Rural Areas in Scotland: Additional Delivery Charges

(Limited Text - Ministerial Extracts only)

Tuesday 2nd July 2019 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

It is a pleasure to serve under your chairmanship, Mr Hollobone, and I congratulate the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) on securing this important debate on an issue that continues to be important for his constituents and those of other Members. I thank all hon. Members for their contributions and the passion with which they represent consumers in their communities.

As the hon. Gentleman will remember, we met last November to discuss his concerns about this issue and we have since corresponded, including my recent responses to the parliamentary questions that he has tabled. I understand the concerns that he and others who are here today have raised that consumers in some parts of Scotland are being charged more for delivery than those in other parts of the UK. I also recognise that similar issues exist for consumers in Northern Ireland.

I am pleased to take part in the debate and to outline the progress that has been made since this issue was last debated in Westminster Hall in a debate responded to by a previous Minister, my hon. Friend the Member for Stourbridge (Margot James), back in December 2017. The Government are committed to promoting growth in the UK economy. The growth in online shopping is increasingly important in achieving that and it is of particular importance to rural communities, where access to physical retail outlets is limited. As hon. Members have said, it is crucial that retailers are up front about their delivery charges, including where they deliver to, what they charge and when premiums apply. Consumers will then know where they stand and can make an informed decision before they purchase. That is what the law requires.

The Government strongly encourage businesses to provide consumers, as far as possible, with a range of affordable delivery options. To help to achieve that, the Government have ensured that everybody, including retailers, has access to an affordable postal service for deliveries across the UK under the universal service obligation, which has been mentioned in the debate. Through the universal service obligation, Royal Mail delivers parcels up to 20 kg, five days a week, at uniform rates throughout the UK. Let me make it clear that it is up to businesses themselves to determine the most appropriate delivery option for the consumers of their products. There are no rules to prevent differential charging between businesses for deliveries, and I do not believe that, for example, imposing a price cap is a practical answer. We should not seek to force retailers to use a specific supplier, such as Royal Mail, because competition in the delivery market is an important driver of efficiency. A competitive market should be a sufficient incentive to put pressure on charges applied by retailers and delivery operators.

There are positive signs that things are changing and businesses are listening. Wayfair took the decision earlier this year to scrap delivery charges for orders over £40 to anywhere in the UK and to charge a standard rate of £4.99 for orders below that threshold. That type of commercial decision will set the company apart from its competitors, drive competition and lead to lower costs. On the delivery side, Menzies Parcels launched a highland parcels service last year, which enables delivery to a virtual address for onward delivery at a fixed price.

Provided that consumers have the information they need at the point of purchase and the ability to shop around, shopping around is effective. Research from December 2017 shows that 59% of those faced with a surcharge often, or always, find the item elsewhere online. However, I can reassure hon. Members that the Government are not complacent. The Consumer Protection Partnership, chaired by my officials in the Department, has recognised the issue as a priority that needs to be addressed.

As hon. Members know, the CPP has been looking over the past year to improve online retailers’ compliance with consumer protection law and considering concerns raised about the level and fairness of parcel surcharging. Its work has involved partners including Citizens Advice Scotland, the Consumer Council for Northern Ireland, the Advertising Standards Authority, and the Competition and Markets Authority. The partners have been working with both the parcel and retail industries and other external organisations, including Ofcom. The work has included liaising with bodies representing both operators and retailers to try to understand the pricing models and structures that influence pricing decisions. The aim is to help industry—both parcel operators and retailers—to find a solution that works for all parties, including consumers.

We have also been liaising with officials in the Scottish Government, who launched a fair delivery action plan last November that maps both delivery hotspots in Scotland and what might constitute a fair charge. The CPP work will be informed by the outcomes and conclusions of that action. The CPP also worked with highland trading standards, the Citizens Advice consumer service and Advice Direct Scotland to launch the delivery law portal last year, which will gather information about delivery charges and parcel surcharging to inform the work and support enforcement. In the past year, the portal has received up to 1,000 hits per day. Referring potential breaches and unfair practices to the site will help enforcement agencies to ensure that retailers meet their legal obligations.

Significant work has been undertaken by the ASA and the CMA to ensure that businesses comply with the legislation, and both have acted swiftly where that has not happened. The ASA, which is responsible for ensuring compliance with the British code of advertising, sales promotion and direct marketing, has issued more than 200 enforcement notices to online retailers regarding their parcel surcharging practices and has achieved a compliance rate of more than 95%.

The CMA has issued a number of advisory notices to major retail platforms and, as a result, eBay and Amazon have reviewed and improved their policies and guidance for retailers who sell via their platforms. However, on the back of this debate, and the intelligence mentioned by the hon. Member for Caithness, Sutherland and Easter Ross that suggests that Amazon may be taking a retrograde step in what it allows its online retailers to do with delivery charges, I would be happy to raise the matter directly with Amazon. I would be very grateful for any information that could be provided to me as the Minister, and I thank the hon. Gentleman for raising the issue.

I reiterate that the advisory notices are making companies such as eBay and other online platforms look at their practices and review them. The CMA continues to work through primary authorities to ensure continued improvement in this area. On the legal compliance side, significant progress has been made and our enforcement partners will continue to monitor and take action where necessary.

