POSTAL SERVICES BILL
Memorandum by the Department of Trade
1. The Postal Services Bill was brought from
the House of Commons on 19 April 2000. This Memorandum -
- summarises the main provisions of the Bill,
- identifies the delegated powers in the Bill,
and describes the purpose and proposed use of those powers,
- explains why the matters have been dealt with
by creating delegated powers, and
- explains the degree of Parliamentary control
on the exercise of those powers.
2. The Postal Services Bill contains 123 clauses
and 9 Schedules. The main purposes of the Bill are to -
- convert the Post Office from a statutory corporation
to a public limited company (plc) formed and registered under
the Companies Act 1985, owned by the Crown;
- maintain the universal service and promote competition
through the establishment of a new regulator the Postal Services
Commission ("the Commission") to oversee a new system
of licensing and regulation for postal services providers, operating
in the "licensed area" of the market (which is currently
reserved largely as a monopoly for the Post Office); and
- give greater protection to consumers through
the creation of the Consumer Council for Postal Services ("the
Overview of the delegated powers
3. The delegated powers to modify or suspend
the licensed area are dealt with in paragraphs 23 to 40 below.
4. The powers of direction relating to the licensing
regime are discussed at paragraphs 42 to 48.
5. The power to specify when the Commission's
register of actions should be available to public scrutiny is
dealt with in paragraphs 49 to 52.
6. Details of the power to direct the Commission
in relation to expenses are considered at paragraph 53.
7. Details on the power of the Secretary of State
to direct the Commission regarding free postal services for the
blind are at paragraphs 54 to 57.
8. Delegated powers and powers of direction relating
to the information powers in the Bill are covered in paragraphs
59 to 67 and 146 to 149.
9. The powers relating to the transfer of Post
Office assets to the new company are considered in paragraphs
70 to 72.
10. The dissolution of the Post Office is covered
in paragraphs 91 to 93.
11. Paragraphs 73 to 90 and 94 to 97 deal with
delegated powers and powers of direction relating to the financial
provisions for the Post Office and Post Office company.
12. Paragraphs 101 to 106 deal with the power
to change the legal relationship between a universal service provider
and its customers.
13. The power to direct the Commission or a licence
holder in the interests of national security is covered in paragraphs
108 to 111.
14. The delegated power to ensure compliance
with the EU Postal Services Directive is covered in paragraphs
112 to 120.
15. The power to make a scheme for the provision
of financial assistance to public post offices is described in
paragraphs 121 to 129.
16. The power of the Treasury to make regulations
with regard to the application of Customs or Excise legislation
is considered in paragraphs 130 to 133.
17. Order-making powers to amend existing legislation
are dealt with in paragraph 136.
18. In considering whether matters should be
specified on the face of the Bill or allocated to delegated legislation,
the Department has had regard to the need:
- to avoid too much technical detail and limit
the length of the Bill;
- to ensure flexibility in the legal framework
allowing for changes in the nature of the postal services market
to be accommodated by the use of the delegated powers in the bill.
PART I: INTRODUCTORY
OUTLINE OF THE PROVISIONS IN PART I
19. This Part creates the Postal Services Commission
and the Consumer Council for Postal Services. It also sets out
the primary duty of the Commission, which is to ensure the provision
of a universal postal service, and - subject to that duty - sets
out a second duty, which is to have regard to the interests of
consumers of postal services.
20. There are no delegated powers in this Part
of the Bill.
PART II: LICENCES FOR POSTAL SERVICES
OUTLINE OF THE PROVISIONS IN PART II
21. Part II sets out the system of licensing
for postal services based on the prohibition that no person shall
convey letters unless they are licensed by the Commission. There
are a number of exceptions to this prohibition and these are all
set out in clause 7. The main exception is for all letters costing
£1 or more or weighing 350g or more.
22. This part also sets out the methods by which
the licence regime is to be enforced and the appeals mechanism
DELEGATED POWERS IN CLAUSE 8
23. Clause 8 enables the Secretary of
State to modify clause 7 by order. This power permits the Secretary
of State to modify the main exception relating to letters costing
not less than £1 or weighing not less than 350 grams as well
as allowing for new exceptions to be added and for other existing
exceptions to be altered or removed.
24. The Secretary of State may only exercise
this power upon the recommendation of the Commission.
25. Where the Commission makes a recommendation
and the Secretary of State decides not to follow it, he must lay
before each House a report containing his reasons for not following
the Commission's recommendation.
26. Before making a recommendation to the Secretary
of State the Commission must consult the Council, license holders
and such other persons as the Commission considers appropriate.
27. An order under this clause can only be made
if approved by a resolution of each House of Parliament (see clause
114 (9)). The Commission must consult the Council, licence holders
and any other persons it considers appropriate before making any
recommendation to the Secretary of State.
REASONS FOR A DELEGATED POWER IN CLAUSE 8
28. Over time, the changes in the nature of the
postal services market (for example as a result of modern technology)
have highlighted inflexibility in parts of the existing legislation
concerning postal issues. This clause allows the regulator to
make recommendations to the Secretary of State on the need for
changes to the exceptions to the prohibition on carrying out postal
services without a licence.
29. This Bill removes the previous system of
granting class licences (which were exceptions to the postal monopoly
granted to the Post Office). Class licences gave the Secretary
of State the ability to licence a "class" of activity
(for example, document exchange services) rather than an individual,
and thus take the whole of that activity outside of the monopoly
area. In effect, each class licence was the same as a clause 7
exception, but in the past the views of Parliament did not need
to be sought before exceptions were created or modified. The regime
created by this bill means that in future all new exceptions or
modifications to the exceptions set out in clause 7 will require
30. There is also a further reason for the ability
to be able to modify the general level of the "licensed"
or "reserved" area (which is effectively defined in
the Bill by the exception set out in clause 7(1) namely that relating
to the conveyance of letters costing not less than £1 or
weighing not less than 350 grams). Under the Postal Services Directive
(97/67EC) Member States may only maintain a reserved area "to
the extent necessary to ensure the maintenance of universal service".
