Postal Services in Scotland - Scottish Affairs Committee Contents


Further written evidence from Consumer Focus Scotland

REGULATION

Consumer Focus is concerned that many of the hard-won consumer protections enshrined in the current licensing system will be lost in the move to reduce the legislative burden on Royal Mail via the Postal Services Bill. Our concerns, in respect of a discretionary ability by Ofcom to regulate, epitomised by the word "may" several times in the Bill, as opposed to a requirement ("must") on Ofcom to regulate, centre on three issues: mail integrity, provision of information, and consumer protections.

Mail Integrity

OFCOM should be required to impose essential conditions on postal operators. Essential conditions guarantee mail integrity: confidentiality, security, data protection etc and as such are an absolute minimum requirement for an operator providing a communication and/or logistics service.

Condition 8 of Royal Mail's licence currently stipulates that all licensed operators comply with the Postcomm Code of Practice on Protecting the Integrity of Mail. Furthermore, Article 5 of the EU Postal Directive 97/67/EC stipulates "Each Member State shall take steps to ensure that the 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 postal operator. Leaving it to Ofcom to determine whether these essential conditions should be imposed on postal operators could lead to significant un-reported detriment and a lack of confidence in the postal system.

Provision of information

Consumer Focus is also keen to ensure that important licence obligations are replicated in a mandatory proposed authorisation scheme. Two licence obligations of particular value are mail integrity figures and delivery & collection exceptions which, under Royal Mail's current licence, are provided to Consumer Focus and Postcomm. This information is not made public and, as such, Consumer Focus and Postcomm currently provide the only scrutiny in these areas of potential serious consumer detriment. Going forward, this information must be made available to the regulator, Ofcom, and to Consumer Focus (or any successor consumer representative organisation).

The Postcomm Code of Practice on Protecting the Integrity of Mail currently requires operators to submit to Postcomm and Consumer Focus reports which set out:

(a)  the number of (or where precise numbers are not known, reasonable estimates of the numbers of) Code Postal Packets during the relevant year which were lost, stolen, damaged or interfered with; and

(b)  details of any trends, patterns or other notable features (such as above average incident levels at certain premises) in relation to the incidence of loss or theft of, damage to, or interference with, Code Postal Packets.

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.

Condition 2 of Royal Mail's Licence requires the reporting, to Postcomm and Consumer Focus, of information relating to delivery & collection exceptions.

Consumer protection conditions

A consumer protection condition would cover: complaints handling procedures; dispute resolution and redress schemes; and publication of information about complaint numbers and complaint handling.

The Bill as currently drafted suggests that Ofcom may impose consumer protection conditions on postal operators and may require reporting and publishing of complaint numbers, processes and compliance with complaint handling standards. Ofcom should be required to impose a consumer protection condition on all postal operators providing either a universal service or a service within the scope of the universal service, as under the current system. (Set out in the Postal Services (Consumer Complaints Handling Standards) Regulations 2008 and the Postal Services Regulated Providers (Redress Scheme) Order 2008.)

Article 19 of Directive 2008/6/EC 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".

The existing licence and legislative consumer protections ensure that consumers' key interests around an accountable and high quality postal service are met. Without a mandatory consumer condition, postal operators will be able to operate without sufficient regard for consumers.

Postcomm's 2009 Customer Survey found that of the 8% of residents and 13% of SMEs who made a complaint to Royal Mail, 73% of residents and 70% of SMEs were not satisfied with the customer service received. These figures indicate the problems consumers experience even with legal protection - this situation is likely to deteriorate given the diminution of protection set out in the Bill.

Postal consumers should be provided with at least the same level of protection, in terms of the quality of providers' own complaints handling schemes; access to Alternative Dispute Resolution (ADR); and information about ADR, as Ofcom will require from telecoms providers, as of July 2011. Postal operators should also be required to be members of an approved redress scheme to ensure complaints handling standards can be monitored and independently investigated.

EXAMPLES FROM OTHER MARKETS

The Committee asked if we were able to identify examples where consumer detriment occurred or exists as a result of the regulator not being required, although given discretionary ability, to undertake certain actions.

Sectoral regulators and referrals to the Competition Commission

Ofgem, Ofwat, Ofcom and the ORR all have competition enforcement powers under the Competition Act 1998 and the Enterprise Act 2002. In particular, these sectoral regulators have the power to make market investigation references to the Competition Commission as the statutory referral body (Section 136 of the Enterprise Act 2002). The Government's 2001 White Paper "A World Class Competition Regime" made no comment on the expected use of these powers. However, Ofgem, Ofwat, Ofcom and the ORR have, in total between them, made only one market investigation reference to the Competition Commission since 2002 and there has never been a market investigation into the energy sector.

