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Lord Kenyon: My Lords, I, too, should like to thank my noble friend Lord Geddes for introducing today's debate on behalf of my noble friend Lord Elibank. I want to take this opportunity to send my best wishes to my noble friend for a speedy recovery. I congratulate the Select Committee on a very comprehensive and searching report.
My reasons for speaking in this debate on the liberalisation of the Community postal services stems from my membership of the Committee of the Regions of the European Union, of which I have been a member since 1994, following its creation under the terms of the Maastricht Treaty.
In addition, the Committee of the Regions must be informed by the Commission or the Council whenever the Economic and Social Committee is consulted and may form an opinion if it feels that specific regional matters are involved. Finally, the Committee of the Regions may issue an opinion on any subject where it considers such action appropriate. I hasten to add that we do not take that route lightly. We measure our achievement by the quality of the debate on the opinions before us and not by the number of opinions that we generate in a year.
All the members of the Committee of the Regions are elected members of regional or local government in their respective countries. My colleagues from the United Kingdom are all from county, district or borough councils, whereas my German colleagues include the presidents and ministers of the Lander. While our levels of influence in our respective regions may be vastly different, we share a common purpose to ensure that careful consideration is given to European legislation that may affect regional matters by politicians who have a regional mandate. As noble Lords will have noted from the preamble to the draft directive on the liberalisation of the postal services, this was a case where the opinion of the Committee of the Regions was sought.
The Committee of the Regions organises its work into eight sub-committees, rather confusingly referred to as commissions. In this case the opinion was referred to Commission 3, of which I am a member, which deals
Right from the beginning we noted the absence of any mention of a uniform tariff. We heard evidence from representatives of employers' organisations arguing for complete freedom to set postal rates that truly reflected the cost of each particular delivery, with the result that a letter to the Outer Hebrides would be prohibitively priced. From a regional point of view that would set the clock back by further marginalising the more peripheral areas of the country. I am sure that I do not have to remind noble Lords that I come from Wales and that I already have an acute awareness of the implications of marginalisation. We do not want more money from the cohesion or structural funds; we just want a level playing field. Indeed, a number of members of the Commission went further and supported strongly the concept of a single European uniform tariff.
We also noted that the draft directive was surprisingly sparse in its coverage of regional and local aspects, particularly in failing to acknowledge the important role of post offices in rural areas, which do not just receive and deliver mail and sell stamps, but provide valuable community services. These are listed in the evidence at page 97 in a response from the Communication Workers Union to the noble Baroness, Lady Dean of Thornton-le-Fylde.
Many of these community services are undertaken by the Post Office at considerable additional expense, and they are undoubtedly at risk if they are not protected. Particularly worthy of mention is the free post service for the blind--the noble Baroness mentioned this earlier--which is currently subsidised by the Post Office to the tune of some £10 million per annum. Bearing in mind that blindness is one of the most debilitating afflictions--my father suffered from severe short-sightedness throughout the whole of his life, and therefore I know what I am talking about--the continued subsidy of this service is a small price to pay, and the inclusion of an explicit obligation on member states to include such a service in the universal service obligation throughout the European Union would be of great benefit to this highly disadvantaged sector of our society.
The Commission was also extremely concerned that the timescale for liberalisation was too fast and would not allow the universal service provider sufficient time to re-organise the business to be able to continue providing a satisfactory service at an affordable price. Our final opinion calls on the Commission to submit its report four years after the date of entry into force of the directive. I believe that this is in line with the views of most consultees except for the Mail Users Association.
I am quite sure that there was never any intention that this article should try to instruct us to change a proud tradition more than a century old. I would surmise that the most likely reason is that the simple article was drafted by someone from one of the 14 other member states who was unaware of this practice. But it has been drawn to our attention by the Post Office and I sincerely hope that Her Majesty's Government will ensure that the final words of that article are dropped from the final directive.