I want to touch on a few of the issues hon. Members have raised, beginning with the hon. Member for Caithness, Sutherland and Easter Ross. He is right to highlight that we expect more of our online retailers and that they should be up front and transparent with their consumers. Applying large surcharges after a purchase has taken place is therefore something we take seriously on the enforcement side. I concur with what my hon. Friend the Member for Moray (Douglas Ross) said about when he has had issues and has been able to get the ASA involved to carry out enforcement. That is highlighted by the number of enforcement notices the ASA has levied over the past year.

I highlight again that the CMA has issued, and will continue to issue, advisory notices where it sees fit. My hon. Friend the Member for Moray was absolutely right to raise a concern about postcodes. Such issues need to be raised directly with retailers. I co-chair the Retail Sector Council with Richard Pennycook and, although this is not a workstream within the council, I commit here today to mention it at the next meeting as an issue that particularly affects Scottish consumers. At least then we can ensure that from a knowledge and a lobbying point of view those retailers understand that there are problems for their Scottish customers.

Companies are missing out on business when they choose to employ couriers that charge large surcharges for deliveries into the highlands. If the information is transparent, the consumer has the opportunity to shop around, and we have seen from research that 60% of consumers will do that and will find a cheaper price or a different supplier. Retailers need to understand that they are potentially missing out on a very valuable market by being restrictive with the Scottish market. The hon. Member for North Ayrshire and Arran (Patricia Gibson) is absolutely right about Scottish consumers. The evidence suggests that people in Scotland pay 30% more for their deliveries, and in the highlands the figure can go up to 50%. That is why the CPP’s work has yet to be finished; we are still monitoring the matter and will continue to engage with the industry and retailers.

I am not sure whether I have stood with the hon. Member for Sheffield, Brightside and Hillsborough (Gill Furniss) and spoken about Scottish surcharges, but we have spoken about most things consumer. She is absolutely right to challenge me on when the potential White Paper will be launched. I can assure her that I have been particularly interested in and working on the enforcement side and, although I cannot guarantee a date today, we hope to introduce it as soon as possible. She is right to highlight the beauty of our universal service, which offers 20 kg at a fixed price to anywhere in the UK, and it is a shame that some retailers have moved away from using it.

We can never forget that the hon. Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney), who is no longer in his place, is a postman. Every opportunity he gets, he bangs the drum on behalf of Royal Mail, our posties and the great service they provide. It is correct that businesses can choose to use different couriers. Some businesses will argue that in certain cases, further costs are incurred for delivering within Scotland and the highlands, which need to be passed on to the consumer. However, we are committed to continue working on that.

[Douglas Ross]

On the point that the Minister has made about further costs sometimes being involved, I take her back to my example, in which companies are not looking at the costs involved; they are simply looking at a postcode. In Moray, when they deliver further because the address has a different postcode, some companies charge no more for delivery than they do for an address that is closer to the depot. If companies were looking at it strategically, based on their costs, I could maybe understand it, but they are not; they are taking a blanket approach for any IV postcodes, and that is not right.

[Kelly Tolhurst]

I agree; my hon. Friend has highlighted a particular example. Since he has been elected, he has spoken with me many times, and he is known as a champion in this area. He has been pushing me as much as any constituency MP to take action. He has raised the issue of postcodes with me, and he is right that in that particular circumstance, there seems to be an absolute unfairness for the Scottish consumer. That is why one of the most important things is that we are working with couriers and highlighting the unfairness of that example.

We are putting pressure on businesses to make sure that when they instruct a courier with a contract, they do so with the best interests of their Scottish and Northern Irish consumers at heart. In some cases, we are talking about large retailers that have buying power, and they have the ability to go into negotiation with those couriers and negotiate better prices and services. I am particularly concerned about the small online retailers that do not have buying power with the couriers and, because of the number of parcels they send out in a day, cannot negotiate with them to perhaps get those surcharges reduced. My hon. Friend the Member for Moray is absolutely right: we need to continue to move forward and get more transparency.

I welcome the work that the Scottish Government have been doing on this, because they are close to this area. We in the Department for Business, Energy and Industrial Strategy and the CPP will keep engaged with the Scottish Government, and a lot of their work and its results will inform what we are doing with the CPP. I understand hon. Members’ frustration about what they perceive as a lack of progress, but I believe we have made progress, although it may not have been along the lines they would have liked to see. We have taken enforcement action; we are looking at this area, and it is being monitored. It is also right that we continue to do our best to make retailers consider their consumers who are being disadvantaged, because in not being able to supply products to those Scottish consumers, those retailers are ultimately the ones that are missing out. I congratulate the CPP on its work to ensure that when consumers purchase goods online, information is up front and transparent, and to take action swiftly when that is not the case.

Although there might be no quick fix on this issue, and although I am unconvinced at this moment about the need for further legislation, that does not mean that the issue is being ignored. I look forward to hearing about further progress through the CPP’s work and the Scottish Government’s initiatives. I am happy to update Members about progress as that work continues, and I thank the hon. Member for Caithness, Sutherland and Easter Ross for having secured the debate.

I understand the concerns of Members. After the next meeting of the Retail Sector Council, I commit that I will write to Members present today to outline what I was able to raise there. This is about a two-pronged attack: dealing with the couriers, but also making the retailers recognise that their decision making has an impact on consumers in Scotland and Northern Ireland. As the consumer Minister, I of course want there to be fairness and transparency for consumers throughout the United Kingdom, including those in the Scottish highlands and mainland Scotland.