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 

Thursday 9 December 2010  

(Morning)  

[Mr Jim Hood in the Chair] 

Postal Services Bill

Written evidence to be reported to the House 

PS 21 Andrew Pendleton 

Clause 44 

Contributions for meeting burden 

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

9 am 

Mr Mike Weir (Angus) (SNP):  I shall not keep the Committee long, but I seek clarification from the Minister of the meaning of subsection (2)(b). I presume that that gives Ofcom the power to set the tariff for the universal service, but I am unsure of exactly how that is to be done. Under our present system, it is clear enough. We have a first and second class postal service, delivered by a public monopoly. If it wishes to raise the price of the service, that has to be determined by Postcomm, and it has recently announced that it is minded to allow a substantial rise from April of next year. However, I am not clear about how such a provision fits in with the Minister’s brave new world of privatised operators competing with one another and only the privatised Royal Mail being obliged to provide the universal service. 

The situation brings to mind the saga of the parliamentary trains, which are now little remembered apart from by aficionados of Gilbert and Sullivan. However, I am sure that the Minister, as a good Liberal, will recall that Gladstone, as President of the Board of Trade, was responsible for the Railway Regulation Act 1844. Incidentally, it is perhaps ironic, given the nature of this Bill, that that Act originally set out to nationalise the railways. The Act decreed that there should be one train with provision for third class passengers running on every line, every day, in each direction; the fare should be one penny per mile; the speed should be not less than 12 mph; and third class passengers should be protected from the weather and provided with seats. That was a universal service for its day, although one wonders whether many of our current providers could manage the last of those conditions. Of course, many railways complied grudgingly, providing the bare minimum or running trains early in the morning or late at night. 

You may well be wondering, Mr Hood, how what I have described is relevant to the current position, but I am concerned that these provisions could just conceivably have the same effect on a universal service in postal deliveries. Due to the weather, I was, unfortunately, unable to be here to debate the earlier clauses on the universal service and obviously I will not seek to revisit those clauses now, but I note that the provisions for the universal service obligation specify that there will be a

daily delivery and pick-up. They do not, however, specify how long it will take for the letter or package to get from pick-up to delivery. We all understand that in the present system a first class item will be delivered the next day or so, whereas a second class item may take several days. It is not clear to me that any such undertaking is given in the new system. 

My particular concern about this provision is that it seems to allow Ofcom to set the price for the USO services to ensure, as in an earlier clause, that the service is financially viable. Does that mean that a branded universal service could be running in parallel with the same company operating a different regular service at a different and lower price in some areas? For example, if I wanted to send a letter from Westminster to a constituent in Angus, I would use the USO service to get it delivered, at a cost of, say, 50p. Perhaps the Minister could use a different service, such as the London suburban express, which delivers only in the Greater London area, for, say, 30p. In effect, the larger urban areas could have a cheaper service than the USO service due to the larger population centres and ease of delivery, leaving the USO operating only on the periphery and Ofcom with the power and perhaps necessity of increasing the price to consumers to ensure that the USO continues. 

I am sure that the Minister, in his usual inimitable way, will just dismiss those concerns. He will perhaps point to subsection (5), but I do not think that that gives protection in the possible scenario that I have outlined. I fully appreciate that there is already a price difference for bulk users in the present system, but I am concerned that giving Ofcom the power to look at the charges for the universal service in this way could open the door to a price difference for individual users of that service, as opposed to bulk users. I would like an assurance from the Minister that that will not happen through Ofcom setting the price for users in this way. 

Gordon Banks (Ochil and South Perthshire) (Lab):  I welcome you to our deliberations, Mr Hood. Mr Amess looked after us well in your absence. 

The hon. Member for Angus picked one aspect of clause 44; I pick another. The Minister will tell me if I am barking up the wrong tree, but I understand that the clause will apply when the Secretary of State directs Ofcom to require contributions to be made to meeting some or all of the burden concerned. The hon. Gentleman spoke about the whole burden, but I wish to speak about only some of it. 

I presume that we are talking about the impact on providers delivering a service such as that currently offered by Royal Mail in its final-mile delivery of competitors’ mail. In evidence, Mr Sibbick of the Mail Competition Forum stated in answer to my question on how the Bill could be improved that he thought that this clause was restrictive of competition. Does the Minister agree with him that the discretion of Ofcom in this clause translates into uncertainty that could be damaging to the market? Does the Minister believe that the access price negotiated by Royal Mail and UK Mail—as Mr Sibbick said, it is now in the market—is sustainable? 

As I read it, clause 44 provides Ofcom with the opportunity to set the level of contributions to be made to meet some of the burden, but the hon. Member for

Angus spoke of setting the level to meet it all. Am I right to deduce that agreements such as that made by Royal Mail and UK Mail for the last-mile delivery, which I believe is 13p per letter, will in future be made by Ofcom? Could that result in the last-mile contract being set at different levels in different parts of the country? Could a mandatory scheme for universal service providers, if there is more than one, apply to all other mail providers? 

Whenever I speak to staff in local sorting offices or have meetings with Royal Mail workers, I am told time and time again that 13p is an inappropriate amount for the job. The Minister may say that it was a commercial decision, but am I right that it will in future be a regulatory decision? Will he tell the Committee what was assessed to be the burden on the universal service provider, or providers, caused by the transfer from a commercial decision to a regulatory one? We know that the last-mile delivery is anything but the last mile; it might be the last 20 miles, and in the constituency of the hon. Member for Angus it might be even longer. 

How can Ofcom make a regulatory decision that is binding on service providers without the commercial information that would allow it to do so? Clause 44(6) allows for 

“any fund set up for the purposes of the scheme to be administered by OFCOM or some other person”. 

If it is not Ofcom, who could it be, and what is the purpose of making such a stipulation? 

I note that the regulations for setting out such a scheme will have to be approved by both Houses of Parliament, and I congratulate the Minister on allowing the additional scrutiny that we have been arguing for in many amendments. How did he arrive at the decision to allow regulations made under this clause to be approved by Parliament, and what value was added by that decision? 

