Postal Services Bill

Viscount Eccles Excerpts

Wednesday 6th April 2011 Lords Chamber

Amendment 24G will facilitate the sharing of information between the parties and thereby help ensure a seamless experience for members. This will be of considerable benefit to pension plan members and I hope that all noble Lords will feel able to support it. In case any noble Lords have concerns in this regard, I assure them that any sharing of information will be fully subject to the safeguards provided by the Data Protection Act.

[Viscount Eccles]

My Lords, I thank my noble friend very much for an extremely clear exposition. We started the group with an extremely clear and well expressed amendment from the noble Baroness, Lady Drake. I want to ask a question that perhaps cannot be answered this morning: namely, what information has been conveyed from Royal Mail either to Postcomm, as it is at present, or to the Government about the expected experience under the new pension scheme? Pension schemes are very difficult to keep in surplus or in balance if the number of employees is declining or their average age is rising. Royal Mail recently declared that it was going to reduce its staff and workforce and I think has further plans that might lead to that happening again in the future. In my submission it is likely that the new scheme, which is entirely properly set up under the arrangements as described, nevertheless could be threatened with going into deficit at an early date. In looking at that subject, I hope that the Government are also taking account of the comparative costs of pensions to Royal Mail and to other postal operators. As I say, I am not looking to receive a detailed assurance today as this is a new and rather complex point. Nevertheless, at a later stage I might consider it right to revert to this subject.

[Lord De Mauley]

My Lords, my noble friend makes an extremely important point. The terminology is confusing but I think that he is talking about the RMPP scheme, the old liabilities and assets having been transferred out into what is rather confusingly called the new scheme. Therefore, he is concerned about the ongoing liabilities in the RMPP scheme. I will write to him, but I can tell him that £1.5 billion of funding will be left in the new scheme specifically to cover what is known as the salary link. However, I had better expand on that in writing, if I may.

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I want to comment briefly on a number of other amendments in this very large group. They include Amendment 24H in the name of the noble Viscount, Lord Eccles. We are not absolutely clear about the intention of this amendment. On the one hand, if the intention is to ensure that Ofcom has an obligation—

[Viscount Eccles]

In the interests of time, it may be better for the noble Lord to wait until I explain what it is about.

[Lord Young of Norwood Green]

On reflection, I am happy to do that and shall conclude my comments at this point.

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The amendments to both clauses would require Ofcom to consider only two factors: first, whether the access is feasible; secondly, whether it will promote effective competition in the long term. They would do that by amending those two subsections. That is all that is necessary. It would also help to create the level playing field which my noble friends and I seek. I hope that that is an objective which the Opposition can share. We might argue about the detail, but what we are looking for is not that there should be no access—clearly, that would be against the provisions of the EU directive—but that there should be fair access to both sides. I have pointed out some circumstances in which the present system might not be fair to Royal Mail and others in which it is not fair to the competitors. That is what we want to address, and I hope that when my noble friend replies to this group of amendments he can give some assurance that that is also the Government's objective.

[Viscount Eccles]

My Lords, we have had two very interesting contributions—I am tempted to call them Second Reading speeches, but perhaps that is unkind or does not fully take into account where the argument has reached. They have been an overall look at where we are. We should remember, first, that the price of stamps went up substantially on 4 April. We should not forget that in all these discussions.

Secondly, we have talked a lot about regulation. Regulation is indeed central, and we have concluded across the House—the Government have certainly concluded—that Postcomm, for one reason or another, has not understood the situation correctly. I think that that is the right way to put it. I cite Mr Tim Brown’s opening to Postcomm's February report:

“There is consensus that deregulating where it is safe to do so is the correct approach and that change is urgently needed”.

That is a pretty comprehensive sentence for a regulator who has been regulating for the past six years. Then there are some qualifications, but he continues:

“That said, all interested parties acknowledge that the current framework is not fit for purpose”.

I do not think that you could go further than that. In his final paragraph, he concludes by saying two things:

“The 2012 price control may look and feel very different to the current price control developed in 2006 … Regardless of the ongoing Parliamentary process, the coming months will be crucial in putting in place the building blocks for a new and sustainable regulatory framework”.

In the ongoing conversations between Postcomm and Ofcom, it is pretty clear that Postcomm has come to the conclusion that it does not know what is going on. I make that comment with all seriousness. I think the reason is competition.

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[Viscount Eccles]

You could run Royal Mail on the basis of the universal service only. That is to say, if you were being properly paid by whoever was using it, you could outsource—I use that word advisedly—every form of sorting except probably the very final sort where you sequence the delivery. You could write a PhD thesis on whether a final-delivery universal service provider should have to sort mail. My answer to that question would be no, it should not have to. It would have to collect it, because that is in the universal service, but it could immediately deliver it to somebody else who did all the sorting. That of course is what is happening with the people who have access agreements. In that way, you would reduce quite dramatically the amount of capital you needed and you might also establish a profitable business which would be attractive to the market.