Therefore, flexibility is necessary to be able to adjust the level
of the reserved area accordingly.
31. A similar power already exists in legislation.
At present, the scope of the Post Office's monopoly is limited
by the Postal Privilege (Suspension) Order (S.I. 1981/1483)
as amended by the Postal Services Regulations 1999 (S.I. 1999/2107).
This Bill retains the flexibility to alter the scope of the "reserved
area", but restricts the Secretary of State's freedom to
do so by preventing him from acting without the recommendation
of the Postal Services Commission. Any order under clause 8 can
only be made if approved by a resolution of each House of Parliament.
We consider that this is an appropriate level of Parliamentary
scrutiny for this power.
DELEGATED POWERS IN CLAUSE 9
32. Clause 9 permits the Secretary of
State, for whatever reason, to make an order suspending the operation
of clause 6 (the licensed area) on the recommendation of the Postal
Services Commission. This would have the effect of allowing any
person to convey letters. The Commission would only make such
a recommendation if it were satisfied that the universal service
could be maintained without a licensed area.
33. The Secretary of State can only act on the
Postal Services Commission's recommendation and the order cannot
be made unless it is approved by a resolution of each House of
Parliament (clause 114(9)).
34. If he chooses not to suspend the operation
of the licensed area contrary to the Commission's recommendation,
the Secretary of State must lay a report before Parliament giving
REASONS FOR A DELEGATED POWER IN CLAUSE 9
35. The suspension of the licensed area may be
necessary in the future interests of consumers. Having considered
all the circumstances carefully, the PSC may recommend a temporary
or permanent suspension of the licensed area. Potentially, the
Commission could find a situation in the future where it considers
that it should recommend that the licensed area be suspended altogether.
36. As mentioned above, under the European Directive
on Postal Services, the reserved area can only be maintained to
the extent that it is necessary to ensure the maintenance of a
universal service. It is therefore necessary to allow for the
possibility of reducing the level of the reserved area (as in
clause 8), or even for its complete suspension, which this clause
would permit. Due to the importance of the subject matter of the
power, we consider that the affirmative resolution procedure is
appropriate in this case.
DELEGATED POWERS IN CLAUSE 10
37. Clause 10 will allow the Secretary
of State, in the national interest, to 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. The Secretary of State may also specify
limitations on the extent of the suspension.
REASONS FOR A DELEGATED POWER IN CLAUSE 10
38. This power is similar to, although narrower
than, that contained in Section 69 of the British Telecommunications
Act 1981. It allows the Secretary of State to suspend the reserved
area in the national interest.
39. The 1981 Act power has been used in cases
of postal strikes, but also provides the basis for the present
suspension of the monopoly to £1 (see clause 8).
40. The power in this clause is intended for
use in the event of, for example, strikes or other unforeseen
events which would affect the provision of an effective postal
service by licensed operators within the reserved area. Longer
suspensions would require the use of clause 9. Clause 10 is a
necessary safeguard for all consumers, ensuring that mail can
be delivered by any person where the national interest would justify
it. As this is an emergency power which would need to be exercised
quickly, it is considered that negative resolution of either House
of Parliament is the appropriate level of scrutiny in this case.
MODIFICATION BY ORDER UNDER OTHER ENACTMENTS
41. Clause 21(4) provides that where the
Secretary of State by order exercises any of the powers specified
in Parts 1 and II of Schedule 8 of the Fair Trading Act 1973,
such an order may also modify the conditions of a licence to such
an extent as the Secretary of State considers necessary or expedient
to give effect to or take account of any provision made by such
an order. Although the Parliamentary procedures for such orders
are already laid down, as this sub-section provided an additional
element to those powers, it was considered prudent to bring the
provision to the attention of the Committee.
POWER OF DIRECTION IN CLAUSE 14 AND REASONS FOR IT
42. Under clause 14(5) the Secretary of
State may direct the Postal Services Commission not to modify
a licence with the consent of the licence holder if the Secretary
of State considers that the modification should be made, if at
all, under clause 17. This would mean that the modification could
only occur following the completion of a reference to the Competition
43. This power of direction mirrors legislation
seen in the utilities sector and is an important check on the
powers of the regulator. Where the Secretary of State considers
that the proposed modification raises issues that mean that the
modification should only occur, if at all, following a full investigation
by a Competition Commission reference panel he can prevent the
modification. It is a matter for the Postal Services Commission
to decide whether or not to make a reference to the Competition
POWER OF DIRECTION IN CLAUSE 15 AND REASONS FOR IT
44. Clause 15(5) contains a power of direction
from the Secretary of State to the Competition Commission not
to proceed with a reference made by the Postal Services Commission
or a variation of such a reference.
45. As for clause 14, this power exists in other
legislation and is a necessary check on the regulator. Competition
Commission references are a serious matter, costing all parties
considerable time and money. This power of direction provides
a counter balance should the Secretary of State believe that the
Commission are making unnecessary references.
POWER OF DIRECTION IN CLAUSE 16 AND THE REASONS FOR
46. Clause 16(4) allows the Secretary
of State to direct the Commission not to publish in a final version
of a Competition Commission report information which the Secretary
of State considers would be against the public interest or any
person's commercial interest. This power mirrors those seen in
utilities and competition legislation and is necessary to protect
information that may be in the public interest to protect or that
is of a commercially sensitive nature.
