Universal Postal Service

Brian Binley Excerpts

Thursday 17th July 2014 Commons Chamber

[Mr Brian Binley (Northampton South) (Con)]

I bring the quiet voice of the other party of the coalition.

I congratulate the hon. Member, and my friend, for North Ayrshire and Arran (Katy Clark), on securing the debate. I also thank the Backbench Business Committee. This is a timely debate, one that those on the Front Bench would do very well to listen to. There were some deep concerns when we supported this measure and I am sad to say that some of them have reared their heads earlier than we might have thought. I therefore agree wholeheartedly that we need action and a review very quickly indeed. I hope this debate will prompt the regulator to pursue that review.

The starting point of this debate is my belief in fair competition. That was one of the reasons I decided, in the first place, to support the original move to privatise the Post Office. However, fair competition does of course have parameters.

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

I thank my hon. Friend for giving way. I think it might be helpful to correct that point. The Post Office has absolutely not been privatised. Royal Mail has been privatised. They are two quite separate companies.

[Mr Binley]

I thank the Front Bench spokesman for that rather pernickety interjection. I will now continue. Of course it has not been privatised—only 70% of its shares have been sold off. We all recognise that point. We know where we are, so there are more serious questions that I would wish the Front Bench spokesman to address, quite frankly. Let us hope we can move on to them.

Fair competition has parameters that need to be well understood. Fair competition needs to take place with a focus on the public interest first of all. That is a consideration we need to hold very closely to our hearts. It is about making sure that the predatory exploitation of a dominant market position does not harm consumers or undermine others who seek to participate in a competitive environment. There are dangers that cherry-picking does, in truth, undermine that. The context of this debate is making sure that the end-to-end postal services in an urban and suburban setting do not undermine the financial sustainability of the universal service obligation, where in my view the overwhelming public interest can be found.

The truth of the matter, and this is a pretty heavy warning that I hope those on the Front Bench will take note of, is that if we are not careful and if action is not taken, we will be driven to the point where the universal service becomes a much more limited service, or is driven to the point where prices are so high it puts itself into a state of extinction. I believe there is enough evidence in the marketplace to suggest that those fears need to be taken seriously.

I believe in the decency of people and especially the decency of the great majority of Royal Mail workers who serve households in every part of the United Kingdom very well. I would like especially to pay tribute to those Royal Mail workers who work, live and provide service in my own constituency of Northampton South. I talk with them very often. I visited them during the passing of the Bill and had sizeable discussions with them—even with Mr Billy Hayes. I pay tribute to him for the way he undertook those discussions. I believe in the basic decency of Royal Mail workers. They are a much-valued part of our national infrastructure. We should give no thought to being anti-union in any way at all, bearing in mind that they have acted in a proper manner and have in many respects taken some pretty heavy knocks from their own specific political point of view. We should pay tribute to them and I am perfectly happy to do so. I repeat that they are a much-valued part of our national infrastructure, especially in the most remote areas.

It is not just in the rural and remote areas where we should be grateful for Royal Mail. There are many outlying areas in places other than the wilds of Dartmoor and the highlands of Scotland. In fact, near to my town of Northampton, many outlying and very small communities rely totally on the postal service. Very often, the postie fulfils a much more important role in terms of social connection than many of us really understand. I am not sure that the companies that are cherry-picking at the moment understand that point of view. Some of the reports we have had back show that the sorts of workers they are beginning to employ perhaps do not fulfil the criteria that most of us would want our postal service workers to fulfil.

I have a firm belief in the universal service obligation, underpinned as it is by statute in the Postal Services Act 2011. Indeed, I sponsored an amendment in the Committee stage to secure the obligation for 10 years, rather than the Government’s original proposal of 18 months. I am very proud of having helped to secure that amendment. However, it seems probable that other players in the postal market will, as they have so far, cherry-pick the operations that offer soft opportunities for profit, leaving the Royal Mail with the relatively less attractive deliveries. The question for the Government is the extent to which the goal of competition in the postal services market should be allowed to undermine the viability of the Royal Mail’s balance sheet. If that viability is allowed to be undermined, that would bring the whole question of the USO into serious danger.

We need to respect the spirit of what was enshrined in the Postal Services Act, as well as the letter of the law. Ofcom needs to ensure that competition in the postal services market does not in any way undermine the USO. That is its task—it is the regulator. I call on it to carry out its duty as we originally intended, both in law and in spirit. The two are not always coincidental. This House is clear that, where a conflict between competition and the USO arises, it is the obligation that should take priority. I hope we will impress that on Ofcom as a result of this debate and in other ways as time passes.

Royal Mail workers, like our constituents, were clear in what was given to them as a clear undertaking in the 2011 Act. An unequivocal restatement of that commitment from the Dispatch Box would be a very welcome response to this debate. I have a number of questions to put that I hope the Front Bench spokesman will answer in her summing up. First, will the Minister confirm that the USO is enshrined in statute in the 2011 Act? On that basis, would it not require a further Act of Parliament to repeal the obligation?

Secondly, the market in which Royal Mail operates is subject to cherry-picking from other operators not bound by the USO. The Government have stated that their policy is that competition should not undermine the USO. What discussions has the Minister had with Ofcom on that and on the precedence of the USO contained in the 2011 Act?

Thirdly, does the Minister accept that the USO rests on the principle of cross-subsidy from the cheaper urban areas towards the greater cost of delivery to rural areas? What change has taken place in the market in the last few years that could alter the balance of competition between Royal Mail and its competitors?

Fourthly, one factor affecting the distribution of power in the postal market is the price of stamps relative to the prices charged by other deliverers. What assurances can consumers expect in future years that Royal Mail’s pricing will reflect the response of postal service users, so as to protect the universal service obligation?

Fifthly, Ofcom has promised to produce a full assessment of the impact of the universal service obligation and competition in the market for the end of 2015. As it is now four years since the passing of the Act, what assessment has the Minister made of any changes that might compromise the universal service obligation, and what impact does she anticipate Scottish independence would have on the economics of the postal services market? Does the Minister recognise that we need a review sooner rather than later? The whole question of competition has moved on much more quickly than we might have thought when we passed the 2011 Act.

In conclusion, let me repeat that I supported the 2011 Act, and I still do. However, I also support the need of the regulator to do its job according to law and the spirit of what the Act was trying to do. I therefore call on the Government to ensure that a proper review takes place much sooner rather than later, and to give us an undertaking that the universal service obligation will remain at the forefront of postal services in this country, even though that might mean laying conditions on those who operate competitor services and even, to a certain extent, an understanding that those services need to provide a levy to subsidise the universal service, if that is necessary to retain it.

--- Later in debate ---

[Katy Clark]

The debate has been extremely useful. I hope that what the Minister says in private is slightly different from what she has said in public today, because she has shown a level of complacency that was not seen in the contributions of Back-Bench Members on both sides of the House. There is a huge amount of concern about the speed at which TNT is expanding its service in the UK and about the impact that that could have on the universal service. I am interested that the Minister is meeting Ofcom later today and welcome the suggestion that Ofcom meet hon. Members, which would be useful. It would also be helpful if Ministers attended the meeting, so I would be grateful if she undertook to do so.

The Minister says that only a small proportion of work is currently undertaken by operators other than Royal Mail, which I made clear in my opening contribution. However, the concern is that TNT’s proposals, which are publicly available and which most hon. Members here have already seen, make clear the speed at which it will expand in this country. As a result, it will be covering a huge number—over 40%—of households, which is different from anything that the House discussed in the various debates that took place—

[Mr Binley]

rose—

[Katy Clark]

I am not sure whether I am able to take interventions when making a closing speech, but if I could allow anybody, it would be the hon. Gentleman given his track record on this issue.

Yes, we have had 10 years of competition, but the lesson that we have learned is that the market does not respond well to competition. The current regime is not protecting the services that we receive. The reality is that we have fewer services now than we did when competition came in. We all remember Sunday collections and twice-a-day deliveries. The road that we are on is extremely dangerous and is a threat to postal services in all parts of the UK. I hope that the Government will take on board the emotion and passion of hon. Members’ contributions today and insist that Ofcom urgently carry out a speedy review.

Question put and agreed to.

Resolved,

That this House believes that the Universal Service Obligation as set out in the Postal Services Act 2011 is under threat from unfair competition from organisations which are rapidly expanding end-to-end delivery services in low-cost, high-density urban areas while leaving high-cost, low-density rural areas to be covered by Royal Mail, the universal service provider; and calls on the Government to instruct Ofcom to bring forward proposals to protect the Universal Service Obligation and the commercial viability of Royal Mail against this threat.