The proposed developments try to strike a balance between strongly divergent interests, as well as aiming to impose a standard of service that will mean a vastly improved service in many other member states. This will not be easy, but I too share the views of the Select Committee in welcoming the proposals and inviting the Commission to look to the United Kingdom Post Office as a model for the European Community.
Lord McNally: My Lords, the most exciting comment I have heard in this debate was made by the noble Lord, Lord Brabazon, when he remarked that the European Commission has ambitions to control the cycle and motor cycle couriers in London. I did not think anyone controlled those free spirits. It seems an ambitious project even for the Commission to consider. I wish to associate myself with the remarks about the noble Lord, Lord Elibank. I wish him well in his recovery. I congratulate the noble Lord, Lord Geddes, on his role as substitute in introducing the debate. Indeed, listening to the speeches, I recalled a remark made to me by a senior official of the European Commission who said that the best scrutiny of Community business was carried out by the House of Lords standing committee on Europe. The quality of its work justifies that kind of comment.
Last night, attending a conference in Birmingham, I was told by an industrialist that drills used to be made in Birmingham and that the people of Birmingham were confident they made the best drills in the world. They felt they did not have to worry about competition as their drills were so good. However, one day someone produced lasers and the people of Birmingham suddenly realised they were not in the drill business but rather in the business of making holes. They realised that if someone developed a better way of making holes the people of Birmingham who made drills would be in trouble.
On the day of the last postal strike, having received a flyer from BT offering to put me without charge on to the Internet, it struck me that the intricacies of the industrial dispute are not the important factor. From the long experience of the noble Baroness, Lady Dean, I accept the advice that we on these Benches should not pontificate or interfere in the minutiae of a dispute. However, when such disputes arise in hundreds of thousands of different places individuals will discover that there are other ways of communicating. That can only do long-term damage to the postal service, workers and management alike.
Experience shows that fossilising or romanticising an industry, no matter how well respected or well loved it is, is almost to condemn that industry to die. There is a need to continue to examine the bases of that industry. In 1991, when the Prime Minister launched the Citizen's Charter he said,
Given the importance of the private sector, there is a need to examine its treatment when considering the broader policies. There is a record in Europe of state monopolies playing the nationalist card to defend vested interest. One has only to look at the state airlines to see how the consumer can be cheated by playing that card. On the other hand, we have to be realistic. There is a tendency by the private sector to cherry pick. If we are too dewy-eyed about the situation, we shall see cherry picking in the postal services which can undermine the service as a whole.
It is not a one-way argument. Perhaps the best summing-up occurred in a debate in the European Parliament. That is sometimes considered a rather dull place. The quotes I shall give indicate that it can have quite spirited debates. I cite first a letter from the Labour MEP, Mr. Brian Simpson. He said:
The postal services cannot debate their future in happy isolation. They must equip themselves in their technology, work practices and marketing for the dawning information society and the 21st century with all its demands. I hear the words of caution from all sides of the House. All I say to the decision-makers is, "Do not allow that caution to become fossilisation. Do not allow it to become a reason for total inaction." That is no friend of the postal services. I should like to see develop a Post Office which is given the maximum freedom of commercial action. If that were done, it would need an Oftel-type regulator to ensure that it behaved properly and transparently. However, that is the way ahead, not just for the postal services but for our whole approach to communications in the years ahead.
Lord Haskel: My Lords, we on these Benches welcome the report and congratulate the Select Committee on its thoughtful and balanced work. We particularly regret the absence of the noble Lord, Lord Elibank, and are delighted to learn that he is leaving hospital today. We wish him a speedy recovery.
The committee and most noble Lords who have spoken today are absolutely right to recognise the economic and social importance of a universal service at affordable prices. This is a sensible and civilising view. They also show some insight in recognising that the competition to this universal letter service is not only from other letter carriers but from other forms of communication: fax, the Internet, e-mail and even the telephone. It is for that reason that the Commission's proposals in the draft directive for liberalising the service by the year 2001 are seen as impractical. As all speakers have said, liberalisation will undermine the universal service.
