Select Committee on Constitution Minutes of Evidence

Memorandum by the Postal Services Commission (Postcomm)


  1.  The Postal Services Act 2000 (the Act) established the Postal Services Commission (Postcomm) as the independent regulator for postal services with powers to license postal operators. It is thus the most recently established sector regulator, having acquired its main functions two years ago. The Act lays down Postcomm's four key statutory duties. Postcomm's primary duty is to exercise its functions in the manner which it considers is best calculated to ensure the provision of a universal postal service. Therefore Postcomm's further key duties are to:

    —  Further the interests of users and disadvantaged customers, wherever appropriate by promoting competition between postal operators;

    —  Promote the efficiency and economy of postal operators; and

    —  Have regard to the need to ensure that licence holders are able to finance activities authorised or required by their licences.

  In addition, Postcomm has a role to provide advice to the Secretary of State for Trade and Industry about the network of public post offices.

  2.  The Act requires Postcomm to publish a Code of Practice setting out how it will exercise its functions. Postcomm's Code[1] explains Postcomm's licensing, information and advisory functions and identifies eight over-arching principles that it follows:

    —  to act in accordance with its statutory duties;

    —  to act in accordance with its duties as a public body;

    —  to act independently;

    —  to act in an open consultative manner, subject to confidentiality obligations;

    —  to seek to establish a firm factual basis for its decisions and advice;

    —  to apply sound governance and decision making structures;

    —  to act in accordance with good regulatory practice; and

    —  to co-ordinate its activities with other regulatory bodies.

  This Code is intended to provide users of postal services with an explanation of how they should expect to benefit from the regulation of the industry and to provide postal operators with a greater degree of regulatory certainty.

  3.  Postcomm summarises its purpose and its vision in the following terms:

    "Postcomm's purpose is to help the UK postal industry provide the best possible postal services for its customers.

  Postcomm's vision is . . .

    —  a range of reliable, innovative and efficient postal services, including a universal postal service;

    —  valued by customers; and

    —  delivered through a competitive postal market."

  4.  Postcomm is a non-ministerial government department and is thus subject to all of the ethical and other constraints that apply to Departments of State and the Civil Service. Postcomm's staff are civil servants.

  5.  From the outset Postcomm has had a corporate structure with policy being determined by a college of seven commissioners: a Chairman who works part-time, five non-executive members who are each contracted to work about forty days a year and a full time Chief Executive. The chairman and the five non-executive members, are appointed by the Secretary of State for Trade and Industry and come from a wide range of backgrounds bringing a variety of experience to the business of Postcomm. The Act requires that the roles of Postcomm's Chairman and Chief Executive are separate. The Chief Executive is appointed by the Commission after consulting the Secretary of State.

  6.  Postcomm's corporate structure[2] means that key decisions in pursuance of its statutory duties are taken by the full Commission which contributes both the accountability and informed decision-making. The structure is also intended to de-personalise the regulatory process and to increase the scope for continuity and consistency when new members are appointed.

  7.  The Commission's annual expenditure, including its annual pay settlement, are subject to the approval of HM Treasury. Postcomm recovers its costs through the licence fees it charges to postal operators (principally Royal Mail).


  8.  As is the case with other sector regulators, Postcomm is independent of Government and is required to carry out its functions in accordance with its statutory duties. Whilst the Secretary of State for Trade and Industry is responsible for the appointment of the Chairman and members of the Commission (except the Chief Executive), she does not have responsibility for the work of the Commission and has only limited powers to give directions to the Commission (for example, in the interests of national security and in order to ensure that the UK complies with European law). Postcomm can also be asked by the Secretary of State to provide advice and information both generally and in relation to the post office network.

  9.  Under the Act, the Secretary of State has given guidance to Postcomm about the Commission's contribution towards the attainment of the Government's social and environmental policies. Postcomm must have regard to this guidance in carrying out its functions. [3]

  10.  The postal services market is different from most other regulated sectors, in that the principal postal operator (Royal Mail) is a company which is owned by the Government. Accordingly, the Secretary of State is responsible for overseeing the regulatory framework, including the appointment of the members of Postcomm, and, as shareholder, also appoints or approves the members of the Board of the company that under the terms of its licence must provide the universal postal service. This combination of responsibilities means that it is especially important that the respective roles of the Secretary of State and Postcomm are clearly understood and respected, including Postcomm's independence and direct accountability to Parliament.


  11.  Postcomm must act in accordance with its statutory duties and is accountable to Parliament for its decisions and its activities. This accountability to Parliament is in practice achieved through the specific scrutiny of the Trade and Industry Select Committee and the general oversight of the Public Accounts Committee.

