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Baroness Byford: My Lords, I hesitate to intervene, but the noble Lord follows me quite closely. I mentioned the inner cities as well, so I hope that he does not think that we do not equally consider the problems of inner-city post offices, as we do the problems of those in rural areas.
My principal remarks relate to the origins of the Bill, which enacts the provisions of the 1997 EU postal services directive. The attempt to establish a single European market in postal services is wholly laudable. The 1997 directive points the way, not only in supporting a gradual and orderly liberalisation of postal services, but also in insisting on a universal postal service delivered at a uniform tariff. That must be right if we are to implement the twin objectives of establishing an efficient and effective market to support British and European business and commerce, while at the same time providing our citizens with the medium to communicate with family, friends and
However, perhaps I may express my regret that the first-class stamp in Britain can no longer be used to send letters to other parts of the EU. Having a uniform rate was part of a building block of a Europe of the people, by the people, for the people. The present E-stamp compensates in some measure, and makes people's lives easier. While I am speaking of a people's Europe, let me repeat that I hope the use of the E-stamp will continue to expand as a complementary service for the convenience of customers. However, I should be sorry indeed to lose national stamps, whose variety, colour and display wonderfully illustrate the splendour and diversity of Europe. We should celebrate such diversity, which, culturally and commercially, is Europe's secret weapon.
Your Lordships may excoriate such racy language and, even more, toy with the challenging thought that the Conservative Party, in contrast to Labour, vies to be part of an international brotherhood. But Mr Lilley's main thrust is that the liberalisation of the EU postal market should be total and immediate. Even single market commissioner Frits Bolkestein is not so daft or dogmatic. But in proposing to open up the market to letters and material weighing 50 or 75 grams and above, he is playing with fire. He and Mr Lilley should note that Sweden, in liberalising its market too precipitately in 1993, has seen the cost of the standard stamp rise by 60 per cent. Everywhere else in the European Union the cost of the standard stamp declined during the same period by 2 per cent under a regime of state-owned mail delivery.
Last month, in Lisbon, EU leaders rightly called for the speeding up of postal liberalisation. But a 50-gram limit would be breaking the speed limit. The European Commission estimates that national post offices would lose 38 per cent of profits if 50 grams were the threshold. I believe that the revenues lost would be even greater if attractive mail flows were cherry-picked commercially and the universal service obligation remained the duty of governments. A 150-gram limit, to come in by 2003, is a more equitable ambition; 50 grams would be to gild the lily.
I conclude on a positive note, and one that illustrates Europe and its postal services at their best. I refer to Letternet, a scheme to get school students across the European Union to exchange letters with each other by finding new pen-friends quickly and easily. My 14 year-old daughter was offered the
While on the educational theme, the fourth Starred Question today was on tertiary education in the West Country. Listening to the Minister's speech, I rather wondered how, if I were an academic, I should mark it, or what comment I should make on it. I found it long on "what", medium on "how", and very short indeed on "why".
That said, the noble Lord, Lord Razzall, is right in his view that it is hardly surprising that much of the debate on the Bill, both today and in another place, has surrounded the issue of post offices, especially sub-post offices, urban or rural. This is, of course, a serious issue. It is so serious that in the time I have been connected with the retail mail order business--in which I declare an interest which I hope the rules of the House, and indeed your Lordships, will allow to last through all stages of the Bill--I have seen them decline from 22,672 to 17,255. That is a reduction of nearly 24 per cent, roughly 1 per cent a year. That is serious indeed.
There are many reasons for the reduction. Changing patterns of rural life, the growth of supermarkets--one wonders whether the noble Lord the Minister is a poacher turned gamekeeper--and more and more commuting to work are some of them. Governments, and to some extent the Post Office corporation itself, have failed to appreciate that they are a service industry: they need to provide services that people want, and to be open when people need them to be open. The Horizon project will help a little. But why is it, for example, that one does not find a post office counter open after five o' clock in the afternoon? Perhaps the Minister can tell us. I had a suspicion that this was a matter of government regulation, but I have been informed recently that it is part of the rules of the Post Office. It is certainly the fault of the Government that one cannot get a passport application form in any but a Crown or franchised post office.
However, the issue of rural post offices, important though it is, had little if anything to do with this Bill. As my noble friend Lady Miller pointed out some time ago, the outcry has provided us with Clause 102. I do not want to drop boulders in tranquil ponds, but it is, after all, quite possible to run a mail service without a single post office. All one needs are collection depots, which do not even have to be in the United Kingdom. One of the reasons why the corporation has lost out in recent years is that more and more British businesses have sent their mass printing abroad. That material is then posted to individual customers in this country from foreign countries.
