Postal Services Bill
Debate between Viscount Eccles and Lord Young of Norwood Green
Lord Young of Norwood Green
My Lords, I support Amendment 67. It would introduce a new clause after Clause 34 requiring Ofcom to monitor indebtedness and giving it the power to limit the indebtedness of the universal service provider in relation to the overall value of the company.
In an earlier debate, my noble friend Lord Brooke of Alverthorpe drew attention to the case of the air traffic control company, NATS, which, when it was privatised, was very highly geared. It was limited to 100 per cent, which was still an extraordinarily high gearing to bear for the airlines group that bought the major part of the company. One aim of the public/private partnership was to bring in capital. My noble friend pointed out that real difficulties would be caused if a company coming into ownership of a utility borrowed most of the money to make the purchase and then found that it was unable to provide the capital needed to effect the changes and necessary modernisation in the operation—a point made by my noble friend Lady Dean. In the same debate, the noble Baroness, Lady Wheatcroft, said:
“Overgearing is as bad for companies as it for Governments, and it is something we need to be aware of as we move towards selling Royal Mail”.—[Official Report, 6/4/11; col. 1758.]
I wholeheartedly endorse the analysis made by my noble friend Lady Dean. This is an important issue and we await with interest the Minister’s response.
Viscount Eccles
My Lords, perhaps I may make a very brief intervention. The noble Baroness, Lady Dean, and I have a small piece of shared past. In fact, we have shared more than one but this one is financial. We were both involved in a company which had an unhappy ending because it got its indebtedness entirely wrong. As far as I am concerned, I am sure that it is a small piece of burnt soul, and no doubt the noble Baroness, Lady Dean, feels the same. Therefore, being really concerned about the gearing of a balance sheet, which is what we are talking about, is absolutely right.
Postal Services Bill
Debate between Viscount Eccles and Lord Young of Norwood Green
Lord Young of Norwood Green
My Lords, we welcome government Amendments 59 and 62, which would allow Ofcom to establish the timescale for the universal service provider to achieve the levels of efficiency which it is reasonable to expect. This is a recognition that Royal Mail is going through the difficult process of modernisation. The amendment acknowledges this process, which is entirely welcome. Government Amendment 61, which is also most welcome, recognises the universal service provider is entitled to achieve a reasonable commercial rate of return in the provision of the universal postal service, as indicated by the noble Baroness.
Amendment 60 seeks to prevent unnecessary regulatory intervention in areas of the market where effective competition exists. According to the regulator Postcomm, Royal Mail has complained of considerable overregulation since 2006, with approximately 80 per cent of Royal Mail letters revenue subject to price controls. A range of changes introduced in April this year has reduced this figure by just 5 percentage points. For example, Postcomm had previously proposed to remove regulation from pre-sorted bulk packets and parcels of more than 500 grams, but when Postcomm reached its final decision, it deregulated only for items above 1 kilogram. This was despite Royal Mail evidence suggesting that there was significant competition in the market for items weighing less than 1 kilogram. Preventing overregulation is seemingly a shared aspiration, and therefore I hope that Amendment 60 will find favour. The current regulator is clear that it would rather not regulate where Royal Mail faces competition; our Amendment 60 will make it imperative that Ofcom does not do so.
Viscount Eccles
My Lords, I am a bit bothered about the amendment that the noble Lord, Lord Young, spoke to because of the great difficulty for anybody to define “effective competition” in a statutory way. The competitive market for communications is very complicated. Ofcom is a very big and well established regulator that no doubt understands that market better than Postcomm did, but Ofcom still has to determine the regulatory framework that it is to follow. Work is going on in the last days of Postcomm that will not be completed until next year.
That is not the only point. Effective competition includes digital competition. Many other means of communication have been developed that have superseded the forked stick, and I think that this amendment is a step too far. I cannot support it.
Postal Services Bill
Debate between Viscount Eccles and Lord Young of Norwood Green(13 years, 7 months ago)
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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.