  12.  Over the last year, Postcomm appeared before both the Trade and Industry Select Committee (TISC) and the Public Accounts Committee (PAC):

March 2002
PAC hearing on NAO report "Opening the post";
April 2002TISC hearing on Postcomm's market opening proposals;
February 2003TISC hearing on Postcomm's proposals on the regulation of Royal Mail's prices and service quality

  Postcomm has also held a number of informal meetings with other Parliamentary bodies, including members of the devolved administrations.

  13.  The Commission is also held accountable to Parliament through its Expenditure Plans Report and Annual Report. The Chief Executive is Postcomm's Accounting Officer and as such is personally accountable to Parliament for the propriety and regularity of Postcomm's finances. Postcomm is subject to examination by the National Audit Office (NAO) whilst suspected injustices (and suspected failures to comply with the Code of Practice on Access to Official Information) can also be investigated by the Parliamentary Ombudsman.


  14.  Postcomm can also be called to account in other ways Postcomm gives effect to many of its decisions through the provisions of its licences. Once Postcomm has issued a licence, it can only modify the licence with the agreement of the licence holder. If the licence holder does not agree the proposed change, and Postcomm wishes to proceed with the modification, Postcomm must refer the matter to the Competition Commission. More generally, as a public body, Postcomm's decisions can be challenged by any interested party under the judicial review process.

  15.  The involvement of interested parties in influencing the terms of Postcomm's work is provided for under the Act which requires Postcomm annually to prepare and consult on a Forward Work Programme setting out how it proposes to carry out its work. Postcomm's final Forward Work Programme and Business Plan[4] summarises its aims, strategy, objectives, projects and workstreams and takes account of comments received. The outcome of the Forward Work Programme is described in an Annual Report which Postcomm is required to publish.


  16.  Commissioners have adopted a consultative and transparent approach to their procedures, activities and proposals. In the interest of openness Postcomm always publishes the reasons for its decisions and has developed a consultative culture which complements the collegiate nature of its decision making processes. Postcomm recognises the value of being open in its work. The disciplines that accompany openness, explaining decisions and publishing the evidence and analysis that underlies them, contribute to good and consistent decision taking. Consistent decision taking helps give regulatory certainty. Postcomm therefore aims to consult everyone likely to be affected by, or having a role in, significant decisions it takes on the development of its policy and in the application of policy.

  17.  In October 2000, Postcomm published its approach to conducting its public consultations[5]. Postcomm's procedures are based on a number of key principles:

    —  Building consultation into the planning process. This is done right from the start of a policy proposal so that sufficient time is allowed for responses from all those affected;

    —  Using the most appropriate approach to reach people. Written consultation is not always sufficient to canvas views. Postcomm has therefore also used less traditional methods such as workshops and road-shows around the country to invite views and inform its approach;

    —  Being clear and focussed. Postcomm seeks to ensure that all consultations are clear, concise and focussed with a summary of the key questions and option on which views are sought;

    —  Consulting in a user-friendly way. Postcomm is committed to ensuring that consultation is accessible and easy to respond to, for example by electronic means.

  18.  Postcomm believes that the end result is a more informed understanding of the issues and better decisions based on the views of all stakeholders. Since it was established, Postcomm has issued consultation documents on a range of different issues including: Royal Mail's initial licence, Postcomm's approach to competition, its standard licences, the Postcode Address File, Royal Mail's price control and quality of service standards and compensation arrangements. All of Postcomm's consultations are available on the website at together with its decisions.


  19.  The Act also established a consumer body, the Consumer Council for Postal Services (Postwatch), which is independent of government, postal operators and Postcomm. Postcomm works with Postwatch consulting them on a wide range of issues. Whilst Postcomm and Postwatch have different roles, they are both responsible for promoting and protecting customer interests and, as provided for in the Act, have agreed a memorandum of understanding[6] to help users understand how the two organisations work together.


  20.  Postcomm works with the other sector regulators to promote consistency in regulatory actions and to share best practice. A significant body of work has been developed by other sector regulators over time, and as a relatively new organisation Postcomm is keen to learn from this experience particularly in relation to issues such as consumer protection, communications, service delivery standards and price control.

  22.  Postcomm also works closely with the Office of Fair Trading (OFT) and has agreed and published a Memorandum of Understanding with the OFT[7] to clarify and ensure consistency in the roles of the two bodies in considering complaints of anti-competitive behaviour in the postal sector.

March 2003

1   The Code of Practice is available at Back

2   "The Constitution and Procedures of the Commission" which lays down its internal decision making process are available at Back

3   "Social and Environmental Guidance" issued to Postcomm by the Secretary of State. Back

4   Forward Work Programme and Business Plan, and Annual Report are available at Back

5   Postcomm's consultation procedure "How should Postcomm consult" is available at Back

6   Memorandum of understanding between Postcomm and Postwatch is available at Back

7   Memorandum of understanding between Postcomm and the OFT. Back

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