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There was ill conceived regulation at that time. I sat over there and listened to the Statement from a chap from down the other end, Stephen Byers, telling us that this liberalisation and new deal would bring in an era of a tremendous new Post Office for the 21st century. I stood up and said that it was a load of nonsense, because if you do not have something to stop people creaming off the work of Royal Mail, as has happened, you will find yourself in trouble. Yet nobody listened, least of all from my own Government's side. That

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followed through to the ill fated 2009 Bill, which has been mentioned, and the product of that ill conceived regulation has been that people in the industry have paid a heavy price. Billions of pounds have been lost because of how Postcomm works.

I said that I would be brief and I will. We will be entering a new era in the long and well respected history of the Post Office. I am not used to begging for things but I beg the Government on this point: not to make another mistake by allowing the anomalous situation whereby an outside body is able to hamstring the business. I have had to come to terms with the idea that the Royal Mail will never be the same once it is privatised. As I said last time we were in Committee, it hurts but it is happening. Nevertheless a new Royal Mail, invigorated by new and competent management, gives us a new chance. That is not to say that Post Office managements were not competent in the past but they were never allowed to do the job because of political interference over decades. The 1960s, 1970s and 1980s were dominated by political interference. Ever since the Post Office became a corporation in 1969, politicians had their fingers on the service being provided.

With that new and competent management, together with the historic agreements that have been mentioned about going forward with modernisation, the staff and people who run Royal Mail deserve to be given fair and just regulation, to quote the noble Lord, Lord Jenkin. It has to be fair and just. I hope that the Government will recognise that the regulator has to be fair. I believe that requiring that the service be "profitable", instead of "financial sustainable", will help. I look forward to the Minister telling me that the Government agree that the Royal Mail will be entitled to be profitable.

Baroness Kramer: My Lords, I had not expected to speak on this amendment at all. Having looked at the language, I thought that "financially sustainable" looked pretty adequate. Why shift it to "profitable" and set the bar higher? However, listening to the noble Lord, Lord Clarke, I found myself convinced on this so I felt I should get to my feet. It would be a positive for this Bill if we came out knowing that we would not have to revisit the future of Royal Mail, the universal service provider, and that it had been moved on to a basis where it would thrive in future and deliver the services that we all want and that our community and economy need, so that we do not have to keep coming back to patch it. Constant salami slicing is quite often the tradition as we make change. As I look at that, the requirement for profitability has some real appeal because financial sustainability can be achieved in many ways; you could talk about additional subsidy, or whatever else. It seems to me that there is a far more secure future. The noble Lord, Lord Clarke, has convinced me and I hope that he will have some success in convincing the Government.

2.15 pm

Lord Christopher: My Lords, it would be extremely helpful if the noble Baroness could explain at some point the precise purpose of this clause because it can be read in more than one way. If we are talking about

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Royal Mail or the company that will own it alone, that is one thing. If we are talking additionally about those providing only part of the service, that is another. The logic of the situation is that when Royal Mail is 99.9 per cent efficient, if it is using much the same machinery as those currently doing some of the sorting do-I think 10 or 12 have been mentioned-then it seems it would not be able to make a profit. What is more, the service would not be economical. Economies of scale suggest that you sort this mail in one place, or at least in one system, so I would appreciate some clarification. Where I fully agree with the two speakers on this, the mover and the speaker from the Liberal Benches, is that whatever happens we really do not want to revisit this issue. If I am right, and that competition to some degree in universal providers is a myth, we must be sure that we do not have to subsidise a Post Office and that proper charges can be made.

Lord Young of Norwood Green: My Lords, I can understand why my noble friend tabled his amendment, given his long association which started at the GPO-an association which I shared, although not on the postal but on the telecoms side, so we both have a long-standing and abiding interest. We want Royal Mail to have the ability to be profitable as the universal service provider meeting its universal service obligation. That has been the Government's aim in removing the burden of the pension and in making it clear in today's comments that they are in favour of competition, but not to the point that it undermines the Royal Mail's ability to function. If that "profitable" was to take into account the full costs of providing the universal service obligation, we could see the benefit of that. There are some concerns about what implications there might be when that test is applied, such as on stamp tariffs et cetera, but I will certainly be interested to hear the Minister's response to this amendment.

Lord De Mauley: My Lords, Amendment 24GD, moved by the noble Lord, Lord Clarke of Hampstead, seeks to delete "financially sustainable" from Clause 28(3), and replace those words with "profitable". If I may say so, he makes an important point, as do my noble friend Lady Kramer and the noble Lords, Lord Christopher and Lord Young. There was a long discussion in Committee in the other place over whether financially sustainable meant "profitable". The Minister for Postal Affairs put it on the parliamentary record, and I would like to do the same today, that this Government absolutely seek for Royal Mail to be a profitable company. Part of the problem and the threat to the universal postal service is that, under the way in which the previous Government managed the postal services sector, Royal Mail has not been making profits and has been a drain on the taxpayer, so at the heart of this concept is the belief that to be sustainable the universal service must make a return for its provider. The only alternative, after all, is perpetual taxpayer subsidy, which is not a realistic, acceptable solution.

Importantly, in addition, "financially sustainable" is a broader concept than simply "profitable". A company can be profitable in the short term but not necessarily financially sustainable; equally, it can make losses in the short term but have a sustainable future. As I have

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said, it will be for Ofcom to determine what needs to be taken into consideration when having regard to financial sustainability: the ability to earn a rate of return on investment; profitability; the setting of prices; long-term market volumes, and so on.

As I said in response to the previous group of amendments, the arguments that have already been made on Clause 28 and Ofcom's duties, both in your Lordships' House and the other place, have persuaded me to revisit Ofcom's regulatory duties. The protection of the universal service is of paramount importance and we understand that we must get this absolutely right. That is the very reason why we are taking action and why we brought the Bill forward.

The noble Lord, Lord Clarke, in particular has unrivalled experience of the postal sector and I am always grateful for his contributions to our debates. He made some excellent and important points and I will reflect on them further when considering this issue. Given my commitment to look again at the issue and to bring forward proposals on Report, I hope that the noble Lord will feel able to withdraw Amendment 24GD.

Lord Clarke of Hampstead: My Lords, I thank the noble Baroness, Lady Kramer, the noble Lord, Lord Christopher, and my noble friend Lord Young for their contributions. I did not do this as a perverse way of having a voice today. I simply believe that we have a chance to look at history and not make the same mistake again. That is why I am particularly pleased to hear what the Minister has just said about revisiting the whole question of the regulatory responsibilities of Ofcom. In those circumstances, I beg leave to withdraw the amendment.

Amendment 24GD withdrawn.

Amendment 24H not moved.

Clause 28 agreed.

Clause 29 : The universal postal service

Amendment 24HZA

Moved by Viscount Eccles

24HZA: Clause 29, page 15, line 30, leave out ", as a minimum,"

Viscount Eccles: My Lords, I shall be brief. I await with interest the remarks of other Members of the House on this group of amendments. My amendment seeks to leave out the words "as a minimum" as they refer to the universal postal service. I put down the amendment to see whether or not the Government had any intention of adding to the universal service because, if I read "as a minimum" correctly, that is an opportunity left open in future after the system of reviewing, which is the subject of other amendments in this group that will be discussed now. With that initial probe, I beg to move.

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Viscount Tenby: My Lords, I shall speak to Amendments 24J and 24K. I hope that I will not be accused of being self-indulgent if I suggest that it may be for the convenience of the Committee if I tack on Amendment 24N, to which I can attempt to move seamlessly after my remarks on Amendment 24K. All these amendments are in the name of my noble friend Lord Low, who very much regrets that he is unable to be here owing to urgent business commitments abroad.

Amendment 24J is a straightforward amendment that is designed to place in the Bill the assurances that the Minister was kind enough to give at Second Reading. At that stage she made it clear that there is no scope for the postal services regulator, Ofcom, to downgrade the minimum requirements that make up the universal postal service. At Second Reading the noble Lord, Lord Tunnicliffe, and my noble friend Lord Low expressed concern that the Ofcom market review, which has to take place within 18 months of the Bill receiving Royal Assent, might be the vehicle for downgrading the universal service obligation. In response the Minister said:

"I am happy to reassure them that this is completely untrue. There is no small print allowing this ... Ofcom must have conducted a market review to ensure that the services offered as part of the universal service reflect user needs. These are set out in statute and the review cannot recommend a downgrade of the minimum requirements after 18 months".-[Official Report, 16/2/11; col. 777.]

That is a welcome reassurance. It is both clear and unambiguous. I therefore hope that the Minister will have no objection to including in the Bill in an equally clear and unambiguous fashion the restriction that it reinforces.

By placing in the Bill that restriction on changes to the universal postal service-a restriction that has support on all sides of the House-we make it clear to Ofcom and, more importantly, to any future Government who may have other ideas, that although Royal Mail is being privatised, the service that the public rightly expect to receive will be maintained. I very much hope that on that basis the Minister will welcome the amendment.

Amendment 24K seeks to strengthen the Bill by giving greater protection to the universal service by ensuring that the current minimum requirements are maintained for a period of five years. I welcome the establishment of Ofcom as the new regulator for postal services. I need not repeat the argument for that. Suffice it to say that it makes sense with the continued development of electronic communications and their integration with traditional postal services. Ofcom will have a key role in determining whether a privatised Royal Mail succeeds or fails. It will not just regulate competition; it will regulate service levels.

Underpinning that is the universal postal service, which is made up of a number of minimum requirements. The obligation itself is non-negotiable: if you have a licence to deliver letters and packets within the regulated area, you must meet the obligations placed on you by these requirements. The value of the universal postal service to the public would surely be diminished if the minimum requirements that underpin it were eroded. Recent research conducted by Consumer Focus and Postcomm highlighted the fact that safeguarding the universal service remains key for customers.

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I do not doubt the Minister's intentions on this, but we should be clear: once the Bill receives Royal Assent, she then hands over responsibility for the protection of the universal postal service to Ofcom, along with an obligation to review the current minimum requirements to see whether they are meeting what are called the "reasonable needs" of consumers. This, along with some 14 other provisions in the Bill, allows the regulator or the Minister to vary the terms of the universal service obligation in a variety of circumstances.

That is worrying. The "reasonable needs" of one person may not be the same as those of another. One person may feel that their reasonable need is to have a delivery every day, while another may be happy to make do with two or three a week. Some people may feel that it is a reasonable need to be able to pay less to post a letter to the next town than to a town 300 miles away. Is that right or wrong? I suggest that it is a matter of opinion.

That is why I believe this amendment will strengthen the Bill. It provides a period of certainty and stability for the public and for any prospective purchaser of Royal Mail. Rather than leave Ofcom with the vague remit to review the universal service "from time to time" it ensures that for a period of five years the current minimum requirements making up the universal service obligation are safe. It protects uniform pricing as well as daily letter and packet collection and delivery to all homes. It protects freepost services for blind people that would otherwise be disproportionately expensive because of the additional weight of braille materials.

The universal service is essential to small businesses. The Federation of Small Businesses notes that small businesses are really struggling in the current economic climate and is concerned that changes to Royal Mail and the Post Office will leave them without access to an accessible and affordable UK-wide postal service. The concerns raised by the federation are stark. It states:

"Given that more than 99 per cent of all businesses in the UK employ less than 50 people, and are dependent on Royal Mail and the Post Office, the importance of the universal service obligation is paramount to their survival and future growth".

Ensuring that the current minimum requirements are maintained for five years would give pause to those who might want to use the sale of Royal Mail as the opportunity to reduce the level of service to which we are accustomed. To take just one all important example, it would protect the principle of a uniform price for a stamp wherever you happen to live. The public want to see their current service maintained. The Bill as drafted leaves too many loopholes for those who might want to erode the current minimum requirements that make up the universal postal service. I urge your Lordships to support this amendment to protect our cherished universal postal service in order to ensure that small businesses, pensioners, people with disabilities and everyone else in our society who has come to rely on the universal service are protected.

2.30 pm

If the Committee can stand it, I will discuss Amendment 24N, which I daringly suggested might be tacked on to the other two. This amendment seeks to

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ensure that no significant changes are made to the postal service without adequate consultation with those who rely upon it. Those who are most dependent on Royal Mail are most at risk as a result of changes to the service it provides. It is surely right that those who are most vulnerable to change should be able to exert some influence over the change that takes place. Whether in public or private hands, the postal service should be responsive and accountable to those it serves.

The lack of protection for service users makes it essential that the Bill does not pass into law without giving users a stronger voice in what happens. On the one hand the Bill legislates to protect the current universal service but on the other it mandates the proposed postal services regulator, Ofcom, to review that service within 18 months of the Bill receiving Royal Assent. It would be completely unreasonable for Ofcom to railroad through changes to the universal postal service without full and proper consultation. This amendment seeks to ensure that this cannot happen.

There was some debate on the first day of Committee about the relative cost of providing postal services in rural and urban areas. According to Royal Mail, delivery costs vary widely depending on the nature of the address. They are relatively low in high-density areas such as town centres where there are large volumes of mail going to a large number of addresses in a relatively small area. Conversely, they are much higher in areas where there are few addresses and small amounts of mail to deliver. The single tariff benefits those who live in rural areas and it is those customers whose service would be most at risk if a wholly commercialised pricing structure was applied to postal services. I am sure that noble Lords from Northern Ireland, Scotland and Wales will share my concern that any review of the universal service obligation by Ofcom will look very closely at how expensive it is to provide services in rural areas. That is what regulators do. It is what Ofcom has done so successfully in the telecommunications sector. However, the mail is not that kind of market. There is no suggestion, even if the Bill allows it, that there will be more than one licensed postal services provider with the universal postal service obligation. Yet the economists at Ofcom will undoubtedly ask why it is that users in urban areas subsidise an often loss-making postal service in rural areas. Why not reduce the cost of a stamp in the cities and make those in the countryside pay a price that better reflects the cost of the service?

