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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
It is a pleasure to serve under your chairmanship, Ms Rees. Thank you for stepping in to enable my hon. Friend the Member for Moray (Douglas Ross) to make his really important case. I congratulate him on securing this debate. The issue continues to be important for his constituents and for those of other Members in the similar debates that he has led over the years. He has been a dogged champion for his constituents in Moray on this and other subjects. They should be proud to have someone championing people who live in the highlands and other parts of rural Scotland.
Delivery charges are part of the underpinning of trade within the UK, so I have a lot of sympathy with my hon. Friend’s concern that some consumers in parts of Scotland are charged differently from consumers in other parts of the UK. I also recognise that similar issues exist for consumers in Northern Ireland.
I am pleased to be able to take part in today’s debate, and to outline the progress that has been made since the previous debate back in July 2019. Let me first of all remind colleagues of our general approach as a Government. The Government’s aim in relation to post is to secure a sustainable, efficient and affordable universal postal service. With regard to delivery charges specifically, it is crucial that retailers are up front about those charges, as my hon. Friend eloquently articulated: where they deliver to, what they charge, and what premiums apply, if any. Consumers then know where they stand, and can make an informed decision before they purchase. That is what the law requires.
Our legislation is robust. The Consumer Protection from Unfair Trading Regulations 2008 and the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 set out that information given by traders to consumers regarding delivery costs, including any premiums, must be up front and transparent before a transaction is entered into. Any consumer who believes that these rules are being breached should report it through the specifically set up deliverylaw.uk website, so that incidents are recorded and appropriate enforcement action can be taken.
A significant amount of work has been undertaken by the Advertising Standards Authority—I am glad to hear about my hon. Friend’s work with the ASA on this issue—and by the Competition and Markets Authority to ensure businesses comply with that legislation. Where that compliance has not happened, both bodies have on the whole acted swiftly. The ASA has issued enforcement notices to online retailers whose parcel surcharging practices have been reported, and has achieved a compliance rate of over 95%. The CMA has issued a number of advisory notices to the major retail platforms, and I take the point my hon. Friend makes about letters: just telling companies not to do it again goes part of the way, but clearly those companies need to actually change their behaviour, rather than just getting a warning letter. We need to see the results of that. The CMA has also published guidance to retailers who sell via those platforms, and continues to work through primary authorities to ensure improvement in these areas.
On the legal compliance side, significant progress has been made, and our enforcement partners will continue to monitor and take action where necessary. However, the Government recognise that the delivery costs to reach some parts of the UK can be higher, and strongly encourage businesses to, as far as possible, provide consumers with a range of affordable delivery options. To help achieve this, we have ensured that everyone, including retailers, has access to an affordable postal service for deliveries across the UK under the universal service. Through the universal service obligation, Royal Mail delivers parcels of up to 2 kg six days a week at uniform rates throughout the UK. I echo my hon. Friend’s thanks to posties up and down this country, in every part of the UK, who have been working through the pandemic to make sure we remain connected even when we are locked down. As my hon. Friend has said, it is a shame that we cannot join them in the sorting office to wish them a merry Christmas and thank them for all their work as they enter this particularly busy time, but this is a good platform to be able to echo his thanks and season’s greetings to them all.
Let me make this clear: it is up to businesses to respond to customers’ needs and determine the most appropriate delivery options for their customers. There are no rules to prevent the differential charging between businesses for deliveries, and I do not believe, for example, that imposing a price cap is necessarily a practical answer.
The postal sector regulator, Ofcom, recently published new information on how this part of the market is operating as part of its annual post monitoring update. Ofcom collected information on the extent to which parcel operators vary the price that they charge online retailers for bulk delivery of parcels to different parts of the UK. The long and the short of it is that some operators do vary their prices, whereas others do not.
The information gathered by Ofcom showed that operators take different approaches to the pricing of parcel delivery services: two large business-to-consumer operations, Royal Mail and Hermes, do not set different prices based on location. However, the geographical profile of deliveries can still play some role in determining the uniform price that these operators negotiate with retailers, especially if volumes are skewed towards a particular part of the UK.
Douglas Ross
I again go back to the Citizens Advice Scotland briefing for today’s debate. I am looking forward to attending the annual general meeting in Moray tomorrow, where I am sure we shall discuss this issue. One of its recommendations is that consideration should be given to whether Ofcom requires further regulatory powers in relation to the parcels market, following on from the publication of the recent data on this market. Is that something that the Minister would consider, and take up with Ofcom?
Paul Scully
Obviously we work with Ofcom; it straddles a number of different Departments. We will always look at issues with it, as we do with other regulators, to make sure it has the powers to do the job it needs to do.
As I was saying, there are a number of delivery options that businesses can adopt. Some have minimal delivery charges, and others are more bespoke models. A competitive market in delivery charges, which will ultimately help consumers, should put downward pressure on the charges applied by retailers and delivery operators. There are positive signs that things are changing in that regard.
In August, for example, Argos announced that it would deliver large items to more than 98% of residents on the main Scottish islands, bringing deliveries to 41,000 more homes and another 56 islands, including Shetland, Orkney, the Inner Hebrides and the Western Isles. In 2019, Wayfair took the decision to scrap delivery charges for orders over £40 anywhere in the UK and charge a standard rate of £4.99 for orders below that threshold. Those are the types of commercial decisions that will set businesses apart from their competitors, drive competition and lead to lower costs.
Let me reassure my hon. Friend that the Government are not complacent. The consumer protection partnership chaired by officials in my Department continues to work on the issues. That goes to the point about working with companies to help foster the necessary competition. I am more than happy to continue to work with my hon. Friend so that we can help, convene, push and shape the conversation. Ultimately it is a free market; we are both free marketeers. However, we can make sure that consumer voices are heard, so that if consumers in his constituency have complaints, and if surcharges are imposed after the event, the consumers’ voice will be amplified and heard, through his work and through the Government, to stop unfair practices.
Alongside the work of the consumer protection partnership, and others, Ofcom will be undertaking a review of its future regulatory framework for post over the next year. A call for inputs from stakeholders will be launched before the end of the financial year and a statement on the future framework is expected to be issued by the end of the 2021-22 financial year. The review will consider issues affecting the broader postal sector, as people’s reliance on parcels continues to grow.
I am unconvinced of the need for further legislation, but my hon. Friend talked about whether there is a need for new powers, and what more can be done to encourage the market, drive competition and make sure we enforce the current regulations and legislation correctly. My priority is exactly that—that robust enforcement of the law should continue to ensure that customers are not surprised by delivery charges, and that competitive pressures should continue to drive down delivery charges, as has already happened. I congratulate my hon. Friend once more on securing the debate and on his further championing of his constituents.
Question put and agreed to.