Universal Postal Service

Iain McKenzie Excerpts

Thursday 17th July 2014 Commons Chamber

[Katy Clark]

Indeed—he is both a friend and a comrade. I am delighted that he is here today. He represents a very similar constituency to mine.

Members in all parts of the House represent constituencies where we know it will never be profitable to deliver mail. That is why the universal service is so important. It is also important that we ensure that stamp prices are kept at a level that is affordable in all parts of the country.

[Mr Iain McKenzie (Inverclyde) (Lab)]

Does my hon. Friend agree that we have seen this unfair competition before when the Conservatives were last in power and they privatised British Telecom? The other companies wanted the cities but not the rural areas, and now we see that again with Royal Mail.

[Katy Clark]

My hon. Friend makes an important point. Perhaps we can enter into that debate on another occasion.

The Government are allowing TNT to cherry-pick the services in more profitable city areas, where its presence has already led to reductions of 14% to 15% in the use of Royal Mail.

--- Later in debate ---

[Katy Clark]

My right hon. Friend is absolutely right. Of course, he has a very long track record and great expertise on these issues. If we do not take action now, then when the House considers this matter in a number of years’ time, there will be serious proposals for a reduction in the kind of service that people receive. We hope that the Government will take action now to make sure that we are not faced with that problem.

At the moment, Royal Mail still delivers 99% of mail in the UK. Our concern is that that situation could change very quickly given the current expansion plans of TNT, in particular, and perhaps other providers as well. Royal Mail itself estimates that TNT’s expansion strategy could result in a reduction of more than £200 million in Royal Mail revenue by 2017-18. The reality is that much of the most profitable section of the market, namely the business mail, is already handled by companies other than Royal Mail. Indeed, that has been the case for a considerable period. There has also been a significant reduction in the volume of letters over the past decade, which also continues to put pressure on the universal service obligation.

Royal Mail is subject to vigorous and rigorous performance standards. Its competitors are not subject to the same standards. There is also no requirement on competitors to report on service standards, as Ofcom says that service standards are driven by market forces. However, as my hon. Friend the Member for Hackney North and Stoke Newington (Ms Abbott) has pointed out, there are many concerns about the poor quality of service that customers receive from TNT in areas where it operates. There are also many concerns about the terms and conditions of the work force, which are considerably worse than those of the Royal Mail work force.

I believe that the motion is moderate. It calls on Ofcom to carry out a full review and to make proposals for regulation to create a level playing field in the postal services market. In particular, I ask Ofcom to consider whether a compensation fund could be established to support the provision of the universal service, which could be used to collect contributions from those that benefit from providing en-to-end service without the requirements of meeting the universal service. I also ask Ofcom to consider whether the general service conditions that currently apply specifically to Royal Mail alone should be extended to apply also to other operators.

We should also consider removing the requirement on Royal Mail to allow other operators to access its network. Hon. Members who visit the postal depots in their constituencies at Christmas will know that the work force have been raising concerns about that issue for many years. There is no doubt that that requirement to deliver mail for others has been a burden on Royal Mail.

[Mr McKenzie]

It is not only about the commitment to deliver that mail for others; often, Royal Mail also has to sort that mail before delivering it for them.

[Katy Clark]

My hon. Friend and his family have a great deal of experience in these matters, as do I. He is absolutely correct. I think that the situation is slightly less frustrating for the work force now, because the work used to be even more of a drain on Royal Mail and it made a considerable loss as a result. The financial arrangements have improved slightly, but this is very much an area that Ofcom needs to look at.

--- Later in debate ---

[Mr Reid]

I certainly agree with my hon. Friend. The universal service is so important for the country that I hope that any reviews or inquiries will be given a high priority and be conducted as quickly as possible, whether they are being carried out by Ofcom or the Competition and Markets Authority.

As I was saying, Royal Mail has pointed out that it has to meet all the targets that are set by Ofcom and publish its performance against those targets quarterly and annually. However, its competitors do not have to meet or publish any targets, other than the figures on complaints. Ofcom should use its powers to set targets for all operators and compel them to meet them. That would provide transparency and allow consumers to make an informed choice between operators.

[Mr McKenzie]

I fully accept what the hon. Gentleman says about the need for a level playing field. Does he accept that companies might want to produce information on targets to show that they have a process of continuous improvement and that they are providing a good-quality service?

[Mr Reid]

The hon. Gentleman is perfectly correct. A company that has any ethos at all will want to demonstrate that it is doing a good job. I therefore do not see how rival operators could possibly object to such a proposal.

In an e-mail that it sent me, Royal Mail alleged that TNT has dumped and misdelivered mail. We heard interventions from two London Members earlier who said that they had evidence of that happening in their constituencies. That backs up the need for the publication of performance statistics. Such statistics would show if mail is not being delivered and is disappearing from the system.

Ofcom has stated that before the end of next year, it will commence a review of the impact of end-to-end competition to assess any potential threat to the provision of the universal service. I do not think that it should wait until the end of next year. It should commence the review now because this is such an important service. That would be in the interests not just of Royal Mail and the consumer, but of rival operators. It is in everybody’s interests to know as soon as possible what conditions Ofcom will impose on mail delivery companies. I can see an operator such as TNT complaining if, in two years’ time, conditions are imposed on it that it was not told about before it made the investment. I see no advantage in waiting another 17 months before beginning the review.

My hon. Friend the Member for West Aberdeenshire and Kincardine pointed out that we have been here before with Postcomm, which seemed to prioritise competition over protecting the USO. Ofcom’s most important legal duty is to preserve the USO. That was written into the 2011 Act by a Liberal Democrat Minister. I expect Ofcom to do everything possible to protect the USO. I believe that that means holding a review now. I see no purpose that will be served by waiting another 17 months. If Royal Mail is crying wolf, there is no harm in having the review now, because it will show that. However, if Royal Mail is correct in its concerns, having a review now is essential.

The universal service is essential to rural communities such as Argyll and Bute. Thanks to a Liberal Democrat Minister, the law protects the universal service. Ofcom has a duty to ensure that that legal protection is delivered. As long as Ofcom carries out its duties properly, the USO will be sustainable. However, I believe that Ofcom must carry out the review now.