Lord Jenkin of Roding
Main Page: Lord Jenkin of Roding (Conservative - Life peer)Postal Services Bill
Lord Jenkin of Roding Excerpts
Lord Jenkin of Roding
My Lords, I hope my noble friend will in the end decide to resist the blandishments that have been advanced across the Floor of the House. The noble Lord, Lord Stevenson of Balmacara, gave the game away at the end of the speech when he said, “We are not asking to legislate for the terms of an agreement”. These are complex agreements and it is much better that they should be left to the two companies—both of which are now under competent and trustworthy leadership—to determine the terms of the agreement. As the noble Lord, Lord Stevenson, said—the noble Lord, Lord Rogan, made the same point—there is an existing agreement between the Post Office and Royal Mail and there needs to be, in one way or another, a continuing agreement.
The noble Lord, Lord Stevenson, said that the two organisations could not exist the one without the other. Without being an expert in this area, I do not know how far that would be true in perpetuity but it certainly would be true for the time being. Therefore it is very much in the interests of both Royal Mail and the Post Office that there should be a workable agreement between the two. It is for them to negotiate, decide and then sign; it cannot be a matter of Parliament legislating and telling them what to do. Otherwise, what is the point of having the present leadership of these two organisations? Why should it not be in the Civil Service?
But, of course, they are commercial companies. They are facing the problems we have debated at some length over recent weeks and they have to be given the trust to do what they consider is in their best interests and the best interests of their customers and employees. I used the word “blandishments” earlier; I was being fairly kind. Parliament should not interfere in this area in the way the amendment suggests and I hope my noble friend will feel able to resist it.
Lord Razzall
My Lords, everyone in the House would entirely endorse the remarks made by the two noble Lords who have brought forward amendments in relation to the importance to our national life of the post office network. That is a given on all Benches and I suspect that no Member of your Lordships’ House would disagree.
I have two propositions, which I hope your Lordships’ will accept, which are totally germane to why the two amendments should be rejected. First, from a commercial point of view, it is virtually inconceivable that any operator of the Royal Mail with a universal delivery obligation to deliver mail six days a week would not wish to avail themselves of the services of the Post Office. There is no other network in the United Kingdom that would enable that obligation to be fulfilled. There is, therefore, an essential logic as to why any owner of the Royal Mail would wish to continue to use the post office network.
Secondly, the noble Lords who have brought forward these amendments have to take on board that, were their amendments to be carried and the requirement placed in the Bill, there is a significant concern that the European state aid rules would come into play. The whole transaction could be held up for a year or two while the European state aid issue was resolved, during which time the Royal Mail would get into further financial difficulties.
In my view, it is inevitable that any operator of the Royal Mail is bound to use the Post Office to deliver the universal service obligation. At the same time, I would not wish to risk the hold-up of this transaction, thereby jeopardising the future of Royal Mail, because of the operation of the state aid rules.
Lord Young of Norwood Green
The point at issue in Amendment 66A is whether Royal Mail should be allowed to be hived off and broken up into pieces. We are proud of the fact that there are 115,000 post boxes around the country. Royal Mail has increasingly modern mail centres and the famous fleet of 30,000 red vehicles. The Royal Mail Group’s letters and packages business covers the whole of the UK with a one-price-goes-anywhere universal service, six days a week. That is something that Royal Mail is proud of, and something that we, as customers, want. It works only because it is part of an integrated system. Amendment 66A would ensure that we cannot have a situation where everything is shattered into smithereens, people pick up the bits that they want, cherry picking, and the bit that needs most help and support—the bit that is most threatened—is left. The consequence of such a situation may be to undermine our universal service, so we seek support for Amendment 66A.
I shall comment, if I may, on government Amendment 69. Clause 42 provides for Ofcom to review the extent to which the universal service provider is bearing a financial burden by providing the universal postal service. Clause 43 provides for the regulator to consider mechanisms to provide for a burden-sharing arrangement, if Ofcom finds that such a burden exists. This is both a necessary and welcome mechanism in the Bill. Government Amendment 69 would prevent Ofcom from making such a review for a period of five years rather than three years, as originally proposed. This could be seen as a concession to those who want to resist a levy to share the burden of the universal service. We are a bit concerned about that and would like to hear the Government’s reasons. However, we can see the argument for a five-year transitional period in this case, as we have sought for the USO minimum requirements under Clause 35.
Government Amendment 70 is exactly in line with the provisions that have been sought by the Opposition. It is welcomed by both management and staff in Royal Mail. With the potential turmoil and uncertainty of privatisation, it is important to provide some guarantee that Royal Mail will be able to make long-term investment decisions in the provision of the universal service. If it could lose all or part of the universal service, that would surely be a deterrent to major investment in the network that guarantees that the universal service is provided. By guaranteeing the universal service provision to Royal Mail for a 10-year period, this amendment gives Royal Mail the confidence to make necessary future investment. We are delighted that the Government have listened to the submission on this question from this side of the House, and from those inside the sector who have argued for such an amendment.