I hope that I have not got the wrong end of the stick on the final-mile delivery—if I have, I am sure that it will not be long before the Minister puts me right—but I am concerned that it will no longer be a commercial decision but a regulatory one. 

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey):  Welcome back to the Committee, Mr Hood. You have missed some fascinating sittings. For instance, we were shown a picture of the hon. Member for Ochil and South Perthshire with his local Santa Claus, which we were told has restored his belief. I say “local” because it is possible that I may appear as Santa Claus for a school near me. 

It is also good to welcome the hon. Member for Angus. We have missed him. It was interesting to hear his historical analysis of train services in the 19th century. I do not know whether he has been on a 19th-century train in third class, in his attempt to get here. I assure him we never dismiss what he says. We always think about it in great detail—and then reject it. 

The hon. Members for Angus and for Ochil and South Perthshire were almost discussing other clauses. At times I was not sure whether we were on clause 44 or some earlier clause. The hon. Member for Angus was worried about subsection (2)(b) and wondered whether the provisions would allow Ofcom to set different prices and service levels in different parts of the country. The answer is no. 

Mr Weir:  That is not quite what I was saying. The point was that the universal service defines a UK-wide service at a universal tariff. I was wondering whether the clause means that Ofcom sets the price for a branded universal service, and that a parallel service could be offered at a lower price in larger urban areas, which could in effect undermine parts of the universal service. 

Mr Davey:  The answer is still no. I am not absolutely sure what the hon. Gentleman is talking about. He seems to be talking about the way in which the universal service is delivered, which is obviously something that we debated under clauses that were considered when he was not here. If it helps him, I can tell him that the universal service structure is built, first, using the postal services directive, then with the minimum service requirements in clause 30, and then of course with the universal postal service order issued by Ofcom, set out in clause 29. 

In all those areas, with respect to letter mail, for example, which goes across the country, there is a uniform price and a uniform service. Nothing in the clause would undermine that, so I am still slightly at a loss to understand what the hon. Gentleman is worried about. The clause deals with a compensation fund. 

Mr Weir:  Will the Minister explain something to me? I understand that the clause is about a compensation fund, but it refers to contributions by 

“users of services within the scope of the universal postal service (by way of the charges paid by them).” 

Presumably the charges paid by them are the cost of the stamp or sending the letter, so the effect will be that if a compensation fund comes into being it may possibly raise the cost of the universal service by increasing the cost of a stamp to send letters around the country. 

I am looking for an explanation. Are we effectively saying that Ofcom can increase the price of the universal service to make up for the fact that it may be losing money and a compensation fund may be necessary? In that circumstance, would postal operators have the option of running a parallel non-universal service in specified areas?

Mr Davey:  Other clauses deal with the raising of prices by Ofcom. Clause 44 is specifically about contributions made to the compensation fund—[ Interruption. ] May I finish? If the hon. Gentleman reads it, he will see that it does not say that. 

The clause is about who, in the unlikely event that a compensation fund is set up, will contribute to it. Subsection (2)(a) states that 

“postal operators providing services within the scope of the universal postal service” 

are potential contributors. Those are the competitors of Royal Mail, in the main. It would also be open to Ofcom to seek contributions from the 

“users of services within the scope of the universal postal service (by way of the charges paid by them).” 

The hon. Gentleman is right to say that that would obviously link to the price of stamps and so on, but in the first instance it is much more likely that bulk customers rather than individual customers would be targeted by Ofcom. It will work not so much by putting up charges, but probably by a percentage of the stamp price being allocated as a levy into the fund. That is a sensible way to proceed should that be the chosen option. 

9.15 am 

Let us be clear about the process that takes us to that option. We must have a review of the unfair burden as set out under clause 42. If Ofcom concludes that there is an unfair burden on the universal service provider in providing the service, it has to make a report and recommendations to the Secretary of State who has to decide how he wishes to proceed. If the decision is taken to go for a compensation fund as a way to help the universal service provider pay for the unfair burden of providing the universal postal service, Ofcom will set out how payments are to be made into the fund, which is where subsection (2)(a) and (b) come in. From users, indirect contributions through their charges would be a percentage of the price paid for the stamp. 

Mr Weir:  I understand what the Minister is saying, but the bottom line is that if a compensation fund has to be set up, the other competitor will contribute to it, but it is clear that consumers will also be paying higher charges for the universal service. I appreciate that the only way in which that can be done is by raising the stamp price, but it seems to give Ofcom the power to raise it for that specific purpose so there will be a danger of the consumer facing ever-rising prices in a competitive world. I am sure that the privatised companies will be fighting hard not to be paying more into the fund. Where does the hon. Gentleman see the parameters? How much will come from the consumer? 

Mr Davey:  The hon. Gentleman is right that if there were a compensation fund, it is likely that there would have been price rises in the meantime. It would mean that there would have been serious financial problems for the universal service provider and that the efficiency improvements that we needed to see in Royal Mail would not have happened. Let us be absolutely clear that if we had reached such a point, things have not worked well and Royal Mail will not have succeeded in its modernisation programme. As we debated at length, it is essential that Royal Mail working with the Communication Workers Union and its employees implements the modernisation agreement to deliver efficiency gains, to avoid future price rises and to ensure that the universal service is financially sustainable. 

The whole Bill is about securing the universal service. As we have debated at length, looking into the long term the modernisation agreement itself will not be sufficient. Capital will need to be injected into the business to make sure that it can continue modernisation for a long period. The hon. Gentleman is right to say that if all that fails—if the modernisation agreement is not implemented, if after the Bill receives Royal Assent and Royal Mail is privatised, the private capital that is injected to continue the modernisation fails to make Royal Mail efficient and competitive and it is still unable to deliver the universal postal service efficiently—there is a danger that prices would continue to increase. We would have probably seen the stamp price increases already, if we had reached such a position. In such a rather unpleasant, and I hope unlikely situation, the consumer will be paying. I am not hiding that from him or the Committee. 