POWER OF DIRECTION IN CLAUSE 18 AND THE REASONS FOR
47. Clause 18 provides the Competition
Commission with a power to direct the Postal Services Commission
not to make modifications following a report of the Competition
Commission if the Competition Commission considers that the modifications
are not those needed for the purpose of remedying or preventing
the adverse effects specified in the Competition Commission's
48. This allows the Competition Commission to
intervene where it believes that the Postal Services Commission
is acting incorrectly following a report. This power underlines
the more general principal that licences should be modified by
consent where possible. Where the Commission makes a reference,
this power will provide reassurance to licence holders that the
Commission will act in a manner consistent with the Competition
Commission's report rather than attempting to use such a report
to pursue a wider regulatory agenda.
DELEGATED POWER AND POWER OF DIRECTION IN CLAUSE
38 AND THE REASONS FOR THEM
49. Clause 38 requires the Postal Services
Commission to keep a public register of actions taken by it in
relation to the licensing regime. This includes details of licences
issued, licence variations, revocations, and enforcement actions,
including details of any fines or notices served for breach of
50. Sub-section (7), contains a power for the
Secretary of State to direct the Commission not to make an entry
if he believes that such an entry in the register would be against
the public interest or any person's commercial interests. Such
directions are expected to be rare, the presumption being first
that information relating to licences should be in the public
register, and second that if not, the decision not to include
something will usually be taken by the Commission. The power is,
however, a necessary safeguard, to ensure that entries on the
register are in the public interest and do not unnecessarily damage
the interests of individuals or businesses.
51. Sub-section (8) requires that the contents
of the register are available for inspection by the public during
such hours as may be specified in an order made by the Secretary
of State. The matter of opening hours which it is proposed to
deal with by delegated powers is appropriate for subordinate legislation
because it is an administrative matter, and because it is a matter
which requires the flexibility to respond to changing demand and
other circumstances. We cannot anticipate at present the public
access that will be appropriate in the market in, say, ten years
52. Because this is a technical, administrative
matter it is provided that an order under sub-section (8) will
be subject to the negative resolution procedures.
POWER OF DIRECTION IN CLAUSE 39
53. Clause 39 allows the Secretary of
State to direct the Postal Services Commission to include in any
licence, conditions requiring the payment of sums relating to
the expenses of the Council or of the Secretary of State, in relation
to the establishment of the Council. It also allows the Secretary
of State to determine anything falling to be determined under
POWER OF DIRECTION IN CLAUSE 41 AND THE REASONS FOR
54. Clause 41 gives the Secretary of State
the power to direct the Commission to include, as a licence condition,
a requirement for licence holders, who are universal service providers,
to provide free postal services for the blind and partially sighted.
This provision is designed to continue the existing practice whereby
the Post Office voluntarily provides free services for the blind
and partially sighted.
55. The clause sets out two powers of direction
for the Secretary of State, one to set out exactly what such a
licence condition should include, and to specify what articles
may be included and the description of blind and partially sighted
people included, and the other directing when the licence condition
should come into force.
56. The powers of direction in this clause would
be used if the Secretary of State felt that there was a genuine
likelihood that the Universal service providers (currently the
Post Office) would not provide such services voluntarily.
57. Powers of direction, rather than order-making
powers, are appropriate in this situation, given the uncontroversial
nature of such directions.
PART III: OTHER FUNCTIONS OF THE COMMISSION AND
OUTLINE OF PROVISIONS IN PART III
58. This Part sets out the duties and functions
of the Commission and the Council that are not covered in Part
POWER OF DIRECTION IN CLAUSE 44 AND THE REASONS FOR
59. Clause 44 requires the Commission to keep
under review and collect information about the provision of postal
services in the United Kingdom, other Member States, and elsewhere
in order to facilitate the exercise of its functions. Sub-section
(2) provides that the Secretary of State may give directions to
the Commission indicating considerations to which it is to have
particular regard in deciding the order of priority in which matters
are to be reviewed in performing these duties. It is not expected
that this power will be widely used, but it is necessary to ensure
that the Secretary of State has a means of ensuring that matters
of importance to the postal sector which it has identified, for
example through its dealing as a Member State, are reflected appropriately
in the review and information gathering activities of the Commission.
DELEGATED POWERS IN CLAUSE 58 AND REASON FOR IT
60. Clause 58 sets out the Council's power
to require information. It gives the Council the power to serve
notice on the Commission, a universal service provider or a licence
holder (who is not a universal service provider), requiring the
production of information specified in the notice which the Council
may reasonably require in exercising its functions.
61. The Commission may refuse to supply information
and may determine that other persons may refuse to supply information
if the Commission, in specified circumstances, so determines.
These circumstances are where the Commission considers that: (a)
the Council does not reasonably require the information in the
exercise of its functions; or (b) the information is of a description
specified in an order made by the Secretary of State; or (c) in
circumstances specified in such an order.
62. It is necessary to achieve the correct balance
on information-gathering powers through a combination of checks
and balances. The Council needs information-gathering powers to
be able to carry out its functions and duties effectively. But
these powers need to be checked to ensure it requires only such
information as is necessary to carry out its designated functions.
63. The Commission has a range of duties, including
ensuring the provision of the USO, promoting effective competition
and furthering the interests of users. Because it is in a more
impartial position to be able to balance the interests of operators
and consumers, it is best placed to judge whether the Council
may reasonably require the information in the exercise of it functions.
