Baroness Dean of Thornton-le-Fylde
Main Page: Baroness Dean of Thornton-le-Fylde (Labour - Life peer)Postal Services Bill
Baroness Dean of Thornton-le-Fylde Excerpts“Indebtedness of potential USP
(1) OFCOM, in designating a postal operator as a universal service provider (USP), 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 purposes 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, Amendment 67 deals with the potential indebtedness of a universal service provider. It is an issue that we aired in the latter stages of Committee at the beginning of April—a long time ago. In that debate, the Minister, the noble Lord, Lord De Mauley, very kindly said that he would go back and look at the matter. Subsequently, he kindly wrote to me to try to give me some assurances. Unfortunately, his letter did not give me the assurances that I was seeking because he referred to conditions under Clauses 38 and 53. He referred to the fact that Ofcom “could” indeed include conditions or that it “could impose” a similar condition. Later in his letter, he said that Ofcom would be “able to impose” any conditions.
On the previous amendment, the Minister referred to the importance of the universal service provision requiring modernisation, but clearly you are not going to be able to invest in modernisation if you do not have the capital to do it. This goes to the heart of my concerns. It is not my intention to press this amendment to a Division but, as the Bill stands, I am perplexed as to why the Government will not agree either to make a commitment or to put something in the Bill in this regard—there are government amendments before us this evening—requiring Ofcom either to monitor or perhaps to intervene, rather than leave it entirely up to Ofcom. That, in itself, raises the question: how do you trigger Ofcom carrying out work that will deal with this issue? Will the trigger be a complaint from a member of the public or from a government department? Who would pull the trigger that would make such a review take place? My concern is genuine and I wonder whether it can be dealt with in the Bill. There is so much else in the Bill. It deals with charges and costs and a whole range of financial issues but it does not appear to deal with financial help for the universal service provider.
We are now at a late stage of the Bill and it is not my intention to detain your Lordships. However, I do not think that the House would be carrying out its function of scrutinising and improving legislation if we let the Bill go from this Chamber without some kind of reference to this matter—if not in the Bill itself then perhaps in the form of an assurance from the Minister at the Dispatch Box that the chosen universal service provider would have the financial health and well-being to be able to carry out the modernisation programme that across the House we agree is absolutely essential.
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.
Lord De Mauley
My Lords, I am grateful to the noble Baroness, Lady Dean, for tabling Amendment 67, as it concerns a vital issue. I also hope that she found my letter on the matter following Committee useful even if she was not entirely satisfied by it. I am grateful to her for finding time to meet me to discuss the matter, which the Government take extremely seriously.
Amendment 67 proposes to give Ofcom the power to limit the indebtedness of the universal service provider in relation to the overall value of the company. The noble Baroness speaks from great experience on this issue and the noble Lord, Lord Young, expanded on her experience, which we value greatly. She made it clear how important it is that Ofcom has the power to monitor the finances of the universal service provider and to act where the situation demands. I very much acknowledge that point. I reassure her and your Lordships generally that Ofcom is well equipped to tackle the risk of unsustainable levels of debt within the universal service provider. As I said in Committee, Ofcom already has the power to impose designated USP conditions through Clause 35 that could include conditions akin to the condition 16 requirement in the Royal Mail’s existing licence. That condition does not allow the Royal Mail to do anything that,
“creates any significant risk that the necessary resources will not be available to”,
carry on its business.
As the noble Baroness, Lady Dean, has mentioned, Ofcom also has powers under Clauses 38 and 53 to require information from the universal service provider and to set accounting conditions to ensure it can accurately monitor the costs of the universal postal service. I appreciate that the noble Baroness, Lady Dean, is concerned at the conditionality implied by my use of “could include”, in the context of a condition 16 requirement in the Royal Mail’s licence. There is no reason I can think of why the condition 16 requirement will not be so included. However, it will not be a matter for the Government. It will be a matter for Ofcom. I hope that the noble Baroness will find considerable comfort when I say that Ofcom’s primary duty for the post is to secure the provision of the universal service. If Ofcom considered that it was essential to use any or all of the powers that I have mentioned in order to deliver that objective, it would, as my noble friend Lord Eccles has said, be legally obliged to do so. I hope and believe that this is what the noble Baroness seeks to achieve through her amendment. With these assurances, I hope that she will feel able to withdraw Amendment 67.
Baroness Dean of Thornton-le-Fylde
My Lords, I thank the noble Lords who have taken part in this short debate and particularly the Minister for meeting me this morning to discuss the issue. We are all trying to get to the same spot. The question is how we do it. I say to the noble Baroness, Lady Kramer, that I do not feel as faint-hearted as she appears to be about putting a debt level on this. This will be a business, with regulated and very transparent charges. It is not like a plc. What is suggested here applies now in the air traffic control regulated business in the UK. The CAA suggested this—though not in this exact wording—and set a gearing level beyond which National Air Traffic Services could not go. I declare I am a member of the board of NATS. The structure of the organisation is part public and part private sector. Nevertheless, NATS is in the CAA stage of regulation for the next three years.
It is, therefore, possible to do it. I accept that it would be a lot more difficult in a wholly private industry which is not regulated like the new universal service provider will be. It has been a helpful debate. I have not reached the destination that I wanted to. Nevertheless there is concern around the House. I hope that Ofcom will take the comments on board when it is looking at what will be a very difficult and sensitive decision. This presupposes that there are buyers out there that will want to take on the universal service provision. I would like to withdraw this amendment.