I stress to the hon. Gentleman that the whole structure of the Bill and our policy is to ensure that that point is not reached. However, as we discussed last week, if there is a review of the unfair burden placed on the

universal service provider, Ofcom and the Secretary of State have not only one, but three options in the Bill. In the 2009 Bill they only had the option of the compensation fund, but this Bill has two others—the procurement option and the option to review the minimum service requirement, subject to the parliamentary accountability set out in clause 33. I understand the point that the hon. Gentleman made and it is a fair one, but he should not worry, because there is nothing hidden and the clause is unlikely to be used. On the points he raised during his initial remarks, about different levels of prices and of services, he need not be concerned. 

The hon. Member for Ochil and South Perthshire cited Mr Sibbick of the Mail Competition Forum on his concerns about the impact of contributions on competitors. Clearly, under subsection (2)(a), the competitors—postal operators—would be asked by Ofcom to contribute. Most people who have debated compensation funds over many years know that it is an option to ensure that the universal service provider is supported if such a fund becomes an unfair burden. Obviously the competitors are not keen to have to put their hand in their pocket, and understandably so. They want to ensure that Royal Mail becomes more efficient and, indeed, they welcome the fact that the envisaged review has been delayed to ensure that no perverse incentives might discourage Royal Mail from becoming more efficient. One reason why we delayed the review was to make Royal Mail understand that it has to become more efficient and so make the compensation fund a less likely outcome. The competitors have welcomed that and although some would rather not have the provision in the Bill in the first place, their situation has improved vis-à-vis the 2009 Bill. 

This may be unfair on Mr Sibbick, but he used to work for the Department of Trade and Industry, as the Department for Business, Innovation and Skills was then called, and when he was an official in the mid-’90s, I met him on a train in Sweden. I say to the hon. Member for Angus that we had second class tickets, which is what they mainly have in that part of Sweden. We were travelling back from a conference on postal economics, which had been thrilling. He and I talked about this—not clause 44, as that had not been written, but the issue of a compensation fund. As a civil servant, he mused on the fact that it was an obvious option. People who have studied postal economics over the years realise that it is fundamental as a safeguard, when a universal service provider has to provide a service at the same price for the same level of delivery throughout the country. 

I understand the concerns of Mr Sibbick, who represents the members of the Mail Competition Forum, but they and he will understand why the provision is in the Bill. They will also understand, that we do not want to get to the point of needing such a compensation fund, and should be reassured by that. I think I have covered all the points raised by the hon. Member for Ochil and South Perthshire. 

Gordon Banks:  Is the Minister going to tell me that I was barking up the wrong tree in relationship to the last-mile charges? 

Mr Davey:  The hon. Gentleman never barks up the wrong tree; he may sometimes be misguided and get the wrong train, but he never barks. The last-mile charges

would not potentially be at different levels under this part of the Bill. Royal Mail may well have different contracts with different terms—that is the case now—but in terms of BIS and a compensation fund, that is certainly not what is intended. Subsection (2)(b) is not about changing other aspects of the universal service or the access pricing regime, or anything like that. It is about seeking contributions to the compensation fund. 

I hope that I have dealt with Members’ concerns. I just want to reiterate that the clause is simply about ensuring that there is some protection for the universal service if things go wrong. It is clear that if such a fund is required, regulations establishing it would require the consent of the Secretary of State and the approval of both Houses. I am glad that the hon. Member for Ochil and South Perthshire welcomed that. Only providers of services falling within the scope of the universal service can be required to contribute to the fund. Individual consumers cannot be required to contribute directly to the fund—I thought that point might come up. The Bill, as we have discussed, allows for contribution by way of charges that would almost certainly be levied by a percentage of the price of a stamp, which would then be allocated to the fund. Ofcom is required to secure that regulations setting up any universal service fund are objective, proportionate, transparent, do not give rise to discrimination against particular providers or users and avoid or minimise the distortion of competition. There are controls around that. Hopefully, that also deals with some of the concerns raised by the hon. Gentleman. 

Question put and agreed to.  

Clause 44 accordingly ordered to stand part of the Bill.  

Clause 45 

Report on sharing mechanism 

Nia Griffith (Llanelli) (Lab):  I beg to move amendment 121, in clause 45, page 28, line 13, leave out ‘12 months’ and insert ‘3 years’. 

It is a pleasure to serve under your chairmanship again, Mr Hood. I rise to speak to clause 45 and amendment 121, which is in my name and that of my hon. Friend the Member for Ochil and South Perthshire. Clause 45 is about the report on the sharing mechanism, which is detailed in clause 44. That clause is about the contributions that Ofcom may require postal operators to make to the operator of the universal postal service, to meet some or all of the burden of providing that universal postal service. As it stands, clause 45 seems to single out the reporting on the contribution to sharing the burden of the provision of the universal service as an area that has a shorter review time than the other aspects under review. Business planning and investment needs to be made well in advance, and the universal service provider needs to have as much certainty as possible in order to make the necessary business plans. 

While I appreciate the very fast-changing nature of consumer use of mail services, any changes in business practices take time to implement. In order therefore to create more stability, and to give the universal service provider—namely a newly privatised Royal Mail—the stability and certainty to plan for a longer period than just 12 months, we are suggesting that the first report should be prepared for the period of three years from

when the first regulation made under clause 44 comes into force. In other words, we are not suggesting that there should be any delay in making those initial regulations on the contributions to share the burden of providing the universal service, but we are suggesting that once those contributions have been determined, they should remain in place for longer than 12 months—for three years, in fact. The idea is to give as much stability as possible to Royal Mail for its business planning. 