64. The assumption is that the Counsel and the
Commission will work together harmoniously without the need for
intervention by the Secretary of State. It is, however, necessary
to have this order-making power in reserve in order to ensure
that the Secretary of State can set down further guidelines if
that is desirable at some future date to ensure the effective
and efficient working of the regulatory system. It is considered
that the procedure of negative resolution of either House of Parliament
is adequate for such a regulatory function.
DELEGATED POWERS IN CLAUSE 59 AND REASON FOR IT
65. Clause 59 requires the Council to
provide information to the Commission if the Commission requires
it in the exercise of its duties. It provides that in some circumstances
the Council may refuse to provide such information, including
where the Secretary of State has made an order specifying information
that the Council may refuse to provide.
66. The order-making power is set out at subsection
(2). It provides the Secretary of State with the power to make
an order specifying:
- descriptions of information which the Council
may refuse to supply, and;
- the circumstances in which the Council may refuse
to provide information.
67. It is necessary to get the balance right
on information-gathering powers through a combination of checks
and balances. These are built into the Bill on the assumption
that the Council and the Commission will work together harmoniously.
As with the delegated powers provided in clause 58, it is necessary
to have this order-making power in reserve in order to ensure
that the Secretary of State can set down further guidelines if
that is desirable at some future date to ensure the effective
and efficient working of the regulatory system. The negative resolution
procedure is considered appropriate again for the same reasons
as apply in respect of the power contained in clause 58.
PART IV: REORGANISATION OF THE POST OFFICE
OUTLINE OF PROVISIONS IN PART IV
68. Part IV of the Bill allows for the creation
of a new Post Office company, which will be publicly owned, and
for the dissolution of the statutory Post Office corporation.
This Part also restricts the disposal of shares in the Post Office
company and its relevant subsidiaries. Any proposal to dispose
of shares put forward by the new Post Office company under the
provisions of clause 67 (which permits disposal in certain circumstances
to cement a commercial alliance with a business partner) requires
the prior approval of Parliament. This is obtained by a resolution
of each House of Parliament passed on a motion moved by or on
behalf of the Secretary of State
69. Part IV also contains financial provisions
that allow for the restructuring of the Post Office's balance
sheet, and establish the financial regime in which the new company
DELEGATED POWER UNDER CLAUSE 62 AND THE REASONS FOR
70. Clause 62 is the clause which changes
the status of the Post Office from a statutory corporation into
a public limited company. It does this by giving the Secretary
of State a power to make an order setting the day for the transfer
of the property, rights and liabilities of the Post Office to
a company formed and registered under the Companies Acts. Such
an order can be varied or revoked by a subsequent order at any
time before the vesting of any property, rights or liabilities
in the new company. The clause also imposes a requirement that
the company to which the transfer is made is wholly owned by the
Crown at the date of vesting.
71. This transfer is an essential part of the
reform package for the Post Office and will underline the new
commercial freedoms of the Post Office and the new arm's length
relationship between the Post Office and Government.
72. This power is required to allow flexibility
in setting the date of transfer and to avoid including unnecessary
detail on the face of the Bill. It is not considered necessary
for such an order to be subject to any Parliamentary scrutiny.
POWERS OF DIRECTION IN CLAUSE 63
73. This clause enables the Secretary of State
to direct the Post Office company or a subsidiary of it to issue
securities (as defined in clause 82) including shares, share rights
and debt instruments. The direction may require that the securities
are issued to the Secretary of State or the Treasury. The clause
also permits the Secretary of State to direct the Post Office
company or a subsidiary to issue shares or share rights direct
to a third party, provided the Parliamentary approval procedure
has been followed. It further permits the Secretary of State to
direct a relevant subsidiary of the Post Office company to issue
shares or share rights to the Post Office company or another subsidiary
of the Post Office company of which it is itself a relevant subsidiary.
But no direction can be given by the Secretary of State without
the consent of the Treasury.
74. Should the company cease to be wholly owned
by the Crown (in the event of an approved disposal to cement a
commercial alliance) it would not be proper for the Government
to have these powers of direction, because the other shareholders
would have an interest in the issue of securities and preferential
powers for the Government would be unfair to the other parties.
Accordingly the power of direction may not be used when the Post
Office company is not wholly owned by the Crown.
75. Clause 63 ensures that the Government can
obtain securities issued by the Post Office company and its wholly
owned subsidiaries - securities here having the meaning given
in clause 82 embracing both shares and share rights, as well as
debt instruments e.g. debentures and bonds.
POWER OF DIRECTION IN CLAUSE 69
76. Clause 69 empowers the Secretary of
State to guarantee the discharge of any financial obligation of
the Post Office company or any of its subsidiaries. Under subsection
(3), if any sums are paid by the Secretary of State in fulfilment
of a guarantee given under this clause, the Secretary of State
may then direct the repayments of the principal and interest by
the Post Office company or the subsidiary concerned in respect
of the sums discharged.
77. This power of direction enables the Secretary
of State to set the terms on which the Post Office company or
the subsidiary concerned will make repayments to him in respect
of the sums discharged by the Secretary of State.
DELEGATED POWERS IN CLAUSE 70 AND REASONS FOR THEM
78. Clause 70(1) empowers the Secretary
of State, to cancel by order any liability of the Post Office
company (or its subsidiaries), in respect of the fulfilment of
guarantees given under section 38 of the Post Office Act 1969
or clause 69 of the Postal Services Act 2000. Under clause 70(2),
the Secretary of State may by order also extinguish any liabilities
to him specified in the order except those which can be extinguished
by virtue of clause 70(1) and those which relate to tax, duties
or fines. As there is no express power in Clause 70 to extinguish
the principal or interest on loans owed to the Secretary of State
and payable into National Loans Fund, such liabilities may not
79. Under clause 70(5) the Secretary of State
may by order repeal the section and it would be the intention
to do so once the purpose of the clause is spent, i.e. the balance
sheet of the Post Office company has been restructured.
