House of Lords - Explanatory Note
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Session 1999-2000
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Postal Services Bill


These notes refer to the Postal Services Bill
as brought from the House of Commons on 19th April 2000 [HL Bill 57]

Postal Services Bill




1. These explanatory notes relate to the Postal Services Bill as brought from the House of Commons on 19th April 2000. They have been prepared by the Department of Trade and Industry in order to assist the reader of the Bill and help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament. The notes comprise a summary of the Bill, an explanation of its background and a clause by clause commentary.

2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.


3. The Postal Services Bill provides for the Post Office to be converted from a statutory corporation to a public limited company formed and registered under the Companies Act 1985, with ownership remaining with the Crown.

4. The Bill introduces a new system of licensing and regulation for postal services operators/providers operating in the area of the market currently reserved largely as a monopoly for the Post Office. This is called the reserved (or licensed) area. The Bill gives the independent regulator, the new Postal Services Commission (the Commission), new duties and powers to protect the interests of users of postal services. In particular, it enshrines the universal service obligation in primary legislation and makes it the duty of the Commission to ensure the delivery of this universal service at a uniform tariff. Subject to this duty, the Commission is required to further the interests of users, wherever appropriate by the promotion of greater competition in postal markets. The Commission will be able to promote competition through recommending changes to the scope of the reserved area and by permitting licensed competition within the reserved area. The Commission will also have responsibility for setting quality standards and regulating prices.

5. Consumers are given greater protection through replacing the Post Office Users' National Council with the Consumer Council for Postal Services. The creation of this body brings consumer representation in the postal services market into line with the provision for other utilities.


6. This Bill implements measures proposed in the White Paper, Post Office Reform: a world class service for the 21st century, published on 8 July 1999. The White Paper sets out the Government's proposals to modernise the Post Office and postal services markets through a number of key reforms. The reforms are intended to:

  • introduce a more arm's-length commercial relationship with Government, including the approval of a five year strategic plan within which the Post Office has greater freedom to develop new products and services; invest; price commercially; and borrow for growth investments;

  • create a new independent regulator, the Postal Services Commission, to promote and protect customer interests, regulate prices, and promote competition;

  • strengthen consumer representation through the restructuring of the Post Office Users' National Council;

  • increase resources for the Post Office company, by more than doubling the proportion of post tax earnings which the Post Office company can use for investment;

  • convert the Post Office to a plc to underline the commercialisation of the business;

  • protect the universal service obligation and uniform tariff;

  • maintain a commitment to a nationwide network of post offices with the Government for the first time setting minimum criteria for access to counters' services.

7. A number of these measures have been implemented already, through administrative action and the Postal Services Regulations 1999 (SI 1999/2107). These include giving greater commercial freedom to the Post Office Board to run the business within the terms of an agreed five-year strategic plan, increasing the proportion of profits that the Post Office can use for investment, giving the Post Office greater freedom to borrow and creating a Postal Services Commission. The aim of the Postal Services Bill is to enable Government to complete this package of reforms. The reforms are intended to comply with the requirements of the EU Postal Services Directive (97/67/EC). The Postal Services Regulations 1999 (SI 1999/2107) completed the implementation of the EU Directive into UK law. The Bill will re-enact those obligations given in the Regulations.

8. The Post Office is currently a publicly owned, statutory corporation, established under the Post Office Act 1969. That Act and the British Telecommunications Act 1981 set out the responsibilities of Government towards postal services and give the Post Office its powers and duties. Since the 1969 Act became law the postal services market has developed significantly, and the Postal Services Bill redefines the roles of the Government and the Post Office to reflect those changes. The Postal Services Bill will enable the Post Office to be transformed into a public limited company formed and registered under the Companies Act 1985 and subject to normal company law. All the shares in the new company will be owned by the Crown. There can be no disposal of shares without further primary legislation, except in the case of a share sale or swap between the Post Office company and a partner to cement a commercial alliance, which will require approval from both Houses of Parliament. Similar restrictions apply to the disposal of shares in any subsidiary company directly engaged in providing the universal postal service.