9.30 am 

We certainly accept the need for reporting and reviewing, not least because the costs of providing the universal service might escalate and it may be necessary to make sure the contributions to the burden are increased accordingly. This is not about setting in stone a particular solution or set of figures for ever, but rather about being realistic about business planning time scales and increasing stability. Businesses need that certainty to plan ahead. To us, a period of three years strikes a suitable balance. It would allow a sufficiently long period of time for which the universal service provider could plan, and yet would allow a report and possible review to be made after three years, which would then allow changes in market conditions to be reflected accordingly. The last thing that a fledgling privatised Royal Mail service needs, particularly if it is encountering difficulties, is a lot of instability, with the goalposts changing all the time. It needs stability to establish itself and to continue with its modernisation plan. 

We had very much hoped that our amendment 95, requiring any USP access condition to be commercially negotiated and not to undermine the universal service, would be looked on more favourably by the Government. Had the amendment been accepted, that would have helped to guarantee the creation of a more realistic financial plan for the provision of a universal service. Even then, there could have been a need for contributions to the burden incurred by the universal service provider. As our amendment was not accepted, and without assurances from the Government that they might bring forward amendments of their own that would have a similar effect, there could very well be an even greater need for the power that Ofcom has under clause 44 by which it can require contributions to the burden. 

It is in the light of that need that our amendment 121 requires, before any report or review, a three-year period after the coming into force of the first regulations made under clause 44. 

Mr Davey:  I am grateful for the hon. Lady’s remarks, particularly as she is showing concern about long-term planning for business, which is what the whole Bill is about. If we are to protect the universal postal service, we need to ensure that the universal service provider is able to plan long term, so I refer the hon. Lady back to clause 28 and the duties that we put on Ofcom as it sets about regulating the universal postal service, particularly bearing in mind the need for financial sustainability. We inserted the financial sustainability duty in this Bill, which is different from the 2009 Bill. It has caused consternation in some of our previous debates, but I return to it at this point because if the hon. Lady is concerned about long-term planning, the duty on Ofcom to ensure that the universal postal service is financially sustainable gives a sense of its need to think long term,

which obviously has implications for how it regulates and how it considers investment and all the other matters that will be required to provide the universal postal service. 

I am slightly confused by the hon. Lady’s amendment, not only because it ignores what is in clause 28, but because clause 45 is about the compensation fund. It is about the requirement for Ofcom to prepare and publish a report into the operation of that compensation fund. It mirrors a similar requirement in the Communications Act 2003. It seems reasonable that—in the unlikely event that, Ofcom having made a review on whether there is an unfair burden, a compensation fund is selected as the option for dealing with that—there should be a report on the operation of that. I should have thought that the hon. Lady—and certainly her hon. Friend the hon. Member for Ochil and South Perthshire, who always wants more reports and more parliamentary accountability—would have welcomed that. Rather than welcoming regular reports, the hon. Lady is seeking to delay the first report and only wants a report every three years. It is important to make the information public regularly, especially because other postal operators who work within the scope of the universal postal fund will be contributing to the fund, and potentially users will be doing so. The argument for regular reporting is even stronger here, so I am slightly mystified that the hon. Lady wants to take us in a different direction. Given the financial implications of the compensation to those contributing to the universal service, an annual report is absolutely appropriate. 

Nia Griffith:  I heard what the Minister said, but I would like to point out a couple of things. First, the suggestion of a 12-month period seems to be rather a one-off, in contrast to some of the periods suggested elsewhere in the Bill. The real issue, however, arises when a fledgling Royal Mail has got itself into a situation in which there clearly needs to be a contribution to the burden of the universal service. If we are looking at and deciding on what sort of contribution is needed, and setting it for a 12-month period, and if there is then to be a very quick review of that—in other words, if a change is to be implemented at the end of the 12 months —we would want to start planning even earlier than that. If there is to be constant reviewing, therefore, it will be difficult to see whether the contribution to that burden is having the required effect in rebalancing the market. 

The Chair:  Order. I am afraid that the hon. Lady’s intervention is too long. 

Mr Davey:  Thank you, Mr Hood. However, I found the hon. Lady’s intervention helpful, because— 

The Chair:  Order. I am sure that the Minister finds it helpful, but he should not encourage Members to make long interventions when the Chair is trying to help the other way. 

Mr Davey:  You are absolutely right, Mr Hood; I do not wish to encourage long interventions. I will now respond to the hon. Lady. 

Retracing the hon. Lady’s opening remarks, she first asked why the three-year period. I am trying to deal with that in terms of the practical realities of the compensation fund and why it would need to report back on how those people’s money is being spent, but she says that the period is different from that in other parts of the Bill. 

Yes, there are different time periods in other parts of the Bill, because they relate to different things, such as when a review can take place. In this case, it is a report. I refer the hon. Lady to clause 36(1)(b), under which Ofcom can, through a designated USP condition, require information from the universal service provider—it talks about publishing 

“annually an independently audited performance report.” 

Elsewhere in the Bill, on reporting, it is quite clear that we have in the main gone for annual reports—when it is going into the future and over a time period—so I do not really accept her argument. 

I hope to disabuse the hon. Lady of her concerns. We hope that a compensation fund would not last long. We do not wish the compensation fund to happen in the first place nor, if it were to happen, for it to become a permanent feature. There is that potential, if it turns out to be the only way forward, but we hope, first, for it not to happen and, secondly, for it to be temporary—possibly not lasting for the three years. The danger in the hon. Lady’s suggestion is that the compensation fund would be set up and closed down before the first report was made. I hope she agrees that that would not be a happy course of events and I hope that she will withdraw her amendment, having received those assurances. 

Nia Griffith:  I apologise, because I thought that the Minister had concluded his remarks and was just being super-courteous and giving me the opportunity to intervene. 

The Chair:  Order. I thank the hon. Lady for that. I, too, thought the Minister had concluded his remarks, which was why I let the hon. Lady go on, but then I realised that the Minister had allowed an intervention, and not finished his speech. 

Nia Griffith:  To get back to the idea of 12 months, it is of course important to have those reports and insight into how the performance indicators are progressing and so forth. My concern is that it takes a while for a compensation fund to kick in. I understand the Minister’s point that one would not want it to last for ever or be longer than it has to be. The complexities of the market are such, and the difficulties of looking at changing consumer and competitor patterns, mean it would be difficult to make a definite assessment. It would be destabilising for Royal Mail to be given such a short leash on the compensation fund that it could not plan ahead effectively. 

