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Committee (3rd Day)(Continued)

8.44 pm

Amendment 82

Moved by Lord Cotter

82: Clause 29, page 15, line 2, leave out “Saturday,”

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Lord Cotter: I rise with pleasure to move the amendment and to speak to Amendment 83. I do not think that I will have to give a long explanation. Exactly what we are talking about is clear from the wording of the amendments.

In the debates on Amendments 80 and 86 of the noble Lord, Lord Clarke, reference was made to provision for all categories of people and users. We on these Benches and others are very committed to the universal service obligation. It is in that spirit that we put forward this amendment. The Government are committed to a universal service obligation and that is welcome, but our concern, which is shared by others, is that on scrutiny of the Bill it appears that the six-day-a-week, one-price-goes-anywhere universal delivery service will be only for letters and not for parcels and packets. That is the sum total of the amendments. They are intended to probe the Government’s rationale for apparently exempting Saturday deliveries of postal packets from the universal postal service. That certainly does not fulfil the vision of the universal service that we have on these Benches. As I said, I will be brief and to the point. What we are looking for is clear: we are looking for the Government to accept that universal means universal and that it should apply to both letters and packages. I beg to move.

Lord Clarke of Hampstead: I support both these amendments for a very simple reason: a postal packet can be described as just a large envelope, and if people want to have their postal packets collected on a Saturday, that should be allowed.

One problem with this part of the Bill is that it gives overzealous, cost-cutting managers the chance to cut out essential services. Packets, as opposed to letters, which are referred to in Clause 29(3)(a), are all sorts of shapes and sizes. You may go into a sub-post office or a Crown office on a Saturday morning to send some documents or even a large birthday card, and such items may be seen as packets. However, if the Bill is allowed to stay as it is, the ability to send such things could be cut. There will be no obligation on the Post Office to deliver packets. I expect we will be told that the guarantee of only a five-day commitment has something to do with Europe, but I hope that we will stop this erosion of a public service.

I have mentioned several times how the then Secretary of State, Stephen Byers, told the world that we would have a postal service that would be fit for the new century. Some of us were a bit sceptical but we believed him at the time. However, over the years we have seen the loss of Sunday collections, the second delivery and late collections from key collection points, all in the name of economy. I hope that common sense will prevail and that we will allow people in this country to post packets on a Saturday. It is as simple as that, and I support the amendment moved by the noble Lord, Lord Cotter.

Lord Hunt of Wirral: As the noble Lord, Lord Clarke, pointed out, our Amendment 83A in this group probes a different aspect of the UPS order—the apparent requirement that a uniform tariff be made available for all types of mail. I have sympathy with the points made by the noble Lord, Lord Cotter, but

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my main attitude to the arguments that he put forward is that I am sure that Ofcom, when undertaking the market assessment, will consider whether such a requirement is needed by users. I am concerned that to add in all sorts of frills to the minimum criteria risks adding unnecessary expense to the provision of the UPS. We feel that that makes the imposition of a levy more likely. We are as committed as other noble Lords to the UPS and I refer noble Lords to the points that we have made in earlier speeches.

I understand that Royal Mail offers a bulk mail service to retail customers with zonal pricing. I hope that the Minister can reassure me that there is no intention to restrict the choice available to business and other operators. As long as the uniform tariff requirement is in place for the man in the street, we would not want to prevent any additional service that Royal Mail felt able to provide to high-volume clients, nor would we want to see bulk mail, where there are considerable opportunities for operators other than Royal Mail to offer competitive alternatives to businesses, brought into the scope of the UPS order unnecessarily. That is why I await with great interest the response of the Minister to this group of amendments.

The Secretary of State for Business, Enterprise and Regulatory Reform (Lord Mandelson): I am grateful for the opportunity to respond to the interesting comments that have been made in contributions to this debate and the opportunity to discuss Clause 29 in more detail.

Clause 29 is the keystone of this Bill. It reflects the Government’s first, top priority: to secure the provision of a strong universal postal service. It is to sustain this service that we are proposing action to turn round the Royal Mail’s finances and business. With consumers having ever greater access to e-mails, text messages and other electronic media, the letters business is in structural decline. That decline seems to be accelerating. In the UK, volumes fell by 2.3 per cent in 2006-07, by 3.2 per cent in 2007-08 and, according to Royal Mail’s results, by 4 per cent for the first half of 2008-09.Yet mail remains part of our social and economic fabric and way of life in this country. People value the ability to receive and send a letter at the same affordable price everywhere in the UK, six days a week.

