Universal Postal Service

Debate between Mike Weir and Jo Swinson

Thursday 17th July 2014 Commons Chamber

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

It is a pleasure to respond to today’s constructive debate. I very much congratulate the hon. Member for North Ayrshire and Arran (Katy Clark) on securing it. As a fellow proud Scot, I am pleased that so many Scottish Members have contributed to it, but I am also pleased that all four nations of the United Kingdom have been represented.

The issues I wish to touch on in my summing up are: the importance of the USO; the concerns raised by various hon. Members about competition; and the Ofcom review, which is the main subject of the motion. We have heard from Members from all parts of the House about how vital the universal service is for rural areas. The hon. Member for Ynys Môn (Albert Owen), my hon. Friend the Member for Argyll and Bute (Mr Reid), and the hon. Members for North Ayrshire and Arran and for Angus (Mr Weir) all made points about that eloquently. We were reminded by my hon. Friend the Member for Northampton South (Mr Binley) that this is not purely a rural issue, as the universal service is vital to many towns and suburban areas. It is right that postal workers are held in great esteem in many communities, as the service is hugely important not only to our local economies, but more widely, in society and in communities. That is why, as my hon. Friend the Member for Argyll and Bute pointed out, we have set out the USO in primary legislation—my predecessor, my right hon. Friend the Member for Kingston and Surbiton (Mr Davey), made sure it was written into the Postal Services Act 2011.

I appreciate that the right hon. Member for Neath (Mr Hain) is no longer able to be in his place, but I am sure he will read my remarks in Hansard in order to follow the reassurances I can give about his concerns on the definition of the delivery of a six-day-a-week service to every address. He seemed to take the view that that was not a significantly well-defined definition. Section 31 sets out what must, as a minimum, be included in the USO. On the delivery of letters and other postal packets it states:

“At least one delivery of letters every Monday to Saturday—

(a) to the home or premises of every individual or other person in the United Kingdom, or

(b) to such identifiable points for the delivery of postal packets as OFCOM may approve.”

Clearly there are very few addresses that are, for whatever reason, inaccessible and for which Ofcom can, in those extreme cases, approve a collection point. That definition is very clear, we should be reassured by it, and it is right that this House and the other place have prioritised it by making sure it is in primary legislation.

[Mr Weir]

I understand what the Minister is saying and I acknowledged that this was the first time the USO was in legislation. Let us consider one thing that Ofcom can do in a review. I believe that section 43(8) states that its

“recommended action may consist of one or more of the following—

(a) the carrying out of a review under section 33 (review of minimum requirements)”.

So if Ofcom does carry out a review under the Act, it could recommend a reduction in the minimum requirements. Will she assure us that she will not accept any such reduction?

[Jo Swinson]

I am delighted to do so. I have given such assurances from this Dispatch Box, as colleagues have done. Speaking for my party going into the next general election campaign, I can say that that will be our position, and I am sure that other parties can also give their assurances on that. I think that there is absolute consensus across the House that that is vital and should be protected. So it is not something that would be changed. In addition, as we have discussed in the debate, to do so would require a vote in both Houses of Parliament, and that is a significant protection. I hope that that reassures the House on the importance the Government attach to the USO.

Members also raised concerns about cherry-picking and end-to-end competition. Of course competition is not new in postal delivery. It has been more than 10 years now since the EU postal services directive opened up the market. At the beginning, the effect was felt much more significantly in the collection and sorting of mail, with Royal Mail still being responsible for the final mile. That is the area in which there has been more competition.

The right hon. Member for Neath was right to highlight the fact that the expensive parts of postal delivery are to the address not in central London, central Swansea or central Glasgow but in those much more inaccessible, remote locations, where the costs are significant. Of course the principle of cross-subsidy, which was mentioned by my hon. Friend the Member for Northampton South, is a crucial part of how the universal service can be delivered. One of the ways in which the structure is created so that that cross subsidy can continue is for Royal Mail to have a lot of flexibility—much more than it used to have—to charge different prices to different operators. It can also use zonal pricing so that it can charge more for delivery to remote rural areas when it is being used for that final mail delivery, which accounts for the vast majority of competition that exists within the mail delivery market. That enables it to recoup the costs that it incurs from providing that universal service.