The Select Committee is absolutely right. The first priority should be the provision of a good quality universal service at an affordable and uniform price, not the promotion of liberalisation. It acknowledges that the universal service will only be provided if it continues to be financially viable and independent of subsidy. The market will not provide this universal service. It will be achieved by the Post Office having sufficient monopoly protection to support the less economic parts of the service.
As many noble Lords have pointed out, the balance between the high fixed costs necessary to provide a universal service on the one hand and the degree of monopoly required to ensure financial viability on the other will only be achieved if incoming, cross-border mail and direct mail are included in the monopoly area reserved for the national post offices.
However, as the noble Lord, Lord Geddes, told us, the Government seem to be in favour of liberalising direct mail. This poses obvious problems of verification and classification. We all get direct mail advertisements
Electronic forms of communication already provide competition to these sectors. Noble Lords who use e-mail will have noticed that their mailboxes already contain direct mail, including special shopping offers and free magazines with advertisements. We have been promised a whole lot more.
My noble friend Lady Dean reminded us that most business correspondence and invoicing is done on computers. Virtually all business computers sold today have modems already built in so that messages can be transmitted straight off the screen, without anyone having to print them out and send them through the mail. Added to that, most retailers and many manufacturers today insist that their suppliers and customers are logged onto their own electronic networks for ordering, invoicing and stock control. This applies to national as well as cross-national communication. For non-business mail, there is a huge growth in the number of people with access to the Internet. It is no longer limited to the e-mail service providers. The cable companies and BT are all offering cheap access.
There is now a set-top box costing £99 which will enable access to the Internet using a telephone and TV set--equipment which most people already have in their homes. This is where the competition will be to the letter monopoly.
The impact of all this competition on the reserved sector will have to be met by increased efficiency and excellence of service and by adapting to survive. I agree with the committee that the sector will not be helped to compete by the liberalisation steps proposed in the draft directive. It will certainly not be helped by privatisation. These steps only dilute or avoid the problem. They do not deal with it.
I agree with other noble Lords that the competition cannot be dealt with by breaking up the service. For some years this has been a fashionable formula used by business consultants for dealing with many industrial problems. Managers now realise that an end-to-end service under their control is valued by their customers and essential to provide continuous improvement--essential for any business to progress.
Here I must congratulate the Post Office. As the noble Lord, Lord Geddes, told us, it emerges from this report extremely well. Its service is acknowledged as being one of the best in the Union: a successful combination of good service, profitability and low cost.
The recommendations of the committee are in no way invalidated by the postal strike. Even though this is the first strike for eight years, any strike is to be regretted. Recent statements by the party opposite implying that the way to deal with the strike is to remove the Post Office's monopoly is misconceived. Other firms will not provide the universal service which is the committee's first priority. As the noble Lord, Lord McNally, said, all it will do is to allow other firms to cherry pick or cream skim, as the directive puts it. Anyway, tough competition already exists from electronic mail.
The strike is a serious matter. It affects the working and private lives of virtually all of us. Yet why politicians want to involve themselves in a dispute of this kind where they can contribute nothing defeats me. Where politicians can be effective is in ensuring that there is a level playing field outside the monopoly area. For example, is there equal treatment between the Post Office and other competing services as regards VAT or customs charges, as the noble Lord, Lord Brabazon asked? Are the Government satisfied that there is no cross-subsidy by the Post Office from its monopoly service area to those areas outside the monopoly? Have the Government considered appointing a regulator to examine the interests of the consumer and others in the monopoly sector? These are areas for political involvement, not the strike.
Meanwhile, will the Minister confirm whether the Government have or have not agreed to, or are in the process of agreeing to, the proposals in the European Commission's draft directive? I understand the matter is being dealt with by Mr. Taylor. If the answer is yes, can the Minister explain the U-turn? In the past the Government have been opposed to the liberalisation proposals. The Government's approval of the directive would, indeed, be a kind of back-door privatisation via Brussels. The irony is that they would be achieving that by qualified majority voting, which the Government have been so anxious to criticise in recent months.
