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In Hooper’s interim report, there were many useful observations on the impact of competition on the mail market. Unfortunately, much of that work was forgotten by the time the final report was published—presumably because the final report is more concerned with justifying the privatisation of Royal Mail—so it is necessary to return to the interim report to get a clearer picture on the issue of competition. The report makes it quite clear. It says:
“There have been no significant benefits for small businesses yet as a result of liberalisation”.
It continues by pointing out that,
- “small businesses have relatively little choice. The vast majority use Royal Mail’s services. Their dependence on Royal Mail seems to reflect an assumption that they are unable to attract alternative carriers, particularly if located in rural areas, based at home, or do not have high volumes to offer. Penetration by alternative carriers in the small business sector will increase over time, as owners have more information about their choices, are able to set out their needs, and new products are designed”.
Surveys so far carried out show high levels of satisfaction with the quality of service offered at today's prices. Some 83 per cent of small businesses believe that first class mail offers good value for money. The response is higher still for a medium-sized enterprise at 92 per cent. But they do not believe that the service fully meets their particular needs. In some cases, recent changes in collection and delivery have made it more difficult to carry out their business.
In spite of advances in technology and online banking, many small businesses are dependent on the postal network to organise financial transactions. More than 50 per cent of companies surveyed by the Federation
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The introduction of a new cost-reflective pricing structure based on weight and dimension known as pricing in proportion means that consumers are more likely to need advice about sending their letters. Small business representatives in particular have expressed concerns about the growing complexity of sending mail. These changes will have the greatest impact on those who work and live in more rural areas as well as domestic consumers unable to travel to the nearest post office, including the elderly and those with disabilities. We can see that there is no real gain for small and medium-sized enterprises.
Market innovation by competitors has been almost entirely confined to the skimming off of the conveyance of bulk mail to Royal Mail sorting and delivery offices. Neither Postcomm nor Hooper suggested how liberalisation could actually deliver benefits to small and medium enterprises. Postcomm was convinced that there would be some sort of trickle-down benefit, yet that has not occurred. Why should competitors develop a highly dispersed customer base? Only Royal Mail has the network and coverage to address the needs of small and medium-sized enterprises. Therefore, it is appropriate to impose on Royal Mail the duty to consider the specific needs of small and intermediate enterprises and I hope that noble Lords will see the logic and sense in this amendment. I beg to move.
Lord Hoyle: I support my noble friend. Once again, he has stated the facts. Certainly, Postcomm, once it was charged with the provision of a universal postal service, was always more concerned about competition rather than provision. The emphasis in Hooper, in putting forward Ofcom as the best regulator, was to say that universal service provision must take priority. We should back that up in a little more detail for those who are absolutely dependent on a universal postal service.
It goes without saying that for those who are disabled, chronically sick or not mobile, the universal postal service is part of the value and quality of life, but the universal service must serve their actual needs. Once more, I could use a similar argument in relation to those on pensions because pensioners become less mobile as they get older—apart from those who attend this House, of course, who are the notable exceptions. Nevertheless, it is generally true that people of pensionable age require the provision of a universal postal service. Those with low incomes are always most adversely affected by any change and that would particularly be so if we did not ensure that the universal postal service served their needs.
My noble friend talked about rural areas. While I cannot be said to live in a rural area because, after all, our village has about 6,000 people, we are part of a rural area as my noble friend knows. Again, it is
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That is the kind of thing that will occur. The market cannot provide for that: it is about a universal service provision that caters for those people who so require it. As I said, it alarmed me when I heard about that. This is the first sign of going down that road, knowing that privatisation may mean that the service side will come second to the commercial side and the making of profit. It will be about efficiency, whatever that means. Efficiency can certainly mean depriving people who need it of the universal postal service, particularly in rural areas.
My noble friend was right to say that small and medium-sized enterprises depend on it. Certainly, competition has benefited large businesses: there is no doubt about that. It has given them a choice, but small and medium-sized businesses are absolutely dependent at this stage of their development. Certainly, as Hooper admitted, there has been no trickle-down to them to enable them to improve their choice from the competition that has already taken place. We must protect them. They are suffering at the moment in the economic squeeze that is going on. They do not need in addition to that to be affected by changes to the postal service being provided to them. Many of them will not be able to continue in business.