Competition can clearly help to drive efficiency, which I am sure people would agree is a positive thing, but it stands to reason that if that competition took a significant portion of the market, especially in terms of end-to-end competition, it could have an impact on the universal service. That is because zonal pricing is particularly related to the competition that exists when Royal Mail is still delivering the final mile. That is why we have put in place a regime in which Ofcom monitors both the situation and what is happening in the postal market. If necessary, it has further powers to act to level the playing field.

I just want to touch briefly on the quantum that we are talking about today. Members have mentioned TNT delivery, but in the last full year, in 2013, 14.6 billion items were delivered—that is the size of the mail market. Of those 14.6 billion items, 14.544 billion of them were delivered by Royal Mail. I am not saying that Members are wrong to be concerned, but I want to put the matter in context. We are talking about a very small portion, 0.38%, of the overall mail market. Members were right to say that it has grown quickly. In 2012, it was 0.11% of the market. Within the space of a year, the volume of items delivered in end-to-end competition more than tripled. It is important that this issue is looked at closely by Ofcom and that it is kept under review.

My hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) pointed out that perhaps Royal Mail needs to have time to adapt to changes. It is clear that we need to keep our eye on the rate of growth, but we are not yet talking about a level or a volume that would cause concern about the impact on the profitability of Royal Mail. Even Royal Mail accepts that the concern is more to do with the potential for that to happen rather than the situation as it is at the moment.

I just want to clarify which review we are talking about today. Two different reviews are being talked about. Some Members have mentioned section 44. I think that the hon. Member for Angus was looking at a copy of the Bill, because by the time that Bill became an Act, it was section 44 rather than 43. That is the review of the financial burden of the universal service on the provider that Ofcom can be directed to undertake by the Secretary of State. That is not the same as the review that Royal Mail is currently asking for, which is about end-to-end competition. That review is something that Ofcom has said that, as part of its wider monitoring regime, it will do in any event by the end of next year, but it is happy to bring it forward if necessary. This is an area in which there is no specific Government power to direct. I hope to reassure the House on this point.

There is a clear desire for Ofcom to keep a close eye on the impact of competition on the universal service. It seems that there is almost an assumption that that is not currently being considered, but I can tell the House that that is absolutely not the case. I have spoken to Ed Richards, who is in charge of Ofcom, and, as it happens, I will be meeting him later today, which is good timing. Ofcom is clear that it is monitoring the situation in the mail market carefully and intensely. It is not waiting until the end of next year; it is doing so on a monthly basis and is very much on the case, ensuring that it has the information. It also has the power to get access to much more detail than any individual player in the market, having access not only to the details of Royal Mail’s financial position, but also to the business plans of TNT and any other providers, so its visibility is excellent. The review will be started by the end of next year at the latest, but Ofcom has said that it is happy to start earlier if it sees any reason for market changes or any financial impact on the universal service that would mean that it needs to be started earlier.

I am conscious of the time, so I will not stray into the Scottish independence issues, tempted though I am to do so. The exchange between the hon. Members for Edinburgh South (Ian Murray) and for Angus set out that the matter is relevant and that there would be consequences in an independent Scotland for deliverability and the price of the postal service.

I want to finish by picking up on the point made by the hon. Member for Hayes and Harlington (John McDonnell), because he made a sensible and constructive suggestion that, given the level of interest in the House, which is clear from the debate’s attendance and from the correspondence that I receive as a Minister, it would be helpful for Ofcom to be able to meet MPs to discuss the issue. It is clear that the appetite is there and it would be useful for the regulator to hear MPs’ concerns directly and not just through Hansard. It would also be useful for hon. Members to be able to have a frank discussion with Ofcom about its approach, which I believe would lead to a great deal of reassurance. As I said, I will be meeting Ofcom later this afternoon and so will have the perfect opportunity to put that request. I look forward to hearing the response of the hon. Member for North Ayrshire and Arran to the debate.