Small businesses, particularly those in rural areas, rely on the postal service for their livelihood. Again, in a truly competitive world these businesses would be charged a price for the service they receive based at least in part on their location. I know that the Federation of Small Businesses is worried about this legislation precisely for that reason. Small businesses in rural areas are perhaps among the most vulnerable to the aggressive commercialism that we associate with privatisation.

Older people are reliant on the postal service as a means of communication. It is hard to believe, I know, but many do not use e-mail and the internet. It is important that a privatised Royal Mail and the new

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regulator do not disadvantage older users by adopting pricing policies which restrict their access to postal services.

I believe that this amendment would strengthen the Bill by ensuring that Ofcom consults fully with key user groups. Organisations representing pensioners, small businesses, disabled people's organisations and rural areas should be an integral part of the review process so that their views inform the decisions Ofcom takes. I hope that the Government will support the obligation to consult contained in this amendment. It would give added legitimacy to the decisions of the regulator, which in the last analysis should be accountable to the public it serves.

Lord Laird: My Lords, I have two amendments in this grouping. I propose, with the permission of your Lordships, to refer first to Amendment 24L. The purpose of this amendment is simple; by delaying the ability of Ofcom to review the universal postal service, the current minimum requirements of the universal postal service will be protected for six years.

It is not my intention to go over a lot of the information so excellently put on the record today by the noble Viscount, Lord Tenby, so I shall try to be brief. The universal postal service is a part of life for small businesses, rural communities, pensioners and others who value the six days a week, one price goes anywhere service.

As noble Lords have already said, the universal postal service and the post office network are part of our nation's infrastructure and must be protected following the privatisation of Royal Mail. By moving this amendment, I wish to ensure that the current levels of service we enjoy are maintained for six years. The British public do not want to see their service watered down. I believe that guaranteeing the service for six years, while not ideal, offers sufficient compromise for the Government to accept without discouraging any potential new provider of the postal service.

Let us be under no illusions; our postal service is a national treasure. While the financial difficulties it has faced in recent years have led to a need for significant investment from the private sector, this should not be at a cost to the public, as is often the case with privatisation. If this House allows the universal service to be unprotected, the most vulnerable in our society will see increased prices and reduced services. This is not acceptable.

With your Lordships' permission, I turn to Amendment 24M. I believe that this amendment, and others like it, reflects deeper concerns about the impact that the privatisation of Royal Mail will have on services in our communities, particularly in rural areas. Noble Lords have set out in Committee a number of worries that they have about the lack of commitment from the Government to use this Bill to ensure that postal services are continued at a level that users currently enjoy. There is also a worry about the effect that this privatisation will have on the network of post offices, which are so essential to rural communities across the United Kingdom.

I am instinctively nervous about this privatisation. I am not against privatisation per se but I believe that in this case the test of whether a transfer of ownership is

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successful is if those who need the service most see it improve. So far more questions have been asked than answered about the long-term future of postal services in rural areas, which in reality are never going to be anything other than a cash drain on Royal Mail. These concerns have been rejected by the Minister, who prefers to hand over responsibility for the maintenance of the universal postal service obligation to a regulator, whose remit is to promote competition to ensure that it reflects the reasonable needs of users.

This amendment aims to slow down any attempt by the regulator to denude the service that users in rural areas enjoy. As the noble Viscount has already pointed out, Northern Ireland, Scotland and Wales have similar characteristics in that the majority of their populations live in towns and cities and there is a substantial land mass that is sparsely populated. I ask the Minister of the day to report to Parliament on the impact of any review of the universal postal service on those areas to ensure that the people who rely on the postal service are not the first to suffer in the new age of Royal Mail commercialisation. That is why I have tabled these amendments.

Lord Stevenson of Balmacara: My Lords, in responding to the last two groups of amendments, the noble Lord, Lord De Mauley, said that the Government would consider strengthening the protection for the maintenance of the current universal service. We welcome that, and thank him. This group of amendments, as we have just heard, contains a number of rather interesting suggestions for how the Government might go about that.

Clause 33(5) would permit the Secretary of State to amend the minimum requirements of the universal postal service provided for in Clause 30, which, as we are well aware, provides a mail service six days a week at affordable, uniform prices throughout the United Kingdom. Under Clause 33(7)(a), such an order would be subject to an affirmative resolution procedure. Amendment 24LZA would delete Clause 33(5) in its current guise and ensure that the European Communities Act 1972, which would otherwise permit the Secretary of State to alter the minimum requirements for the universal service through the negative resolution procedure, cannot be used to reduce the universal service.

The Government have stated that the protection of the universal service is at the centre of the Bill and in particular underpins the privatisation proposed for Royal Mail. On Second Reading in this House, the Minister emphasised this, saying:

"The purpose of the Bill is to secure the future of the universal service. The Government are committed to the existing service-six days a week collection and delivery of letters, at uniform and affordable prices, for all the United Kingdom's 28 million addresses. This is at the heart of our legislation. We have no intention of downgrading the minimum requirements of the universal service".

She continued:

"Crucially, this Bill gives both Houses of Parliament a say in whether the universal service can be amended in the future".-[Official Report, 16/2/11; col. 776-77.]

Our concern is that although the Government say that they have no intention of downgrading the minimum requirements of the universal service and, indeed, have repeated that intention today, the Bill brings in a procedure for the amendment of the universal service

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not previously contemplated in legislation. This seems to be a bit of a problem, which we should address. Our amendment seeks to ensure that any amendment of the minimum universal service requirements can take place only as a result of primary legislation and not through an order brought in by the Secretary of State.

The Delegated Powers and Regulatory Reform Committee expressed concern at the way in which Clause 33(5) contains a significant power that would allow the Secretary of State to alter the minimum requirements for a universal postal service set out in Clause 30. It is worth quoting a little more of this passage in full:

"Clause 29(1) requires OFCOM by order (subject to no Parliamentary procedure) to set out the services which a universal postal service should provide. Clause 29(2) requires the service to include, as a minimum, the services set out in clause 30".

We have touched on that before. It continues:

"The order by OFCOM cannot alter the minimum requirements".

That is a very important safeguard. The committee then says that,

The committee makes no recommendation on Clause 33(5), but draws it to the attention of the House as a significant power that would allow the Secretary of State to alter the minimum requirements for the universal postal service set out in Clause 30. We will come on to some elements of this in later amendments, but I want to pick out a particular aspect.

2.45 pm

Under the Bill as it stands, any amendment to the minimum requirements as set out in Clause 30 would be subject to an affirmative resolution procedure under which the Secretary of State would bring an order to Parliament requiring the approval of this House and the other place within 40 days. This could see a reduction of the universal letter service from six days a week to five days a week or remove certain requirements for services to be provided, including a reduced service for the blind and the partially sighted. As I have said, the 2009 Bill, which the previous Government introduced, had no special provision for altering the minimum requirements other than through primary legislation, but we think that this Bill could go further.

Under the European Communities Act 1972, the Government have the power to change the requirements of the universal service under a negative resolution procedure to the levels that are set out in the third EU postal directive from 2008. This amendment invites the Secretary of State to show forbearance and removes the power to exercise that option.

A privately owned Royal Mail would be under huge pressure to reduce costs. A recent report for Postcomm by Frontier Economics published in February estimated that for Royal Mail the net cost of delivering on a Saturday compared with a five-day universal service Monday to Friday was £256 million. Under private ownership, this would clearly become an issue.

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Moreover, the Bill sets out two separate tracts for Ofcom to recommend changing the minimum requirements for the universal service. Under Clause 33, Ofcom is required to review the extent to which provision meets user needs within 18 months of the Bill coming into force. It is not clear that a review under this clause would necessarily exclude a review of the universal service minimum requirements. The Minister has said that Ofcom could not recommend a change to the universal service under this review, and we note that. At Second Reading, the Minister referred to the requirement that within 18 months of Part 3 of the Bill coming into force, Ofcom must have conducted a market review to ensure that the services offered as part of the universal service reflect user needs. She stated:

"These are set out in statute and the review cannot recommend a downgrade of the minimum requirements after 18 months".-[Official Report, 16/2/11; col. 777.]

Amendment 24J would make this crystal clear and I hope that the Minister will look favourably on it.

Clause 43 is very clear, however, in providing for Ofcom to review the minimum requirements. This is a new, specific power. Postcomm was not specifically granted such powers under the Postal Services Act 2000 and, more worryingly, its duties gave a greater priority to protect a universal service. For Postcomm, safeguarding the universal service took precedence over the promotion of efficiency and economy, but Ofcom will be required to consider efficiency and the financial viability of the universal service as part of its duty to ensure provision under Clause 28. These new obligations to consider efficiency and the financial viability of the service are likely to shift the emphasis of the Ofcom review squarely on to downgrading services. This issue was addressed separately by Amendment 24GC, which was discussed earlier and spoken to by my noble friend Lord Young.

Both these factors-the new power for Ofcom and the shift in the balance of obligations on Ofcom-are likely to increase the pressure on the universal service and make this less secure than under the current regime. We argue that the universal service is a valued public service for individuals and businesses. It supports the economy, provides a basic form of communication and access to services, and prevents social exclusion and marginalisation from society. Clause 33(5) would merely provide a 40-day time limit on scrutiny to any proposals to change the service, following an order from the Secretary of State. This is inadequate. There must be proper debate and scrutiny of any proposals to cut the universal service, opportunity for their amendment and time provided for them in both Houses of Parliament. The Minister stated at Second Reading in this House that there was a pressing need to bring stability to Royal Mail, but it is far from clear that this would be delivered for the universal service.

Amendment 24PC seeks to make it clear that in any review of the universal postal service, the principle of one price goes anywhere in the UK is maintained. Clause 33(5) permits the Secretary of State by order to change the minimum requirements of the universal postal service as set out in Clause 30. At present, a first-class stamp gets a letter to Balmacara, Ross-shire, in just the same way as it does to Land's End, Bangor

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in Northern Ireland and Bangor in Wales. This is important to business and important to the general public. Clause 33(6) states:

"The provision that may be made by an order under subsection (5) does not include the making of different provision in relation to different places in the United Kingdom".

However, the words do not mention a universal or uniform tariff specifically. We know that the European standard does not require a uniform tariff in each country.

Imagine just for a moment a hypothetical case in which a price per distance was being charged-say, 54p for the first 400 miles and then 64p beyond that. This would not be discrimination by geographical area as such, but it would not represent a uniform tariff for England, Scotland, Northern Ireland and Wales.

Clause 35 describes the USP conditions that Ofcom can place on a universal service provider. The USP conditions can require it to provide all or part of a universal service, to provide or make arrangements for the provision of access points, and to provide specified information about the services it provides. Subsections (4) and (5) provide that the designated USP condition can also set prices for the provision of a universal service and that Ofcom must ensure that they are affordable, take account of the cost of providing the service, and ensure that they incentivise a service to provide efficiency.

However, Clause 35 does not specify that the prices imposed as part of a USP condition be universal. The clause does not clearly state that prices must continue to be "one price goes anywhere". Whether you send a letter within London or to Balmacara in the west highlands, the stamp price has to be the same. A uniform tariff is an essential part of the universal service. It allows all citizens equal access to the postal network for communications and engagement in economic activity, regardless of where they live. It is a component of our citizenship of the United Kingdom.

Our amendment seeks to confirm that a USP condition must maintain the universal service at a uniform tariff. This is consistent with the minimum requirements of the universal service, as set out in Clause 30's requirement 3 for:

When discussing Clause 30 at the Public Bill Committee, the Minister for Postal Services stated that:

Our amendment seeks to confirm the position expressed by the Minister, and it is important, given the tension between the provision of a uniform tariff and the requirement in Clause 35 that prices take account of the cost of providing the service. The latter requirement could be interpreted as meaning that the price of specific geographic services should take account of the cost of their provision, rather than the cost of the universal service as a whole being reflected in overall prices.

It was claimed in earlier debates that there is no difference between the cost of delivering a letter to the Scottish highlands and within London. We now know

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that this is not the case, and the Minister has circulated a letter that we were grateful to receive, setting out her understanding of the situation. It is therefore right to be concerned that Clause 35 might imply that, in order for prices to reflect costs, non-uniform tariffs might be applied. Our amendment seeks to ensure that this is not the case. Its adoption should not be controversial, given that it ensures simply that the principle outlined by Ministers applies to not only Royal Mail, as a universal service provider, but any other operator that may be subject to USP conditions.

Turning to other amendments in the group, we wait to hear what the Minister has to say about the probing amendment moved by the noble Viscount, Lord Eccles. We are pleased to support Amendments 24M and 24N, which were powerfully spoken to by the noble Lord, Lord Laird. The requirement for further review and reports is an important part of the process. Amendment 24K, spoken to by the noble Viscount, Lord Tenby, is very important, and seeks to maintain the current minimum requirements for the universal postal service for at least five years. Amendment 24L, spoken to by the noble Lord, Lord Laird, seeks a period of at least six years. We therefore have two options to consider. If Ministers insist on keeping the power of the Secretary of State to reduce the universal service requirements by order, the case for having an initial period of stability is surely compelling.

Clause 33 contains no timescale for an Ofcom review of the minimum requirements and no timescale in which the Secretary of State can change the requirements by order. That could happen within a year or 18 months of the Bill becoming law. The shortest assessment of the timescale for selling Royal Mail is 2012. Imagine the turmoil and uncertainty if Royal Mail were to be privatised, only to have a universal service provision thrown into complete doubt during its first few months and years as a private company. A period of calm has much to be said in its favour, and we support a period of stability, as proposed. To be clear, our Amendment 24LZA seeks the still firmer protection of maintaining the universal service requirements, unless Parliament decides otherwise by primary legislation.