So I hope the Minister will not take the view that because of the strike the opinion of the Select Committee is invalid, wrong or impractical. This strike is a matter of managing change and industrial relations; it has nothing to do with the rights and wrongs of a universal service. I hope the Minister will not confuse the two.
It could well be that the Post Office is suffering from BOHICA. I see the Minister looking a little confused. BOHICA is a disease prevalent among the staff of companies where new and fashionable management
Baroness Miller of Hendon: My Lords, despite the excellent way in which my noble friend Lord Geddes moved the Motion, I know that he will not mind my saying that I very much wish that the noble Lord, Lord Elibank, had been well enough to do so himself. On behalf of all those who have not had the opportunity of speaking today, I wish him a very rapid recovery.
I would like to thank the committee for the attention it has given to the Commission's proposals, the thoroughness of both its inquiry and the subsequent report, and for the opportunity it has given for a full debate. I thank the House for the excellent contributions made--even though I did not know anything about BOHICA.
I apologise to noble Lords for the delay in their receiving the Government's response. That, I am afraid, was due to the fact that the department was determined to provide the committee with a full and thorough response. It therefore took a little while to complete.
The Government fully share the committee's view that the development of a European postal policy is important and warrants careful examination. Without doubt the postal sector has great significance for both economic and social reasons. The committee's report and our debate today have rightly drawn attention to the striking record of our own Post Office.
As the report reminds us, in the mid-1970s the Carter Report anticipated only problems and predicted that the Government's likely task was confined to managing the decline of the United Kingdom Post Office. But in 1996 we can be proud of a highly successful and profitable Post Office that is the envy of many countries. My noble friend Lord Kenyon said that it was a model that others might want to follow.
And how was this achieved? In 1981 the Government took the unprecedented step of reducing the Post Office monopoly to items costing up to £1 to post. This, coupled with consistently sound management, effective restructuring with cost reduction programmes where needed, and a philosophy that put the customer first has led not just to a successful Post Office but to a thriving private postal sector.
I say that because while the Government are in full agreement with much of what the committee's report says, there is a difference between us over liberalisation and its effectiveness as a tool for promoting reform and growth in this sector.
The Government are firmly committed to the Commission's overall aim to develop the postal sector through a programme of controlled liberalisation. We share the concerns highlighted in the committee's report and repeated today about the threat from the new
We share the committee's view, as my noble friend Lord Geddes and the noble Baroness, Lady Dean, said, that the more extensive liberalisation measures adopted in Sweden, the Netherlands and Finland do not provide models for the Community as a whole. The variations in geography, social needs and cultural expectations and the stage of postal development in each member state demand tailored solutions within a broad regulatory framework. These liberalisations are also relatively recent and longer experience of them will be necessary before definitive conclusions can be drawn. Nevertheless the vigour and imagination with which these countries have approached the problem of potential declining postal markets is to be commended.
As my noble friend Lord Geddes and the noble Baroness, Lady Dean, pointed out, we share the committee's view that postal services have a vital social as well as economic role. We welcome the fact that the Commission has now set in hand a number of independent studies that will help inform discussion and decisions in the future. Community postal statistics are also inadequate and we shall continue to press for improvements in that area. We welcome the provisions in the directive for the establishment of a committee comprised of individuals with relevant experience with whom the Commission can consult.
What the Community does not have is the luxury of time. We have to move forward, and swiftly. Too many member states still have public postal services with over-staffed monopolies that neglect the needs of their customers and require urgent reform. They need a regulatory framework that will compel them to restructure if they are to provide a universal service, achieve and maintain financial viability in the 21st century and, of course, improve the postal service throughout the Community.
I should like at the start to address the controversial issue of the second stage of liberalisation--and in particular the Commission's proposals for liberalisation in 2001 of direct mail and incoming cross-border mail. This is certainly the major issue for most member states, and the committee rightly gave it considerable attention.