Post Office

Debate between Mike Weir and Jo Swinson

Wednesday 27th November 2013 Commons Chamber

[Jo Swinson]

I shall endeavour to give a full answer to all those points but, if the House will forgive me, I shall write with all the details on those questions. As for temporary closures, I think it is about 400, but I can obtain the most up-to-date figures. As the hon. Gentleman can imagine, the figure fluctuates. I accept that it is important that we make sure that Government work is available as part of a mix of services and income streams that the Post Office can access. I absolutely accept that things are not easy, and I have said that a number of times when responding to questions this afternoon. I would not wish to suggest that it is an easy life being a sub-postmaster, because it is not, but we are trying to create a sustainable network for the future and, indeed, in communities that have experienced temporary closures, to look at what more we can do to make sure that post office services are delivered to those communities.

[Mr Mike Weir (Angus) (SNP)]

The sad fact is that many post offices in rural areas continue to close and have been replaced by outreach services. The £20 million investment fund is said to enable the improvement and modernisation of branches, but that is not the problem—it is postmasters’ income in those branches. Is there anything in the statement that will allow the Post Office to give more direct subsidy to the income of postmasters in remote rural areas to stop the closure of those branches?

Delivery Surcharges (Transparency for Consumers) Bill

Debate between Mike Weir and Jo Swinson

Friday 13th September 2013 Commons Chamber

[Jo Swinson]

I do not think that the problem has necessarily been quantified for all areas, but the hon. Gentleman is quite right. There has been a lot of campaigning on this issue in the north-east of Scotland and the highlands, not least because of work done by my hon. Friend the Member for West Aberdeenshire and Kincardine and others, but I am sure that it is also likely to be an issue for island or rural communities elsewhere in the United Kingdom.

[Mr Weir]

Citizens Advice also looked at Northern Ireland and found that there was an average mark-up of 216% for packages, so it is not just a problem for the highlands and islands of Scotland.

[Jo Swinson]

I thank the hon. Gentleman for that intervention. If I may add an anecdote, I was discussing the issue a few days ago in the Tea Room with my hon. Friend the Member for Argyll and Bute (Mr Reid), whose constituency is rather further south than West Aberdeenshire. He reported the frustration of some of his constituents in Dunoon when they telephone to ask why something could not be delivered or why it was so expensive. Dunoon, of course, is most often reached by ferry, and that information is clearly in a system somewhere, so the customer service assistant would explain to the customers that it was because they live on an island, which of course they do not, even if a ferry is often the most efficient way to reach it. That could create quite a lot of customer dissatisfaction. The important point for businesses to remember is that an unhappy customer is far more likely to tell other people that they are unhappy than a happy customer is likely to tell them that they are happy, so it is not necessarily in businesses’ interests for that to happen.

Postal Services (Rural Areas)

Debate between Mike Weir and Jo Swinson

Monday 2nd September 2013 Commons Chamber

[Jo Swinson]

It is up to Parliament to defend that universal service. That lies in Parliament’s power. We have protections in place through the 2011 Act because the Government recognised that that is an important service. [Interruption.] Members heckle from a sedentary position, but I highlight that it was the coalition Government who enshrined the universal service in legislation, not the previous Government. I think that it is incumbent on all Members of Parliament to ensure that we protect that, because it can be changed only if Members of Parliament decide to do so. I can certainly give an undertaking that I have no desire to do so. Perhaps Opposition Members are worried that they might feel under too much pressure and cave in; that is all I can imagine must be the cause of the concerns they are raising.

[Mr Weir]

The Minister is ignoring the point that has been made consistently: the universal service might become endangered owing to privatisation and increased competition. She can stand there and say that it is enshrined in legislation, but if Royal Mail can no longer deliver, there is very little that Parliament can do to stop it collapsing; there are only Ofcom’s various processes, which, as I explained in my speech, are unlikely to work.