Amendment 70A goes on to seek that a reasonable period of notice be given before any other operator can begin providing postal services required under a universal service obligation. Under Clause 43, Ofcom can make a procurement determination—in other words, allow some or all of the universal service to be provided by a company other than Royal Mail. Royal Mail and the postal sector desperately need stability. Royal Mail is undertaking a major programme of modernisation involving more than £2 billion of investment. This process, combined with an aggressive regulatory regime, means that the company is facing a very restricted financial position. The business must be given sufficient notice of such a drastic change if it is to be able to plan effectively and to continue to provide the services expected of it. We are pleased that the Government have listened to representations and agreed that there should be no procurement determination for at least 10 years. However, if such a drastic move were to be made to remove Royal Mail as universal service provider, Amendment 70A would simply ensure that a reasonable period of notice would be required to allow everyone to make the transition. We hope to hear an assurance to this effect.
Lord Jenkin of Roding
My Lords, I listened to the noble Lord, Lord Young, but there are anxieties that the protection of the universal service and the amendments he has moved may, to some extent, weaken the determination of the management of Royal Mail to make the maximum effort to achieve the efficiencies that are now widely recognised as being an essential part of the whole programme. The Bill contains measures which would enable the Government, on the advice of Ofcom, to take other measures, for instance going for procurement, to which the noble Lord referred, if somebody else is prepared to offer the service at a lower cost because they are more efficient. It would be difficult to preclude that happening by legislation. Similarly, on the question of the fund, if other providers are to contribute to a fund, is there not a danger that they will find themselves contributing to reinforcing the inefficiencies of Royal Mail? I have said in previous debates that the chief executive of Royal Mail is making a tremendous, herculean effort as a manager to secure the efficiency savings that can be made. She is the first to admit that there is more to do. Royal Mail recognises that it has made a start and that she has the apparent support of the workforce. There needs to be greater efficiency.
I read these amendments, tabled by the Opposition, as removing some of the pressure on Royal Mail to get ahead with that. The noble Lord shakes his head but that is the fear. I therefore hope that that amendment will not be accepted. The amendments proposed by my noble friend on the Front Bench seem to be an admirable way of giving the appropriate protection to ensure that the services have the opportunity to become as efficient as possible, so perhaps not surprisingly, I find myself supporting the government amendments. I hope that they will not be used so that competitors, who could offer other services, find themselves subsidising the inefficiencies of Royal Mail. I know that that is not my noble friend’s intention but nevertheless there are fears among some of the competitors that that might be the unintended consequence. If my noble friend can reassure me on that I will be very grateful.
Lord De Mauley
My Lords, I thank all noble Lords who participated in this short debate. I shall speak to the amendment the name of the noble Lord, Lord Young. It would remove from the Bill the ability to designate, even in extremely limited circumstances, more than one company as a universal service provider. The intention of Clause 34 is to give Ofcom the power to designate more than one universal service provider in two specific circumstances only, in order to ensure the provision of the universal service.
As with other elements of the Bill, Clause 34 has been drafted to ensure that the Bill stands the test of time. It enables the regulatory regime to adapt when it needs to, in order to ensure the continued and long-term provision of the universal service. The measures we are taking in this Bill are designed to put Royal Mail on a sustainable footing so that it can continue to provide the universal service that we all value so highly.
However, it makes sense to set the legislation in this way to ensure that the universal service could continue to be provided in two specific, and extreme, circumstances. The first of these is where providing the universal service is found to represent an unfair financial burden on the universal service provider. The Secretary of State agreed with Ofcom’s advice that the best way of addressing that burden was through a procurement exercise, provided for by Clause 43.
I want to be clear that this is not about another operator being able to cherry pick profitable parts of Royal Mail’s business. This scenario would transpire only if it was determined that Royal Mail was subject to an unfair burden in providing the universal service. Ofcom would then assess whether another company could provide the relevant part of the universal service with less of a burden—in effect, removing the burden from Royal Mail. It is in this scenario that another company could be designated the universal service provider for that part of the universal service.
The second circumstance—and we all hope that this will never happen—is where Royal Mail has become insolvent and has entered special administration. Where a postal administration order has been made under Part 4, and it is not possible to rescue Royal Mail as a going concern, some of its activities could be transferred to another company, and Ofcom could then designate that company as a universal service provider as well, in order to secure the universal service.
As I have said, the full package of measures in the Bill is designed to secure the future of Royal Mail and the universal service, and therefore to ensure that we do not end up in either of those scenarios. Both the procurement process and the special administration provisions are backstops to be used only if the future of the universal service is at risk. However, as already has been mentioned, having the ability to make such designations in these specific cases is a sensible and pragmatic safeguard.
It is also important to make it clear that having more than one designated universal service provider in no way provides for or permits a varying level of minimum service across the country. Provisions elsewhere in Part 3 guarantee that the minimum requirements of the universal service remain uniform. I hope that, with those assurances, the noble Lord will feel able to withdraw the amendment.
Turning now to Amendment 70A in the name of the noble Lord, Lord Young, let me start by saying that I could not agree more with the intention behind this amendment, which seeks to protect the universal service provider from harmful cherry picking that could undermine the universal service. However, I hope to convince the noble Lord that this amendment is neither as strong nor as targeted as government Amendment 68, which we discussed in an earlier group, and government Amendment 70, to which I will come shortly.
Amendment 70A would apply only after several conditions had been met. First, a review of the costs of the universal service under Clause 42 would have to have taken place and, as we will discuss shortly, we are proposing that this cannot take place for five years. Secondly, Ofcom would have to have determined that the universal service provided an unfair burden, and would then have to report to the Secretary of State setting out its recommendations for dealing with any unfair burden identified by Ofcom. Finally, the Secretary of State would have to make a decision on what action to direct Ofcom to take, and all this would have to take place before Amendment 70A would apply.