80. This clause is intended to facilitate the
restructuring of the balance sheet by 1 April 2002, as announced
in the White Paper. The balance sheet will be restructured in
order to place the Post Office company on a more commercial footing
and allow benchmarking against its competitors. At present the
Post Office holds accumulated reserves in the form of gilts and
National Loans Fund deposits on its balance sheet. In effect these
reflect accumulated dividends which could not be paid over to
the Exchequer since the relevant legislation did not provide for
the Post Office to do so. External advisers have been appointed
to support the Government with this work.
81. The provisions of this clause, if required,
will be carried out by means of the order-making power. The provisions
are included to provide flexibility when decisions are taken about
the restructuring of the balance sheet. The powers given by it
may, for example, be used to cancel certain liability with a view
to its replacement by new debt which may better meet the Government's
and the Post Office's restructuring objectives, but without conferring
any unjustified commercial advantage or disadvantage on the Post
Office company. These powers are only to be exercised after consultation
with the Post Office company, or with the Post Office company
and the subsidiary, if the liability of a subsidiary is to be
extinguished. The consent of the Treasury is also required before
the powers may be used.
82. All the orders under this clause are subject
to negative resolution in either House of Parliament.
DELEGATED POWERS IN CLAUSE 71 AND REASONS FOR THEM
83. Clause 71 sets a limit of £5,000
million on the total of the Crown's financial arrangements with
the Post Office company and any of its subsidiaries and defines
what is to be included in the calculation of the figure. The Secretary
of State may increase the limit set out in the Bill by an order
approved in draft by a resolution of the House of Commons. A limit
is set in the Bill in part to provide assurance to Parliament
that the Post Office company and its subsidiaries are not being
afforded unlimited access to the National Loans Fund. The limit
also provides reassurance that unlimited calls may not be made
on monies to be provided by Parliament.
84. The figure of £5,000 million is based
on a commonly used formula for calculating the top stop on company
indebtedness and has been calculated on the basis of the Post
Office's current financial position. But flexibility has been
built into the clause by providing that the limit may be increased
by an order approved in draft by the House of Commons should this
prove necessary in the future. The bringing forward of an order
to effect an increase would depend on whether it was considered
at the time that the Post Office company could sustain a higher
limit. As a higher borrowing limit would almost certainly entail
greater borrowing from the National Loans Fund, the draft order
requires the approval of the House of Commons, rather than being
subject to the negative resolution procedure.
POWERS OF DIRECTION IN CLAUSE 72
85. Clause 72 empowers the Secretary of
State, after consultation with the Post Office company and with
the consent of the Treasury, to give directions to the Post Office
company requiring it to allocate amounts to general reserves or
to reserves for a particular purpose; and to reallocate those
reserves to other specified purposes. The Secretary of State may
also direct the Post Office company to cause any of its subsidiaries
to create such reserves or to reallocate them for other purposes.
86. The Secretary of State may also direct how
amounts allocated to a reserve are to be applied and may require
such amounts to be paid as if they were profits available for
distribution within the meaning of section 263(1) of the Companies
Act 1985 or Article 271(1) of the Companies (Northern Ireland)
87. This clause and the powers of direction therein
are intended to help facilitate the restructuring of the balance
sheet of the Post Office company by 1 April 2002, as announced
in the White Paper. The balance sheet will be restructured in
order to place the Post Office company on a more commercial footing
and allow benchmarking against its competitors. At present the
Post Office holds on its balance sheet the government securities
and deposits with the National Loans Fund (NLF) which represent
accumulated reserves, which could be viewed as accumulated dividends,
which were not payable to the Consolidated Fund. This clause will
allow the Government to extract an agreed amount in respect of
these accumulated reserves by providing for the creation of specific
distributable reserves within the meaning of the Companies Act
from which the Post Office company (or its subsidiaries) can pay
over to the Government a dividend which in turn will be paid into
the Consolidated Fund.
88. No direction can be given by the Secretary
of State under clause 72 without the consent of the Treasury and
the Secretary of State must consult the Post Office company before
giving any direction.
DELEGATED POWERS IN CLAUSE 74 AND REASONS FOR THEM
89. Clause 74 gives the Secretary of State
further powers for the purposes of restructuring the balance sheet
of the Post Office company by injecting debt to create a commercial
level of gearing and removing from the balance sheet accumulated
reserves, which, as explained above represent accumulated dividends
to Government that could not be paid over because the relevant
legislation did not require the Post Office to do so. It enables
the Secretary of State to create debt owed by the Post Office
company, including debt in a form of debentures or bonds. These
powers are only to be exercised after consultation with the Post
Office company. They are not limited to the time when the company
is wholly owned by the Crown as the timing of restructuring in
relation to any commercial partnering of the Post Office cannot
be predicted and flexibility is required.
90. However, under clause 70(6), the Secretary
of State may by an order, which is subject to negative resolution
of either House of Parliament, repeal the section. It would be
the intention to do so once the purpose of the clause is spent,
i.e. the balance sheet of the Post Office company has been restructured.
It is considered that the negative resolution procedure is appropriate
for such a provision.
DELEGATED POWER UNDER CLAUSE 75 AND THE REASONS FOR
91. Clause 75 provides that the Post Office
continues in existence after the appointed day (the day when all
the rights, liabilities and property transfer to the Post Office
company) until it is dissolved in accordance with this clause.