[Jo Swinson]

Of course, Ofcom, as the regulator, has a range of tools. The nub of the hon. Gentleman’s point—there is a sensible point that he is making—is that it is vital that Royal Mail can continue to deliver as a successful company, and one of the challenges it currently faces is its lack of ability to invest. The postal service market it changing rapidly—parcel delivery, in particular, is very much a growth area, as other hon. Member have outlined—and we need to ensure that the Post Office has the capacity to react to changing circumstances. That is why it needs to be able to access private capital and why that is a way of protecting the universal service obligation, rather than the contrary.

Time is short and I would like to ensure that I mention post office matters, but on the issue of profitability and Royal Mail, which various hon. Members raised, I will put into context the challenges it faces. Competitors are investing significantly in their postal service markets and in improving their technology to deal with that. For example, Deutsche Post has invested more than €700 million over the past two years alone in its mail facilities and infrastructure and is focusing on another €750 million of investment by 2014. That is the type of investment that Royal Mail, in its market, ought to be looking at and that others in similar markets are looking at. That is why accessing private capital will be so important.

The debate has also covered the post office network. I think it is important to point out clearly that Post Office Ltd is not for sale; as of 2012 it is formally separate from the Royal Mail Group and remains wholly owned by the Government. Issues of Government contracts have been raised. I point out to hon. Members that Post Office Ltd has won 10 of the 10 Government contracts it has bid for since 2010, and it has done so on merit.

The hon. Member for South Down (Ms Ritchie) talked about the important opportunity of high street banking being provided through post offices, and I absolutely agree. It is pleasing that 95% of high street bank accounts can now be accessed through local post offices. That network is very important, particularly in areas where many of the banks have closed their branches. I encourage hon. Members to bring that to the attention of constituents, as they might not be aware of it. Also, the Post Office is currently undertaking a current account pilot in the east of England, so current accounts can be available from the Post Office as a financial services provider across the rest of the country.

Postal Services in Scotland after 2014

Debate between Mike Weir and Jo Swinson

Wednesday 10th July 2013 Westminster Hall

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

It is a great pleasure to serve under your chairmanship, Mr Hood. How apt it is to have a Scot in the Chair for a debate on the important matter of postal services in Scotland post-2014. I thank the hon. Member for Glasgow South West (Mr Davidson) for securing the debate, and for his wide-ranging introductory speech. We have covered a good amount of ground today; indeed, I wondered at times whether we were in a rerun of a debate from two weeks ago on the privatisation of Royal Mail. I know that the hon. Gentleman was unfortunately not able to attend that debate, but I hope he is able to be in the Chamber later today for the Secretary of State’s statement on this issue. The hon. Member for Angus (Mr Weir) mentioned that there may well be further opportunities for discussion in Backbench Business Committee debates, if the Committee so agrees, so I am sure that we will return to the issue time and again over the next few months, and beyond.

In 2014 we face an historic choice in Scotland—arguably the most important vote that Scots will have cast in decades. I hope that there will be a high turnout in the independence referendum, and I very much believe that the Scottish people will decide to reject the notion of independence because we are better off as part of the United Kingdom. It is important that over the next 14 months or so we continue to have a full and healthy debate about all aspects of what such a change would mean for everyday life in Scotland. The Government are, of course, making the case that Scotland should remain in the United Kingdom, and as part of that we are carrying out a programme of analysis across a number of Departments about Scotland’s place in the UK and how it contributes to, and benefits from being part of, the UK.

I am sure that right hon. and hon. Members are aware of the paper that the Department for Business, Innovation and Skills produced on 14 June, which demonstrated that Scotland and the rest of the UK benefit from the domestic market and the shared business framework that underpins it. The paper had a section on postal services as part of a more general consideration of infrastructure in Scotland. We take the view that we are better and stronger together as part of the United Kingdom. We are not making contingency plans for the Scottish people deciding to leave the United Kingdom because we do not believe that that will be the outcome, but it is absolutely for the Scottish Government to set out what would happen in that scenario, given that it is they who are advocating the change, and that is a challenge for the SNP.