In conclusion, the Bill rightly enhances the parliamentary approval required for any changes to the universal service. Several of the amendments in the group would go further and make sure that Parliament and the public are given a proper say before any reduction can be made-or at least secure the current levels for a number of years. Ministers say that they want to retain the universal service for six days a week and at "one price goes anywhere". This is a real test of the Government's commitment to the current requirements of a universal postal service. If the Government really mean what they say about protecting the current universal service, I hope that they will look favourably on these amendments.

Lord Laming: My Lords, perhaps I may speak very briefly in support of Amendments 24J, 24K and 24N, in the name of my noble friend Lord Low of Dalston, that were so ably introduced by my noble friend Lord Tenby.

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The Minister helpfully assured the House that the Government intend that the changes introduced by this important Bill will be open and transparent. These amendments have the virtue of combining simplicity with clarity. Amendment 24J leaves absolutely no doubt or ambiguity about the responsibilities of Ofcom in enforcing the minimum standards that together make up a universal postal service that we all value so highly. Amendment 24K seeks to reinforce the importance of the universal postal service obligation that is central to this. Amendment 24N seeks to ensure that no significant changes can be made without adequate consultation with the postal service user groups.

These amendments are not controversial. They are aimed at strengthening the Bill and making sure that, together as a community, we continue to enjoy a reliable, efficient and enduring universal postal service. I hope that the Minister will feel able to accept the amendments.

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, the primary purpose of the Bill is to protect the universal service. The Bill requires Ofcom to secure the provision of the universal service and to ensure that it is meeting the reasonable needs of users. Indeed, that latter point is a requirement not just of this Bill but of the European postal services directive.

The noble Lord, Lord Stevenson, suggested that Ofcom's duty to secure the future of the universal service was in some way on a par with its duty to have regard to the financial sustainability and efficiency of the universal service. I am happy to reassure noble Lords that this is not the case. Ofcom's overriding duty in relation to postal services is to secure the provision of a universal service. In doing so, Ofcom must have regard to the need for financial sustainability and efficiency, but these considerations cannot outweigh the need to secure a universal service.

Clause 29 requires Ofcom to assess the needs of users and to set the universal postal service order at a level that meets those needs. The provision is a necessary tool to ensure that the postal market remains flexible and responsive to user needs. I know that there has been some confusion and concern about the relationship between the universal postal service order and the minimum requirements in Clause 30. The order will set out the particular products and services that Royal Mail must provide, over and above the minimum requirements and the standards that the company must meet. These products are currently set out in Royal Mail's licence. As we are abolishing the licensing regime, they will need to be set by order in the future.

Amendment 24HZA, tabled by my noble friend Lord Eccles, seeks to constrain the scope of the universal postal service order. Clause 29(2) provides that the universal postal service order must include "as a minimum" each of the services set out in Clause 30. The subsection allows Ofcom to include more services or higher requirements-for example, it can specify the percentage of first-class letters that must be delivered the next day. Given that the universal service must evolve in line with user needs, this is appropriate. I understand where my noble friend is coming from and

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it is important that we hear the arguments he has made so well. However, I should say to him that to be compliant with the directive, we must allow Ofcom the flexibility to ensure that user needs are met. It is right that Ofcom, as the expert regulator with all the market information, is the body that makes the judgment. Given that explanation, I hope that my noble friend will withdraw his amendment.

3 pm

I turn to Amendment 24J in the names of the noble Lords, Lord Low and Lord Laming, and the noble Viscount, Lord Tenby. I recognise that the noble Viscount is speaking for the noble Lord, Lord Low, and I thank him for introducing the amendments. I assure the House that the market assessment that Ofcom is obliged to carry out as a result of Clause 29(4) is not a review of the minimum requirements. It cannot change those requirements. As I said earlier, the European directive requires that the universal service should respond to user needs. Therefore, Clause 29 requires that Ofcom must carry out a market assessment before it makes a universal postal service order. This is eminently sensible, given the rapidly changing market.

The first universal postal service order will not be subject to such a market assessment for the simple reason that Ofcom will not have time to conduct one. We therefore expect that the first universal postal service order will require Royal Mail to provide essentially the same services that it is required to provide now. However, the Bill ensures that the market assessment will be conducted within 18 months so that we will be sure that the universal service is meeting user needs. I stress again that the market assessment under Clause 29 has nothing to do with the minimum requirements in Clause 30 and cannot recommend changes to those requirements. In light of that reassurance, I hope that noble Lords will not press the amendment.

I turn to Amendment 24K in the names of the noble Lords, Lord Low and Lord Laming, and the noble Viscount, Lord Tenby, and to Amendment 24L in the name of the noble Lords, Lord Laird and Lord Rogan. The power in Clause 33 enhances the safeguards against changes to the universal service minimum requirements. As we have discussed, Clause 30 enshrines the current minimum requirements for the universal service, with the important addition of free services for the blind or partially sighted. The requirements gold-plate our European obligations, but this is gold-plating that we are rightly proud of. As my colleague, the Minister for postal affairs, said in the other place-I am happy to repeat it here-the Government have no intention of reducing the minimum requirements of the universal service.

As things stand, and as they would have stood under the 2009 Bill, a future Government could reduce those minimum requirements to the level required by the European directive through a negative resolution procedure using powers under the European Communities Act 1972. This means that Saturday deliveries could have been dropped, and different prices could have been charged for sending letters to Cornwall and Clapham. We do not believe that that is acceptable, which is why we have introduced Clause 33. Before I

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go into the detail of the clause, I ask noble Lords to note that the power to review the minimum requirements is just that-a power. It is not a duty or an obligation.

Clause 33 puts in place a clear procedure to be followed before the minimum requirements can be altered. Through this procedure, it offers vital new protections for us all. The protections are threefold. First, there can be no changes to the minimum requirements unless Ofcom has conducted a review of the needs of users. Secondly, the clause guarantees that no change can result in a different minimum level of service for different parts of the country. We could never have a five-day-a-week letter delivery requirement in Cornwall and a six-day-a-week requirement in Birmingham. Services must always be priced uniformly. Thirdly, any proposal for change would be subject to the affirmative procedure in both Houses. The noble Lord, Lord Stevenson, stated that Clause 33(6) does not reference the uniform tariff. I reassure him that this is contained in the meaning of Clause 33(6) and is absolutely the Government's policy. Clause 30(3) makes this clear.

I turn now to the amendments. Their effect would be that for at least five to six years, Ofcom would not be able to initiate a review of the minimum requirements. Given the enhanced protections that we have established under Clause 33, it would not be helpful to tie the hands of the regulator in this way. Ofcom will be responsible for regulating the postal services market and should be able to review the market and user needs where it feels this is appropriate. We should not forget that Ofcom's primary duty will be to secure the universal service. It will need to be able to gather vital information on customer and market needs if it is to fulfil this obligation. Given the reassurances I have made on the protections for the minimum requirements, I hope that noble Lords who spoke will not press their amendments.

I turn to Amendment 24LZA. As I explained earlier, Clause 33 puts in place new protections against changes to the minimum requirements-changes that could be made now using European Communities Act powers. What noble Lords seek to do with this amendment is to prevent any changes to the minimum requirements by disapplying the European Communities Act powers. While I sympathise with the intention behind this, it is simply not practical. The European Communities Act exists because it is sometimes necessary to make changes to primary legislation in order to implement European obligations. We cannot rule out the possibility that at some point in future there may be a new European Union postal services directive setting new minimum requirements-possibly higher ones, possibly lower ones and possibly just different ones-and we will be legally obliged to make those changes. It would not be acceptable in those circumstances not to have a means of doing so other than by new primary legislation, which might well not be possible in the time required.

The provisions in the Bill tread the right balance between ensuring that a future Government cannot use the European Communities Act to make changes simply because they want to reduce the minimum requirements, while leaving Parliament the power to make necessary changes-for example, if required to

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do so by European law. I also politely remind noble Lords opposite that their 2009 Bill did not include any provision such as the one proposed by this amendment. I make it clear that we have no intention of changing the minimum requirements. The Bill enshrines the same minimum requirements that we currently enjoy and enhances the protections against any changes to them. For those reasons, I hope that noble Lords will not press this amendment.

I turn to Amendments 24M and 24N, which seek to ensure that the review of user needs established under Clause 33 is comprehensive. Amendment 24M would require there to be an assessment of the impact of any changes on postal services as a result of a review of the minimum requirements in Northern Ireland, Scotland and Wales. I reassure the noble Lords, Lord Laird and Lord Rogan, that Section 7 of the Communications Act gives Ofcom a duty to carry out impact assessments. In light of that, were Ofcom to conduct a review of the minimum requirements, it would have to consider the impact of any proposals it made on users in the three devolved territories, as well as on a range of other categories of person.

Amendment 24N in the names of the noble Lords, Lord Low and Lord Laming, and the noble Viscount, Lord Tenby, would require Ofcom, when conducting a review of the minimum requirements, to consult user groups representing people in rural areas, small businesses, pensioners and people with disabilities. These intentions are entirely appropriate. However, I remind noble Lords that the Bill must be read alongside the Communications Act 2003. Section 3 of that Act already requires Ofcom to have regard to a specified range of groups when carrying out any of its functions. In particular, Ofcom must have regard to,

It also has to have regard to,

It is also important to note that in the Communications Act "persons" refers to corporate bodies as well as individuals. Therefore, Ofcom must equally have regard to the needs and interests of businesses in different parts of the United Kingdom, including small businesses.

I turn to Amendment 24PC. I can tell the noble Lord, Lord Young, and his team that I agree wholeheartedly with the intention behind this amendment. However, happily, it is not needed. Requirement 3 in Clause 30 requires uniform and affordable pricing. I also remind the noble Lord that in Clause 33 we are putting in place new safeguards that explicitly prevent any changes to the minimum requirements that would result in non-uniform pricing.

With those reassurances, I hope that the noble Viscount will feel able to withdraw the amendment.

Viscount Eccles: My Lords, I am very grateful to all those who have taken part in the debate on this group of amendments. I think particularly of the three

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amendments spoken to by the noble Viscount, Lord Tenby, and the noble Lord, Lord Laming. Their comments have shown very clearly how important the universal service provisions are to this House and to the general public. That also came through very clearly in the two amendments spoken to by the noble Lord, Lord Laird. I am sure that the Government will take on board that such concerns are at the forefront of everyone's minds, and indeed that was set out very firmly by my noble friend on the Front Bench.

I am prompted to make only one short reflection. If the provision of that service does not produce a positive cash flow-I use that expression rather than talk about profits-we may well find ourselves returning to the subject again. We all fervently hope that the Bill will turn into an Act and that the subject does not recur-at least, not for very many years to come.

I think we would all agree that we have received the reassurances for which we were looking, and I therefore have much pleasure in begging leave to withdraw the amendment.

Amendment 24HZA withdrawn.

Amendment 24HA had been withdrawn from the Marshalled List.

Amendment 24J not moved.

Clause 29 agreed.

Clauses 30 to 32 agreed.

Clause 33 : Review of minimum requirements

Amendment 24K not moved.

Amendment 24KA had been withdrawn from the Marshalled List.

Amendments 24L and 24LZA not moved.

Amendment 24LA had been withdrawn from the Marshalled List.

Amendments 24M and 24N not moved.

Clause 33 agreed.

3.15 pm

Clause 34 : Designation of universal service providers

Amendment 24NZA

Moved by Lord Stevenson of Balmacara

24NZA: Clause 34, page 19, line 3, leave out subsection (1) and insert-

"( ) OFCOM must designate a postal operator as universal service provider."

Lord Stevenson of Balmacara: I shall speak also to Amendment 24AHA. All the amendments in this group have a common theme. Amendment 24NZA seeks to maintain the integrity of the universal service obligation by maintaining one universal service provider. Amendment 24AHA provides that consumer protection conditions should apply not just to the UPS at the discretion of Ofcom but to all postal operators as is appropriate to the postal service that each provides.

There are several points where the Bill provides for more than one universal service provider. One example is where Ofcom makes a procurement determination

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under Clause 43 and decides to hand the provision to another operator. We do not know how rare an occasion that might be, although we hope that it would not be regular. The second is where the USP has been taken into administration under Part 4. We hope that this will not happen but, again, we do not know whether it will occur. Our basic contention is that the universal service should be delivered by one provider and that the only provider capable of delivering this is Royal Mail.

The provision of a daily collection and delivery service covering 28.4 million addresses in the UK requires a very large capital infrastructure and a large and skilful workforce. Because it constantly deploys such an array of capital and workers, Royal Mail is able to sustain an extraordinary turnover of mail. In the first half of 2010-11, the average daily mailbag contained around 68 million letters, packets and parcels. In 2009-10, Royal Mail carried 6.3 billion items of USO mail, 6.4 billion items of downstream access mail, and around 18.7 billion items in total.

No other company has ever delivered such a service in the United Kingdom and it is our view that no other company could do it going forward. However, surely the danger is that some companies think that they can provide parts of a universal service in certain geographically restricted areas. These areas are likely to be highly urbanised and, as was explained in our earlier debates, potentially very profitable for the provider. Therefore, we could envisage a competitor to Royal Mail offering to be a universal service provider for a city such as Birmingham. However, we could also envisage a situation where that competitor could not offer an alternative to the rural areas in the West Midlands.

Should that happen, there would be some huge problems. First, the areas surrounding Birmingham would have to continue to be serviced by Royal Mail. This would inevitably be loss-making, and Royal Mail would either have to bear the costs or increase stamp prices to compensate.

Secondly, the Birmingham provider would require a much more comprehensive access arrangement to Royal Mail's network than exists under current downstream access arrangements. Not only would this create the basis for large-scale friction between the two networks but it would almost certainly create new costs, as the interaction between the two networks would have to be supervised.