We discussed the need not only to keep the service going, but to provide investment for future modernisation. I understand that some competitors raised concerns about subsidising an inefficient Royal Mail, but I am sure that the regulator could ensure that appropriate levels were set in the contribution. It would be helpful to Royal Mail to have a proper period in which those

contributions could work their way through, and we could see if that were the right level and would make the service operate in the interests of the consumer. 

Question put, That the amendment be made. 

The Committee divided: Ayes 7, Noes 10. 

Division No. 34 ]  

AYES

Banks, Gordon   

Blenkinsop, Tom   

Griffith, Nia   

McClymont, Gregg   

Morrice, Graeme (Livingston)    

Turner, Karl   

Weir, Mr Mike   

NOES

Collins, Damian   

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 45 ordered to stand part of the Bill.  

Clause 46 

Notification by postal operators 

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

9.45 am 

Gordon Banks:  I shall not keep the Committee long. [ Interruption. ] Yes—I am just buying a bit of time until the Whip comes back. 

Clause 46(7) relates to the publication of a register that Ofcom must keep of every notification given to it by the Secretary of State. I want to ask the Minister a few questions. Why does the subsection restrict the times at which the public can have access to the register? Why cannot it be permanently available and updated in real time? 

Furthermore, where will Ofcom advertise the publication advising the availability of public scrutiny, and what is the likely period of time of that availability? Will it be electronically available, or will access be by some other means? Finally, how will Ofcom determine the fees payable for access to the register? 

Mr Davey:  I am delighted that the hon. Gentleman has asked those questions, because we have been thinking of nothing else in the Department when we have been thinking about clause 46. 

Clause 46 gives the Secretary of State power to make regulations that require operators to notify Ofcom before they carry on business as postal operators. It requires the Secretary of State first to consult Ofcom before making such regulations. The regulations are also subject to the negative resolution procedure. I am sure that the hon. Member for Ochil and South Perthshire will be delighted about that. 

The clause specifies, as the hon. Gentleman has said, that if operators are required to notify Ofcom that they are carrying on business as postal operators, Ofcom must 

“establish and maintain a register which records every notification”. 

The hon. Gentleman has asked many questions about that register. 

The clause makes it clear that Ofcom must make the register available for public inspection. It requires Ofcom to publish notice setting out when that will be and stating the fees that anyone wanting to see it must pay. The notice must be published in such a way as to bring it to the attention of those who would be interested in it. The hon. Gentleman has invited me to enter into the mind of Ofcom with respect to the way it would think about the notice it had to publish and about the details of the notice. 

There are some points worth making. It would be unreasonable to require Ofcom to have the register available 24 hours a day. That is not to say it might not choose to put it on the web, in which case it would be available 24 hours a day, but we shall not require it to do so. It is also worth bearing in mind that Ofcom is unlikely to set up the scheme. Similar provisions have never been used even though they are in the Communications Act 2003, but it is important that the powers should be available if it were decided to go down such a route. 

One must be clear that the detailed decisions that the hon. Gentleman wishes me to opine on would be made if and when such a situation arises. Given that such a situation could be a long way off and is certainly a big hypothetical, I do not think that in this Committee this morning I should restrict the decisions in the years ahead of people who are not yet in post and who have not yet even had to think about this problem. 

All I will say to the hon. Gentleman, because we have fought long and hard about this issue, is that we believe that Ofcom will make the right decisions and we think that Ofcom will ensure that the public can access this register at the appropriate time. I also say to him that this register will obviously be a scintillating read; I know that there is likely to be massive demand to read it across the country. However, I think that the higher the demand, the more accessible Ofcom will make the register. 

Gordon Banks:  I am grateful to the Minister for giving way before he finally sits down. I think that he and Mr Sibbick will probably be reading this register. However, before he winds up, can he enlighten me as to why there is a time restriction on when the register is available? Irrespective of whether it is available electronically or in some other form, is there any reason why there is that time restriction? Also, he has not explained how that access might be available. Will he encourage Ofcom to make this register available electronically, so that, for the period of time that it is available, it will be available 24/7, even if it is not available 24/7 for 365 days a year? Furthermore, in relation to the last point that I made, he has not yet touched on the fees payable to allow access to the register. I would be grateful if he were to just address that point in some way before he finally sits down. 

Mr Davey:  The hon. Gentleman is right; I have failed to answer his point about fees. I will answer it now simply by saying that the same sort of considerations that I was outlining about the time that the register will be available would apply to fees. Ofcom will make those decisions in due course in the unlikely event that it decides to go down this road. 

I am in danger of repeating myself in answering the hon. Gentleman’s main points. Regarding what Ofcom will want to have on this register, for the purposes of ensuring that all the people carrying on businesses as postal operators are properly brought together on it, it is difficult to predict the information that Ofcom will require. On one level, one assumes that the information will be pretty basic—simply the names and addresses of the headquarters of the businesses, the directors and so on. However, I do not want to restrict Ofcom from seeking more information, although some of that further information might be commercially confidential. Who knows the nature of the information that Ofcom might want to put on the register? Therefore, once it has decided exactly what information it wants to have on the register, it will want to take decisions about how accessible it wishes that information to be. Who knows what might inspire Ofcom when it is thinking about that? If we are too specific, there is a danger that we might end up tying up Ofcom in knots and creating unnecessary burdens and expenses. 

The hon. Gentleman can be reassured that, because the Secretary of State will be involved in making the regulations in this area—I refer the hon. Gentleman to subsection (1)—and therefore those regulations will be laid before the House, it will be possible for the Secretary of State to make provisions for electronic access and to discuss fees and the availability of the register in such an order. The Secretary of State, of course, is under a duty to act in a reasonable manner always and in every case. So perhaps the best way to answer the hon. Gentleman is to say that the times that the register will be publicly accessible will be reasonable and that the fees will also be reasonable. 

