

Clause 35 allows Ofcom to impose designated universal service provider conditions, which will enable Ofcom, among other things, to require a universal service provider to provide a universal postal service in accordance with the standards set out in the universal postal service order. Designated USP conditions may also set tariffs or price controls for the provision of the universal postal service. 

Amendment 11 would, on the face of it, make a relatively minor change. The Bill, as drafted, provides that Ofcom must seek to ensure that prices are affordable, that prices take account of costs and that prices provide incentives for the USP to provide an efficient service. This mirrors the requirement in article 12 of the directive. The amendment would delete “seek to” so that Ofcom must ensure these objectives are delivered. 

If one reflects on that, one would understand why that would be quite difficult. It would not be appropriate or workable for Ofcom to ensure, in all instances, that prices were affordable, that they took account of the costs of providing the service or that they provided efficiency incentives. Let me explain that a little more, because however attractive that idea might be, it is the practicalities that are of concern to us. 

At any given time, circumstances outside Ofcom’s control might make it impossible for it to deliver such a commitment. For some unforeseeable reason—for example, because of a change in accounting methodology—it simply might not be possible for Ofcom to ensure that prices took account of costs. In such a scenario, Ofcom would, of course, still be under a duty to seek to ensure that they did, but it could not reasonably be expected to ensure that they did. The clause builds in sufficient flexibility to deal with such a scenario, and I hope that my explanation satisfies hon. Members. Although the hon. Member for Angus is not here, I think he will understand why amendment 11 is not needed. 

Amendment 90 would make a different change altogether. It would add a requirement on Ofcom, when setting price control tariffs, to seek to ensure not only that the prices provided incentives for the USP to be efficient, but that the level of the prices took into account the need for future investment and service provision. Obviously, one understands the rationale behind the proposal, but it really is not needed. 

Clause 28 provides that Ofcom must carry out all its functions in a way that it considers will secure the provision of a universal service. In doing so, it must

have regard to the need for the provision of the universal service to be financially sustainable and efficient, and the hon. Lady can refer back to our discussions on those points. The need for future investment and service provision is clearly implicitly included in those considerations. It is difficult to see how Ofcom could fulfil the key duties in clause 28 if it was not taking account of investment. In setting price controls, Ofcom will have to give consideration to those primary duties, so the amendment is not needed, and I hope that the hon. Lady will not pursue it. 

Nia Griffith:  We still feel that it is important that the future need for modernisation and investment is taken into consideration. It is not sufficient for Ofcom just to look at prices in terms of incentives to provide the service efficiently. Given the way in which paragraph (c) is worded, we want to press amendment 90 to a vote, because it adds a different dimension and introduces a more realistic appraisal of the costs and the way in which a universal service provider must look to the future to make sure that it can invest appropriately. On that note, I would like to press amendment 90 to a vote.  

Amendment, by leave, withdrawn.  

Amendment proposed: 90, in clause 35, page 20, line 22, at end insert ‘including the need for future investment and service provision.’.—(Nia Griffith.)  

Question put, That the amendment be made. 

The Committee divided: Ayes 6, Noes 9. 

Division No. 24 ]  

AYES

Blenkinsop, Tom   

Griffith, Nia   

McClymont, Gregg   

Morrice, Graeme (Livingston)    

Turner, Karl   

Wright, David   

NOES

Davey, Mr Edward   

Fuller, Richard   

Harris, Rebecca   

Newmark, Mr Brooks   

Patel, Priti   

Stephenson, Andrew   

Swinson, Jo   

Vaizey, Mr Edward   

Walker, Mr Robin   

Question accordingly negatived.  

Clause 35 ordered to stand part of the Bill.  

Clause 36 

Publication of information about performance 

Nia Griffith:  I beg to move amendment 92, in clause 36, page 20, line 38, at end insert— 

‘(c) to publish annually an independently audited performance report concerning each of the devolved government territories.’.

I expect that hon. Members are getting hungry and will not want me to speak for too long on this amendment. You will be pleased to hear, Mr Amess, that as part of the amendment is similar to what has been said before, we will not detain the Committee long. 

There is a keen interest in the devolved government territories in the future of Royal Mail and the universal postal service. As I and hon. Members from Scotland

have said, there has been specific investment from the Scottish Executive and the Welsh Assembly Government in the post office network with the challenge fund in Scotland and the post office diversification fund in Wales. 

The amendment is about making a report concerning each of the devolved Administrations, not because we want a fragmented service that is different in any of the devolved territories, but because of the importance of Royal Mail with its universal service to the devolved territories, and the interest that the devolved Administrations take in its future. 

The universal service is particularly important to small businesses, and links in with the devolved Administrations’ responsibilities for economic development. They know how important the universal postal service is to the many small businesses in their territories, and they have put by significant sums of money for investment in their post office programmes. They are particularly keen to have full consultation about the future of the universal service provision. The amendment would require an independently audited performance report to be published annually on the specific Government territories. 