9. Decisions relating to the Post Office monopoly are currently taken by the Secretary of State for Trade and Industry under provisions in the British Telecommunications Act 1981. The Postal Services Regulations 1999, tabled on 26th July 1999, designated the Postal Services Commission as the new independent regulator for postal services. Provisions in the Bill replace this advisory body with a new fully independent regulatory body, along the lines of those in the privatised utility industries (e.g. Office of Telecommunications), by giving the Commission powers to issue licences, to regulate prices, to enforce the monopoly, to introduce greater competition and to maintain a universal service at a uniform tariff.

10. At present, the Post Office has the exclusive privilege of delivering mail costing less than £1 within the UK, subject only to a handful of exceptions provided through niche and class licences. The Bill makes it necessary for any person operating in the reserved area, including the Post Office company, to be licensed by the Postal Services Commission. The Commission will be responsible for recommending the level of the reserved area in future and judging how far to open up the market to further competition. It will also be given powers of investigation and enforcement, including the power to impose monetary penalties for breach of licence conditions.

11. The Post Office Users' National Council, which represents consumer interests, is replaced by the Consumer Council for Postal Services and given a central role in the new regulatory framework, monitoring service standards that users can expect and acting as a focus for consumer issues and complaints. Its powers are strengthened and it is given wider access to relevant information from the Post Office company and other licence holders. Its remit will be brought into line with consumer representation for the water, energy and telecommunications utilities.

12. The main pieces of legislation currently governing the Post Office are the Post Office Acts 1953 and 1969 and the British Telecommunications Act 1981. This Bill seeks to consolidate the postal services provisions in these Acts, by repealing or redrafting relevant sections, to provide a more simple and modern legal framework in which the Post Office company and other licensed persons can operate.


Part I Introductory

Clause 1: The Postal Services Commission

13. Clause 1 creates the Postal Services Commission. This body will be the independent regulator of licensed postal operators and replaces the advisory body, also called the Postal Services Commission, which is abolished by the Bill. Schedule 1 is given effect by this clause. In these Notes, references to "the Commission" are to the Commission established by Clause 1.

Clause 2: The Consumer Council for Postal Services

14. Clause 2 creates a new consumer body to be known as the Consumer Council for Postal Services. The existing user-representative bodies in the UK, which are limited in their scope to representing users of Post Office services, are abolished. Schedule 2 is given effect by this clause. In these notes, references to "the Council" are to this Council.

Clause 3: Duty of the Commission to ensure provision of a universal postal service

15. Clause 3 sets out the primary duty of the Commission, which is to exercise its functions in a manner best calculated to ensure the provision of a universal postal service. In pursuance of this duty it has power to require a person licensed to provide postal services under Part II of the Bill ("a licence holder") to provide a universal service or part of such a service. This is to be read with clause 5 which sets out other duties of the Commission.

Clause 4: Provision of a universal postal service: meaning

16. Clause 4 sets out the meanings of a universal postal service and of a universal service provider. These definitions comply with those required under the EU Postal Services Directive (97/67/EC). A universal service provider is described for the purposes of this Bill as any person who the Secretary of State has identified to the European Commission as being a provider of universal postal services in the UK and on whom the Secretary of State has served a notice informing him of that fact.

Clause 5: Other duties of the Commission in the consumer interest

17. Subject to the duty to ensure the provision of a universal postal service as set out in clause 3, clause 5 places a duty on the Commission to exercise its functions in a manner which will further the interests of users of postal services, wherever appropriate by promoting competition.

18. In performing these duties the Commission is to have regard to, amongst other things, the interests of the disabled or chronically sick, pensioners, those on low incomes, and those located in rural areas. It also provides for the Commission to have regard to the promotion of efficiency and economy on the part of postal operators; and the need to ensure that they are able to finance activities authorised or required by their licences.

Part II Licences for Postal Services

Clause 6: Restriction on provision of postal services

19. The Post Office currently has the exclusive privilege of delivering letters within the United Kingdom with a value of less than £1 or weighing less than 350 grams and it is an offence to infringe the privilege.