The Secretary of State may not dissolve the Post Office until
he is satisfied that nothing further remains to be done by the
Post Office under paragraph 8 of Schedule 3 (which relates to
the vesting of any foreign property).
92. The Secretary of State may not dissolve the
Post Office unless he has consulted both the Post Office and the
Post Office company.
93. It is not considered necessary for any Parliamentary
scrutiny of this clause.
POWER OF DIRECTION UNDER CLAUSE 76
94. Clause 76 provides for the Secretary
of State to prepare accounts for each financial year, prepared
in the form and manner directed by the Treasury, showing:
- sums issued to him from the National Loans Fund
for lending to the Post Office company and its subsidiaries;
- repayments to him in respect of those loans and
payments of interest on them; and
- how he disposed of the sums issued to him for
lending and of the repayments of and interest on loans made by
him, the repayments and interest being payable into the National
95. Provision is made for the accounts to be
prepared as the Treasury directs in order to ensure that the department
with responsibility for the public finances can determine the
form and manner of the information which is prepared for audit
and eventual presentation to each House of Parliament.
POWERS OF DIRECTION UNDER CLAUSE 79
96. If the Treasury, or the Secretary of State
with the Treasury's consent, appoint a person to act as their
nominee for the purposes of clause 63 (Government holding in the
Post Office company and its subsidiaries), clause 64 (Government
investment in securities of the Post Office company) and clause
74(3) and (4) (Further provisions relating to the capital structure
of the Post Office company), then the nominee shall hold and deal
with the securities or debt securities on such terms and manner
as directed by the Treasury, or with the consent of the Treasury,
the Secretary of State.
97. The powers of direction enable the Treasury
and the Secretary of State to ensure that their nominees hold
and deal with any securities in accordance with their intentions.
PART V: OFFENCES IN RELATION TO POSTAL SERVICES
OUTLINE OF PROVISIONS IN PART V
98. This part creates offences of interfering
with the mail, prohibits the sending of certain articles by post
and provides protection for universal service providers, their
post boxes and post offices.
99. There are no delegated powers in this Part
of the Bill.
PART VI: UNIVERSAL POSTAL SERVICE: SUPPLEMENTARY
OUTLINE OF PROVISIONS IN PART VI
100. Part VI makes supplemental provisions about
the universal postal service. It provides for the limitation of
liability for universal service providers. It also provides for
the inviolability of the mail by making it immune from examination,
seizure or detention as if it were the property of the Crown.
This Part also sets out how mail should be considered for harbour
charges and by harbour authorities and states that universal service
providers are not "common carriers" insofar as they
are providing a universal postal service. It provides for exemptions
from postage for certain petitions and addresses sent to parliament.
DELEGATED POWER IN CLAUSE 93 AND REASONS FOR THEM
101. Clause 93 creates a power for the
Secretary of State to modify clauses 89 to 92 by order.
102. Clauses 89 to 92 concern the legal relationship
between a universal service provider and its customers. They enable
a universal service provider to make and operate schemes setting
out the terms and conditions for the provision of postal services
in place of contracts, limiting liability, in particular the liability
for consequential losses. They replace similar provisions in sections
28 to 30 of the Post Office Act 1969 that dealt only with the
legal relationship between the Post Office and its customers.
103. The available evidence supports the need
for the continuation of schemes of this sort in order to ensure
the continuation of an affordable, accessible universal postal
service. But that does not mean that it will always be the case,
or that the scope and nature of the provisions might not need
to be adapted to reflect changing circumstances.
104. The postal services market is at the beginning
of a period of rapid change. We cannot anticipate with any certainty
what changes, if any, might be desirable or necessary in the future.
But the need for and scope of the provisions relating to schemes
and limitation of liability needs to be kept under review so as
to ensure that they continue to be in the best interests of users
of postal services. In practice this will be monitored and reviewed,
as appropriate, by the Postal Services Commission.
105. The order-making power is necessary to ensure
that the conclusion of any such review could be implemented without
unnecessary delay. Without it, further primary legislation would
be required to effect any changes. Delay in such circumstances,
particularly if it were for a number of years for want of a legislative
slot, could be detrimental to the interests of users of postal
106. Before modifying the provisions the Secretary
of State must consult the Postal Services Commission, the Consumer
Council, and such other persons as the Secretary of State considers
appropriate. Also, because these provisions are potentially critical
to the nature of the universal postal service, an order under
this clause requires the approval by resolution of both Houses
of Parliament (see clause 114(9)).
PART VII: MISCELLANEOUS AND SUPPLEMENTARY
OUTLINE OF PROVISIONS IN PART VII
107. Part VII of the Bill concerns miscellaneous
and supplementary provisions including the reserve powers of the
Secretary of State to give directions in the national interest
and ensure compliance with the Postal Services Directive. It also
includes evidential provisions. It requires the owner of the Postcode
Address File to maintain it and make it available on reasonable
terms to those who wish to use it.
POWER OF DIRECTION IN CLAUSE 100 AND REASONS FOR
108. Whilst not strictly a delegated power, in
the sense of a power to make regulations, we believe it worth
highlighting the reserve power of the Secretary of State at clause
100 to direct the Commission or a licence holder as he considers
appropriate if he considers it expedient to do so either in the
interest of national security or in order to discharge an international
obligation; to meet the object of an international organisation
of which the Government is a member or agreement to which they
are party; or to enable the Government to become a member of such
an organisation or party to such an agreement.
109. The directions should generally be laid
before Parliament but there are exceptions to this on specified
grounds. It is an offence to contravene a direction or, in certain
circumstances, to disclose it.