In 2010 the National Audit Office carried out a review of the UK's competition landscape and concluded that the Government should evaluate the appropriateness of the incentives for regulators to use their competition powers. In particular, they stated that "Regulators are not making Market Investigation References to the Competition Commission to the extent envisaged in the planning assumptions" (National Audit Office, "Review of the UK's Competition Landscape", March 2010).

Ofgem's removal and re-instatement of licence conditions

Consumer Focus's experience as the energy watchdog has led us to the conclusion that an over-confidence in the competitive health of the energy market and its ability to self-police has blighted the consumer experience. For example, in 2004 Ofgem scrapped licence conditions banning undue discrimination between consumers "in a bid to minimise regulatory burdens" (Ofgem press release, "Improving consumer protection by reducing the regulatory burden", July 2000).

Very similar licence conditions had to be re-introduced in 2009 after Ofgem found there were persistent unjustified differentials between the prices suppliers charged customers depending on their payment method or region. Ofgem's assumption that consumer protections should always be removed, never introduced, explains our finding that in a study assessing consumers' perceptions of 45 markets for products or services, energy scored worse than any other market (Consumer Conditions Survey, December 2009).

Ofcom's duties around consumer protections

Under the Communications Act 2003, Ofcom has a duty to establish and maintain procedures pertaining to complaint handling, dispute resolution, redress and service standards. However, the wording in the Act leaves the duty very diluted: "It shall be the duty of Ofcom to set such general conditions (if any) as they consider appropriate" in respect of consumer protections (Section 52 of the Communications Act 2003). This relaxed duty has led Ofcom to impose two regulatory conditions on communications providers: that they must have and comply with a Complaints Code of Practice approved by Ofcom and that they must belong to an Ofcom-approved ADR scheme.

However, Ofcom recently announced that, as of next year, it will be tightening up the regulations around consumer protections. Its research on the existing complaints handling and ADR schemes found that a significant number of consumers experience poor complaint handling and that "providers incentives to compete on the basis of customer service are not proving sufficient to ensure that individuals will receive satisfactory treatment from their provider when they try to pursue a complaint" (Ofcom press release, "A Review of Consumer Complaints Procedures", 2010).

Ofcom is therefore establishing minimum standards for complaint handling procedures that will apply to all communications providers ("The Ofcom Code") and is requiring communications providers to provide extra information to consumers about their rights regarding redress. Despite our reservations regarding the wording of this duty this level of protection is still stronger than that afforded to postal consumers under the Postal Services Bill who do not even enjoy the limited consumer protections that competition can bring.

CONSUMER FOCUS POSTAL SERVICES—FUNDING & STAFFING

The Postal Services funding stream allocation for all work in Consumer Focus, Consumer Focus Wales, Consumer Focus Scotland, Consumer Focus (Post) Northern Ireland is just over £3 million in the current financial year (2010-11). Our funding stream allocation for 2011-12 has yet to be confirmed. We currently have 10 full-time equivalent posts, encompassing eight full-time posts, dedicated to work in this area with a proportionate cost allocated against this funding stream for other corporate support functions.

SCOTTISH POSTAL SERVICES CONSUMER SURVEY (2010)

In our written evidence, and during the oral evidence session, references were made to the views of Scottish consumers in relation to the Postal Services market. The relevant report is available on our website Scottish Postal Services Consumer Survey (2010) together with the full research report (Consumer Survey of Postal Service Users in Scotland Research Report) detailing information on the geographic and demographic spread of those surveyed, as requested by the Committee.

PARCEL DELIVERIES IN SCOTLAND

The Committee requested any further information we could provide in relation to the parcel delivery market, services and consumer experience in Scotland. Our briefing paper Parcel Deliveries: Current practice and possible solutions, produced by Consumer Focus Scotland in July 2010, is available online.

VIEWS AND EXPERIENCES OF NON-USERS OF POST OFFICES

The majority of consumers use post office services regularly: according to research undertaken in Summer 2006 by our predecessor body, Postwatch, 81% use post offices each month, and 55% use the post office at least once each week (The Future of the UK's Rural and Deprived Urban PO Network). However, the number of customers using post offices has steadily fallen, with 20 million customers visiting post offices each week, compared to 24 million customers five years ago.

Usage (and non usage) of post offices is driven by a number of factors, including:

¾  Opening hours of post offices not being convenient for consumers;

¾  Increasing queues in High Street branches;

¾  Local post offices may have closed, or the nearest post office may be some distance from where consumers live;

¾  Increasing preference to undertake transactions online or over the phone;

¾  Services that were previously offered at post offices have been withdrawn and moved elsewhere e.g. the loss of the TV Licence contract;

¾  The shift to Direct Payment, in 2004, means many people receive their pensions and benefits into a bank account, as opposed to through a post office.