We have had a fair challenge from the hon. Member for Edinburgh South (Ian Murray) about the price of a stamp for a Christmas card because, although we have e-mail these days, there is something lovely about sending and receiving Christmas cards and people want to know how much it will cost. There are question marks over what the cost would be in an independent Scotland.

[Mr Weir]

The Minister says that the Scottish Government or the SNP have to make clear the cost of sending a Christmas card post-independence. However, under her privatisation proposals we do not know what the cost will be in 2016 for sending a Christmas card in the UK whether or not there is independence for Scotland, because there is no longer a price cap on anything other than second-class mail.

[Jo Swinson]

I welcome the hon. Gentleman’s intervention because it gives me the opportunity to confirm and clarify the situation. I appreciate that there are strong views on different sides about the privatisation of Royal Mail, but many wild stories have been going about. It is absolutely clear that the universal service obligation remains. The obligation is enshrined in the Postal Services Act 2011, which was passed by this Parliament. The Act sets out that there has to be a six-days-a-week service to every location at an affordable and uniform price. That provision is monitored by the regulator Ofcom, and will remain in place after privatisation. The exact same set of protections that is in place at the moment will, therefore, remain.

What is unclear, however, is what would happen in an independent Scotland. We do not know whether Scotland would be a member of the EU and therefore whether the EU postal services directive would apply. If we assumed that it did, there would have to be at least a five-days-a-week universal service—Ireland has such a service. Only five EU countries, including the UK, go beyond that and have a six-days-a-week service. We do not know whether it would be a five-day or a six-day service in an independent Scotland. The SNP says that it will give guarantees—I noted that from the speech made by the hon. Member for Angus—but it does not back up how it would do it.

This comes down to the basic economics point to which various hon. Members have referred, and which applies to both the Post Office and Royal Mail. What we have in Scotland is a different sort of demography and geography to that of the rest of the UK, which is something that the hon. Member for Glasgow North West (John Robertson) mentioned. His area is very urban, and the costs of the logistics of getting about to deliver letters are, therefore, lower than they would be in a very rural constituency. If one country has a higher proportion of rural areas and addresses than another—Scotland compared with the UK for example—the service becomes more expensive to operate, and that cost must be accounted for. An hon. Gentleman chuntered from a sedentary position, “Do you think that Scotland could not run a postal service?” Of course it could, but we need to know what the costs will be. To suggest that they would be the same as for running the service across the UK, where there is cross-subsidisation between more densely populated areas and rural areas to offset the higher costs in the latter, is to misunderstand the basic economics.

Post Office - Horizon System

Debate between Mike Weir and Jo Swinson

Tuesday 9th July 2013 Commons Chamber

[Jo Swinson]

I very much welcome my hon. Friend’s comments. He is quite right that the Government are investing £1.34 billion in the post office network, and I know from speaking to Members on both sides of the House that where these new models are open and working, they have had a really positive reaction from consumers. The Post Office has a bright future, but part of that is about ensuring that where issues arise, they are properly investigated. That is what this independent process has been doing, and that is why we are discussing it today.

[Mr Mike Weir (Angus) (SNP)]

The number of sub-postmasters affected might be small, but none the less it has led to terrible consequences for many of them. One reason many people pleaded guilty, paid back money or had money taken off them by the Post Office at source might have been the latter’s insistence that there was absolutely nothing wrong with the system. It has now been proved that there is doubt about at least part of the system, so is it not imperative that all these cases be dealt with speedily and that justice be done for these sub-postmasters?

[Jo Swinson]

The hon. Gentleman is right that it is imperative that these cases be looked at speedily, although I think he would also agree that that needs to be done comprehensively, and clearly when forensic accountancy work is going on, things can take time. We need to be clear about what the report says about the Horizon system. It did not find evidence of systemic failures; that is not to say there has never been a bug in the system, but I defy anyone to find an IT system that has never had a bug. What is important is that when bugs are found, they are dealt with and the problems are rectified. What has not been found, however, is any systemic problem leading to the issues faced by sub-postmasters, although there have been issues with the support and training provided alongside Horizon.