I agree with all noble Lords that it is high time that the Post Office was given more commercial freedom. I welcome the Bill if it works as intended. One of the current proposals is share swaps. The noble Lord, Lord Clarke of Hampstead, commented on that proposal in a very brave speech. What he did not say might well be encompassed by the phrase "his worst fears"; namely, what happens if, say, the French or German post offices, which own a chunk of British Post Office shares, are themselves privatised? In those circumstances, what happens to the shares under the Government's proposals?
None the less, joint ventures should be performed with foreign post offices. I argued for that in an article that I wrote some two years ago. I went considerably further than today's Bill and asked for a partial privatisation of 49 per cent of the shares. No government have been brave enough to go even that far, although at least on one occasion during a postal strike they went as far as to suspend the Post Office's monopoly, quite rightly. But it did not happen during the postal strike in 1971, when I was engaged to be married. I had to undergo all kinds of contortions to get letters to my future wife in Zambia. One of my friends who was a pilot posted my letters from wherever he landed. I had another friend in Ireland to whom a third would take my letters for onward transmission. I am glad that in extreme circumstances the Secretary of State can suspend the monopoly again under Clause 10.
This brings me to universal service provision. I am surprised that, as the Government claim, this Bill enshrines it in law for the first time. The Royal Mail works effectively only if there is cross-subsidisation. I doubt that anyone would send a letter to, say, the island of Colonsay in the Inner Hebrides if he was forced to pay the full cost, which I am told is about £10, but that is no reason why there should be a monopoly. I am glad that the principal job of the regulator will be to introduce competition into the current market of
In passing, in my experience, that competition has not improved the service very much. My noble friend Lady Miller pointed out the continuing loss to the Post Office accounts as a result of Parcelforce. I am not clear whether the regulator is to become involved here. Will existing competing carriers have to be licensed? Will the universal service obligation apply? If the service is regionalised will it be able to apply different rates to different areas, for example the West Country as compared with the Highlands and Islands? Will an entrepreneur be able to set up a service covering only one region? These latter questions apply equally to letters and small packets as they do to parcels.
With the regulator in mind, can he prevent the total abandonment of second-class post, as an article in today's Evening Standard suggests could happen? There is to be an independent check on these matters, and many more, by the consumer council for postal services which is to replace POUNC, with which we are all familiar. But what necessitates this change? Why not simply extend its brief and give it teeth, which I fully admit are somewhat lacking in its present existence? The Explanatory Notes give no guidance on this matter or in relation to Schedule 9, which relates to repeals.
I am glad that the Minister referred to e-mail. He will recall that I have a long-running interest in Subscription Services Ltd, the Post Office's comparatively new telemarketing business. I understand that since its inception it has been prohibited by the telecommunications Acts from distributing its incoming data by electronic means; in other words, firms can send their information to the company by electronic means but the latter is not allowed to distribute it other than in printed form. Is this not now "obsolete or unnecessary" (to quote the Explanatory Notes)? It is possible--I shall discover in Committee, if not today--that that restriction is in Section 63 of the British Telecommunications Act 1981, as amended by paragraph 78 of Schedule 4 to the 1984 Act. If so, I welcome its disappearance; if not, at some point we must discuss whether the time is now right for that business to compete on a level playing field with existing businesses in the private sector. After all, Clause 110 makes clear that the corporation must make the Post Office address file available to anyone who wishes to use it. The clause does not say that it must be used for addressing mail. In this day and age that is more than a little out of date. Faxes and e-mails are just as likely to be used, or indeed required.
Despite those quibbles, the Bill is very definitely a step in the right direction, especially as it will, one hopes, inhibit the Secretary of State of the day from interfering as much as he has to date with the activities of the Post Office. The noble Lord, Lord Dearing, is absolutely right, and, given his experience, that is hardly surprising. "Hands off" is most definitely the
The history of government corporations of all kinds shows that governments run businesses extremely badly. If the Post Office must be a wholly state-owned public corporation, in the opinion of many commentators this is the way to go about it, although many who have spoken today are, to say the least, somewhat suspicious. Of course, it does not have to be. However, as my noble friend Lady Byford said in relation to another subject, that battle is for another day.