We have heard little about customers in debates about the Bill so far, yet it is precisely customers we want to protect by securing the universal postal service. There will always be a need to post mail and packets. That is why, in the face of falling letter volumes, the Government are taking decisive action. Clause 29 enshrines in legislation the minimum requirements of a universal postal service, at the current standards that we enjoy in the UK now. We agree with the Hooper report that the option of degrading the universal service as a response to the worsening finances and trading conditions of the Royal Mail should be rejected. That is not the path along which we want to go.

Amendments 82 and 83 would add Saturday collection and delivery of non-letter postal packets such as parcels to the minimum level of the universal service. In our view, the amendments are not necessary or appropriate. That requirement is not currently part of the universal service. None the less, Royal Mail already collects and

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delivers parcels or postal packets six days a week, despite not being bound to do so by the universal service obligation. It does so now, and it does so because it is convenient for customers.

Furthermore, the parcels business is a competitive and vibrant market. As Adam Crozier told the BERR Select Committee in another place, Royal Mail expects 75 per cent of its profits to come from parcels in five years’ time. Customer demand and an effective market should therefore ensure that consumers retain the ability to send and receive parcels on a Saturday through either Royal Mail or another postal operator. In those circumstances, we believe that adding an additional regulatory burden to the Royal Mail at this stage is neither helpful nor necessary.

Finally, the Bill allows for flexibility in the regulatory structure. Should Ofcom in future decide that the market is not meeting the reasonable needs of customers, it may add services to the universal service under Clause 29. That could indeed include Saturday collection and delivery of parcels if necessary.

The Bill gives Ofcom the power it needs to protect users while allowing for less regulation and more flexibility for both Royal Mail and other operators where the market works well. I hope that, in view of that reassurance, the fact that Ofcom has within its power under the Bill to introduce such a regulatory requirement should it prove necessary in future and that the service is already currently provided, the noble Lord, Lord Cotter, will be content to withdraw his amendment.

The amendment in the name of the noble Lord, Lord Hunt, proposes to remove expressly bulk mail services from services that need to be provided at a uniform tariff. The requirement for a uniform tariff is provided by Clause 29(3)(e). I believe that the intention behind the amendment is to make clear that there does not have to be a “one price goes anywhere” service for bulk mail. I understand the background to that proposal. The Hooper report indeed suggests that there is a strong case for Ofcom to consider whether competition is sufficiently well developed to remove some bulk mail products from the universal service specification.

I assure the noble Lord that we do not intend to restrict the choice of consumers. On the contrary: we seek the opposite. The amendment he proposes is unnecessary. Clause 29(3)(e) does not require Ofcom to secure that bulk mail is provided at a uniform tariff in the whole of the UK. However, there is the option. In principle, we want to leave that question open for Ofcom to judge and decide because it will be best placed to reflect the changes in the postal market. We do not believe that it is appropriate to fix the details of the individual specific products to be provided to the specification of the universal postal service in the Bill. Frankly, it is for the market, for customers and for the regulator, responding to customer demand, to form such a judgment if necessary, in due course. I therefore invite the noble Lord, Lord Hunt, in the light of what I have said, not to press his amendment.

9 pm

Lord Cotter: I thank the Minister for responding as he did. As he says, Clause 29 is extremely important and a key part of the Bill. That is why we thought it

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appropriate to raise this issue. The fact is that Saturday is excluded, notwithstanding the fact, as the Minister says, that packages are currently delivered on Saturdays. None the less, we have had this debate. It has been put on to the record that this could be an area of concern, and the Minister has said that Ofcom needs to take this into account. In debates only a short while ago, we talked about the need for the universal service to meet the needs of all users, and to do so there could sometimes be an urgent need for packages to be delivered on a Saturday. However, in the light of what the Minister has said, and given that Ofcom will consider this issue very seriously and, we hope, address what we think is a concern, I beg leave to withdraw the amendment.

Amendment 82 withdrawn.

Amendments 83 and 83A not moved.

Amendment 84 had been withdrawn from the Marshalled List.

Amendment 84A

Moved by Lord Hunt of Wirral

84A: Clause 29, page 15, line 21, at end insert—

“( ) A universal postal service must not include services exempted under the Postal Services Directive.”