20. Under the Bill, the monopoly will be replaced by a system of licensing. Licence holders will be able to convey, in accordance with the terms of their licence, letters worth less than £1 or weighing less than 350 grams (see clause 7). Subsection (2) makes it an offence to convey letters without the necessary licence.

21. Subsection (1) establishes that no person shall convey a letter without a licence granted by the Commission. Exceptions to this prohibition are set out at clause 7.

22. Subsections (2) to (5) create three methods of enforcing the prohibition in subsection (1). The first is to bring criminal proceedings for an offence under subsection (2). The second is to bring civil proceedings for an injunction interdict or other appropriate relief or remedy under subsection (4). Prosecutions can only be controlled by or on behalf of the Commission or the Secretary of State or, in Scotland, will be dealt with by the Lord Advocate. (The Lord Advocate generally controls prosecutions in Scotland.) Civil proceedings under subsection (4) may be brought by, or on behalf of, the Commission or the Secretary of State. There is also provision in subsection (5) enabling civil proceedings to be brought by any person who suffers loss or damage.

23. Subsection (6) makes clear that conveyance for the purposes of clause 6 and clause 7(1) includes the incidental acts of receiving the letter, collecting or delivering it.

Clause 7: Exceptions from section 6

24. Clause 7 sets out exceptions from the general prohibition in clause 6(1).

25. Subsection (1) exempts letters conveyed for a payment of not less than £1 or weighing not less than 350 grams.

26. Subsection (2) sets out further detailed exceptions. They include activities currently exempted as "class licences", such as the document exchange system used by lawyers and other professionals. The clause then defines exactly what is meant by these exceptions.

Clause 8: Power to modify section 7 by order

27. Clause 8 allows the Secretary of State acting on the recommendation of the Commission to modify by order clause 7. This could be used to add a further exception to the general prohibition or modify the value or weight specified at clause 7(1)(a) and (b). Such an order would be subject to approval by a resolution of both Houses of Parliament. Where the Secretary of State has received a recommendation from the Commission to amend the reserved area and the Secretary of State does not act upon it, he must place a report containing his reasons before Parliament.

Clause 9: General power to suspend the restriction

28. Under clause 9 the Secretary of State may, on the recommendation of the Commission, suspend the operation of clause 6 and allow any person to convey letters.

Clause 10: Emergency power to suspend the restriction

29. Under clause 10 the Secretary of State may in the national interest suspend by order the licensing regime for a time-limited period not exceeding six months. Non-licensed persons would then be able to convey letters within the reserved area without penalty.

Clause 11: Licences: general

30. Clause 11 allows the Commission to grant licences authorising the licence holder to carry out the activities described by the licence. To that extent the general prohibition in clause 6(1) does not apply to him.

Clause 12: Licences: grant

31. Clause 12 details the procedures that must be followed before a licence is issued including provisions about giving notice and receiving representations.

Clause 13: Licences: conditions and other provisions

32. Clause 13 gives the Commission the authority to include in a licence such provisions as it considers appropriate, including provisions which do not relate to anything authorised by the licence (including, for example, the provision of all or part of a universal postal service). Under subsection (4) the Commission must consult a person who is to be granted a licence about the conditions it intends to include in their licence.

Clause 14: Modification of licences by agreement

33. Clauses 14 - 21 provide a system for licence modification, similar to that seen in utilities regulation. This clause allows for licence modifications to be made by agreement between the licence holder and the Postal Services Commission. Before making any such modification the Postal Services Commission must publish a notice stating what the modifications are, the effect of them and the reasons for them and serve copies on the Secretary of State, the licence holder and the Council. Under subsection (5) the Secretary of State may direct the Postal Services Commission not to make a proposed modification if he considers that the modification should be made, if at all, following a Competition Commission reference under the procedures in this Part.