Mr Davey:  I often begin by making the point that the Bill’s overall aim is to secure the universal service. By definition, that service benefits consumers throughout the United Kingdom. If I have understood the hon. Lady’s intentions correctly, she is keen to ensure that there is no reduction in service in the devolved Administrations. The amendment would place an additional requirement on Ofcom to publish an annual independently audited performance report concerning each of the devolved Government territories. I understand her intentions, but hon. Members have no cause for concern. Ofcom already has statutory duties and powers relating to consumers, and the Bill extends them to cover the interests of postal service consumers. Furthermore, Ofcom has well established advisory committees representing the interests and opinions of those living and working in England, Wales, Scotland and Northern Ireland. Those committees offer advice to Ofcom on the needs of those they represent. 

I assure the hon. Lady that the universal service is for the benefit of consumers throughout the entire United Kingdom, and preserving it for all consumers is what the Bill is about. Given that existing protection, I invite her to withdraw her amendment. 

Nia Griffith:  As I have said, the devolved Administrations have a particular interest because we know that considerable sums of money have been invested in providing updated post office counters and so on. It would be very nice if those post office counters were protected in the Bill with some reference to access points or a specific reference to the Post Office. The interest of the devolved Administrations is specific, because of the money that they have put in. That is why we bring it to the Minister’s attention a second time this morning, and why we want the provision about the publication of information on performance, with specific relevance to the devolved territories. 

However, if the Minister can give a full assurance that all the necessary consultation will take place, perhaps it will be possible for us to consider withdrawing the amendment; but I do not really see why we should. It is

a perfectly good amendment and would ensure that there was additional involvement for the devolved Administrations. On that basis, I will press the amendment to a vote. 

Question put, That the amendment be made. 

The Committee divided: Ayes 6, Noes 9. 

Division No. 25 ]  

AYES

Blenkinsop, Tom   

Griffith, Nia   

McClymont, Gregg   

Morrice, Graeme (Livingston)    

Turner, Karl   

Wright, David   

NOES

Davey, Mr Edward   

Fuller, Richard   

Harris, Rebecca   

Newmark, Mr Brooks   

Patel, Priti   

Stephenson, Andrew   

Swinson, Jo   

Vaizey, Mr Edward   

Walker, Mr Robin   

Question accordingly negatived.  

Clause 36 ordered to stand part of the Bill.  

Clause 37 

USP access conditions 

Nia Griffith:  I beg to move amendment 106, in clause 37, page 21, line 36, leave out ‘and’ and insert 

‘provided in either case that such action would not be likely to adversely affect the ability of the provider to provide the universal postal service in accordance with the service standards specified in the universal postal service order’.

The Chair:  With this it will be convenient to discuss the following: 

Amendment 95, in clause 37, page 21, line 37, at end insert— 

‘(4A) Any USP access condition must—(a) be commercially negotiated, and(b) not undermine the universal service.’.

Amendment 108, in clause 40, page 24, line 10, at end insert 

‘OFCOM shall exercise its power under subsection (1) if it considers that the provision of a service within the scope of the universal postal service by a person other than the designated universal service provider may impede the ability of the designated universal service provider to comply with its universal service obligations.’.

Amendment 112, in clause 48, page 30, line 10, at end insert 

‘provided in either case that such action would not be likely to adversely affect the provision of the universal postal service in accordance with the service standards specified in the universal postal service order.’.

Nia Griffith:  We now embark on a new and different chapter, and no doubt the hon. Member for Bedford will be extolling the virtues of the opportunity for all sorts of providers to use the final mile of the Royal Mail. It has certainly been a matter for considerable discussion in the past. Hon. Members may recall that way back in the Hooper report and again in the evidence

sessions at the beginning of our sittings there was considerable concern about the exact operation of the arrangements. 

There were two sides to the story: Royal Mail always reckoned that it did not have the right price for the provision of the universal service for that last mile, and that therefore those who were, in the jargon, joining upstream—bulk carriers such as TNT, who do a lot of mailing for large companies and put a lot of similar, easy-to-sort and easy-to-deal-with mail in one place, at one price, for companies that want that—would pass it on to Royal Mail for the difficult bit, or the last mile. 

Therefore Royal Mail felt that the prices were not effective for it, and did not take into account its real costs. It considered that the arrangement was an unfair form of competition. On the other hand, submissions from some competitor providers argued the other case—that there was not in fact such difficulty for Royal Mail, and that it was those competitors who were perhaps not getting a fair deal. 

The clause is immensely important in trying to get things right for the future and ensure that Ofcom’s role under the clause will be performed effectively. We do not want to end up with a situation like that in which Postcomm was accused by both sides of not getting the sums right or doing things correctly and properly. 