Thirdly, there is no evidence in the EU of any other country currently operating with more than one USO provider. In Germany, at the moment there is no designated USP at all and it is all left to the market. Deutsche Post, however, is the effective provider, offering services six days a week nationwide and benefiting, by the way, from VAT exemptions in order to do this. The regulator in Germany has the power to arrange for the USP to be provided through public procurement if the market does not deliver a universal service but, as the market in the form of Deutsche Post is delivering a universal service, this has not happened to date. In the Netherlands, TNT can apply for a partial repeal of its

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designation as the USP, which perhaps could allow more than one USP to be designated but, again, that is not taking place.

It is noticeable in the legislation that there are two options under which we could see more than one USO provider in the UK. The first is a possible case of bankruptcy of Royal Mail and an interim administrative regime that would follow from that. The second is the case of the regulator making a procurement determination. On the first point, there has been no serious study of Royal Mail which suggests that its delivery of the universal service obligation has been malfunctioning to date; indeed, some earlier speakers have praised its operations, and I agree with that. Perhaps this lack of academic study is just an oversight of generations of academics and economists. Perhaps it is a tribute to the excellent staff and management of Royal Mail. Or perhaps it is really an acknowledgement that there is great effectiveness in the manner in which the USO has existed in Royal Mail-and, after all, if it isn't broken, don't fix it.

The second case in which more than one USO provider is provided for in the Bill is where Ofcom decides to allow for such a development by making a procurement determination. That is a power and not an instruction. We would argue that there is no reason why Ofcom should engage in such a move. We are all worried that there will be pressure from Royal Mail's competitors to secure such a procurement determination. That is why we think that, rather than experiment with the USO, it would be wise of the Government to secure its future without a gamble. The USO is a very complex operation to maintain, and ill-thought out ambitions are no alternative to the present provision.

On Amendment 24ABA, Clause 43 deals with how the universal service should be dealt with should Ofcom find that it constitutes a financial burden on Royal Mail. If it is found to be a burden, Ofcom has three options open to it. First, it can undertake a review of the minimum requirements of the universal service under Section 33; secondly, it can require that contributions be made from other postal operators towards the maintenance of the USO; or, thirdly, it can make a procurement determination, allowing part or all of the USO to be provided by a company other than Royal Mail. This amendment requires that a minimum of three years' notice be given before any other operator can begin to provide postal services required under a universal service obligation.

As I have just argued, there are serious concerns about the potential impact of breaking up the USO through a procurement determination. It is questionable whether a multiple-provider USO could guarantee consistent levels of service across the country. We do not know what it might mean for the financing of the USO if the more profitable and easier-to-complete parts of the service go to competitors and Royal Mail is left servicing the more expensive, hard-to-deliver-to parts of the country. In a time of great change and economic flux, Royal Mail and the postal industry desperately need stability. Royal Mail is in the middle of a major programme of modernisation, including more than £2 billion of investment. That process, combined with an unloved regulatory regime, means

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that the company is facing a very restrictive financial position. Further major upheaval through the potential loss of the USO threatens the viability of such a programme. Any change to the USO provider must surely not come before Royal Mail has completed its modernisation and is financially secure. Moreover, the loss of any part of the universal service via procurement determination would have a major impact on Royal Mail's business model and the viability of the business.

Royal Mail successfully delivers mail across the UK at an affordable, uniform tariff by taking advantage of the considerable economies of scale that it is able to access. The business must be given sufficient notice of any change if it is to be able to plan effectively and to continue to provide the service that we expect of it. A procurement determination is a very real possibility and inquiry into whether the universal service is a financial burden on Royal Mail would very likely find that it is a burden. For example, in evidence to the Scottish Affairs Select Committee, Tim Brown, the chief executive of Postcomm, stated that, a number of years ago,

The postal industry has suffered from a lack of stability in recent years. The potential break-up of the universal service would exacerbate the problem. The most important element in the future of the postal services in the UK is the successful investment programme and the modernisation of Royal Mail. Long-term investment in postal infrastructure should not be compromised in order to make short-term savings via what would essentially be the franchising of elements of a profitable universal service. I beg to move.

Lord Cotter: My Lords, Amendment 24X suggests that the proposed period for the review of the universal service provider by Ofcom be extended from three years to four years. The Bill gives Ofcom a series of different powers to review the financial burden and how it is to be calculated through various recommendations. It has a lot to consider in the review and it is vital that the matters are considered in the correct manner. Ofcom must look at and assess the cost of the service provided both to the generator and to the consumer. We need to make sure that that is examined correctly to ensure that further losses are not made by Royal Mail. In view of the diversity and depth that are needed for the review to ensure the success of the universal service provided, why not allow an extra year for the evidence to be collected and presented? We need a comprehensive review that gives detailed examination to ensure that all aspects of the universal service provider are examined and given consideration. An extra year would ensure that all aspects were considered in such a way. I maintain that it is quite clear that more time is needed for the review of the universal service provider by Ofcom.

Baroness Kramer: I shall speak briefly to Amendment 24AB in my name and that of my noble friends Lord Razzall and Lord Cotter, as the argument for the need for stability and certainty for Royal Mail as a universal service provider has been made extensively in the

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House today in discussion of the previous group of amendments and by the noble Lord, Lord Stevenson, on this group. However, there is a glaring gap in the Bill, because there is no set timetable for the period during which Royal Mail would continue reliably to carry that role. The amendment would set a period of 10 years before Ofcom may make a procurement determination that would change that position.

The case was well made in the other House by a Member of the Opposition-some people will think that I am supporting those on the Benches opposite more today than those on mine. The honourable Member for Ochil and South Perthshire, I think, said that moving to the 10-year period,

The point was also made that, for Royal Mail to have a secure future, significant investment will be required, much of it in equipment. Given the lifespan and cycles of equipment, 10 years becomes a reasonable minimum for that kind of stability.

We have heard again in this House real concern about cherry picking. It is clear to me that your Lordships do not want others coming in to cherry pick pieces or aspects of the universal service. I am sure that that is true for the public at large, who perhaps matter the most; it will certainly matter to Royal Mail itself and future investors. Given the widespread concern, it strikes me that an amendment such as Amendment 24AB neatly covers a variety of concerns by providing fundamental stability over a 10-year period. That may alleviate many of the other issues raised in this important debate.

Baroness Wilcox: My Lords, this group of amendments relates to the actions that could be taken if Ofcom found that there was an unfair financial burden on the universal service provider as a result of its complying with its universal service obligation to ensure that consumers are protected under the new regulatory regime. Clause 43 sets out three options if there were found to be an unfair burden: a review of the minimum requirements; a procurement process; or the establishment of a compensation fund. If it considered that action would need to be taken, Ofcom would have to recommend to the Secretary of State which of those options would best address the unfair burden.

I speak first to Amendment 24X, in the names of the noble Lords, Lord Razzall and Lord Cotter, and the noble Baroness, Lady Kramer. The noble Lord, Lord Cotter, made an eloquent case for the amendment. It is right that we should consider it alongside the other amendment that would prevent a procurement determination for 10 years; the two need to be seen in balance. Your Lordships will need no reminding that our central objective in the Bill is to protect the universal postal service. We have been clear that Royal Mail must continue to modernise and, to that end, have included a new requirement on Ofcom to have regard to the efficient provision of the universal service.

No one would dispute that Royal Mail needs to improve its efficiency, and the company has already taken significant steps on its modernisation journey. However, without further modernisation, costs will

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remain high, increasing the risk of substitution by other forms of communication, in turn exacerbating volume decline and further threatening the universal service. The package of measures in the Bill will greatly assist Royal Mail in its modernisation. We believe that it is important to allow Royal Mail to continue on this modernisation path for a few years, able to take advantage of the benefits of the Bill, before the regulator assesses whether the universal service represents an unfair burden. This would also give certainty to all those who might be required to contribute to a compensation fund, given the reassurance that that would not be on the table for at least three years after the Bill came into force. This is clearly a fine balance. There is no right number; it is a judgment. I would therefore like to take the amendment away to consider it, so I hope that the noble Lord will, for now, consent not to press it.

3.30 pm

Amendment 24AB was also tabled by the noble Lords, Lord Razzall and Lord Cotter, and the noble Baroness, Lady Kramer. It seeks to prevent Ofcom from launching a procurement process for 10 years after Clause 43 comes into force. While we absolutely need Royal Mail to modernise, we also recognise that, for the foreseeable future, only Royal Mail will be able to deliver the universal postal service. Noble Lords have eloquently made the case for a period of certainty for Royal Mail as the designated universal service provider. I understand entirely that Royal Mail, when making investment decisions related to the universal service, needs to have certainty about its status as provider of that service. We could not expect a responsible management team or board of directors to invest large sums of money in modernising its business if it did not expect that it could recoup its investment.

Not only is the procurement option another tool to secure the universal service, but it is also designed to assist the universal service provider. A procurement determination could relieve the universal service provider of the requirement to continue to deliver the universal service in areas where it was an unfair financial burden on it to do so. However, we recognise that there would be risks for it, too. Under the current licensing regime, Royal Mail has a 10-year notice period. In many other sectors, companies providing something like the universal postal service have similar periods of certainty. I cannot in principle see a reason why post should be different, as the noble Lords propose in their amendment. I will take away their suggestion about certainty of designation for the universal service provider to see whether we can do something to deal with the risk here without losing the potential benefit. I will consider this alongside their corresponding proposal to increase the period before a review of costs could be undertaken. If I may, I will come back to your Lordships on Report with proposals to deal with the important issues that have been raised in this debate.

Amendment 24ABA, which was tabled by the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe, would require that any direction made by the Secretary of State under Clause 43(12) must give a universal service provider three years' notice before letting anyone else provide any of the postal services required by the

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universal service obligations. This amendment would effectively kill off competition in the postal services market. While I have made it clear that the security of the universal service is our priority, we must strike the right balance to ensure that the benefits of competition-and there are indeed many benefits of competition- can be realised as well. Given the impact that Amendment 24ABA would have, I am not able to accept it. However, I have listened carefully to the concerns raised in this House and in the other place about the risk of other operators cherry picking business from Royal Mail, which, as a result, would undermine the long-term future of the universal service. I therefore give a commitment to your Lordships that I will take away and consider this specific issue and bring forward proposals for debate on Report.

In respect of Amendment 24AC-

Lord Jenkin of Roding: We tried to give notice to my noble friend's office that this amendment would not be moved, but the message has obviously not got through.

Baroness Wilcox: I apologise. Scrap that. How about Amendment 24NZA? This amendment is tabled in the name of the noble Lord, Lord Young, and is concerned with removing the ability to designate, in extremely limited circumstances, more than one company as a universal service provider. The intention of Clause 34 is to give Ofcom the power to designate more than one universal service provider in two specific circumstances only in order to ensure the provision of the universal service. As with other elements of the Bill, Clause 34 has been drafted to ensure that the Bill is future-proofed. It enables the regulatory regime to adapt when it needs to in order to ensure the continued and long-term provision of the universal service. The measures that we are taking are designed to put Royal Mail on a sustainable footing so that it can continue to provide the universal service that we all value so highly. However, it makes sense to future-proof the legislation in this way to ensure that the universal service could continue to be provided in two specific and extreme circumstances.

Clause 34 will allow Ofcom to designate more than one provider in only two specific cases. The first case is where providing the universal service is found to represent an unfair financial burden on the universal service provider. The Secretary of State agreed with Ofcom's advice that the best way of addressing that burden was through a procurement exercise provided for by Clause 43. This would assess whether another company could provide the relevant part of the universal service with less of a burden. In that event, that company could be designated the universal service provider for that part of the universal service.

The second circumstance is where Royal Mail has become insolvent and has entered special administration. Where a postal administration order has been made under Part 4 and it is not possible to rescue Royal Mail as a going concern, some of its activities could be transferred to another company. Ofcom could then designate that company as a universal service provider as well in order to secure the universal service.

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As I said, the full package of measures in this Bill is designed to secure the future of Royal Mail and the universal service and therefore to ensure that we do not end up in either of these scenarios. Both the procurement process and the special administration provisions are backstops to be used only-I repeat, only-if the future of the universal service is at risk. However, as I mentioned, having the ability to make multiple designations in these specific cases is a sensible and pragmatic safeguard.

It is also important to make it clear that having more than one designated universal service provider in no way provides for or permits a varying level of minimum service across the country. Provisions elsewhere in Part 3 have the effect of guaranteeing that the minimum requirements of the universal service must remain uniform. Given these assurances, I hope that noble Lords who tabled these amendments will feel able not to press them.

Amendment 24AHA, in the name of the noble Lord, Lord Young, relates to the power that Ofcom has under Clause 49 to impose a consumer protection condition on either,

The amendment would replace these categories with a single category that allows for the imposition of consumer protection on,

The intention of this amendment may be to ensure that regulation can be applied with greater precision or to ensure that all circumstances are captured by regulation and that none falls through a perceived loophole. However, I hope that I can reassure noble Lords that it is unnecessary and has the potential to create confusion for the regulator and postal operators.

Giving Ofcom the power to describe separate categories of operator enables it to direct the consumer protection conditions very precisely. This follows the model in Section 52 of the Communications Act in relation to Ofcom's functions in other regulated sectors. This approach is consistent with other parts of the Bill and allows for the clear and effective targeting of regulation to where it is required. I can therefore assure noble Lords that there are no loopholes.

I do not believe that this amendment would help Ofcom to regulate, nor would it offer any greater protection to consumers than is already provided for by Clause 49. However, it might leave the regulatory system open to challenge and confusion, which I believe all involved will wish to avoid. With these reassurances, I hope that the noble Lord, Lord Stevenson, will feel free to withdraw the amendment.