Listing all those categories, my noble friend and I are right to say that this is not to be taken as implying that regard must not be had for other descriptions of users. We are trying to protect the rights of those individuals in our society who are absolutely dependent on the universal postal service—one that can be provided not on the basis of competition or profits but on the basis of need. They certainly need it. I hope that my noble friend will reply to me and assuage the fears that I have expressed in all of these categories but particularly in relation to rural areas. As I said, developments have occurred in Scotland before partial privatisation has even taken place. I support my noble friend in this.
Lord Whitty: I also support my noble friend in this amendment or something very like it. I declare an interest as the chair of Consumer Focus which inherited the duties of Postwatch. I also want to emphasise that I support the broad thrust of Part 3 of the Bill. I support putting the universal service obligation on the face of the Bill in unequivocal terms. There were fears that that would not be done. It ensures that the individual or business expects the same service on the same terms and at the same price whether they are in the furthest reaches of Fermanagh or based in inner London. I greatly welcome that.
I also welcome the transfer of responsibility—the abolition of Postcomm—for reasons that my noble friend hinted at and has previously expounded on.
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However, two things are missing. One is that unless we say otherwise, the interests of consumers can be interpreted as the interests of the mainstream or average consumer. We need to make it clear that the interests of vulnerable consumers—whether geographically vulnerable or vulnerable because of their personal circumstances—need to be taken especially into account in Ofcom’s deliberations. In general, I am happy that the details of the regulatory framework are left to Ofcom, but it needs to be clear in the Bill that that consideration of vulnerable consumers is an obligation on the regulator. I hope that the Government would indicate through my noble friend that they are prepared to move in that direction.
The other point is that, despite the stipulations on the universal service obligation in the Bill, it will always be possible for the Government to alter or interpret it. It is very important that it is clear in the Bill, or at least in a ministerial commitment, that any change in the universal service order contemplated would be subject to consultation with consumer organisations including Consumer Focus—I repeat my interest there—and with representatives of organisations that purport to talk for small businesses, to which my three noble colleagues have already referred.
We need the double guarantee that the vulnerable consumer will be given special attention by the new regulator and that any change in the USO will be spelt out and subject to clear consultation. Both of those things need to be somewhere in the Bill.
Lord Hunt of Wirral: In intervening for the first time today, I remind noble Lords of my interests as set out in the Register of Members’ Interests, including my having been a partner for more than 40 years in the national commercial law firm Beachcroft LLP.
I am very sympathetic to the amendment moved by the noble Lord, Lord Clarke. When looking at designating the UPS, Ofcom should consider not only the average user but those groups for whom an effective universal postal service is of the greatest importance. I was very interested to hear what the noble Lord, Lord Hoyle, and, in particular, the noble Lord, Lord Whitty, said. I had been reading Consumer Focus’s March 2007 publication, Rating Regulators, about Postcomm. I quote from page 10, where Consumer Focus argued against designating in the way in which the noble Lord proposes in the amendment. It said that this,
- “labels everyone falling into these groups as vulnerable, which ignores the diversity of capability within these groups and feels patronising to the individuals targeted”.
I was not quite sure from what the noble Lord, Lord Whitty, said, whether Consumer Focus has changed its mind about that or whether that comment is now
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- “may lack the flexibility to allow regulators to respond to changing ideas about the nature of consumer disadvantage”.
In expressing my sympathy with the amendment, I say to the noble Lord that I hope that the Minister will be able to reassure the Committee that the list of minimum criteria, such as that there be an affordable uniform tariff, will be assessed against the sort of groups that the noble Lord’s amendment highlights. Surely that is the main purpose of today’s debate.
Lord Whitty: As the noble Lord has asked the question, perhaps I can respond briefly. My point is that there needs to be some reference to vulnerable consumers or those who are likely to be more disadvantaged. The previous documentation objected to a list that implied that everyone within the list was vulnerable and that people who were not on the list were not vulnerable. The final paragraph of my noble friend’s amendment covers the second point. There may be other ways to cover the first point, but the principle is that particular attention must be paid to the more vulnerable and disadvantaged consumer, not simply the average consumer.