Our amendment 106 would insert, at the end of subsection (4)(b): 

“provided in either case that such action would not be likely to adversely affect the ability of the provider to provide the universal postal service in accordance with the service standards specified in the universal postal service order”. 

We want to insert that because we understand why people want competition—the hon. Member for Bedford made a good case for competition and all its possible benefits. However, we have the strange situation of what the Bill describes as the “burdens”—that is not me putting in an emotive aspect, but because the additional responsibility or cost of that final mile is well recognised. 

While Ofcom is looking at the universal service provision conditions, and in particular the access conditions, our amendment would provide that it needed to take into account each of the following purposes. We would not just extend paragraph (b) so as to promote effective competition but also put in an amendment that would, in some ways, seek to protect how the universal service is provided—in other words, it would not be detrimental. 

The hon. Member for Bedford is anxious to explain a bit more about competition policy. 

Richard Fuller:  The hon. Lady is extremely generous in giving way—perhaps too generous. As my hon. Friend pointed out, I rather jumped the gun when discussing a previous amendment, in extolling the virtues of competition, but I was getting warmed up for now. 

Is the hon. Lady concerned that her amendment is drawn so widely that it gives a provider the opportunity to cry wolf all the time? The definition of what might adversely affect a provider’s ability is so broadly drawn that it could have the chilling effect of damping down any form of competition whatsoever. 

Nia Griffith:  That is an interesting observation. The difficulty is how to leave a regulator any leeway in which to operate if some things are not widely drawn. We have had that discussion, in part, elsewhere in the Bill. The Minister has pointed out that Ofcom needs some leeway, while we have tried to tighten up on that leeway. Here is a possible opportunity for Ofcom to have such discretion, but if it is not stated in the Bill—in other words, without the requirement to look carefully at what might affect the universal service provision and the ability of any universal service provider to provide that service for the last mile—I am not sure where that protection is to come from. It is easy to open the doors to all sorts of competitors, but it is much more difficult to provide the necessary framework and protection for the provider of the universal service provision. 

I do not know whether the hon. Gentleman had any particular example in mind, but we thought Ofcom ought to have the opportunity to have as a must that it has got to do something. It can then turn around and say, “Well, the reason we have had to set such and such a price is because we had to take into consideration the needs of the universal service provider.” That is precisely the sort of criticism that Postcomm came under previously. Ofcom would then have a legitimate reason to look at such matters but, I hope, with enough flexibility for it to be able to make an appropriate judgment and balance the pros and the cons and the necessary factors that have to be taken into consideration when allowing for certain access provisions and when setting certain prices. 

Under subsection (4), Ofcom 

“may not impose a USP access condition unless it appears to them that the condition is appropriate for each of the following purposes”. 

The purposes are not (a) or (b) or (c) as under the 2009 Bill, but the condition has to be appropriate for each of (a) and (b) and (c) provisions. To make it more appropriate for the universal service provider, we would not remove “promoting efficiency”. In the past, we have been accused of wanting to do that. For obvious reasons, we would not remove the provision under paragraph (c) of 

“conferring significant benefits on the users of postal services”, 

nor would we remove the idea of effective competition. We are not saying that there should not be competition. Sometimes, we are portrayed as a monolithic, dinosaur socialist party. At some stage, the Minister was trying to convey to us some rather insulting comments. 

We are saying that there should be competition, but that Ofcom would need to look carefully at the way in which people were to have access, to what they were let access for and for what price. That would need to be balanced by the needs of the universal service provider. Obviously, we want the provider to continue to provide the service as specified under the standard in the universal postal service order. That is why we specifically want to include such a provision in the clause. We are not anticompetitive. We simply want a firm way in which to ensure proper consideration of all the arguments. 

Amendment 95 deals with the condition being commercially negotiated at a proper commercial price. An earlier argument in respect of Postcomm was that the price was not a real reflection of the cost. If something were commercially negotiated, we would hope that both sides agreed the right price for the job to be done. The amendment would link in clearly with the need for

consideration of what is both efficient and good for the service while at the same time being a viable and proper commercially negotiated agreement. 

Richard Fuller:  When we were talking about the relationship between Royal Mail and the Post Office, the hon. Lady spoke eloquently about disparities in commercial negotiations, and about her desire to maintain the agreement between the two for a very extended period. Will she admit that, in these circumstances, we find ourselves in a situation of even greater disparity of competition between a Royal Mail monopoly provider of the last-mile service and a potential entrant into that market, which—if subject to the amendment—would

be in a very inferior situation to Royal Mail, which could always say, “We are just not going to provide commercial terms” and, as if that was not bad enough, could also cry wolf because it would undermine the universal service obligation. If the hon. Lady does not accept that amendment 106 would be chilling on competition and perhaps make us fall foul of our obligations under European— 

1 pm 

The Chair adjourned the Committee without Question put (Standing Order No. 88).  

Adjourned till this day at Four o’clock.