Lord Stevenson of Balmacara: I thank the Minister for her full reply. It was good of her to take the time to go through the detail we have raised because some of these are very technical points. Obviously we will need time to read through what she has said because she covered a lot of ground. I have not been keeping score, but my sense is that rather a lot of concessions were emerging in the previous two or three groups, which we are pleased about. We seek no vainglorious victory on this, but simply to improve the legislation, which is always the role of Her Majesty's loyal Opposition in

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these matters. However, I am pleased that we are beginning to see a degree of discussion and debate around the issues that is not on the lines of "We have made the legislation and we will keep it". We look forward to seeing what the Minister brings forward on Report.

Most of what has been said in this debate and in the debates on the two previous groups has really been about the type of regulation that must apply to the universal service provision and to the universal service obligation within that. There is bound to be tension between economic regulation on the one hand, which the noble Lord, Lord Jenkin, spoke to very fully, and the more social regulation which this side of the Committee wishes to see strengthened in order to ensure that the citizenship approach to the service is preserved. As many noble Lords have said, this is in a sense a fault-line across all the regulation that applies to former public utilities. I do not think that anyone has got it right yet and that there are going to be tensions. You cannot have at the same time the best possible public provision and the most profit-generating and economically appropriate way of doing these things because the two are in conflict. Profit will often-not always, but often-drive out the best. We have to live with that, and as the Minister said, we have to find a judgment that will work not only now but in the long term.

Although noble Lords who have spoken in the debate come from different places, we are all trying to seek one thing, which is that in times of change there will be some stability in the processes we are engaging with in this Bill. I felt that the Minister did respond in a way that gives us some assurance that on Report we will be able to see that built into the Bill. She also tried to explain why the Bill spends a lot of time future-proofing the arrangements. This may be simply because the advice she is getting from her civil servants is that, having gone through this in 2009, having walked up the aisle towards the altar and having been jilted at that point, they are experienced in these issues and therefore able to work towards producing what could be a divorce-proof marriage going forward. Perhaps there is a pre-nup situation here that we should be thinking about and using in other places, or perhaps not.

Having said that, the last part of the Minister's speech stressed that future-proofing does not necessarily open loopholes, but we feel a little sceptical about that. We would like to look at it in some detail and I suspect that it will form one of our debates on Report. However, given what the Minister has said and the assurances we have received, which are extremely welcome, I beg leave to withdraw the amendment.

Amendment 24NZA withdrawn.

Amendments 24NA to 24NC had been withdrawn from the Marshalled List.

Amendment 24P

Moved by Lord Laird

24P: Clause 34, page 19, line 40, at end insert-

"( ) Prior to a sale or transfer of a Post Office company, an agreement must be secured to guarantee the Inter-Business Agreement between Post Office Limited and each of the universal service providers for a period of not less than 15 years."

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Lord Laird: The post office network is part of the fabric of rural life. In Northern Ireland, as elsewhere, the local post office is so much more than a retail outlet. We all have access to big shopping centres to which we drive, sometimes for many miles, to do the weekly shopping. But the local post office plugs gaps and helps the wheels of the local economy to run smoothly.

The two businesses, Post Office Ltd and Royal Mail, are strongly linked. I am surprised that the Government are using this Bill to sever that link, but we have been reassured that they will continue to operate a business agreement so that local post offices can receive the vital revenue stream for the work they do for Royal Mail. However, the very act of separating Post Office Ltd and Royal Mail undermines the potential value of that relationship to local post offices.

My amendment seeks to guarantee that local post offices are able to plan and operate their businesses safe in the knowledge that they will continue to receive the custom from Royal Mail that helps them survive as small businesses. It seeks to make that agreement binding in law for 15 years, a reasonable period during which the remaining network of post offices will have time to establish themselves. I beg to move.

3.45 pm

Lord Skelmersdale: My Lords, I readily understand why the noble Lord, Lord Laird, seeks to protect local post offices, not only in Northern Ireland but in the other far flung parts of the United Kingdom. The trouble is that, with this amendment, he has cast the agreement between Royal Mail and Post Office Ltd in what I would call a leaden block. Not only is 15 years very long term but it means that, when Royal Mail is sold, there will be absolutely no opportunity within that 15 years to change the agreement, which might well be to the benefit of both sides. In the initial sale, the pre-nup agreement, as the noble Lord, Lord Stevenson, has just called it, will come as part of that particular package, but, as I have said, over a period of perhaps very few years, it may be to the mutual interest of both sides of the equation to come to renew the agreement. As far as I can see it, the amendment of the noble Lord, Lord Laird, prevents that happening.

Lord Young of Norwood Green: Amendment 24PA, standing in my name, would ensure the continuation of the current inter-business agreement between Royal Mail and Post Office Ltd. The agreement should be in force before any disposal of an interest in a Royal Mail company and should include the definition of the relationship between that Royal Mail company and Post Office Ltd after the disposal.

Amendment 24P, in the name of the noble Lords, Lord Laird and Lord Rogan, seeks an inter-business agreement of 15 years' duration, while that in the name of the noble Lord, Lord Bradshaw, seeks one of 10 years' duration. We share the view that that would be a reasonable period, although Amendment 24PA makes the point at a different clause in the Bill. At this stage, I am sure that if Ministers could accept the principle then we could between us find the best place in the Bill to insert it.

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The noble Lord, Lord Skelmersdale, made a point about setting things in tablets of stone. I should have thought that there ought to be the capacity to review some of the detail of an inter-business agreement. The important thing is to establish it.

The Post Office is dependent on Royal Mail's business for a significant part of its survival strategy. More than one-third of its revenue, some £343 million, and one-third of sub-postmasters' pay, £240 million, is generated by selling Royal Mail products and services. If the two businesses are to be forced to separate, our concern is that a privatised Royal Mail might look elsewhere for a better bargain and for other retail outlets to sell its products. There is no guarantee it will use post offices to the same extent. The Bill does not safeguard the inter-business agreement through which Royal Mail guarantees use of the Post Office as its retail arm. When it comes to be renegotiated, a privatised Royal Mail could look to reduce costs by using other outlets such as supermarkets or high-street chains instead of post offices. To date, the Government have not agreed to undertake to extend the current, five-year IBA to 10 years.

Without an extended IBA, there is no guarantee that Royal Mail will continue to use the Post Office. In evidence to the Postal Services Bill Committee, the Minister, Ed Davey, stated:

"No previous Government have thought to put it on any different footing".

But then no other Government have needed to intervene on the inter-business agreement because no other Government have separated the Post Office from Royal Mail. The Minister tried to reassure stakeholders by arguing that both Royal Mail and the Post Office want an extended inter-business agreement. He further said in evidence to the committee:

"I refer the Committee to what the chief executive of Royal Mail, Moya Greene, and Donald Brydon, the chairman, said. Moya Greene said it was unthinkable that there would not be a long-term relationship between Royal Mail and Post Office Ltd. Donald Brydon said that he wanted to have the longest possible legally permissible agreement".

The stated aims of the current management of Royal Mail, while welcome, are insufficient reassurance. The relationship between the two companies is one of imbalance. The Post Office cannot survive without Royal Mail, yet Royal Mail could succeed without the Post Office. Ed Davey went on to argue in his evidence to the committee:

"If you actually wrote that there should be a contract between two companies that are going to be separate companies into law, I think that it would be subject to serious legal challenge". -[Official Report, Commons, Postal Services Bill Committee, 11/11/10; cols. 121-23.]

However, he has provided no evidence to support this position. Given the importance of retaining the relationship between the two businesses and the risk of leaving its maintenance to the discretion of Royal Mail, the Government should instead require a 10-year IBA as part of the Bill and ensure that this meets the requirements of EU competition law. To do so could only strengthen the position of the Post Office. As I understand it from a recent discussion with the Post Office, it is indeed seeking to establish a legally binding agreement with Royal Mail.

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Consumer Focus has warned of the risk to the Post Office of the lack of a long-term IBA. It has argued that the number of post offices could fall by 37 per cent, from its current level of 11,900 to a minimum number consistent with the Government's access criteria, 7,500. The National Federation of Sub-Postmasters believes that a minimum 10-year IBA is essential and that, in order to avoid further post office closures, the existing levels of Royal Mail work at post offices must be maintained, with a minimum 10-year IBA between the two companies.

Post offices-predominantly those in rural areas-are still struggling to survive; they are finding it hard. Only 4,000 of the UK's 11,905 post offices are economically viable and, despite assurances from the Government, which we welcome, that there will be no further programme of post office closures, branches are still closing every week. More than 150 post offices have closed on a long-term temporary basis this year alone, with no absolute guarantee that they will reopen. So there is genuine concern here. The 900 post offices that are currently up for sale, an issued referred to George Thomson, the General-Secretary of the National Federation of Sub-Postmasters, is an unusually high number. Many sub-postmasters are retiring or leaving the business because of the low levels of revenue generated in sub-post offices and the Post Office is struggling to find alternative premises and service providers.

The post office network can ill afford to lose any more work. That is why it was unfortunate, to put it mildly-it is my attempt at irony-that the Post Office's contract to award 400,000 green giros a week has recently been lost. This provided 400,000 transactions a week, a significant of level of footfall supporting the network and around £70 million in revenue over five years to Post Office Ltd. It strikes an unfortunate note given the recent statements by the Government that they are determined to ensure that post offices will be the front office for a number of government services. I would welcome the Minister's comments on that decision.

As I have said, the Government have rejected a number of opportunities to make that commitment firm in this important legislation. They have declined to accept a statutory commitment, as exists in countries such as Germany and the Netherlands, to a figure of 11,500 offices; they have rejected embedding into the Bill the access criteria stating how close your nearest post office will be; and they have even rejected empowering Ofcom to adjust the statutory commitment over time. We do not doubt the Government's good intentions but it will take more than that to require a privatised Royal Mail to use the post office network to the same extent as now.

European competition law is trailed as a possible obstacle to an inter-business agreement. The Minister for Postal Services told the Public Bill Committee in another place:

"I am unaware of any statutory precedent for requiring particular commercial terms between two independent businesses".-[Official Report, Commons, Postal Services Bill Committee, 23/11/10; col. 360.]

However, there is no precedent for separating the Royal Mail from the post office network. The National

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Federation of Sub-Postmasters has said that there is nowhere in the world where this has happened. It is the role of new legislation to create precedents. It is because of the precedent of totally separating the Post Office from a privatised Royal Mail that we seek to underpin the relationship with the post office network.

We hope that the Government will reconsider this vital business agreement, which will ensure not only an enduring relationship but the future of the Post Office. I am conscious of the time and I shall cut short my contribution. I look forward to the Minister's response.

Baroness Wilcox: In these amendments, noble Lords express a concern that has been debated at length in the other place and in other fora-namely, that taking Post Office Ltd out of the Royal Mail group of companies will put at risk the commercial relationship between Royal Mail and Post Office Ltd, and therefore the post office network. The amendment also seeks to provide for any situation where the universal service provider may no longer be Royal Mail alone. I share the noble Lords' laudable interest in ensuring that a strong commercial relationship is maintained between Royal Mail and Post Office Ltd but the approach taken in the amendment-legislating for a contract of a certain length-is not the way to achieve our shared objective.

In the evidence given by various stakeholders to the Public Bill Committee in the other place, strong backing was given for the separation of Royal Mail and Post Office Ltd. Let me reassure this House that the separation of Post Office Ltd and Royal Mail will not lead to dangers for the post office network. Operationally, these companies are reliant on one another. Post offices carried out more than 3 billion transactions for Royal Mail in 2009. They will continue to be partners because there will remain an overwhelming commercial imperative for the two businesses to work together.

In her evidence to the Public Committee in the other place, Moya Greene, the chief executive of Royal Mail, called the post office network,

She also said that it would be "unthinkable" for there not always to be a very strong relationship between the Post Office and Royal Mail. To underline this point, Donald Brydon, Royal Mail's chairman, pledged in his evidence to the same committee that, before any transaction took place, a continued long-term commercial contract will be put in place between the two businesses for the longest duration that is legally permissible. On Report in the other place, the Minister for Postal Affairs pledged to the House that the Government will ensure that this commitment is upheld. I repeat that pledge to your Lordships today.

I also remind your Lordships of my commitment to consider the amendment to Clause 2 proposed by the noble Lord, Lord Whitty. His amendment would have ensured that information regarding the relationship between the two companies is included in the report laid before Parliament when a decision has been taken to dispose of shares in a Royal Mail company. I hope to bring forward a government amendment on Report to address those concerns which I believe will also provide greater comfort to the noble Lords bringing

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forward these amendments today. However, I would like to explain why I cannot accept these particular amendments.

In these amendments, the noble Lords, Lord Laird and Lord Rogan, seek to place the agreement between Royal Mail and Post Office Ltd on a statutory basis, requiring a minimum duration to the contract of 15 years. The noble Lord, Lord Young, and his colleagues on the Front Bench also specify that the Secretary of State should ensure that an agreement of at least 10 years is in place. As was discussed in the other place, legislation is not the appropriate place for the commercially sensitive terms of a relationship between two independent businesses to be settled. These negotiations are best left to the businesses themselves, which know far better than we in this House their customers, the markets they serve and the services they require of one another. Contractual negotiations between these businesses will involve a complex interaction of many different factors, such as pricing, volume, service levels and duration. Focusing on the duration of the contract would simply not achieve our shared objective of ensuring the strongest possible commercial relationship between Post Office Ltd and Royal Mail. The experts-the businesses and their advisers-should negotiate and agree the commercial relationship between the two businesses for the long term, rather than us in Parliament. What the Secretary of State and indeed the Government can and will do is to ensure that there is a contract in place between the two businesses before separation. Most importantly, government can of course help to create the conditions in which both businesses can flourish in partnership with one another. One thing is certain: a struggling Royal Mail will lead to problems for the Post Office. This Bill introduces the ability to bring in much-needed private capital for Royal Mail to invest in its transformation so that it can offer the very best service.