Lord Hunt of Wirral: I am grateful to the noble Lord for that explanation. It highlights the fact that we are now dealing with some important issues that are causing considerable concern to a wide range of people in this House, another place and outside. I hope that the Minister will be able to reassure us. It also gives me the opportunity to mention that the Business and Enterprise Committee in the other place has produced a report since our previous Committee sitting—it was published on 1 April—which raises a whole series of points that must give us all cause for reflection and, in various cases, concern. For example, the Select Committee in the other place pointed out in paragraph 88 of its report:
“The Communications Act 2003 requires Ofcom to have a Consumer Panel, advisory committees for different parts of the United Kingdom and on elderly and disabled persons. We are concerned about the extent to which Ofcom will be required to take into account the interests of vulnerable or marginal members of society in provision of postal services. Under the Bill their interests would have to be taken into account as part of Ofcom’s duty to review whether the universal service provider is meeting the reasonable needs of users, but members of particular groups may feel better protected if the requirement to address their needs is listed expressly on the face of the Bill, or if the Government can give an assurance that the advisory committees of the Communications Act 2003 will be expected to advise on postal services in addition to their existing tasks”.
There we have the problem; it is causing concern elsewhere. I wonder whether in responding to Amendment 80 the Minister might tell us what the Government intend to do about that detailed report, in which many points are raised. We could, during all these debates and when we return on Report, ensure that all the concerns are raised, but it may be easier and quicker if the Government publish their response to the Select Committee report within the normal timescale, which I understand is within two months. If the Government could by the end of this month or during next month respond in detail with their answers
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The Parliamentary Under-Secretary of State for Communications, Technology and Broadcasting (Lord Carter of Barnes): I thank my noble friends for tabling the amendment. Before we delve into the detailed amendments, of which there are many to this section on regulation, I thought that, as this is the opening debate on this section, it might be worth making a couple of comments.
The first observation to be made on the Government’s behalf is that the purpose of the change is to achieve a clear rebalancing and reprioritisation of the regulatory regime for postal services. It is not to remove any element of competition from the postal services market. Indeed, Royal Mail, in both its written and its verbal response to the Hooper review, made it very clear that competition was a significant force for good. However, there was a clear question about balancing priorities where the search for competition sits alongside the universal service obligation and the nature of the regulatory regime.
I hope noble Lords will forgive me if I do not join the long queue of people rather gleefully burying Postcomm, as I have sat alongside it as a regulator—my noble friend Lord Whitty referred to this—and have been regulated by it, albeit in a non-executive capacity, when I sat on the board of Royal Mail. Postcomm in many ways did an admirable job, but it was working within a specific regime which we propose to change. Everyone, including Postcomm, is aware of that and welcomes it. It is time for a change. That change comes in many forms, not least in the overall regulatory regime change from a licensing regime to an authorising regime, which brings with it flexibility for the regulator which Postcomm did not have.
My noble friend Lord Clarke raises a number of issues, which I will come to in a second. He asked about small and medium-sized enterprises and the need to ensure that the regulatory regime takes their needs into account. He can rest assured that that is the case. Indeed, Section 405 of the Communications Act, which controls Ofcom’s overall responsibilities, specifically requires Ofcom to take into account the needs of small and medium-sized enterprises and the business consumer in the exercise of its responsibilities. The same is true of the at times vulnerable groups to which noble Lords have referred. I will come back to that.
My noble friend Lord Hoyle asked about the use of Royal Mail vans in remote areas. He might be reassured, and possibly amused, to know that I spoke only this morning to the current chief executive of Ofcom, who spent his Easter vacation on the remote Western Isles of Scotland, where he discovered, as a result of hitching a lift, the value of the Royal Mail vans in location.
Lord Clarke of Hampstead: Will my noble friend get this right? They are post buses, not Post Office vans, and they are constructed for the conveyance of passengers.
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Lord Carter of Barnes: I stand duly corrected. As I was going to say, the use of the post bus service is an operational question for Royal Mail’s management, but I am sure that this evening’s debate will raise those issues.