Lord Brightman: My Lords, perhaps I may take up a moment of your Lordships' time to turn away from the substance of the Bill to the manner in which it is drafted. I refer to Clause 118, "Index of defined expressions". I congratulate the draftsman on including in the Bill this invaluable device which saves the reader so much time and trouble. He can discover immediately from the first column of the index whether a simple word such as "employee" has a special meaning or the dictionary meaning. If it has a special meaning, he can discover immediately from the second column where that meaning is to be found among the 123 clauses in the Bill.
This most user-friendly practice featured in four Bills during the 1997-98 Session; and not in one single Bill during the last Session. I submit that the device deserves more frequent consideration by the Office of Parliamentary Counsel than perhaps it receives at present. When used, it is quite invaluable.
Baroness Sharp of Guildford: My Lords, it is my task to wind up from these Benches. Having spent part of the holiday reading the debates on the Bill in another place, I am struck by the good humour and constructive criticism of the speeches in this House in contrast to the highly politicised atmosphere in another place. As my noble friend Lord Razzall made clear, we on these Benches extend a broad welcome to the Bill. It helps to bring a major institution into the 21st century. It keeps it--as we on these Benches think fitting--as a public sector institution providing a universal postal service across the country at a uniform rate, but gives the commercial flexibility needed to compete in the age of modern digital communications, and the power to borrow directly from the market and to pursue mergers and joint ventures within limits.
In return for its public service obligation to provide a universal postal service at a uniform price, the Post Office retains, for the moment at least, the monopoly for all postal services under the £1 limit; and given the
All that we welcome. The Bill brings to an end an era of extended uncertainty for the Post Office which has already done a great deal of harm to that body and to the extended network of sub-post offices. As the noble Lord, Lord Dearing, made clear, 20 years ago when British Telecom was separated from the Post Office it was clear that if the Post Office were to compete in the new age of digital communication it needed investment and commercial freedom to pursue new markets. Far from giving such opportunities, the Conservative Party shackled it firmly within the public sector, limiting its freedom to borrow or develop its services, interfering in its pricing decisions, dictating its internal structure, milking its profits to the tune of over £1 billion and, finally, holding the threat of privatisation over it for a full five years between 1992 and 1997.
In the process it shut down 974 Crown post offices--between 1979 and 1997 down from 1,508 to 606--and 3,482 sub-post offices. It was a record number of closures, the maximum, nearly 400, being between 1984-85. While we share the Conservative Party's concern about the network of sub-post offices, its defence would sound to these Benches a little less hypocritical if its record in office had demonstrated earlier more appreciation of the value of that network. It was the Conservatives who initiated the disastrous Horizon project. They were responsible for its original specification which is the cause of much of the aggro that the system faces.
Nevertheless, one cannot blame the previous government for all that has happened to the Post Office. The present Government have hardly helped matters. They dithered and dallied for over two years over this Post Office decision, finally producing their White Paper in July last year when the Select Committee to review it had been set up the previous November. In the meantime, we have again seen sub-post offices being closed at a record rate.
We think that the proposals are timid. They do not give the freedom of manoeuvre that governments in other countries have given their post offices. Let us take Holland, Germany or New Zealand. There are many examples of public sector institutions which have been given much greater commercial freedom than the Government propose to give the Post Office now. Freedom to borrow remains highly constrained. Other noble Lords have mentioned that £75 million is not a large sum these days, particularly when the chief executive officer of the Post Office has estimated that a minimum of £3 billion of investment is required. So one has to go cap in hand to the Treasury and say, "Please may we have a little more?"; and we know perfectly well what the Treasury answer will be.
It is all too apparent that substantial constraints have been put on all aspects of borrowing. As the noble Lord, Lord Dearing, mentioned, the opportunities for joint ventures and acquisitions are constrained not only by the Treasury but also by the need for affirmative resolution before the House. While we applaud that--we like open Government; we like the fact that the democratic part of the legislature will be asked to approve such matters--one must echo the reservation of the noble Lord, Lord Dearing, about the time that that may take. Such matters should not be stopped en route by the departments concerned, but brought as rapidly as possible before the House so that quick decisions can be made.
On top of those timid moves towards commercial freedom, the Government then dropped another bombshell. I refer to their decision last May to accelerate the payment of social security benefits directly through banks through the automated credit transfer system. If pursued, with one blow it effectively wipes out one-third of a staple source of the income of sub-post offices. That decision is a prime example of the lack of joined-up thinking by Government. The noble Lord, Lord Dearing, asked whether a full cost benefit analysis had been done. The situation smacks of the Treasury and the Department of Social Security being only too anxious to make savings at the expense of rural and urban sub-post offices. At a time when one of the Government's main issues relates to social exclusion, it is extraordinary that they should allow such a decision to be taken.