4 pm

Amendment 24P also envisages a scenario where Royal Mail is not the only universal service provider. That is an extremely unlikely scenario for the foreseeable future and one that can come about only in two very specific circumstances. In short, those circumstances would mean that Royal Mail was facing a crisis and unable to provide the universal service on a sustainable basis. I am afraid the idea that we should tie the hands of the universal service provider under such a scenario is not one that I believe to be sensible. But it is of course important, too, that the Post Office continues to offer the very best possible service to Royal Mail, as well as to other current and potential clients. Our £1.34 billion funding package to the Post Office over the spending review period will ensure that the service provided by post offices is modernised and improved, that people continue to see their local post offices as the natural and convenient place to access Royal Mail products, and that the Royal Mail management continues to see the Post Office as its retail partner of choice. It is by attracting customers for all types of services that the Post Office will ensure its future success. With this Government's funding and support, I believe that is precisely what will be achieved. As such, I would ask the noble Lord to withdraw his amendment.

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With the leave of the House-and I apologise for trying to read a note in the middle of my answer-time apparently is pressing. The Clerk of the Parliaments is about to stand up and leave. I gather that this is his last stint on duty in your Lordships' Chamber, and I feel that it would be appropriate to offer him at this moment, from all sides of your Lordships' House, our very best wishes and enormous thanks for the good-natured care and attention he has given us over a period of quite a few years. On behalf of all of us, I wish him good fortune and thank him very much indeed.

Noble Lords:Hear, hear.

Lord Young of Norwood Green: My Lords, I thank the Minister for her response. I have a couple of comments to make. She talked about a long-term contract that is legally permissible. I would welcome some elaboration on what the Government envisage. We constantly talk about this long-term contract that is legally permissible, but somehow we seem to be short on finding out what is the longest contract that is legally permissible. That creates a feeling of uncertainty. If she does not envisage that this is the appropriate place for that contract, in the legislation, can she make it clear that the Government will ensure that there is a contract in place before separation?

Although we welcome the £1.3 billion funding package, the other concern that I addressed in my contribution, to which she did not respond, was that the funding package is good but that it also requires commitment in business coming from the Government. As I pointed out, in the first test that we saw on this, on the green giro cheques, the Post Office did not get the contract. In our view, and in that of a number of people, that was a significant contract. Before I make up my mind, I would welcome a response on what is legally permissible with a long-term contract, or an explanation of what the Government are doing to get that answer if the noble Baroness does not have it, and on the commitment to ensuring that government business will go to the Post Office.

Baroness Wilcox: We have gone on record in the other place and I have repeated it here today. I have no doubt that the noble Lord will read it but I will write to him to clarify further, as best I may. I understand about the business. In fact, the contract was not that big but the Post Office had to bid for it. We are very encouraging of all government departments to bear in mind the work they may be doing themselves but which the Post Office could do better for them. We are encouraging all departments to look again and think carefully about what work they can start to bring forward that could be better done by the Post Office.

Earl Attlee: My Lords, I remind the Committee that the amendment was moved by the noble Lord, Lord Laird.

Lord Laird: My Lords, I thank the Minister and all noble Lords who took part in the debate. I was particularly interested in the remarks of the noble Lord, Lord

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Skelmersdale. I will consider these matters carefully and may return to them on a different occasion but I propose to withdraw the amendment at this stage.

Amendment 24P withdrawn

Clause 34 agreed.

Amendment 24PA not moved.

Amendment 24PB

Moved by Baroness Dean of Thornton-le-Fylde

24PB: After Clause 34, insert the following new Clause-

"Indebtedness of potential USP

(1) OFCOM, in designating a postal operator as a universal service provider must take into account the financial indebtedness as a proportion of the value of the company of any potential USP, and may limit this indebtedness to such a percentage as OFCOM may from time to time determine.

(2) For the purpose of this section-

(a) "financial indebtedness" means, at any time, the aggregate outstanding principal, capital or nominal amount of any indebtedness of the company calculated in accordance with guidelines published by OFCOM, and

(b) "value of the company" means the value of the company's assets calculated in accordance with guidelines published by OFCOM and taking into account the timing of material transactions affecting that value."

Baroness Dean of Thornton-le-Fylde: My Lords, I was encouraged, and I hope rightly so, by the Minister's response that this matter would be considered between now and Report. Will that consideration include ensuring that we are not faced with Ofcom regulating after the sale, and that we have cover for the sale itself? If I had that assurance, I would be delighted to withdraw the amendment.

Lord De Mauley: I am sorry. May I ask the noble Baroness to repeat that? I was having words in my right ear.

Baroness Dean of Thornton-le-Fylde: I noticed that the noble Lord was somewhat distracted. My concern on this amendment is that if, on looking at the indebtedness of a potential USP, the Government come forward with a wholly acceptable measure, they do not do so after the boat has sailed-in other words, not after the sale. That is because the debt level which may or may not be raised by whatever model the Government decide on for the sale could still burden the company, although there would be provision for the future. Will the Minister please take that into account when he considers the matter before Report?

Lord De Mauley: Of course, my Lords.

Baroness Dean of Thornton-le-Fylde: I thank the Minister very much for that. I beg leave to withdraw the amendment.

Amendment 24PB withdrawn.

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Clause 35 : Designated USP conditions

Amendment 24PC not moved.

Clause 35 agreed.

Clause 36 agreed.

Clause 37 : USP access conditions

Amendments 24PD to 24W not moved.

Clause 37 agreed.

Schedule 3 : Further provision about access conditions

Amendments 24WA to 24WG not moved.

Schedule 3 agreed.

Clauses 38 to 41 agreed.

Schedule 4 agreed.

Clause 42 : Review of costs of universal service obligations

Amendment 24X not moved.

Clause 42 agreed.

Clause 43 : Fairness of bearing burden of universal service obligations

Amendments 24Y to 24ABA not moved.

Clause 43 agreed.

Clause 44 : Contributions for meeting burden

Amendment 24AC not moved.

Clause 44 agreed.

Clauses 45 to 47 agreed.

Clause 48 : General access conditions

Amendments 24ACA to 24AH not moved.

Clause 48 agreed.

Clause 49 : Consumer protection conditions

Amendment 24AHA not moved.

Clause 49 agreed.

Clause 50 agreed.

Schedule 5 agreed.

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Clause 51 agreed.

Schedule 6 agreed.

Clause 52 agreed.

Schedule 7 agreed.

Clause 53 agreed.

Schedule 8 agreed.

Clause 54 agreed.

Amendment 24AJ not moved.

Clauses 55 to 57 agreed.

Clause 58 : Section 57: supplementary

Amendment 25

Moved by Earl Attlee

25: Clause 58, page 36, line 36, at end insert-

"( ) An order under subsection (6) applying an enactment under which a criminal or civil penalty could be imposed may not provide for the penalty to be greater than that which could be imposed under the enactment."

Earl Attlee: My Lords, I shall speak also to Amendment 31. Amendment 25 implements a recommendation made by your Lordships' Delegated Powers and Regulatory Reform Committee in its report on the Bill. The Government have also accepted the second and final recommendation by the committee, and we will come to that in a later debate.

Amendment 25 relates to Clause 58. This clause allows the Secretary of State to apply, with or without modifications, certain provisions of the Enterprise Act 2002 to appeals made under Clause 57 of this Bill. Amendment 25 ensures that this power is not broad enough to permit increases in civil or criminal penalties beyond the levels specified in the Enterprise Act 2002. I believe that this is a sensible and appropriate change and one that I hope your Lordships will welcome.

Amendment 31 seeks to remove from the Bill a reference to Schedule 5 to the Government of Wales Act 2006. Schedule 12 to the Bill included a consequential amendment to remove references to "licensed operators" and "Postcomm" in Schedule 5 to the Government of Wales Act. However, Schedule 5 to the Government of Wales Act will cease to have effect from 5 May this year. This is a consequence of the yes vote in the recent referendum on the powers of the Welsh Assembly and the resulting changes to the Assembly's legislative competence. Schedule 5 will be replaced by Schedule 7 to the Government of Wales Act, in which the references to postal operators are not so defined and thus do not require amendment.

I hope that your Lordships will feel able to accept these government amendments. I beg to move.

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4.15 pm

Lord Stevenson of Balmacara: I thank the Minister for introducing these amendments. We on this side have no objection to them. They carry forward sensible recommendations from the Delegated Powers and Regulatory Reform Committee which we support in relation to these amendments and the subsequent amendment to the Government of Wales Act.

Amendment 25 agreed.

Clause 58, as amended, agreed.

Clause 59 agreed.

Clause 60 : UK postage stamps bearing image of Her Majesty

Amendment 25A

Moved by Lord Christopher

25A: Clause 60, page 37, line 21, leave out "may" and insert "must"

Lord Christopher: My Lords, I am slightly nonplussed to see two of these amendments grouped together as they are entirely at one, but we will live with that. As the Committee knows from what I have said previously, I am not sure that we are likely to get a buyer for Royal Mail that we shall come to love as much as we love Royal Mail. However, one has only to express some surprise that Cadbury chocolate is now made by an American cheese firm to realise that these difficult things happen.

We seek to achieve that, whatever may happen, the Queen's head will appear on stamps. I hope that the Government will have no difficulty accepting this strengthening of the Bill. My noble friend Lord Clarke and I are slightly nonplussed because he has a print of the Bill that already includes the word "must", and I have a print of the Bill that says "may". I am happy with his print and I hope that the Minister will not contradict it.

I wish that I could speak as briefly on the other amendment that I wish to address, but I do not think I can. The reason for that is quite simple; I was wholly ignorant of the existence of a post office museum on such a scale as the one that exists. Ministers have tended to talk about an archive, and I always think of dungeons and cellars when in fact it is a very substantial museum. It was established as an independent charity and the principal and significant funder is Royal Mail. The museum has post office and Royal Mail records dating from the 17th century and is designated as an outstanding collection, which I do not believe is gained easily. It has statues and an archive that matches any that you might find at Kew, and illustrates the history of the postal system. I shall list some, at any rate, of its artefacts. It has stamps and their artwork; photographs, posters and design; records relating to the birth of mass communication; and technological reform in the Victorian era and the Penny Black stamp. It also has material relating to war and emergencies; material

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relating to films, broadcasting, censorship and politics; maps; and records of staff, finance and buildings essential to local and family history. Ten other things are also listed.

The museum is of great significance to the history of this country and to some degree the world, because we led the way in postal service. It has 36 full-time staff and 20 regular volunteers. It was part of the London Festival of Stamps in January this year. It accepts visits from schools and staff make visits to schools. There are around 1 million public visits, either on the net or in person. What is at stake is the money that keeps it going. One had better be frank about this; it receives £725,000 a year in cash from Royal Mail for its archive services and nearly £750,000 of items in kind. It has a donation-for which I trust Royal Mail gets tax relief-of £1,280,000 a year. The total is nearly £2,750,000. The amendment proposes that whoever takes on Royal Mail shall take on responsibility for the archive of the history of 400 years which it has inherited.

Lord Clarke of Hampstead: My Lords, obviously I completely support my noble friend. I do not intend to delay the Committee any longer than I have to, except to say that many years ago I went to the then postal museum in Bruce Castle in Tottenham-I hope noble Lords will forgive me for mentioning Tottenham, the day after its problems. It was also the home of Rowland Hill and the City of London Middlesex Regiment. I remember asking the curator of the museum, "Are you a philatelist? Do you collect stamps?". As a postman, I never collected stamps because they lay all over the floor and you did not want to get involved with what was then called the investigation branch. Miss Flint turned to me and said, "Mr Clarke, stamps are just a bagatelle. I collect the waybills for the livery and the hay for the horses that fell off the stagecoaches between the various cities". So I was put in my place about postal history.

I am concerned about the memorials to the fallen from two world wars in a number of Post Office buildings. I am concerned that the many works of art should be preserved, and I wholeheartedly agree with my noble friend Lord Christopher that we must provide the wherewithal.

Above all, my reason for speaking is to ask the Minister, who knows that I have this interest, what has happened to the Post Office railway. Do we still own it? I know that it is in mothballs. We used to get mail conveyed under the ground using an efficient post office railway system rather than having trucks rumbling around the streets, filling the air with fumes. I am just curious. Has it been sold already by the Post Office or is it an asset that will be taken into account in the valuation, which I hope will happen before too long?

I fully support the three amendments, and am anxious to know what has happened to that train. Some nasty people put me in one of the carriages when I was 15 years of age and sent me from Mount Pleasant up to Oxford Street, and I had to find my own way back. That was a punishment in those days for cheeky boys. It was a terrifying experience, but I want to know what has happened to the railway.

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Lord Brooke of Sutton Mandeville: My Lords, it is a pleasure to follow the noble Lord, Lord Christopher, with whom, more than 25 years ago, I negotiated across a table in the Treasury on the pay and conditions at the Inland Revenue. Likewise, it is a pleasure to follow the noble Lord, Lord Clarke of Hampstead.

This is my first participation in the proceedings on the Bill, so I should declare a coincidental interest. When I was a temporary part-time undergraduate postman in Hampstead, nearly 60 years ago, I was assigned to a delivery round in Hampstead, later served so remarkably by the noble Lord. When I told him that I had delivered Christmas mail to the late Sir Ralph Richardson, who used to open the door to me in a silk dressing gown, the noble Lord, Lord Clarke, could give me the particulars not only of that address but of the whole round. When later I lived on the south face of Highgate West Hill, immediately overlooking the garden of the noble Lord, Lord Healey, on the Holly Lodge Estate, our regency terrace abutted that shrine of philatelists, the grave of Sir Rowland Hill, the inventor of the penny stamp, in the northern element of Highgate Cemetery. I would not want whoever lives in my house today to be troubled at night because Sir Rowland was turning in his grave at the treatment of his remarkable inheritance by either Her Majesty's Government or your Lordships' House.