On the security of the universal postal service, Clause 28 gives the Bill one of its essential features: Ofcom’s primary duty in this rebalancing is to secure the provision of the universal postal service. Amendment 80, tabled by my noble friend Lord Clarke, seeks to ensure that Ofcom takes into account the needs of the disabled, pensioners, those on low incomes and those living in rural areas when it carries out its primary duty to secure the universal postal service. This is a laudable aim from my noble friend and one which the Government share wholeheartedly. The wording proposed by Amendment 80 replicates Section 5(2) of the Postal Services Act 2000, which requires Ofcom to have regard to the needs of special interest groups when carrying out its duties. The Bill does not include the same wording simply because Ofcom is already required under the Communications Act 2003 to take into account the needs of the disabled, pensioners, those on low incomes and those living in rural areas. This requirement applies to all Ofcom’s functions, including its new responsibilities for the postal services.
Section 3(4) of the Communications Act 2003 requires Ofcom, in performing its general duties, to have regard to the needs of persons with disabilities, the elderly and those on low incomes and to the different interests of persons in the different parts of the United Kingdom and persons living in rural and urban areas. In fact, the Communications Act 2003 goes further than Amendment 80, as it requires Ofcom to take into account and explain a wider range of interests, such as the vulnerability of children, regional differences across the UK and ethnic minorities.
I therefore hope that I can reassure your Lordships that Ofcom will have to have regard to the needs of the disabled, pensioners, those on low incomes and those living in rural areas in carrying out its postal duties. There is no extra protection to be had by accepting this amendment, as it is already there in statute and, perhaps more reassuringly, already operates in practice.
Amendment 86 from my noble friend deals more broadly with the needs of users in accessing the universal postal service. It relates to Clause 32 on the designated USP conditions—conditions that Ofcom can impose on the designated universal service provider to secure the provision of the universal service. Those can require the universal service provider to do a variety of things, including,
- “to provide, or make arrangements for the provision of, access points for the purposes of the universal postal service”.
My noble friend wishes to add to this his amendment to take into account the needs of users. I reassure noble Lords that the needs of users are at the heart of what we propose with this Bill and why we propose it. We have repeatedly argued that the universal postal service is part of the social and economic glue that binds us together as a society. It is therefore paramount
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Clause 28(3) clearly provides Ofcom with a duty to,
- “secure the provision of sufficient access points to meet the reasonable needs of users of the universal postal service”—
all users whom Ofcom will be required to take into account. Clause 29 then requires at least one collection from access points for letters and packets within the universal postal service order. The Bill therefore ensures reasonable access to the universal postal service. I would add that in this respect, on a practical level, the Bill mirrors the current system whereby, through its licence granted by Postcomm, Royal Mail is required to provide access points that meet the reasonable needs of users.
On the broader points made by the noble Lord, Lord Hunt, and my noble friend Lord Whitty about the role of advice from the consumer panel and my noble friend’s own organisation, Consumer Focus, noble Lords can rest assured that Ofcom will be well advised by its own consumer panel—a critical friend that is within the regulator but is without it in terms of its ability to offer advice across the new extended remit—and by Consumer Focus’s broader responsibility to represent the consumer interest in these discussions. I assure my noble friend Lord Whitty that Ofcom will consult fully and in the normal manner on any changes to the universal postal service order following the general duties that apply in best regulatory practice.
I hope that these comments have reassured noble Lords that the needs of users generally and the particular groups mentioned in the amendment are catered for in the Bill and that my noble friend Lord Clarke will see fit to withdraw his amendment.
Lord Hunt of Wirral: I am sure that the Minister is about to deal with my question, which could help to shorten some of the debates not only on this issue but on others: do the Government intend to respond to the very detailed report by the Business and Enterprise Select Committee? The report raises a whole series of questions not only in this area, which the Minister has dealt with in part, but elsewhere. It would be of great assistance if he could reassure the Committee that the Government intend to respond in detail, certainly in the next month. Any advance information would be very useful to your Lordships in dealing with a whole series of issues that we have still to debate.
Lord Carter of Barnes: My apologies: as the noble Lord has said, it is an important and excellent report. I am afraid that my official briefing says that we will of course look and publish our response as soon as possible. I am not sure I find that terribly clarifying and I suspect that he does not. I will do my best to get a more specific response to him forthwith.
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