We had hoped that real progress would be made at the Telecommunications Council meeting yesterday and that the directive would be adopted before the end of the year. Unfortunately, no political agreement was reached and the timetable for adoption has certainly been set back.
Noble Lords may know that at the Telecommunications Council meeting yesterday there were two possible compromises on the table concerning the second stage, one of which proposed the liberalisation of direct mail--but not incoming cross-border mail--in 2001. The hope was that political agreement would be reached and real progress made
I take full note of the committee's concern about a firm commitment to liberalisation of direct mail in 2001, referred to by my noble friend Lord Geddes and others. However, the Government have become increasingly concerned that the first liberalisation measures will not produce the level of change that is needed in some member states if the postal sector as a whole is to meet effectively the challenges of the 21st century. My noble friend Lord Brabazon commented on that point. It is for this reason that we have argued strongly for a clear timetable for liberalisation based on a Commission review in 1998 of all the options, without prior presumption, being on the table. We have now moved forward from this position in an attempt to be flexible and reach agreement with other member states.
Direct mail represents 17 per cent. of Royal Mail's volumes and 10 per cent. (or £500 million) of its income and we have therefore had to look carefully at whether or not removal of this traffic from the reserved area could threaten its ability to provide a universal service at a uniform tariff, particularly if this was coupled at the same time with liberalisation of incoming cross-border mail. We have concluded that an efficient and competitive Post Office, such as our own, could accommodate liberalisation of direct mail in 2001 without a threat to the universal service. Furthermore, we believe that our Post Office would be a strong competitor in a liberalised market. Many of your Lordships have congratulated the Post Office today and we believe that they have the competence and ability to do that. The UK is therefore prepared to support a firm commitment to liberalisation of direct mail in 2001.
Europe needs this directive and we are concerned about the lack of progress. We believe that the postal sector needs competition, and the liberalisation of direct mail in 2001 is a comparatively modest step and a reasonable compromise. We shall continue to state our view, but we shall also strive for an acceptable compromise among member states on this crucial issue.
I was fascinated by the story told by the noble Lord, Lord Bridges, of the Greek island and the donkey. No doubt the pace of life in such communities is such that one delivery a week does meet their needs. The story illustrates clearly why the Council of Ministers finds it so difficult to reach agreement on the universal service and the reserved areas that should be adopted at European levels. What suits one place clearly may not suit another.
I shall now turn to the detail of the recommendations and try to address the particular points that have been made in debate. I want to reaffirm the Government's commitment to a universal letter and parcel delivery service to every address and household in the United Kingdom. That would certainly ensure delivery to the address in Wales of my noble friend Lord Kenyon. We also have a firm commitment to a uniform and affordable tariff and to a nationwide network of post offices. As we have said on many occasions, these are, for the Government, non negotiable.
We share the view of the committee that the universal service obligation proposed in the draft directive represents the minimum acceptable service that Community post offices should provide. We think that the weight limit for packages could be reduced from 20 kilogrammes to 10 kilogrammes without difficulty, but this too was one of the items discussed yesterday and on which there was no agreement among member states.
Of course, we would like all member states to offer a six-day service, like our Post Office, but that is unrealistic at the present time. Nor, as the report suggests, must those that currently offer a higher level of service be tempted to slip backwards. We are confident that that will not happen. The public postal operators are well organised at Community level and the successful post offices are driving up standards.
We think the reserved area proposed for the first stage of liberalisation is about right. As the noble Baroness, Lady Dean, said, the combination of price and weight makes for unnecessary complication, but it recognises that some member states define their reserved area by weight and it has the broad support of member states.
For some public operators it will mean a significant reduction in their monopoly, but I would emphasise that the directive sets only a maximum reserved area. Member states are free to set a smaller reserved area. We have further work to do on the detail but we shall not enlarge the United Kingdom's present reserved area. The advantage of our current price-only definition is that it allows for gradual liberalisation as the real monetary value reduces. We shall want to retain this feature.