Question put and agreed to.  

Clause 46 accordingly ordered to stand part of the Bill.  

Clause 47 

Essential conditions 

Amendment proposed: 50, in clause 47, page 29, line 22, leave out ‘may’ and insert ‘must’.—(Nia Griffith.)  

Question put, That the amendment be made. 

The Committee divided: Ayes 8, Noes 9. 

Division No. 35 ]  

AYES

Banks, Gordon   

Blenkinsop, Tom   

Griffith, Nia   

McClymont, Gregg   

Morrice, Graeme (Livingston)    

Turner, Karl   

Weir, Mr Mike   

Wright, David   

NOES

Collins, Damian   

Davey, Mr Edward   

Fuller, Richard   

Harris, Rebecca   

Patel, Priti   

Stephenson, Andrew   

Swinson, Jo   

Vaizey, Mr Edward   

Walker, Mr Robin   

Question accordingly negatived.  

 

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

Gordon Banks  rose—  

Mr Davey:  Jesus. 

Gordon Banks:  Who? No, no, no. It’s just me—Santa. 

We have had discussions and votes on mays and musts, but the essential conditions guarantee mail integrity—confidentiality, security and data protection—and are an absolutely minimum requirement for operators providing communication and logistics services. Condition 8 of Royal Mail’s licence stipulates that all licensed operators comply with Postcomm’s code of practice on protecting the integrity of mail. That code requires all operators to submit to Postcomm and Consumer Focus annual reports on a whole range of data. I shall not go into those data—some of them have been covered in other contributions—but basically, they are on lost, stolen, damaged or interfered-with items, and also on trends, patterns or other notable features, such as above-average incident levels at certain premises. All of that is important and necessary if we are to have faith in the integrity of the mail service. All licensed operators must also submit, with each report, a statement of the measures that they intend to take to remedy any failure, or patterns of failure, to achieve mail integrity objectives and to reduce the numbers of code postal packets lost, stolen, damaged or interfered with. 

Article 5 of EU postal directive 96/67/EC stipulates: 

“Each Member State shall take steps to ensure that universal service provision meets the following requirements: 

- it shall offer a service guaranteeing compliance with the essential requirements”. 

Residential and business consumers require confidence in the integrity of the postal system, and of the postal operator or operators. Leaving it to Ofcom to determine whether the essential conditions should be imposed on postal operators, could lead to significant unreported detriment and to a lack of confidence in the postal system. 

The Bill suggests that Ofcom “may” impose consumer protection conditions on postal operators, and “may” require the reporting and publishing of complaint numbers, complaint processes, and compliance with complaints handling standards. The existing licence and consumer protection legislation ensure that consumers’ key interests in an accountable and high-quality postal service are met. Without a mandatory consumer protection condition, postal operators would be able to operate without sufficient regard for consumers—I am not saying that they will, but they will be able to. 

Postcomm’s 2009 customer survey found that 8% of residents and 13% of small and medium-sized enterprises, which have formed a significant part of our deliberations, had made a complaint to Royal Mail. Of those, 73% of residents and 70% of SMEs were not satisfied with the customer service that they received, and that is in a system in which legal protection is stipulated. I have significant experience of an instance in my constituency; no doubt my constituent would have been one of the 8% who complained and one of the 73% who were not satisfied with the outcome. 

10 am 

Our concern is that the situation is likely to deteriorate, given the diminution of protection set out in the Bill. Ofcom should be required to impose a consumer protection

condition on all postal operators providing a universal service or a service within the scope of the universal service, as is the case under the current system. That is set out in the Postal Services (Consumer Complaints Handling Standards) Regulations 2008 and the Postal Services Regulated Providers (Redress Scheme) Order 2008. Directive 2008/6/EC amends directive 97/67/EC such that article 19 stipulates: 

“Member States shall ensure that transparent, simple and inexpensive procedures are made available by all postal service providers for dealing with postal users’ complaints”. 

Mr Davey:  It may help the hon. Gentleman if I point out that we are on clause 47, which deals with essential conditions, not consumer protection. 

Gordon Banks:  We’ll get there—I have been there and will get back there. 

Postal consumers should be provided with at least the same level of protection, in terms of the quality of providers’ own complaints handling schemes, as Ofcom will require from telecoms providers. An example is alternative dispute resolution. Postal operators should be required to be members of an approved redress system to ensure that complaints handling standards can be monitored and independently investigated. 

Consumer Focus made representations to the Committee in written evidence. I will not repeat those to the Committee, but it is important that the level of protection provided to postal consumers should be high and should be delivered with an even hand by the regulator across the services that it regulates. Going back to my argument, I wonder whether the Minister agrees with my comments. If so, he may well want to reconsider the use of the word “may” in clause 47(1). 

Mr Davey:  I am very happy to deal with the consumer protection issues, but if you do not mind, Mr Hood, I shall deal with them when we come to those clauses. I will deal with the hon. Gentleman’s points then. 

I want now to deal with the provisions in clause 47, because it outlines “essential conditions” that Ofcom can impose on postal operators. Such a condition can be applied to every postal operator or to a particular description of postal operators that the condition specifies. Ofcom can impose such conditions for any or all of five purposes. The first is to safeguard the confidentiality of letters at all stages of their journey: sending, conveyance and delivery. The second purpose is to safeguard security where dangerous goods are transported. The third is to safeguard the confidentiality of information conveyed. The fourth is to guard against theft, loss or damage, and the fifth is to secure the delivery of postal packets to the intended addresses. 

Gordon Banks:  The Minister intervened when I was making my contribution and pulled me up about the clause, saying that it was not about consumer protection. Does he not agree that safeguarding confidentiality is consumer protection? 