Lord Hunt of Wirral: I thought that the previous debate gave the Secretary of State an excellent opportunity to set out the background to the agreement which I think has been reached on all sides of the Committee about the vital importance of the universal service obligation. As we debated a little earlier, the review recommended a completely new regulatory regime, not just a new regulator. The independent review of the UK postal services sector by Richard Hooper, Dame Deirdre Hutton and Ian Smith last December has met with general approval. We certainly accept those recommendations in principle.

As was debated a little earlier, we are dealing not only with a new regulator, Ofcom, but with a whole new set of tools, including much wider-reaching regulatory powers. The Bill certainly gives those powers. Indeed, the new and improved drafting of the regulator provisions places significantly fewer limits on Ofcom’s powers than the limits which the previous Postal Services Act 2000 placed on Postcomm. There are some safeguards on when certain conditions can be imposed, although I confess that they are so buried in the schedules that it has taken a little while to dig them out. Unlike in the Postal Services Act 2000, no clear exemptions from regulation are laid out in this legislation.

The Government like to claim that the Bill is deregulatory. The move from a licensing regime to an authorising one might indeed be useful for achieving deregulation, and Ofcom certainly has a duty to be proportionate. However, we know from experience that regulatory creep has happened elsewhere with stronger safeguards than that. We are very glad to see that the Bill states unambiguously that Ofcom’s primary duty is to preserve the universal postal service, but the question of what is covered by that term is left entirely open beyond the minimum set out in Clause 29. Our

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Amendments 84A and 89E therefore seek to ensure that regulation in the UK does not gold-plate the European Union’s postal services directive. Of course, the amendments may not be perfect since services are not exactly exempted in this directive. They are protected from being reserved to the USP. But I seek to ensure that the services that were exempt under the Postal Services Act, such as document exchange, express services and so on, continue to be excluded from the UPS.

I understand that Ofcom will naturally have to comply with the directive, but it will have the power to go beyond the limits indicated by the directive under Clause 29 and, especially, Clause 36. It certainly has the power and, possibly, the duty to go beyond previous regulatory limits in its market assessment. Even being included in the review will be a burden for many operators and will add significantly to market uncertainty. I am looking therefore to the Minister to confirm that not only will Ofcom not extend the UPS into previously exempted services, but also will not assess those areas within the review.

I have to say that, from time to time, this Government seem to believe that every aspect of our lives should be regulated to a greater or lesser extent. But on these Benches we do not support the state’s intrusion into sectors where there is no important social benefit to regulation. Services such as document exchange and courier services were established as an unregulated alternative to the UPS and should remain that way.

Our second amendment highlights the same concern, this time in Ofcom’s assessment under Clause 36 of whether a service falls within the scope of the universal postal service. We have later groups of amendments looking at the objectivity of that assessment, but for now I want to restrict my concerns to the possibility that Ofcom will have the authority to decide that an exempted service is within the scope. For precisely the same reasons as in Clause 29, exempted services should remain exempted and should be clearly seen to be so. The loss of specific exemptions in primary legislation means that the sector has lost a considerable amount of legislative certainty. Businesses operating in a fluid and competitive market need that sort of certainty. In view of the words a few moments ago from the Secretary of State about the way in which this whole market is changing, and his implication that innovation in this sector should be encouraged and will undoubtedly increase, I hope he would accept that to try to extend the regulatory burden on exempted services is not the way to do this.

It might also be of assistance to the Committee if we could be brought up to date as to exactly where Directive 2008/6/EC of the European Parliament and of the Council of 20 February 2008 is at the present time because there has been some talk of further amendments to this directive. It would be helpful if the Minister could place on record exactly where we are as regards the directive. I beg to move.

The Parliamentary Under-Secretary of State for Communications, Technology and Broadcasting (Lord Carter of Barnes): As has already been discussed today, the Government’s first priority is to secure the provision of a strong universal postal service. Clause 29

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defines the minimum requirements of the UPS, valued by individuals and businesses alike. The amendments proposed by the noble Lord, Lord Hunt, are, if he will forgive me, potentially open to interpretation. These amendments may seek to exempt services listed in certain recitals of the original, unamended postal services directive from being regulated. The recitals mention certain services and say that these services are different from or do not form part of the universal service.

These are, as he has alluded to, express services, document exchange, new services and self-provision. The recitals do not say that the services are “exempted” from the whole of the application of the directive. Whether these recitals mean that these services are “exempted” from the provisions of the directive concerning the universal service could no doubt give rise to long legal debate. We believe that they do not mean that. Recitals, as he will know, are guides to interpretation and not operative laws in themselves.

