Tenth Report
Instruments reported
The Committee has considered the following instrument
and has determined that the special attention of the House should
be drawn to it on the ground specified.
Draft Post Office Network Subsidy Scheme Order
2007
Summary: This Order carries forward the annual
subsidy to the Post Office at a level matching that of recent
years. In parallel, the Government are conducting a consultation
process on the future of the Post Office network, which will be
concluded in early March.
This Order is drawn to the special attention of
the House on the ground that it gives rise to issues of public
policy likely to be of interest to the House.
1. The Department for Trade and Industry (DTI)
have laid this Order under sections 103 and 122(2)(a) of the Postal
Services Act 2000 ("the 2000 Act"). An Explanatory Memorandum
(EM) has also been provided.
2. The EM states that the Order enables the payment
of subsidy to Post Office Limited (POL) towards the costs of providing
a national network of public post offices ("the PO Network
Subsidy"); and lays down criteria to which the Secretary
of State will have regard in making subsidy payments. There is
a maximum annual limit of £160 million for the PO Network
Subsidy.
3. The EM also explains that the Government have
in the past deployed the Social Network Payment to fund the costs
of maintaining non-commercial branches that would close unless
their full costs were reimbursed to POL. In recent years, the
required payments have been at an annual level of approximately
£150 million. The EM states that, while the Social Network
Payment has hitherto been provided from reserves on Royal Mail's
balance sheet, those reserves are now proposed to be put to other
uses. The Committee understands that such uses include transfer
into a pension escrow account that may be drawn on by the pension
trustees in the event of company failure.[1]
Since alternative sources of funding such as equity or debt are
unsuitable for the provision of a subsidy, it was appropriate
to establish a Scheme under section 103 of the 2000 Act. That
is achieved by this Order.
4. The EM refers to the announcement which DTI
made on 14 December 2006 about the future of the Post Office network,
at the launch of public consultation on their proposals. The principal
proposals are intended to maintain reasonable accessibility to
a national network of post offices, and to help the company make
the necessary changes to transform the network and put it on a
stable footing for the future. It also explains that the consultation
process covers the access criteria and the plans for the long-term
direction of the PO network; and that it is appropriate that the
Order is laid before the consultation process is completed (on
8 March 2007), because POL requires funding to be provided under
the Scheme by the end of March 2007, and because the Scheme has
been drafted in such a way as to ensure that it will operate appropriately
whatever the final outcome of the consultation.
5. The statement on 14 December 2006 by the Secretary
of State for Trade and Industry was repeated by Lord Truscott.[2]
The House showed a keen interest in the Government's proposals
for the future of the PO Network, and particularly in the acknowledgement
that about 2,500 post office branches (out of the current total
of some 14,300) might close.
6. The Statement made it clear that the annual
subsidy to POL would remain in place, and that the cost of the
subsidy was included in the sum of £1.7 billion which the
Government would provide until 2011 to support POL. Beyond 2011,
DTI have acknowledged that there is likely to be an ongoing need
to subsidise the non-commercial network that the Government require
to be maintained.
7. We believe that the House will be interested
to see that the Government have brought forward this Order to
meet their commitment to carry forward the annual subsidy to POL,
at a level matching that of the Social Network Payment in recent
years. The Order has been laid in parallel with the conduct of
a consultation process on the future of the Post Office network,
which will be concluded in early March.
1 DTI press release of 18 May 2006 on the new Royal
Mail financing framework. Back
2
HL Deb, 14 December 2006, col 1655 et seq. Back
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