Having launched the Bill in another place, the Government dramatically changed course by introducing at Third Reading new Clause 102. The new clause changes the nature of the Bill, giving the Government the power to introduce subsidies to maintain the Post Office network. One cannot help but suspect that late in the day the Government have come to realise how disastrous were their decisions about the ill-fated Horizon project and the payment of benefits through the automated credit transfer. During the Third Reading in the other place, our spokesmen reiterated that time and time again.
What is promised in the new clause is vague in the extreme. We have no idea how the subsidy is to be paid, to whom it is to be paid, or how far it will help to keep open small rural and urban sub-post offices. We greatly welcome the fact that the Government accept that they may well have to pay subsidies, but that is where the transparency ends.
It is disingenuous for people to say that there have never been subsidies in the Post Office. Implicit in the whole concept of a universal provision at a uniform price is the concept of cross-subsidy. I am told that it costs eight times more to deliver a letter in rural areas than in urban areas. There has constantly been a process of cross-subsidisation and we are well used to that in all our public utility services. Telephones in rural areas are subsidised by the use of telephones in the urban areas. The same principle applies to gas and electricity.
The decision was, and remains so with the regulator, to use cross-subsidisation as a form of providing the social services, rather than having an explicit subsidy. As an economist, I have a preference for an explicit transparent subsidy, where people are subsidised for social purposes, rather than hiding that subsidy. Equally, our only example of an explicit subsidy for a public utility service is the rural bus service. Our local authorities must now pay an explicit subsidy. I do not believe that that is a happy example because one sees precisely what one fears might happen within the Post Office; namely, despite subsidies, the total collapse of rural services. However, I make that point as an aside.
My colleagues here and in another place have consistently argued in favour of retaining the universal public service obligation for the Post Office because we recognise the importance of the postal services to all communities in the country. We have been consistent in arguing to retain the higher £1 limit on the monopoly, at least until the regulator has had an opportunity to assess the situation. We have been consistent in arguing that the payment of all benefits through ACT should be delayed until the completion of the Horizon project and that the sub-post offices are linked into the system through which benefits can be paid. Like the noble Lord, Lord Skelmersdale, my reading of the situation is that there is no need for people to receive their benefits by automatic payment. As the Minister in the other place reiterated several times during the debates, it is open to people to continue to have their benefits paid directly to them at the local post office. Therefore, it is up to people who claim benefits to keep their post offices open and it is important that that is made known to them.
We on these Benches have been consistent in arguing that the whole process should be delayed until sub-post offices can play an active part in the new financial services network. We have been consistent in supporting the role of the sub-post offices in both rural and urban communities as focal points of community activities. Therefore, I join my noble friend Lord Razzell in asking the Minister to reassure us that this Bill is not the beginning of the slippery slope towards privatisation; that the Post Office will be kept in the public sector; and that within its framework we shall retain our network of sub-post offices.
Lord Northbrook: My Lords, the Postal Services Bill provides for the Post Office to be converted from a statutory corporation to a public limited company, ownership remaining with the Crown. The Bill introduces a new system of licensing and regulation for postal services or providers operating in the area of the market currently reserved largely as a monopoly for the Post Office.
The Bill gives the independent regulator, the new postal services 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 service at a uniform tariff.
Subject to that duty, the commission is required to further the interests of users, wherever appropriate, by the promotion of greater competition in postal markets. The Bill states that the commission will be able to promote competition through recommending changes to the scope of the reserved area and by permitting licensed competition within it.
The commission will also have responsibility for setting quality standards and regulating prices. Consumers are in theory given greater protection through replacing the Post Office Users National Council with the consumer council for postal services. The creation of that body brings consumer representation in the postal services market in line with the provision for other utilities.
We on this side of the House, while giving the Bill a cautious welcome, believe that it offers a confused half-way answer. The Government have failed to give the Post Office the freedom it needs to compete against its international rivals. Without full commercial freedom, the Post Office cannot take advantage of being the most efficient postal service in the world. We welcome the decision to grant plc status but regret the 100 per cent retention of public ownership.