Clause 15: References to the Competition Commission

34. Clause 15 allows the Postal Services Commission to make references to the Competition Commission requiring the latter to investigate and report on whether:-

    a) matters specified in the reference and which relate to the provision of postal services whose provision is authorised or required by a licence operate against the public interest or may be expected to do so; and

    b) if so, whether the effects adverse to the public interest which the matters have or may be expected to have could be remedied or prevented by modifying conditions of the licence.

35. The Postal Services Commission may vary the terms of a reference. They may also specify what adverse effects they believe matters specified in the reference may be expected to have and any modifications of the licence by which it considers that those effects could be remedied or prevented. The Postal Services Commission shall give the Competition Commission any related information or assistance that it considers appropriate or which has been requested by the Commission.

Clause 16: Reports on references

36. Clause 16 provides that the Competition Commission shall make definite conclusions on the matters referred to it, and specify remedies where appropriate. The Competition Commission's report shall be made to the Postal Services Commission who shall, if required to by the Secretary of State, exclude from the published report such matters he believes may be against the public interest or the commercial interest of a person.

Clause 17: Modification following report

37. Under this clause, where the Competition Commission has identified matters operating against the public interest and concluded that remedies could be made by licence modifications, the Postal Services Commission shall make such modifications to the licence conditions as it considers appropriate for the purpose of remedying or preventing the adverse effects specified in the report.

38. The Postal Services Commission shall give notice of its intended modifications. After this the Postal Services Commission shall make such modifications if after four weeks the Competition Commission has not issued a direction under clause 18.

Clause 18: Power of intervention of the Competition Commission

39. This clause allows the Competition Commission the power to direct the Postal Services Commission not to make modifications under clause 17 if it considers that the modifications proposed by the Postal Services Commission are not appropriate for the purpose of remedying or preventing all or any of the adverse effects specified by its report. Under subsection (5) of this clause the Competition Commission may make its own licence modifications.

Clause 19: Procedural requirements in relation to modifications

40. Clause 19 sets out the procedural requirements for licence modifications following a report by the Competition Commission.

Clause 20: Application of competition legislation to references etc.

41. Clause 20 provides for the application of competition legislation to references. The purpose and effect of this clause is to ensure consistency between the Competition Commission's procedures in relation to a reference under this Part of the Bill and with its procedures in relation to its (relevant) functions under competition legislation. For example, it deals with the treatment of witnesses and documents, time limits on reports and penalties for false and misleading information. Details of these provisions are set out in the relevant legislation and not in this Bill.

Clause 21: Modification by order under other enactments

42. Clause 21 allows for the modification of licences as a result of investigations and reports under the Fair Trading Act 1973.

Clause 22: Final Orders

43. Clauses 22-29 lay down the powers of the Commission to make final and provisional enforcement orders in relation to breaches of licence conditions, and the procedures to be followed. Under clause 22, final orders may be issued where the Commission is satisfied that a licence holder is contravening any condition of his licence or is likely to do so. An order makes such provision as is needed to secure compliance with the licence condition and shall require the licence holder to do, or not to do, such things as are specified.

Clauses 23 and 24: Provisional Orders

44. Where the Commission is not satisfied, but nonetheless it appears to the Commission that there is or is likely to be a contravention and that an order should be made, it may impose a provisional order lasting up to 3 months. If the Commission is subsequently satisfied, it shall confirm the provisional order.

Clause 25: Exceptions from the duty to make or confirm enforcement orders

45. This clause provides that the duty to make orders does not apply where the duties imposed under clauses 3 and 5 on the Commission preclude it from doing so, the licence holder has agreed to take and is taking all the steps that the Commission considers appropriate, or the contraventions are trivial.

Clauses 26 and 27: Procedural requirements

46. These clauses set out the steps the Commission must follow when making orders, such as notice provisions.

Clause 28: Validity of enforcement orders

47. This clause allows a licence holder to whom a final or provisional order relates to appeal to the courts on the grounds that the making of the order by the Commission was not within their powers under clauses 22, 23 or 24 or that any of the requirements of clauses 26 and 27 were not met. The court may quash the order.