The postal directive has evolved over time, and the recitals of 1997 are less targeted to the present times. The first postal services directive, the 1997 directive, was principally concerned with which services member states were allowed to reserve as an absolute monopoly to their main postal service provider—in the United Kingdom, the Royal Mail. That does not equate to saying that the UK could not require Royal Mail to provide an express service if, in the light of changing national circumstances, it were appropriate to do so. Indeed, the directive as it is now, 12 years later, requires member states to allow the universal service to evolve with society. It does not list or otherwise set out any “exemptions” except in Article 3 for packets that are very heavy or of unusual dimensions.

The services listed in the recitals can be unclear; new services, for instance, are difficult to define. We would suggest, therefore, that the proposed amendments would not provide clarity but potential uncertainty, and this could cause confusion if they were taken to apply to the minimum requirements of the universal service as defined in Article 3 of the postal services directive. The central reason for this is that these are the key areas where the United Kingdom has explicitly gone beyond the minimum requirements of the postal services directive for the universal service here in the United Kingdom. These amendments could have the unfortunate consequence of the universal service being degraded. That could potentially reduce the requirement of a service of letter delivery six days a week in the United Kingdom to five days, and remove the requirement to have a service at an affordable price that is uniform throughout the United Kingdom.

The noble Lord may be seeking to replicate some of the exemptions under Section 7 of the Postal Services Act, which result in some services not being regulated at present. Moreover, as he rightly suggests, the fact that these exemptions are not mirrored in the Bill simply reflects the change in the regulatory regime from licensing to authorisation. It will no longer be an offence to convey a letter without a licence or exemption because where everyone can provide a service and licences are not required, there is by definition no need for exemptions.

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A particular consequence of the change is to remove the exceptions applicable to some operators such as couriers and other parcels businesses. We believe it is important that Ofcom, with the necessary controls that the noble Lord has alluded to, has the discretion to develop the future regulatory regime, albeit subject to appropriate levels of public consultation. I hope he will be reassured that Ofcom will not want to regulate everything which could fall within its potential scope. As required by the terms of its founding statute, it will regulate only where it is necessary, proportionately and in the interests of consumers and competition, and specifically in this area, to secure the provision of the universal service.

Ofcom is an experienced regulator subject to the principles of ensuring proportionate, transparent and targeted regulation in all its decision-making. It is required to exercise those responsibilities with appropriate levels of consultation. The Bill is explicit in requiring Ofcom to consult on the original specification of the universal service, both in its detail and in products and services.

I move on to the point made by the noble Lord about potential gold-plating, which is one we would recognise. The amendments may seek to reduce the requirements of the UK universal service to those of the postal directives, which could also have the effect of diminishing the universal postal service we enjoy today. The postal services directive defines in article 3 the minimum requirements of the universal service. The Postal Services Act 2000 and now the Bill mostly reflect those requirements. There are three areas where the United Kingdom, again, has explicitly gone beyond the minimum requirements of the postal services directive for the provision of a universal service: first, the six-day-a-week delivery of letters; secondly, the one price goes anywhere service or a uniform price across the United Kingdom; and, thirdly, the imposition of a 20 kilogram weight limit on domestic package, which can be part of such a service.

9.15 pm

I shall now address the main consequence of this. The Bill aims to protect customers by securing the universal postal services we currently have. I am sure this aim is shared by the noble Lord, Lord Hunt. We believe that it is right that the United Kingdom continues to have a service of letter delivery six days a week and at a price that is uniform throughout the United Kingdom. Reducing letter delivery to five days a week, as is the minimum required by the postal services directive, and potentially removing the one price goes anywhere requirement, would rightly be seen as a reduction of the protection afforded to customers. Individuals and business customers would not, therefore, receive their letters on Saturdays and may have to pay different postal prices depending upon where they live or do business. Royal Mail could lose business to other communications channels as a result of the additional complexity and inconvenience to its customers. The wider postal market would also suffer a decrease in mail volumes as a result of that lack of clearly specified convenience.

Another consequence of the amendment would be to restrict the postal items and packets which could be

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included in the universal postal service to postal items up to two kilograms and postal packets up to 20 kilograms for all UK mail. These are the minimum requirements, again, of the postal services directive. The directive allows member states to increase the weight limit of the universal service for postal parcels delivered in their territory, again up to 20 kilograms. The United Kingdom has decided to take advantage of this flexibility, both in the original Postal Services Act and in this Bill. This means that the Bill sets the limits of letters and packages which can be considered as part of the universal service at 20 kilograms.

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