The shift to new operating models means some customers no longer use post office services as regularly, or have stopped using post offices altogether. For example, our recent research into Outreach services (Sink or swim: Post Office Outreach Services in the Long-term) finds that many consumers do not or no longer use the service because its opening hours do not meet their needs (31%); it does not offer the products or services they wish to use (9%); they have concerns regarding the reliability of the service; they did not know the service existed (35%); or because of other aspects of the customer experience, such as concerns about the suitability of the premises and the privacy it offers.

Government has recently announced that 2,000 subpostoffices will be converted into a new operating model, Post Office Local (PO Local), in which post office services are provided as a secondary retail offer from existing premises such as petrol stations, convenience stores or corner shops. PO Locals typically offer a restricted product offer.

Research recently conducted, for a forthcoming evaluation report by Consumer Focus, in the areas where the operating model is being piloted suggests that 22% of consumers do not use Post Office Locals, even though it is the branch closest to them, for a number of reasons which include:
Reason for non-usage %
Not aware it existed21
Does not offer services I need21
Prefer to use a bigger branch17
Not near where I work or shop13
Do not like the branch12

Unless efforts are taken to ensure the PO Local model meets consumers' needs as effectively as possible, Consumer Focus anticipates that either a significant number of consumers will opt to use other post office branches further away—or, more worryingly, consumers may opt to undertake transactions through other means with this business lost to the PO network altogether.

ACCESSIBILITY ISSUES IN WHSMITH FRANCHISE BRANCHES

The Committee requested any information we might have on accessibility challenges faced by consumers where Post Offices were operating in shared premises with the Post Office service located on floors below or above the entrance floor.

WHSmith operate 78 franchise post offices, the majority of which are located on the basement or first floor of High Street WHSmith branches. The branches were introduced as part of a franchising programme, which was designed to stem the losses generated by the Crown Office network. Crown Office losses remain stubbornly high at approx £60 million.

Consumer Focus recognises that the location of post office services other than on the entrance floor presents issues in respect of the accessibility of these branches for customers with disabilities, who use wheelchairs or motorised wheelchairs, and for customers with pushchairs. On that basis, our predecessor body, Postwatch, investigated each proposal and secured agreement from POL on the following measures to maintain reasonable access for consumers using these branches:

¾  Maximum two hour call out time in the event of a lift breaking down or suffering technical failure;

¾  The provision of a screenless post office counter, on the ground floor, to provide access to post office services for customers who are unable to use post office counters on other floors;

¾  Signage in a prominent location which informs consumers of the option to be served on the ground floor;

¾  Contingency measures in the event the lift breaks down, including means to offer post office services from a ground floor counter.

We would be pleased to investigate any concerns that members of the Committee have in respect of accessibility problems in a specific branch.

Any further conversions would be subject to the Code of Practice, which is jointly operated by POL and Consumer Focus, which requires the Post Office to consult on changes and demonstrably take account of concerns expressed regarding the physical accessibility of the premises (or any other issue pertinent to the branch re-location.)

Research undertaken for Consumer Focus (Post Office Mystery Shopping Study; December 2009) finds that many branches have benefitted from improvements such as ramps to ensure level access, low level counter positions, lightweight and easy grip doors, and the installation of hearing loops for consumers with hearing difficulties.

The following table shows the availability of facilities designed to improve the accessibility of the branch for disabled customers, which is broadly comparable to the accessibility provided in Crown branches:
Facilities for disabled consumers % of branches available
Wide entrance84
Flat entrance84
Wide aisles and floor space63
Automatic doors 56
Staffed low counter position51
Conveniently placed door handles23
Ramp installation 18
Hearing loops 32

While we are satisfied WHSmith has taken reasonable measures to make physical improvements to its branches, we remain concerned that the layout of some of its branches may make it difficult for consumers to reach post office counters. Some branches also tend to leave stock on the shopfloor, before it is shelved or put on display, which presents an additional challenge for consumers attempting to navigate the branch to access PO services.

MAINTAINING, AND CODIFYING, THE NUMBER AND DISTRIBUTION OF POST OFFICES

There are currently 11,870 post offices in the UK, of which 1,441 (12%) are located in Scotland. Government has stated that it intends to maintain the current number of post office branches but has so far declined to put the access criteria that specify minimum levels of coverage on a statutory footing.

Consumer Focus sees merit in the existing Government access criteria for post office provision, which could presently be met with a network of approximately 7,500 branches, being strengthened to more closely reflect existing coverage, and being incorporated into primary legislation.

If Royal Mail were required by primary legislation to use a minimum number and distribution of postal service access points, POL would be better placed to secure future mail related contracts and would consequently represent an effective long-term safeguard for consumers.

Consumer Focus recognises that the demand for postal and post office services may change over time. We therefore suggest that the introduction of statutory access criteria, for both post office services and mails services, should be subject to a review process to be initiated by the Secretary of State and that any proposed changes to the minimum level of provision should require parliamentary approval.

16 December 2010


 
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