Clause 29: Effect of enforcement orders

48. Clause 29(1) makes it a duty of licence holders to comply with a final or provisional order.

49. Clause 29(6) makes it clear that if the Commission brings civil proceedings to enforce a final or provisional order, it shall not prevent others with a right to claim from bringing their own actions against the licence holder.

Clause 30: Financial penalties

50. Clause 30 gives the Commission power, where it is satisfied that a licence holder has contravened or is contravening a condition of his licence, to impose a penalty on the licence holder. The penalty must be of such amount as is reasonable. Therefore, both the decision to impose a penalty must be reasonable as must the actual amount of that penalty.

Clause 31: Statement of policy in relation to penalties

51. Clause 31 provides that the Commission shall after consulting the Council and others prepare and publish a statement of their policy in relation to the imposition of penalties and the determination of their amount.

Clause 32 and Clause 33: Penalties

52. Clauses 32 and 33 lay down the procedures the Commission must follow before imposing a financial penalty including giving notice and allowing for representations, and procedures that may follow from the notice including variation of penalties.

Clause 34: Time-limits on the imposition of penalties

53. Clause 34 sets out time limits on the Commission's ability to impose financial penalties.

Clause 35 and Clause 37: Interest and payments by instalments; recovery of penalties

54. Clauses 35 and 37 cover the payment of interest on unpaid penalties and the recovery of unpaid penalty payments.

Clause 36: Appeals

55. Clause 36 allows licence holders to appeal against penalties to the courts (the High Court in England and Wales or Northern Ireland or the Court of Session in Scotland). The court may quash the penalty or order a reduction in the penalty or in certain cases substitute a different date for payment of the penalty.

Clause 38: Register

56. Clause 38 requires the Commission to keep a register of licences, licence modifications, revocations and surrenders, directions, determinations, consents and approvals given under a licence, the terms of final and provisional orders and revocations, and penalties imposed. Safeguards are provided to ensure that as far as practicable matters relating to the affairs of a person are not entered in the register if that could be seriously prejudicial to that person's interests. In addition, the Secretary of State may direct the Commission not to make an entry where it would in his view be against the public interest or a person's commercial interests to do so. The register is to be available to public inspection, and copies may be obtained, subject to a reasonable fee.

Clause 39: Recovery of costs of the Council etc.

57. Clause 39 enables the Secretary of State to direct that licence conditions shall include paying for the Consumer Council and its start up costs. It also enables the Secretary of State to direct the Commission in any matter falling to be determined under such a licence condition.

Clause 40: Directors' remuneration

58. Clause 40 requires companies which are also licence holders under the Postal Services Bill to disclose the links, if any, between the achievement of service standards in the activities covered by their licence and the remuneration of their directors. If no such links exist, this must also be disclosed. The clause sets out the criteria for determining whether a licence holder must comply with the provisions of the clause and the disclosure requirements which then apply. The requirement to disclose what links, if any, exist between service standards and remuneration is intended to encourage companies to establish and strengthen such links and to stimulate improvement to service standards.

Clause 41: Free services for the blind and partially sighted

59. Clause 41 gives the Secretary of State powers to direct the Commission to impose a licence condition requiring the licensee to provide free postal services for blind and partially sighted people. The Secretary of State shall consult the Commission and the Council before giving any directions. The clause is designed to ensure the continuation of existing non-statutory practice by the Post Office who convey certain items, known as Articles for the Blind, free of charge for blind and partially sighted people.

Part III Other Functions of the Commission and the Council

Clause 42: Duties in relation to public post offices

60. Clause 42 imposes a duty on the Commission, in consultation with the Council, to provide advice and information to the Secretary of State about the number and location of public post offices and their accessibility to users. In the Bill, a public post office means any post office from which postal services or postal and other services are provided directly to the public.

Clause 43: Duties in relation to social and environmental matters

61. Clause 43 provides that the Commission, in exercising its functions, should have regard to any guidance issued by the Secretary of State issued under this clause. Such guidance, which will need to be laid before each House of Parliament and subsequently published, will be concerned with social and environmental policies which may include criteria for access to postal and other services.

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