110. These powers of direction are necessary
to ensure that national security and international obligations
can be maintained. They provide very limited powers of direction,
particularly when compared with the range of powers of direction
in the existing postal legislation (under sections 11 and 12 of
the Post Office Act 1969).
111. The need for a continuing power of direction
in relation to national security is necessary to ensure the continuation
of vital postal services or take other action in the interest
of national security. In relation to international relations the
intention is to ensure that the power exists to support, as necessary,
the Government's continuing role in relation to international
regulation and related matters, including treaty obligations.
DELEGATED POWER IN CLAUSE 101 AND REASONS FOR IT
112. Clause 101 provides an order-making
power for the Secretary of State to ensure compliance with the
EU Postal Services Directive.
113. An order under this clause may make such
provision as the Secretary of State considers appropriate to ensure
that an obligation is complied with (for example the universal
service obligation). In particular it may: confer or modify the
functions of the Commission or the Council; require a postal operator
to provide all or part of a universal postal service; specify
terms and conditions for such services; provide for payment from
public funds for any purpose of the order; and for the enforcement
of provisions in the order.
114. The purpose of this power is to ensure that
the Government's obligations under the EU Postal Services Directive
can always be met, in particular in the event that the reserved
area is removed and with it the ability to impose the universal
service obligation and related requirements through licence conditions.
It is a fall back power.
115. It is the primary duty of the Commission
to ensure that the universal service obligation is delivered (as
set out in clause 3 of the Bill). The intention is that they will
do so through the licensing regime, in particular by imposing
as a condition of a licence (on one or more operators) a requirement
to provide a universal service or part of such service. It is
also intended that the requirements on universal service providers,
such as quality of service standards, regulatory accounts, complaints
and compensation schemes will all be imposed and enforced through
the licensing regime. The Bill is built on this foundation.
116. It is envisaged that the licensing regime
will continue for the foreseeable future. However, the Bill also
provides (at clause 9) for the suspension of the licensed area.
This is necessary because the European Directive on Postal Services
requires that the reserved area can only be maintained to the
extent that it is necessary to ensure the provision of a universal
service. If in the view of the Postal Services Commission a licensed
area was no longer necessary to maintain a universal service at
a uniform tariff, then it would recommend that the reserved area
be discontinued. The power to suspend the reserved area completely
(under clause 9) would only be made on the recommendation of the
Commission and on the basis that the market would provide the
117. The order-making power in clause 101 will
only apply in exceptional circumstances. The gateway for the use
of the powers is narrow. They can only apply where the Secretary
of State is satisfied that a Community obligation under the Postal
Services Directive is not being met or will not be met (for whatever
reason) and where he has been unable to obtain any undertakings
from any person which are sufficient to satisfy him that the situation
will be remedied. There is no expectation that these powers will
ever be used. But they are necessary because we cannot rule out
the possibility that there might be circumstances where they would
need to be used to ensure that we continue to meet our EU obligations.
118. The Government recognises that the power
is in some respects a very wide one. But this flexibility is critical
to ensure that the power is sufficient to deal with whatever circumstances
the future throws up. We cannot know now what those circumstances
might be but it is our duty to make provision in the Bill (which
is intended to be capable of lasting for at least a generation)
to ensure that the universal postal service which is central to
the Bill, as well as other Community obligations, can be safeguarded.
119. There are important limits to the order-making
power. In deciding whether to make any such order the Secretary
of State must have regard to the likely impact of the order on
the business of the person on whom the requirement is to be imposed.
Before making such an order he must also consult with any such
person. In addition there is provision for the payment of sums
out of money provided by Parliament for any purpose of the order.
That could be used as necessary to reimburse a postal operator
required to provide designated postal services for the cost of
providing such services.
120. It is proposed that this order-making power
should be subject to the negative resolution procedure. The reason
for this is that by its nature the power here is intended to meet
and remedy exceptional circumstances where the market fails to
provide the necessary minimum service and for which it may be
necessary to move very quickly to ensure that services are resumed
as soon as possible.
DELEGATED POWERS UNDER CLAUSE 102
121. Clause 102 allows the Secretary of
State, by affirmative resolution, to establish a scheme or schemes
for the making of payments for the purpose of-
- assisting in the provision of public post offices
or public post offices of a particular description, or
- assisting in the provision of services to be
provided from public post offices or public post offices of a
122. Where a scheme is about financial assistance
for the provision of services, payments may only be made
where the person responsible for making payments is satisfied
that the provision of financial assistance for services from a
public post office would assist in the provision of public post
123. Subsection (3) provides that this scheme
shall be funded by the Secretary of State. Under subsection (6)
the exercise of this clause is subject to the consent of the Treasury.
124. By virtue of subsection (4), as part of
the scheme, the Secretary of State must specify-
- the descriptions of payments which may be made
under the scheme
- the descriptions of persons to whom such payments
may be made
- the person by whom such payments may be made
- the criteria to which that person is to have
regard in deciding whether to make such payments, and
- the amounts of such payments or the basis on
which such amounts are to be calculated.
125. Under subsection (5) the scheme may in particular
provide that payments may be made subject to conditions, that
functions under the scheme may be delegated and that where necessary
the functions of a body established by enactment may be modified
to take on these functions. The Secretary of State may also make
payments to a person who exercises functions under this scheme.
REASONS FOR DELEGATED POWERS IN CLAUSE 102
126. Considerable concern has been expressed
by Members of Parliament and the public at large about the maintenance
of an effective public post office network.