We share the views of my noble friend Lord Geddes, the noble Baroness, Lady Dean, and indeed other noble Lords, that the uniform tariff concept could have received more attention in the Commission's proposals because of its importance to so many member states. The Commission's reasoning, however, is that there must be a degree of flexibility to accommodate both those member states that do not have a uniform tariff structure and future customer needs that may require some adaptation in services. There is the safeguard in the directive that requires the universal service to be affordable. On balance, we think this is an acceptable way to proceed and that we cannot impose a uniform tariff requirement on all member states.
I understand that the European Union is reviewing the public postal service exemption under their sixth VAT directive. We are well aware of the private couriers' concerns and we will take them into account when reaching a United Kingdom view. The first stage of liberalisation, however, remains quite modest and cautious. It is only a step in the right direction.
The noble Baroness, Lady Dean, referred to the notice's separate market definition of collection, sorting, transport and delivery. That has been widely interpreted as requiring open access to all but the delivery market, but the Commission has made it clear that the requirement is simply that, where a member state chooses to permit open access, it must be provided on a transparent and non-discriminatory basis. Clearly, the ambiguity in the text must be removed.
We also share the committee's doubt that the optional suggestion of a levy on other operators to contribute to the universal service provision, referred to by my noble friend, Lord Brabazon of Tara, and, I should add, included largely on account of the new German regulatory proposals, may prove cumbersome and difficult to enforce.
With regard to the Royal Mail strike referred to by my noble friends Lord Brabazon of Tara and the noble Baroness, Lady Dean, they are both right in that it is not strictly to do with this Motion today. However, we also welcome the UCW's willingness to sit down with the Post Office, in a calm and constructive atmosphere and, without the threat of strike action, come to a reasonable and acceptable conclusion.
I also wholly agree with the noble Lords, Lord Kenyon and Lord McNally, and indeed the noble Lord, Lord Haskel--I expect I may have missed out some other noble Lords--that our Post Office's free post for the blind scheme is extensive and well-established, and we are fully committed to its continuance.
My noble friend Lord Kenyon referred to Article 9 of the draft of the European Union directive. The United Kingdom is the only country which does not have to include the name of the country on its stamps. We have a dispensation from the Universal Postal Union in recognition of Rowland Hill's invention of the postage stamp as a means of pre-payment. I can assure noble Lords that this position has been accepted by the European Commission.
The noble Lord, Lord McNally, asked that the Post Office should be given the maximum possible amount of commercial freedom. The Government will look at any proposals which the Post Office puts forward that in its view will help it to compete more successfully in the European postal market. They will be considered on their merits, but against the background that the Post Office is a public undertaking. We must have regard to possible displacement of private sector activity and the need always for fair competition.
Finally, I emphasise again the Government's firm commitment to the universal postal service concept and to the development of high standard postal services throughout the Community. We believe that that can best be achieved through a programme of controlled liberalisation broadly as set out in the Commission's proposals. In the further negotiations on the directive we shall try wherever possible to take account both of the committee's recommendations and the points made in the debate this morning. I thank the committee for its valuable contribution to this important discussion.
Lord Geddes: My Lords, I hope all noble Lords who have taken the time and trouble to be in your Lordships' House on a Friday morning share my view that this has been a most worthwhile debate, and delightfully short, if I may say so. I would particularly like to thank the noble Baroness, Lady Dean, the noble Lord, Lord Bridges, the noble Lord, Lord Brabazon of Tara, and fellow members of the sub-committee for taking part. I know my noble friend Lord Elibank will be extremely grateful for their
I thank my noble friend the Minister for her comments. Perhaps to her surprise, I am relieved that no decision was reached at the meeting yesterday. As I said in my opening comments, I personally was not at all happy with the view that the Government took. While asking her to pay attention, of course, to all the recommendations made in the report, I particularly ask her to look again at the question of uniform tariff, summed up succinctly in paragraphs 162 and 163 of the report: