Rural Areas in Scotland: Additional Delivery Charges

Gill Furniss Excerpts

Tuesday 2nd July 2019 Westminster Hall

[Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)]

It is a pleasure to serve under your chairpersonship, Mr Hollobone. I congratulate the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) on securing this important debate. I recall his excellent contribution in a debate on broadly similar themes that was secured by the hon. Member for Moray (Douglas Ross) around 18 months ago.

However, it is disappointing to see that there has been so little progress in tackling this unfairness since that previous debate. The Minister responsible at the time, the hon. Member for Stourbridge (Margot James), assured us that the consumer Green Paper would be the start of the process of finding an answer, but the Green Paper did not mention the issue at all. We are still awaiting the response to the Green Paper consultation, and by later this week we will have been waiting for one year. Can the Minister here today say when we can expect the response?

It has been valuable today to learn about not only the problems that consumers continue to face, but the actions that have been taken since the previous debate. The hon. Member for Caithness, Sutherland and Easter Ross has already referred to the Scottish Parliament’s actions, and hopefully there will soon be some clarity on many of these issues, including misleading delivery charges. However, I take on board both his comments and those of the hon. Member for North Ayrshire and Arran (Patricia Gibson), who also issued a plea to the UK Government to assist them in this matter, because it is Government action that is needed. I was interested to hear the hon. Lady talk about the people’s delivery guarantee, which I think is an excellent idea. I hope that the Minister will take that up and tell us more about it later. There should be more work with delivery companies, and more information and reporting, but those things are useful only up to a point. The evidence that we have heard today has shown that the core problem—the hugely inflated delivery prices that many people face—still exists.

The universal service obligation ensures that firms that use the Royal Mail for deliveries are able to charge precisely the same amount for the highlands as for any other UK address. Regrettably, however, many UK online retailers have moved away from using the Royal Mail. The Government must consider how, in the deregulated postal market, the universal service obligation protects consumers in rural Scotland. Will the Minister examine and assess the effectiveness of the universal service when it comes to protecting rural customers?

The Postal Services Act 2011 sets out the universal service obligation as a service that must simply be available, rather than guaranteeing a consumer the right to access a universal service when a third party, such as an online retailer, is contracting the delivery. The obligation means that for anyone sending post below 20 kg, there is a fixed price to any UK address. That is all well and good in protecting citizens’ rights when people send items themselves, but the majority of online deliveries are by retailers that operate across the UK.

A retailer’s commercial motive will lead it towards wanting to offer incredibly cheap or free delivery to the majority of its customers. In recent years we have seen nearly every online retailer splash an offer of free delivery on their homepage. In fact, led by Amazon, same-day delivery is being pushed as the new ultimate convenience. However, Members will know that not only is that promise rarely universally available, but the desire of online sites to offer delivery leads them to move away from the somewhat higher price of the universal service offered by Royal Mail and towards competitors who can offer cheaper services. Clearly, that is at the cost of consumers in the highlands and islands, who have to pay the exorbitant rates that we have heard about today.

In the previous debate, I said that Ofcom needs to be empowered to take action to ensure that this geographic discrimination is tackled. The then Minister disagreed, on the basis that some delivery firms do not charge additional rates in Scotland. That is true, and I encourage all retailers to choose one of these firms to deliver their goods, if they do not use Royal Mail. However, the Government’s position completely misses the point that consumer choice should naturally be about choosing the best quality and value products. Other than by using a few select retailers, consumers cannot choose to go with Royal Mail as an option, so in this environment a universal service does not really exist.

Ofcom continues to report a fall in the cost of parcel postage, due to increased competition. That is good news for the majority of UK consumers, but with margins becoming tighter it represents quite the opposite for consumers in rural locations, as it makes it increasingly unlikely that the highlands and islands will be included at equal rates. I fear that without genuine action the outlook for many Scottish families is bleak. The market is moving at pace towards a low-cost convenience model, and it is difficult to imagine that rural Scotland will be a beneficiary of the change.

It is clear that there is a market failure that must be corrected. I believe that Ofcom can make that correction, if it is correctly instructed. There are two approaches that the Government should consider. First, when there is an option to select Royal Mail delivery, there is a degree of protection available to consumers. The Government should consider how they can ensure that as large a part of the delivery market as possible has an option for Royal Mail delivery, either by a voluntary agreement or, if necessary, by regulation.

Secondly, Ofcom could add geographic delivery to its list of regulated prices. That could certainly curb the worst examples of overcharging faced by rural Scottish communities. Ofcom has used its regulatory powers to cap broadband and phone prices. Therefore, given the evidence of overcharging for delivery, it is logical to cap parcel delivery costs too.

In conclusion, will the Minister recognise that the Government must move beyond guidance and warm words, and instead take real action to ensure that hundreds of thousands of people do not continue to suffer this unfair penalty?