Mr Davey:  I do, but the consumer protection clauses are 49 and 50. This clause is about the conditions and whether they are right. When the hon. Gentleman was talking about consumer protection, he went into complaints

systems and so on, which we will come to and I am keen to debate with him, but I do want to debate these conditions, because we need to know, of course, whether they are the right conditions for Ofcom to be able to place on postal operators. I argue that they are. Securing these conditions is essential to maintaining an effective and reliable postal service. 

I do not know whether you were in the Chair, Mr Hood, when I mentioned Correo Argentina, the Argentine Post Office. I do not want to go over those remarks again, because they involved its privatisation. 

Nia Griffith:  Gunrunning. 

Mr Davey:  Gunrunning and drug smuggling, and public concern in Argentina about whether a notorious mafioso criminal individual could gain control of the Argentinean postal service. Obviously that will not happen here, but it is important that consumers and businesses know that their letters will remain confidential. 

Our Royal Mail service has a very high standard of integrity, and I pay tribute to all its employees; they provide a first-class service and have done for many years. Although the amount of mail has fallen in recent years because of digital substitution, overall we still have relatively high volumes. That is because people trust Royal Mail and know that their letters will not be interfered with. Countries such as Argentina do not have that benefit. Ensuring that those conditions are imposed on other postal operators and not only on the universal service provider is important, as it protects the integrity of the mail service. Customers, be they businesses or households, will know that their mail will not be tampered with but will remain confidential. 

Other elements of the essential conditions are important, such as those on theft, loss and damage. It can be a real concern if letters or parcels are damaged, but I think particularly of the dangers that Royal Mail employees often face. I know that Royal Mail employees have been robbed while going about their duties in my constituency, and I am sure that it will have happened in other constituencies, with people trying to steal things from the postman’s pouch. I shall give an example. 

There was a spate of such crimes a few years ago when mobile phones were being delivered regularly. They were obviously seen to be highly valuable items, and organised gangs were robbing the postmen in order to get hold of them. It is important to ensure the safety of Royal Mail employees and to ensure that packages are safely conveyed. That is why these conditions should be imposed on all postal operators. The integrity and security of the mail service is paramount. 

Gordon Banks:  The Minister speaks about ensuring the integrity of the mail service. I am glad that he recognises that confidentiality and guarding against theft and so on are consumer protection issues. He can achieve all that by changing the second word in the clause from “may” to “must”. If he is intent on all these protections, why does he not make that change? 

The Chair:  Order. I draw the hon. Member’s attention to the fact that we discussed that point in an earlier clause. 

Mr Davey:  I take that as a suggestion that I should not return to debates on the musty and willy amendments, and those other things that we have discussed at length. You will be pleased to know, Mr Hood, that I have finished my remarks. 

Question put and agreed to.  

Clause 47 accordingly ordered to stand part of the Bill.  

Clause 48 

General access conditions 

Amendment proposed: 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.)  

Question put, That the amendment be made. 

The Committee divided: Ayes 8, Noes 9. 

Division No. 36 ]  

AYES

Banks, Gordon   

Blenkinsop, Tom   

Griffith, Nia   

McClymont, Gregg   

Morrice, Graeme (Livingston)    

Turner, Karl   

Weir, Mr Mike   

Wright, David   

NOES

Collins, Damian   

Davey, Mr Edward   

Fuller, Richard   

Harris, Rebecca   

Patel, Priti   

Stephenson, Andrew   

Swinson, Jo   

Vaizey, Mr Edward   

Walker, Mr Robin   

Question accordingly negatived.  

Clause 48 ordered to stand part of the Bill.  

Clause 49 

Consumer protection conditions 

Nia Griffith:  I beg to move amendment 122, in clause 49, page 30, leave out lines 34 and 35 and insert ‘every operator appropriate to the postal service each provides’. 

We recognise the importance of consumer protection conditions, as my hon. Friend the Member for Ochil and South Perthshire has just pointed out, and feel that it is important that Ofcom should impose such conditions on every operator, appropriate to the service that each provides. As we have explained, we would have liked the Government to have been willing to accept the amendment that would have replaced “may” with “must” in the first line of the clause, which we feel would have offered the consumer better protection. I will not reopen that debate, other than to say that it is a recognition of just how important we consider consumer protection conditions to be. 

Subsection (1)(a) and (b) seem to allow Ofcom to impose a consumer protection condition on either “every postal operator” or merely 

“every postal operator of a specified description”. 

That seems to leave a loophole, because it depends on what is meant by “of a specified description.” We feel that the amendment would help to protect the consumer better by ensuring that every operator is subject to consumer protection conditions appropriate to the service it provides. We have already taken issue with the use of “may” instead of “must” in the first line, which seems to lessen the requirements of the regulator considerably. When the Minister responds, would he explain the thinking behind the decision to allow the regulator to opt for subsection (1)(b) and impose a consumer protection condition on every postal operator of a specified description? 

If someone takes money from consumers in exchange for providing them with a postal service, the consumers deserve proper protection. That is particularly true because of the nature of the postal service, as people entrust something they value to an operator. They are asking an operator to take a letter or package out of the consumer’s sight and pass it along from one employer to another through a range of settings, from its collection to its transportation, and then on to a sorting office and perhaps another until the postman or postwoman finally delivers it to its destination. For someone to entrust their goods to such a service, they really need a strong belief that they will arrive at their destination safely. We have agreed that that is an important point for the consumer. 

That situation contrasts strongly with other products and services that the consumer can complain about straight away if they are dissatisfied, often because they have the evidence in their possession. For example, if someone is dissatisfied with the food or service provided in a restaurant, they can complain about it straight away. If someone has problems on a journey on public transport—not that any of us knows anything about those—they are there in person to witness those problems and complain. If someone has problems with goods they have purchased, they have the evidence in their possession and they have the option to return the goods to the shop. 

10.15 am 

Those examples are rather different from the postal service. People hand something over, trusting that it will be delivered, and there can be serious consequences if it does not arrive as anticipated. For example, if someone sends a cheque to pay off a debt, but it does not arrive when they expect it to, they can incur interest charges or late-payment charges. Someone with a business who wishes to keep to a commitment by supplying a customer with documents for a project within a specified time scale could have to make embarrassing apologies. The reputation of their business could suffer, and the loss of reputation and the loss of future custom could be difficult to quantify. We could also be talking about the disappointment of a child who has no present from their granny or their auntie to open on their birthday. 