[Lord Christopher]

My Lords, I had not intended to speak, but some of the comments made require a response. The noble Lord, Lord Flight, put his finger on one point: we have had much discussion about competition for the universal service when it does not exist and, in my own judgment, never will. However, you need regulation, because science moves on and who knows what might happen?

I was interested in the intervention of the noble Viscount, Lord Eccles, because I was going to use as a not-too-strong illustration the supermarkets. It is very interesting that they have not come together to provide a universal delivery service; they all do it on their own. Whether they ever will, I do not know, but I think that people would be very worried if we had the system which the noble Viscount, Lord Eccles, has just suggested, because the delivery of one’s letter in 24 hours would disappear and it would become increasingly difficult to discover who was responsible for it.

I shall move on to something more practical; the low cost of postage in this country, as has been mentioned. A couple of days ago, the Telegraph ran one of its happy headlines about the increase in the price of postage, and now utterly unrealistic correspondence is going on. I should like to put the differences on record. Despite the increase that is about to take place, we are still the second cheapest in Europe and the only country which has a mandatory access service. No other country in Europe has picked that up—not one. The new price of posting a first-class letter in the UK is to be 46p as compared with the following countries, none of which has an access requirement. In Denmark it costs 64p; in Germany 48p; in Belgium 51p; in the Netherlands 38p; in Sweden 58p; in France 50p; in Austria 48p; and in Spain, at the bottom, 30p, which will come as no surprise to anyone who has had experience of its postal service. Whichever company ultimately buys Royal Mail, it will seek to make a profit, so how can we conceivably expect a price structure to exist unless we have some regulation over it? We should be realistic, not only with ourselves but with the country, about the fact that there will continue to be increases in the price of mail in this country.

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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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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 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.

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[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. 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.

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[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 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.

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[Lord Stevenson of Balmacara]

I thank the Minister very much for his comments. He came up to us at the end of day three of the Committee stage, with a more mournful expression than he sometimes has on his face, saying that we had cheated him of his moment of glory because we had withdrawn our amendment at quite short notice. It was the only amendment that he was down to speak to that day, and we took it away from him. Now here he is, irresistibly back in the Box, popping up all the time. So it does come back; it goes in rounds.

Quite a lot of what we have talked about today are what could be described as mop-up provisions and backstops—things that are very unlikely to occur. The Minister argued that, as a result, we did not really need to put them in the Bill, because they were so unlikely that it would be a waste of our time to spend our precious moments on them. In The Hitchhiker's Guide to the Galaxy, a book that I am sure all noble Lords have read, or listened to the programmes, there is a vehicle driven by a thing called the improbability drive, which has the result of making the space travellers turn up in the least likely situation that can be imagined at the time of their arriving. In a situation where they are being threatened by giants and attacked from all sides, they think of something completely unlikely and are immediately transported there. I simply say this because sometimes the impossible and the improbable does happen; we should not be deluded into thinking that it is so remote that we should not have provisions for it. That was what inspired us to put forward these proposals, some of which the Minister looked at sympathetically and some of which he did not.

It is important to have contingency provisions, and we are not arguing against that, but if we are going to do that we should be consistent. I hope that on reflection the Minister might accept that there were one or two points in what we said that might be worthy of a little bit more consideration. The principle on which we have been working is that if the aim is continuity, the going-concern process would be the least disruptive. That is why our amendments are framed as they are. I do not think that anything the Minister said is against what we are trying to achieve. My sense is that the whole process of going into administration would be such a major issue that making sure that there was greater concern than currently expressed in the statute for going concern would be helpful. But we would not push that at this stage.

As we reach the end of our discussions here, I wanted to say that, particularly today but as mentioned on a number of occasions in Committee, we have been a little unkind about Postcomm. We had a quotation from the noble Viscount that expressed in its own terms what it felt about itself. Even so, I am sure that the people at Postcomm have done what they could with possibly difficult ammunition to achieve what Parliament wanted them to do, and no personal criticism should be implied by what we or anybody else has said. On the other hand, the Minister kindly pointed out what the framework was for the new regulatory structure and expressed various options and hopes for that, but he did not say that Ofcom would not be an unsympathetic regulator in the same way as Postcomm was. We should bear that in mind. Having said that, we register our support for government Amendment 26.

[Viscount Eccles]

I intended no criticism of the individuals in Postcomm. We need to remember that regulators have only a limited amount of independence. We are inclined to talk as though they had a rather larger amount of independence than they actually have. When I look at the 2000 Act and think about the policy intentions behind it and the interpretation of them, I am not entirely surprised that Postcomm got itself into what it admits is a very difficult position. In any evaluation of how the present situation comes about, we have to remember—and that is exactly why I intervened on Schedule 9—that the Government of the day are in the final analysis the accountable body and Parliament with it, and the regulator is trying to carry out their wishes as it interprets them, with a certain amount of independence, but only a certain amount.

[Earl Attlee]

My Lords, I must confess to never having read The Hitchhiker’s Guide to the Galaxy, but I do have my own personal copy of the law of unintended consequences, which was passed many aeons go. I am happy to have further discussions with the noble Lord offline and we take on board his comments about Postcomm.