It is also a pleasure to serve as a foot soldier in the gallant band assembled under the command of the two noble Lords opposite, whose concern, inter alia, is to ensure the maintenance of our postal heritage, which is the subject of the amendment. I would be misleading your Lordships' House if I implied that either my signature or, I suspect, that of my noble friend Lord Boswell beside me, was written in invisible ink between the particular words in all three amendments in the group. Certainly, in my case and, I suspect, that of my noble friend Lord Boswell, my heart is loyal to the general calls of the noble Lords opposite. The whole House is in their debt for providing the hook on which to hang an exploration of how far Her Majesty's Government constructively concur with that concern.

Given the interest shown in the archive beside Mount Pleasant, not only by Back-Benchers but by Ministers-I know that my noble friend Lady Wilcox has paid a visit to it, and I hope that she was as impressed as I was when the All-Party Parliamentary Arts and Heritage Group had an enthralling visitation-I am reasonably clear that Her Majesty's Government are seized of the issue. At the end of this debate, we shall all have a clearer idea of how seized they are of a solution.

Of course I can see the problems that this inheritance confers on HMG but, at this time, those problems should be a spur to an imaginative and constructive solution rather than a response of despair and inertia. When I was at the Harvard Business School more than half a century ago, an engaging professor reminded us that if you did not know where you were trying to get to, any road would get you there. Conversely, in this instance, the scale of the inheritance and the United Kingdom's pivotal role in postal history provide the knowledge of whence we have come. The existing collection, as the noble Lord, Lord Christopher, said, is designated in the "outstanding" category, which

6 Apr 2011 : Column 1807

makes it the equal of the National Archives at Kew, and no one in your Lordships' House would suggest that we should not seek to preserve those.

I should warn my noble friend that this is a battlefield over which I have fought previously. My favourite-ever Committee stage was that of the Greater London Authority Bill in the other place, where 27 of the Committee's 29 Members sat for London seats. The only outsiders were the Minister's PPS, who was from Aberdeen, and the Official Opposition's Whip. The latter had, in his day, been the leader of another metropolitan authority. Much of the initial Bill, which grew by more than 50 per cent in the number of its clauses by the end of its progress, was devoted to strategies that the Mayor had to prepare. However, there was to be no strategy for archives. I moved a small amendment in a short speech saying that there should be such an archival strategy, but warned the Minister, the right honourable Nick Raynsford MP, that if his response showed no sympathy for the idea, I had a much longer speech up my sleeve for my response. He showed me no sympathy. I delivered my gargantuan but pertinent oration. The amendment was not carried, but the debate was the foundation for a similar amendment that was carried in your Lordships' House.

I reassure the Minister that I am not uttering that threat today because I have every confidence that her heart is in the right place on this issue. However, I will listen closely to what Her Majesty's Government propose. Since I have not put down an amendment, I would be abusing the procedures of your Lordships' House-as some may feel I have already-if I aired my views, except to say that if the Government are, almost certainly sensibly, reluctant to load burdens on to the private sector for heritage maintenance. I suspect that transferring this task to Post Office Ltd would contain what an American advertising executive once described in my hearing as "the mucus of a good idea". To mislay or disperse four centuries of postal history would be a stain on the escutcheon of any Administration, and especially on that of the coalition.

4.30 pm

Lord Boswell of Aynho: My Lords, I am delighted to follow my noble and good friend, Lord Brooke of Sutton Mandeville, whose speeches I always enjoy. The House has enjoyed one this afternoon. We owe an equal debt of gratitude to the noble Lords, Lord Christopher and Lord Clarke, on the opposition Benches, for initiating this debate. I share with them the spirit of these amendments, and a belief in the importance of the subject. I should perhaps make clear to noble Lords that in another capacity and in another place I was involved in the establishment of the All-Party Parliamentary Group on Archives, of which in due course I became the founder chairman, and of which I am still an officer. We brought it into being because we thought that archives were a part of our heritage that was unsung, understated and always vulnerable to financial pressures, and that it needed a closer focus. I think that we were right to do that.

The group sits alongside the All-Party Parliamentary Arts and Heritage Group. As my noble friend pointed out, some of us were privileged to attend the British

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Postal Museum and Archive for an intensely interesting morning. Not only was it intrinsically interesting, but it showed the wider importance of archives, for example by showing the relationships involved in the formulation of new stamp designs and the exchanges before they were approved and came into circulation.

I will add at this point there are always two tests. One is the importance of business archives generally. In the capacity that I mentioned, I attended a meeting in this House at which the Business Archives Council launched a new guide for businesses. It was very well attended and addressed by the Governor of the Bank of England. It showed the importance of business archives. In the wider context of heritage, we are conscious that, for example, Minton and Wedgwood are under severe pressure at the moment, and it is important that we do not slip this catch in the course of the Postal Services Bill.

My second point is more generic. Wherever one transfers an activity or asset, or any combination, to private contractors or undertakers, it is particularly incumbent on us to make sure that our heritage is preserved. As I mentioned to the House, the British Postal Museum and Archive is a major resource. It represents the distillation of many years of postal and official history. I am privileged to know its director and the chair of its organising committee, who is both a neighbour and a personal friend. We should take time-I am sure that the Minister's good will is there-to see that we get this right.

I say to the House-I need not do so at length-that there are complexities in this. Many of them are set out in the amendments that noble Lords have brought forward. I look forward to the Minister's take on this and to hearing about the ways in which she might consider taking this forward. For a start, there is an archive and an associated obligation to what was once a department of state. Like any other archive, it has a relationship with the National Archives; that should be understood. It is a continuing act of state and an obligation that we should maintain.

Then there is the postal museum. By their nature, the assets are somewhat less intensely valued, although they may have a very high intrinsic and visual interest. The assets are not quite the same as those of the archive, and that is why it is called the British Postal Museum and Archive. That leads me to suggest that there may be different solutions in different cases. As I understand the Bill-this is also my first entry into the Committee stage-there is reasonable provision, at least within the clause to which the amendment is attached, for looking at the public record function and seeing that that is satisfied. That of course applies particularly to existing records, which is I think step one of the process. Then there is the question of what happens when people discharge public duties in the future and whether securing the continuing acquisition of relevant archives will be adequately tied down by the Bill.

There is also the question of proper resources. I remember from our visit that the museum is under some pressure with regard to its existing resources, and the noble Lord has already explained the financing. Nothing is easy in the heritage and archive world at

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the moment. However, we need to see that the whole thing does not fall down because it somehow misses out on financing.

Although not absolutely essential, it would clearly be very beneficial to the public interest to make sure that the postal museum and archive continued to be collocated on one site, with the possibility of their development either there or elsewhere as an asset to the heritage more generally. Therefore, there is both an archive interest and a wider heritage interest.

I know that my noble friend Lady Wilcox has visited the museum and I hope that she was impressed, as we were. I am sure that this is a problem that is capable of solution, and we look forward to her response in leading the way towards it.

Lord Young of Norwood Green: My Lords, I suspect that everything that needs to be said has been said already and I do not want to fall into the trap of saying "but not by everyone". There is a common thread relating to heritage. I think that keeping the Queen's head on stamps would be a reasonable tribute as we come up to her Diamond Jubilee. An amendment on that matter was the only amendment passed in the other place, and I look forward to hearing a confirmation of that. Other noble Lords have eloquently stressed the importance of the archive. When companies are privatised, that poses a real threat to their records, and I witnessed what happened to British Telecom's archive and heritage. Therefore, I, too, look forward to the Minister's response.

Baroness Wilcox: My Lords, I very much understand and appreciate the sentiments behind these amendments. Royal Mail has a tremendous history and heritage. I know that the noble Lords, Lord Clarke and Lord Christopher, have both campaigned to secure Royal Mail's future for many years, and they have a strong desire to protect the company's proud heritage.

As noble Lords have heard, I recently visited Royal Mail's archive and saw for myself some of the public records, including a sheet of Penny Black stamps-something that I thought I would never see-and museum artefacts on display in the archive. I also saw on my visit the designs for stamps commissioned by the then Postmaster-General, Tony Benn, working with the artist David Gentleman, which did not include the image of Her Majesty. Thankfully, as I think the Committee will agree, these stamps were never issued and the tradition that the noble Lords are seeking to preserve through Amendments 25A and 25B continues to this day.

Clause 60 provides the Secretary of State with a power of direction that can be used to require the universal service provider to maintain that tradition and to make sure that the stamps receive royal approval before they are issued. Amendment 25A would require the Secretary of State to issue such a direction, while Amendment 25B would require that any such direction was subject to the affirmative resolution procedure.

This clause was discussed in the other place and, as was mentioned by the noble Lord, Lord Young, the Government subsequently introduced an amendment

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to strengthen the safeguards for protecting the future of this unique tradition. We are not here today to remove that amendment in any way. The current voluntary framework governing the approval of stamp designs has been in place for more than 40 years and it has worked well.

Royal Mail has been, and is currently, doing just what a direction would require it to do. I would therefore like to draw on a piece of timeless wisdom that says, "If it ain't broke, don't fix it". That is not to say that we should not have the tools in place to fix it, if fixing were ever required. That is precisely what this clause provides for. However, this power is a failsafe that should be drawn on only when required. It can easily be drawn on by the Secretary of State if there is ever a justifiable need to do so.

On Amendment 25B, we take the view that if there is ever a need to use the power of direction, the direction itself will not be of a nature to warrant the use of the affirmative resolution procedure. This power of direction can be used only for a limited and focused purpose, in effect to re-impose time-honoured practice and processes. Furthermore the direction will be imposed only on the universal service provider, and Clause 60 allows for any such direction to be varied or revoked by subsequent directions. We believe that this clause as it stands is fit for purpose and proportionate to the important task of protecting the future of the sovereign's image on UK postage stamps, if such protection is ever needed. I hope that I have been able to reassure the noble Lords on this.

On Amendment 29A, and as noble Lords will recognise, archive status and museum collection status are different, although both are currently maintained by the British Postal Museum and Archive-the BPMA. The archives of Royal Mail and its predecessors are part of the public record, and they will remain part of the public record after we dispose of shares in Royal Mail. The Bill makes this clear and ensures that no changes can be made to the way in which the records are kept without consultation with the Keeper of Public Records, which is the National Archive. As public records, the archive must be preserved, maintained and made available to the public in accordance with the Public Records Act 1958. Amendment 29A would, however, place additional requirements on Royal Mail that would not apply to other organisations which have responsibility for keeping public records. I do not think that it would be right to place an additional burden on a privately owned Royal Mail that Parliament does not place on publicly owned bodies.

The museum collection is not part of the public record; I understand that its ownership was passed to the BPMA in 2004. Although the Government, like noble Lords, wish to see the collection maintained, we do not believe that this should be a statutory requirement on Royal Mail. It is currently not a statutory requirement for Royal Mail to maintain the collection. Royal Mail funds the BPMA because it recognises the importance of its heritage; it does so not because it is publicly owned but because heritage is part of the Royal Mail brand. I would fully expect this approach to continue in the future. Royal Mail, whether privately or publicly owned, should be proud of its history and use it to positive advantage in an open and transparent way.

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I read in my brief that British Telecom is a good example of a privatised company respecting and maintaining its heritage, although the noble Lord, Lord Young, has just given us an instance of when it was not. It has a purpose-built repository for the archive which is located in Holborn; and although the dedicated British Telecom Museum closed in 1997, it has invested some £6 million in establishing its Connected Earth initiative which provides access to its museum collection online and at its 10 partner museums located around the United Kingdom, including the National Museum of Scotland, the Museum of London and the Amberley Museum and Heritage Centre.

The noble Lord, Lord Clarke, mentioned the Post Office underground railway-Mail Rail. He was even kind enough to mention it to me the other day in passing so that I would not get caught out, as I would have done if he had mentioned it only today. I understand that the Post Office (London) Railway Act was passed by a Select Committee of this House in 1913. Construction began in 1914 but was halted during the First World War, when the tunnels were used to store and protect art treasures belonging to the National Portrait Gallery and the Tate. The railway finally opened in 1927. At its height it was carrying an estimated 4 million letters a day. Royal Mail decided to stop using Mail Rail for operational reasons in 2003, primarily because many of the mail centres that Mail Rail serviced had been closed or changed their function. Of the nine original stations, Royal Mail still owns only four of the properties.

Royal Mail is not unique in deciding to disuse such underground railways. The German and United States postal service providers have similar systems, but they also no longer carry mail. In fact, the United States railway in Chicago is now used to carry rubbish, as part of the city's waste disposal system. Royal Mail has not made any decisions about the future of the railway; it does, however, continue to maintain the tunnels, to ensure that they remain safe and sound. Although there have been previous discussions about putting the tunnels to commercial use, no commercially viable solution has been developed so far. Any suggestions that your Lordships may have on good commercial uses for the railway can be sent on a postcard to Royal Mail at 100 Victoria Embankment. I am sure that the company would be only too delighted to offer a prize to any offer put forward and successfully processed.

In all seriousness, in response to the noble Lords, Lord Boswell, Lord Brooke of Sutton Mandeville, Lord Christopher and Lord Young, I assure them that I recognise their concerns about Royal Mail, its heritage and how it should best be preserved in future. I would like to take away the issues that they have raised for further consideration and will return to the matter at Report. I ask that, with those reassurances, the noble Lord will be kind enough to withdraw his amendment at this time.

4.45 pm

Viscount Eccles: Very briefly, I recall that 55 years ago, I used to be responsible for making 5 foot 8 inch diameter tunnel sections for the GPO tunnel system. The firm was called Head Wrightson, and it made many tonnes of the segments that made up the tunnel.

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There is no question of them deteriorating. As with the Northern line, which is older, they will be there for ever, because in London clay, cast iron has an almost infinite life. You will notice that when the Underground does things on old lines, it does not have to replace the tunnels.