Gordon Banks:  Or Santa Claus. 

Mr Davey:  That is Santa’s fault. 

Nia Griffith:  Quite possibly. 

The consequences of such things may last a lifetime, all of which makes it particularly important that consumer protection conditions are in place. Hon. Members will remember the statistics alluded to by my hon. Friend

the Member for Ochil and South Perthshire, so I will not repeat them. The Committee should, however, remember the face of the child whose birthday card does not arrive on time. 

The existing licence and legislation on consumer protection ensure that customers’ key interests in having an accountable and high-quality postal service are met. We are concerned that without a mandatory consumer protection condition, postal operators will be able to operate without sufficient regard for their customers. 

The figures that my hon. Friend mentioned indicate the problems that consumers experience, even with legal protection, and the situation could deteriorate greatly, given the diminution of protections in the Bill. Opposition Members strongly feel that Ofcom should be required to impose a consumer protection condition on all postal operators providing a universal service, or a service within the scope of the universal service, under the current licensing system. 

Under subsection (1), Ofcom could opt for paragraph (b) rather than paragraph (a), in which case the relevant parts of the clause would read: 

“OFCOM may impose a consumer protection condition on…every postal operator of a specified description.” 

The phrase “of a specified description” describes the postal operator. If it were intended to describe the condition, it would be in the first line of the clause, and the relevant parts of the clause would say that Ofcom may “impose a consumer protection condition of a specified description on…every postal operator”. In that context, the phrase “of a specified description” would be redundant, because the clause already refers to “a consumer protection condition”. 

The wording of the clause seems to allow for the watering down of what is required under current legislation. Postal consumers should be provided with at least the same level of protection as is required under current legislation, be that in terms of the quality of the providers’ complaints handling schemes, access to alternative dispute resolution or information about ADR, which Ofcom will require from telecom providers from July 2011. 

Under the amendment, there would be no either/or regarding paragraphs (a) and (b). My colleagues and I propose that a consumer protection order should apply to every operator and that it should be appropriate to the service that each of them provides. We are extremely disappointed that the Government did not accept our amendment to change “may” to “must” in the first line of the clause. Amendment 122 gives the Government another opportunity to improve the Bill and to strengthen protections for consumers. For that reason, we would like to press it to a vote. 

Mr Davey:  The hon. Lady’s remarks have moved the Committee almost to tears. I have been so moved that I have had to reflect hard whether we could accept her amendment, because it is potentially devastating. I would not want to be guilty of creating the kind of psychological damage that she described for generations of children. On reflection, I reassure the Committee that our clause will not do so. Indeed, there is a danger that if we accept the amendment, generations of children could suffer psychological damage. I will not sit down, because I

want to explain myself. I hope that I can help the hon. Lady understand the severity of the implications of her amendment. 

Clause 49 sets out the consumer protection conditions that Ofcom may impose on all postal operators, or every postal operator of a specified description, in order to protect service users. Amendment 122 relates to Ofcom’s power under clause 49 to impose a consumer protection condition on either every postal operator or every postal operator of a specified description and seeks to replace those categories with a single category allowing for the imposition of consumer protection on every operator appropriate to the postal service each provides. 

The intention of the amendment might be to ensure that regulation is applied with greater precision. It may even be designed to narrow the circumstances in which Ofcom can impose consumer protection conditions. However, it is unnecessary and could create confusion for the regulator and postal operators. Giving Ofcom the power to describe separate categories of operator, as the clause does, enables it to direct the consumer protection conditions precisely. That follows closely the model in section 52 of the Communications Act 2003, which relates to Ofcom’s functions in other regulated sectors. 

We are moving away from the current licensing regime to a regulatory system based on general authorisation where Ofcom can impose certain conditions on certain categories of postal service provider. Clause 49 gives Ofcom the discretion to impose consumer protection conditions on all postal operators or postal operators of a specified description. The latter category allows for differentiation of services, as Ofcom can specify a description of services to ensure that regulation is accurately targeted at the appropriate postal operators. That approach is completely consistent with other parts of the Bill and allows regulation to be targeted clearly and effectively where it is required. 

The amendment does not help Ofcom’s ability to regulate. I do not believe that it offers any greater protection to consumers than is already provided for; indeed, it might weaken the Bill in that respect, and would serve only to leave regulation open to challenge and confusion. It might help the hon. Lady to read subsection (1) again. It is clear that Ofcom is not being restricted to making only one consumer protection condition; it can make a series of them. One consumer protection condition might apply to every postal operator, and another could apply to every postal operator of a specified description. I hope that my explanation in more detail will help her understand that the measure is about targeting and being proportionate. In relation to the children whom she discussed, if it is necessary in Ofcom’s view to impose a consumer protection condition on all postal operators, that is what Ofcom will do. Accepting her amendment would make that more difficult. I therefore ask the hon. Lady to withdraw her amendment. 

Nia Griffith:  I remain a little confused, because I still see a loophole. If Ofcom may impose a consumer protection condition on every postal operator of a specified description, some postal operators might not meet that specified description. It seems to be a let-out clause. Otherwise, consumer protection conditions would have to apply to every postal operator. The measure does not seem to be tight enough to prevent that from being a partial effort. 

Mr Davey:  Let me try to give an example to help the hon. Lady. Imagine a postal operator—there are many of them—which operates only in the express parcels business and a consumer protection condition meant only for letter mail. That is an example of a consumer protection condition that we would not want to apply to a particular type of operator; we would want to exclude operators not involved in letter mail. 

Nia Griffith:  I see what the Minister is saying, but that is what our amendment would achieve by referring to every operator appropriate to the services each provides. 

10.25 am 

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

Adjourned till this day at One o’clock.