We believe that the Government should have sold at least 51 per cent of the shares, enabling the Post Office to compete, particularly with Dutch and German post offices, on a level playing field. As was stated in the Economist last year, in a commentary on the White Paper which laid the foundations for the Bill:
In addition, the Government have backtracked on plans to reduce the Post Office's legal monopoly over deliveries from £1 to 50p. The noble Lord, Lord Harrison, mentioned the Lisbon summit which asked for greater freedom for national postal services. The Government started out on that path, but they have backtracked. The saga was quite extraordinary. In December 1998, Peter Mandelson proposed the phasing out of the Post Office's monopoly over letters costing less than £1.
The 1999 White Paper proposed that the Post Office's legal monopoly over deliveries costing less than £1 should be reduced to 50p and in July 1999 a statutory instrument was laid on that. However, in October 1999, a second statutory instrument was laid, the effect of which was to reverse the first. The decision on the future of the reserved area will now be taken by the new postal services commission. We believe that the failure to privatise fully and go below £1 on the monopoly is due to worries about the reaction of the Post Office workers' unions.
Another of our concerns--and I echo the comments of my noble friend Lady Byford--is that the Bill offers little comfort to those threatened with losing their livelihood following the decision to switch benefit payments to automatic credit transfers. That threatens
As has been stated, benefit payments account for approximately £400 million of income--one-third of Post Office Counters' turnover. Of the 18,500 sub-post offices, only 10,000 are commercially viable. At this point, with regard to the comment of the noble Baroness, Lady Sharp of Guildford, about sub-post office closures under the previous Conservative administration, perhaps I may set out the figures for the record. Between 1979-80 and 1996-97, an average of 143 sub-post offices closed annually. Between 1992 and 1997, 99 sub-post offices closed annually. However, in the first two years of this Government the annual figure was 235 closures a year. This year, that number will exceed 500.
The change to the benefit payment system will alter the finances of so many sub-post offices. I do not believe that the Government will subsidise each and every one that experiences financial difficulty. Closures will result and due to those will be lost a focus of the local community. People go to their sub-post offices not only to buy stamps but also to shop for other items. Therefore, as other noble Lords have done, I ask the Minister to explain how the subsidy system will operate in detail in order to reassure those sub-post offices whose livelihoods may be threatened.
I should also be grateful for a response from the Minister regarding other financial considerations. First, can he assure the House that there will be transparency in the accounting structures to ensure that there is no undue hidden cross-subsidy from monopoly to non-monopoly areas within the Post Office? Secondly, how will it be possible for the Post Office to enter into a joint venture or strategic alliance with another company by way of a limited sale or exchange of equity, as detailed in Clause 67? The Bill would seem to allow for such a disposal, but how would it work in practice? Thirdly, what will be the rate of interest, mentioned in Clause 68, charged on loans taken out by the Post Office? Will it be a commercial rate, as the noble Lord, Lord Clarke of Hampstead, stated? Clause 68(2) states that it will be,
In summary, we give the Bill a cautious welcome, but in particular we are concerned about the effect of the switch to ACT, which threatens the survival of thousands of sub-post offices across Britain, and which, as the noble Lord, Lord Dearing, said, is a cost to society.
Lord Sainsbury of Turville: My Lords, it has been a privilege for me to listen to what has been an extremely interesting and, indeed, well-informed debate. Once again, I believe that it has proved the strength of feeling that exists in this country with regard to the valuable service provided by the Post Office. This debate concerns how we ensure that it continues to provide that valuable service while at the same time responding to the major challenges and opportunities that confront it.
I am particularly grateful for the many comments from noble Lords who welcome the introduction of the Bill. I now deal with some of the points raised. I am delighted that the noble Baroness, Lady Miller, feels able to give the Bill a cautious welcome and, indeed, will approach it in a constructive manner. I felt that her criticisms were somewhat half-hearted, but I attribute that to the excellence of the Bill.
I deal, first, with the question of what I believe is currently called "regulatory creep"; that is, the issue of information required by people who are not in the licensing system. We have been concerned to provide for the regulator to have all the necessary powers to ensure the delivery of the universal service and, indeed, to promote competition and the interests of consumers. Many of those powers will simply replicate those previously exercised by the Secretary of State or the Post Office in relation to the monopoly area. There are only minor requests about information with regard to the area outside the licensing area. Therefore, I believe that there is no need for concern on that particular front.
One of the major themes of the debate has been the impact of the new ACT system. However, that does not form part of this particular Bill. The reason that we have had to take action on that matter is to clear up what has, rightly, been pointed out to be an entirely misconceived system which the previous administration introduced in a great hurry. It was well behind schedule and was believed by most people to be undeliverable.
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