127. The Government recognises these concerns
and is encouraging the Post Office's efforts to develop new revenue
streams to ensure the future wellbeing of the network. However,
the Government recognises the important social and economic role
that post offices play, particularly in isolated rural and inner
128. For this reason this Bill contains a power
for the Secretary of State to make a scheme enabling him to assist
in the provision of public post offices or to assist in the provision
of services to be provided from public post offices. Government
at present is not convinced that financial assistance is necessary,
however it does not rule out the possibility in the future. A
reasonable degree of flexibility about the nature of the final
scheme is allowed in the Bill since the Government wishes to have
the power to deliver assistance in the most effective and targeted
129. It is felt that it is appropriate that such
schemes relating to financial assistance be the subject of Parliamentary
debate, hence the affirmative procedure for this power.
DELEGATED POWERS IN CLAUSES 103 AND THE REASONS FOR
130. Clause 103 applies customs legislation
to postal packets. It re-enacts and updates the provisions contained
in section 16 of the 1953 Post Office Act. It gives the
Treasury, on the recommendation of the Secretary of State or the
Commissioners of Customs and Excise, the power to make regulations
specifying how the legislation should apply. This power is almost
identical to the one that was included in the 1953 Post Office
Act. The power has been changed only so far as is necessary to
reflect changing market conditions by changing references to the
Post Office to a postal operator. It is intended to maintain the
powers that the Customs and Excise currently enjoy. The power
in section 16 of the 1953 Act is the one under which the Postal
Packets Regulations 1986 were made. The power allows HM Treasury
to make regulations:
- specifying which postal packets the clause applies
- making any exceptions or modifications in how
those acts apply;
- enabling a postal operator to perform the duties
of the importer, exporter or remover;
- giving effect to arrangements for foreign postal
- securing observance of the acts; and
- punishing contravention of the regulations.
131. The power will be subject to negative resolution
procedure in the House of Commons. It is considered that the procedure
of negative resolution of the House of Commons is adequate for
such a regulatory function.
132. Customs and Excise legislation already applies
to other goods being imported or exported but special provision
is needed in relation to postal packets because they are not classed
as goods and have special protection through the inviolability
of the mail provisions.
133. The new power like the existing one, will
be limited by the extent of the Customs legislation.
134. Clause 114 sets out supplemental
provisions relating to orders and regulations. It includes standard
provisions to make different provisions for different purposes
and to make incidental, supplementary, transitory, transitional
and saving provisions as appropriate (clause 114(2)). It also
specifies which procedures are to be applied to which order or
135. We would point out to the Committee that
clause 114(5) refers to paragraph 2 of Schedule 3. This previously
contained an order-making power relating to the transfer of pension
rights and liabilities. This was removed by a Government amendment
at Report in the House of Commons and replaced by substantive
provisions. This consequential amendment will be dealt with at
Report in the House of Lords.
DELEGATED POWERS IN CLAUSES 119 AND 120 AND REASONS
136. Clause 119 confers a power on the
Secretary of State to make further modifications by order of enactments,
instruments and other documents in consequence of the Bill. An
order tabled under this clause will be subject to the affirmative
procedure. Clause 120 confers a similar power, but in relation
to local enactments. An order under clause 120 will be subject
to the negative procedure as it is considered that modifications
to local enactment will not be controversial. There are more than
1,600 consequential amendments to consider and it is impractical
to include all these amendments on the face of the Bill. These
consequential amendments will, for example, amend references from
the "Post Office" to "Post Office company"
or "universal service provider" and references to the
existing legislation to "Post Office Act 2000". The
order-making power in these clauses is necessary to complete the
new framework for postal services provided by the Bill.
SCHEDULES TO THE BILL
OUTLINE OF PROVISIONS IN SCHEDULES
137. Schedule 1 sets out a series of detailed
provisions regarding the membership and constitution of the Commission,
staffing and supplementary powers.
138. Schedule 2 sets out a series of detailed
provisions regarding the membership and constitution of the Council.
139. Schedule 3 sets out a series of provisions
regarding the vesting of property, rights and liabilities of the
Post Office in the Post Office company.
140. Schedule 4 sets out the provisions for the
treatment of tax for the transfer from the Post Office to the
Post Office company.
141. Schedule 5 sets out the detailed provisions
on the compulsory acquisition of land by a universal service provider.
142. Schedule 6 contains further provisions relating
143. Schedule 7 sets out the basis upon which
information obtained under the Bill can be disclosed. Information
may only be disclosed if it falls within one of the criteria in
144. Schedule 8 amends a number of enactments
in consequence of the Bill.
145. Schedule 9, repeals and revokes a number
of enactments in consequence of the Bill or which are obsolete
DELEGATED POWERS IN SCHEDULE 7, PARAGRAPH 4 AND REASONS
146. Schedule 7 applies to information
obtained by virtue of the Bill and which relates to the affairs
of an individual or particular business. It prohibits the disclosure
of information obtained under the Bill relating to the affairs
of an individual or a particular business, for the lifetime of
the individual or so long as the business is carried on, unless
the disclosure is permitted by the Schedule.
147. Disclosure is permitted either where the
individual, or the person for the time being carrying on the business,
consents; or for the purposes as set out in paragraph 3. These
gateways for disclosure follow normal precedents for provisions
of this kind. They are, for example, similar to the restrictions
on disclosure of information in the Water Industry Act 1991.
148. Paragraph 4 provides a delegated power for
the Secretary of State to modify by order the disclosures permitted
under paragraph 3. This is a necessary technical order-making
power to ensure that the gateways are kept up to date with changes
in other legislation without the need for primary legislation,
which would be cumbersome for such administrative matters.
149. The order is subject to negative resolution
in either House of Parliament which is considered the appropriate
level of Parliamentary scrutiny.