On a more serious point, I urge my noble friend to have serious thought about the non-public records part-what could be loosely described as the stamp collection. It would be a great shame if it were not kept coherent and whole. I do not know if that can be achieved by some partnership agreement with the British Museum, for example, or some other imaginative idea about who would undertake some combined financial responsibility-perhaps partly charitable and partly public money. It would be a great shame if it was not kept together.

Baroness Wilcox: I will of course add the comments of the noble Viscount, Lord Eccles, to those that we have already heard in this debate. They will form part of our discussion before we come back at Report.

Lord Christopher: I thank noble Lords who have spoken in support of the amendment, which is very encouraging. I was going to call the noble Lord, Lord Brooke, my noble friend, because, as he said, he has been a friend for about 25 years. One of his remarks reminded me of a true story. I have been thinking about this for some time. The Inland Revenue has-or had; I hope that it still has-a very large and valuable collection of stamps which it seems to me appropriate to put into the museum. Some of them used to be exhibited in three or four large glass cases as you walked into Somerset House. You could view the stamps and they were changed. One day, someone from Stanley Gibbons came in and asked to see the chairman. He said, "Do you know what you have in your glass cases?". The chairman said, "Well, stamps". "Yes, he said, but there is £1 million-worth in there". The stamps were then taken away. As far as I know, they are not being seen by anyone. That seems to me to be a great shame.

I thank the Minister for her remarks. Her early remarks were a bit technical and I will need to take some opinions on them but, in view of the assurances that she has given, I am content to withdraw the amendment.

Amendment 25A withdrawn.

Amendment 25B not moved.

Clause 60 agreed.

Clauses 61 to 64 agreed.

Schedule 9 : Transitional provisions for Part 3

Amendment 25C

Moved by Baroness Wheatcroft

25C: Schedule 9, page 100, line 17, at end insert "but they may not impose any conditions that could not have been imposed under Part 2 of the 2000 Act"

Baroness Wheatcroft: My Lords, it is precisely because I do not want what is now known in so many quarters as snail mail to be consigned entirely to our heritage

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that I have tabled Amendments 25C and 30. I must confess that I have never done a mail round, but I have pushed numerous leaflets through numerous doors. Sadly, I never encountered a famous actor in a silk dressing gown or, indeed, a famous actor at all, but I met a lot of Rottweilers. I therefore know that our post men and women take risks when they go out on their rounds, and I applaud them and want them to continue doing that, but I do not believe that we should isolate Royal Mail from competition in the long term. That is what these amendments are about.

They take it for granted that we will have a regulatory regime that will allow Royal Mail to charge a fair price and to determine what products it offers. We had much discussion about that earlier in the day and received reassurances that the new regulatory regime will be more accommodating. However, there need to be safeguards. Amendment 25C concerns the move over from Postcomm to Ofcom as the regulatory authority. I do not want to malign every regulator, but one has to note that among regulators there are many tendencies towards doing more rather than less. It is somehow in the nature of the beast. Amendment 25C aims to put a line under what the regulator of postal services can touch. It decrees that before the appointed day for the change over from one regulator to another a line will be drawn and no other services should be brought within the scope of the regulation. It may be a technical amendment, but it seems one worth moving. We do not want to see, for instance, motorbike couriers or cycle couriers drawn within the scope of the legislation. There may be many of us who would like to see cycle couriers reined in, particularly those of us who have encountered them while driving, but that is not the role of Ofcom. Amendment 25C is intended simply to make it clear to the market that there are areas of deliveries that will remain free of regulation. I believe that that is important.

Amendment 30 covers the delivery of some of those election addresses that I, for one, have pushed through many doors. As noble Lords will know, the Representation of the People Act 1983 entitles candidates to a free delivery of election mail. I see no reason why we should preserve a monopoly situation here where Royal Mail is the only deliverer of that free address. Assuming that Royal Mail is able to charge a fair and profitable price for delivering what is known as the final mile, it seems perfectly reasonable that any other postal operator should be free to tender for that business. My noble friends Lord Jenkin and Lord Eccles stressed in earlier amendments that what we want to see is a market where competition flourishes. I believe that more competition might generate more business and that Royal Mail could in the end be the winner from that rather than the loser. I beg to move.

Lord Young of Norwood Green: My Lords, I oppose Amendment 25C moved by the noble Baroness, Lady Wheatcroft, and Amendment 30 also in her name. I do not think we can say arbitrarily that we are going to draw a line in the sand. Who knows what situations may arise? I did not quite understand that or get a validation of that argument.

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As regards Amendment 30, we talked earlier about getting the balance right between trying to ensure the future of the universal service provider and competition. I am not sure why we would want to remove from the universal service provider this important and sensitive material in some cases, with a guaranteed standard of service and delivery of election material. The noble Baroness painted a picture whereby in the future it might be a competitive scenario but for the time being we believe that it should remain with the universal service provider.

Earl Attlee: My Lords, before turning to Amendments 25C and 30 in the name of my noble friend Lady Wheatcroft, I would like briefly to outline the important provisions that they seek to amend. The objective of Schedule 9 is to ensure a smooth transition between the current and the new regime, and to provide as much certainty to the market as possible. It enables Ofcom to carry out certain functions, including work on developing the new regulatory regime, during the transitional period between Royal Assent and the date at which Ofcom takes full responsibility for postal regulation on the appointed day. During the transitional period, Ofcom must determine the initial regulatory conditions, which will apply to postal operators until they are modified-if at all-once the Act fully comes into force and we move from a licensing to a general authorisation regime.

Amendment 25C seeks to add a requirement that Ofcom cannot impose any initial,

Postal Services Act 2000. I would like to reassure my noble friend Lady Wheatcroft that there is no need for such an amendment. The schedule already provides that initial conditions,

There is no chance therefore of involving, say, motor cycle couriers.

Given that existing licence conditions stem from the 2000 Act, they will of course need to be compatible with it. It is inconceivable that in practice something could be substantially to the same effect as the current licence conditions without being compatible with the 2000 Act. The schedule also provides that were Ofcom to modify an initial condition, it cannot do so in such a way that was not compliant with the 2000 Act. I hope that this provides my noble friend with reassurance and that she will feel able to withdraw Amendment 25C.

Amendment 30, which concerns the Representation of the People Act 1983, would substitute the words "postal operator" for "universal postal service provider" with the intention of opening up to government the option of utilising any postal operator for the delivery of election material at public expense. My noble friends propose to make this amendment to Schedule 12, "Minor and consequential amendments". While we see that there could be merit in opening up this area to competition, the proposed amendment cannot, in the Government's view, be considered a simple minor consequential amendment as it has significant wider policy implications for the management of elections.

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We would need to consider carefully all the implications and potential policy consequences before making any such change, and the timing of the Bill does not allow for that. I believe that this is an issue that requires further consideration, including discussion with other political parties, which I am sure will be of interest to the noble Lord, Lord Young. My officials have been liaising with their counterparts at the Cabinet Office, who have given an assurance that the matter is already on their radar for consideration and will be looked at as part of the wider work on the overall operation of elections following the referendum.

While I have sympathy with the intention of the amendment, I hope that my noble friend will accept this reasoning and not move Amendment 30 at the appropriate time.

5 pm

Viscount Eccles: My noble friend has referred extensively to Schedule 9 covering the transitional arrangements, to which the amendment moved by my noble friend Lady Wheatcroft also refers. Those arrangements are very necessary because it has been agreed by Postcomm itself that its present regulatory system is dysfunctional, although to be correct, I think the words used were "not fit for purpose". We are therefore moving from a regulatory system which is not fit for purpose to another one by another regulator. Of course I agree strongly with my noble friend in what she said about regulatory creep. So we are moving from an unsatisfactory situation into the unknown.

I have a second and rather more important point to make. My noble friend on the Front Bench keeps referring to Ofcom, which is absolutely right, but Schedule 9 gives the Secretary of State three order-making powers. Given that, we must ask the Government just to think through what they might say at the Report stage about this transitional period. It is all very well to say that Ofcom will do this and Ofcom will do that, but it is accountable to the Secretary of State who in turn is accountable to Parliament. If Ofcom makes a recommendation, it may have the power to make an order itself. It does in certain circumstances, although on many occasions it does not have it without the approval of the Secretary of State. What I think Members of the Committee on all sides are interested in is not just Ofcom's attitude towards regulation, but the Government's attitude to the system of regulation which is laid out in tremendous detail in the Bill and which, earlier in the day, my noble friend Lord De Mauley said would be given further consideration.

I am not sure that I have put it terribly well, but I think we still need to understand the basic attitude of this Administration towards a regulatory system for which, as it also said in Postcomm's February paper, the building blocks have yet to be constructed.

Earl Attlee: My Lords, it may be helpful to the Committee if I explain the extra flexibility that "substantially the same effect" clearly gives Ofcom compared with the wording of the amendment. Where possible, Ofcom should be trying to make the initial conditions compatible with the new regime. There may

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be circumstances where an existing licence condition is not technically capable of transferring to the new regime, but it is possible to create a new regime requirement that has substantially the same effect. I think that that would be a desirable outcome.

Baroness Wheatcroft: My Lords, I thank the Minister for his response. I am to some extent relieved to know that nothing other than minor changes will be possible under the legislation. However, I share the concerns of my noble friend Lord Eccles that regulatory creep is something that we need to be eternally vigilant about, so I trust that this will continue. On Amendment 30, I was delighted to hear my noble friend say that this is already under consideration, and I look forward to seeing how that progresses. I am more than happy to withdraw the amendment.

Amendment 25C withdrawn.

Schedule 9 agreed.

Clauses 65 and 66 agreed.

Clause 67 : Objective of a postal administration

Amendment 25D

Moved by Lord Stevenson of Balmacara

25D: Clause 67, page 41, line 4, after "order," insert-

"( ) the rescue as a going concern of the company subject to the order,"

Lord Stevenson of Balmacara: The amendment introduces an additional objective for the postal administration so that the main aim should be to rescue as a going concern the company that is subject to that order. This means that, instead of staying neutral as to whether the current universal service provider should be allowed to fail and should be replaced by an alternative or whether the company should be saved, the postal administrator would have a primary duty to seek to save the company.

When this issue was raised in the House of Commons Public Bill Committee, Mr Ed Davey said:

"We hope that we never find ourselves in either of those scenarios, and we do not expect that we will. Both procurement determination and the special administration provisions are genuine backstops, only to be used if the future of the universal service is at risk".-[Official Report, 7/12/10; Commons, Postal Services Bill Committee, col. 602.]

While it is reassuring to read what the Minister said and that backstops will exist, it is essential that the Bill properly reflects this intention.

Transferring all or part of the universal service provider to another company, should it find itself in financial difficulty and subject to a postal administration order, would be hugely disruptive to customers, to service provision, to the company and to its staff. While it may not always be possible to support the company and help it become a going concern, there should surely be a presumption that this is the first

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and least disruptive course of action to be pursued. If this is not possible, the option to pursue a relevant transfer of course remains.

Royal Mail operates on a huge scale. While the business is modernising successfully, should it find itself in financial difficulty, this would likely be attributable to significant market changes and potentially an unsympathetic regulatory regime which exacerbated the problem rather than supported the company as a universal service provider. Therefore, we propose a further amendment, Amendment 25E, to ensure that the postal administrator takes into account the interests of employees of the company. Should the business go into administration, it is hard to see that passing all or some of the business to an alternative mail operator would be good for the employees. It would clearly, where possible, be preferable to re-establish the business as a going concern, and that is why we make these proposals.

Amendment 26A refers to the regulatory powers exercisable during postal administration. We note that Clause 80 creates a huge power, including in Clause 80(5), which says:

"The Secretary of State may by order amend section 30".

The regulatory regime-in particular, access pricing-has been one of the most contentious areas of regulation since the introduction of competition into the United Kingdom. Indeed, the updated Hooper review of 2010 recommended the introduction of a new access regime to ensure the right balance between competition and the financial sustainability of the universal service.

It is rare for regulators to be loved and it is clear that Postcomm did not get the balance right. Among the outcomes of its tenure is the fact that Royal Mail's competitors now have more than 60 per cent of the pre-sorted, "upstream", bulk mail market, the most profitable business sector of the letters market. So we can certainly see how regulation can go wrong.

Unless the right balance is struck in pricing, there are likely to be further reductions in the universal service, at great cost to the public. The amendment would restrict the Secretary of State's hand so that an order to amend Section 30 may not do so in way which reduced the extent of the minimum requirements of the universal postal service. We hope that the Government will see this is a reasonable provision and support it.

Amendment 25F deals with postal transfer schemes and stems from the report of the Delegated Powers and Regulatory Reform Committee of this House, which invited the House to consider whether the Secretary of State's approval, so far as it relates to the exercise of power in paragraph 9 of Schedule 11, should be subject to the negative procedure. Schedule 11 contains provisions for transfer schemes to achieve the objective of a postal administration. New paragraph 9(4), proposed by the amendment, would set out the conditions for approval and modification of a postal transfer scheme by the Secretary of State. The Secretary of State has to have regard to the public interest and must consult Ofcom prior to any modification of the scheme, but there is no requirement to consult Parliament. The amendment would therefore strengthen oversight and accountability for the Secretary of State's approval or

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modification of postal transfer schemes. As the Bill stands, the Secretary of State has complete discretion to approve or modify a postal transfer order without any reference back to Parliament. The amendment would make such a decision subject to the negative resolution procedure as recommended by the committee. I beg to move.

Lord Christopher: These amendments certainly deserve support. One of the problems with writing the law is that you do not necessarily relate it to what is going on in the global economy. As I have said before, one should not rule out the prospect that whoever buys Royal Mail may get into difficulties and present you with considerable problems.

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