Delivery Charges in Highlands and Islands

Paul Scully Excerpts

Tuesday 8th June 2021 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

It is a pleasure to serve under your chairmanship, Ms Rees. I congratulate the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) on securing today’s important debate. Its subject continues to be important for his constituents and, similarly, for other Members across the House, including, as he mentioned, my hon. Friend the Member for Moray (Douglas Ross), who raised this last, in December 2020. The hon. Gentleman was there, and he and my hon. Friend came together in a cross-party spirit, because this is very much a geographical issue rather than a political issue, although there are often political levers we can look to to see what we can work on together.

It is not unreasonable for business to seek to cover the legitimate costs of delivery, but it feels to some customers outside the major conurbations that charges are going beyond that, so I have a lot of sympathy for the case that the hon. Member has made—that consumers in some parts of Scotland continue to be treated differently from those in other parts of the UK. I also recognise that similar issues exist for consumers in, for example, Northern Ireland and, latterly, the Isle of Wight. I am pleased to take part in this debate and to update Members on developments since the previous debate in December 202, but let me first remind colleagues of the Government’s general approach.

The Government recognise that delivery costs can be higher when reaching some parts of the UK, but delivery surcharges should be based on real costs of transportation. Businesses are strongly encouraged, as far as possible, to provide consumers with a range of affordable delivery options. Moreover, the Government have ensured that there is access for everyone, including small retailers, to an affordable, consistently priced postal service for deliveries across the UK under the universal postal service. Royal Mail, through the universal service obligation, must deliver parcels up to 20 kg five days a week at uniform rates throughout the UK.

The Government believe that businesses should be free to choose partners and make the contractual arrangements that best fit their commercial needs. At the same time, consumers need transparency of information so that they can choose the supplier who best meets their requirements. The resulting competition should lead to a more efficient allocation of resource.

Consumer protection laws require transparency of costs, including delivery charges. Retailers are therefore required to be up front about their charges, including where they deliver to, what they charge and when any premiums apply. In that regard, at least, the law was working well for the hon. Gentleman’s constituent, Graham, in terms of his batteries, because at least he could make an informed decision, as unfair as he felt that extra transaction cost was. With that transparency, consumers know exactly where they stand and can therefore decide accordingly. If retailers are to take advantage of the considerable opportunity for online sales, they need to take heed of the needs of consumers in all parts of the country, developing delivery solutions to realise sales potential in every single area.

Our legislation is robust. The Consumer Protection from Unfair Trading Regulations 2008 and the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 set out that the information given by traders to consumers regarding those delivery costs, including any premiums, must be up front and transparent, as I have said.

In response to concerns raised previously by hon. Members about understanding the rules, highland trading standards established a website to provide advice and delivery charges for consumers and businesses. Any consumer who believes that the rules have been breached should report it through the deliverylaw.uk website so that incidences are recorded and appropriate enforcement can be taken.

Furthermore, as I reported to the House last year, a significant volume of enforcement work has been undertaken by the Competition and Markets Authority and the Advertising Standards Authority. The ASA has issued enforcement notices to online retailers where parcel surcharging practices have been raised and has achieved a compliance rate of over 95%. The CMA has continued to issue advisory notices to the major retail platforms and has published guidance to retailers who sell via those platforms. It continues to work through primary authorities to ensure improvement in this area. On the legal compliance side, our enforcement partners are continuing to monitor the situation and to take action where necessary.

In November last year, the postal sector regulator, Ofcom, published updated information on how this part of the market is operating, as part of its annual postal service monitoring update. I set out Ofcom’s findings in the December 2020 debate in the House. Ofcom found that operators take different approaches to the pricing of parcel delivery services. Some vary their prices by location, but others do not. Businesses have options. For the subset of suppliers who vary delivery charges by location, some use a binary standard charge and an out-of-area charge and some set different prices for different areas. In other cases, the actual prices charged for business-to-consumer parcel deliveries are bespoke. Although operators may start with a standard rate, they often negotiate charges on a bespoke basis with individual retailers. As I outlined in the previous debate on this issue, some major retailers, such as Argos and Wayfair, have taken positive steps, vastly improving the delivery service by removing surcharges for most customers in the Scottish highlands and islands.

The Government have no role in interfering with business decisions. Businesses can adopt a range of options on delivery charges and may apply none at all, and the parcel delivery market is competitive. The hon. Member for Caithness, Sutherland and Easter Ross talked of the Penny Post, which was, in its time, an important standard to reach, but the post service has moved on in the past few years. Parcels, rather than letters, are more predominant in people’s lives than ever before, and the market is hugely competitive. Steps taken by suppliers to apply no delivery surcharge will put downward pressure on charges from other suppliers. Royal Mail clearly needs to be in that space, looking at that downward charge, to be able to modernise and compete with other suppliers.

I reassure the hon. Gentleman that the Government continue to look at this issue. The Consumer Protection Partnership brings together consumer protection organisations from across the UK. It runs a dedicated working group, including consumer advocates, trading standards and Government representatives, to focus on this issue. The working group also includes the Scottish Government.

Ofcom will be undertaking a review of its future regulatory framework for post over the next year. In the call for input between March and May this year, Ofcom invited views and comments from stakeholders. It intends to publish a full consultation on the future regulation of postal services later this year, before concluding its review in 2022. The review will consider issues affecting the broader postal sector, as people’s reliance on parcels continues to grow.

Other ongoing work to enhance compliance with the legislation includes updating the best practice guidance available from the Chartered Trading Standards Institute. The updated guidance has been informed by CPP members, as well as other organisations, and aims to drive the messaging out to online retailer platforms and delivery services.

I continue to believe that the legislative framework is robust and provides appropriate protections for consumers. The Government remain committed to ensuring that the universal service obligation, including the delivery of parcels at a set charge throughout the UK, remains affordable and accessible to all users. My priority is continued enforcement of the law to ensure that customers are not surprised by delivery charges and are able to make choices based on clear information. In that way, consumer decisions will apply competitive pressures that can drive down delivery charges to the benefit of all.

On behalf of the Government, I express my gratitude to postal and parcel workers across the UK, who have been working tirelessly throughout the pandemic to keep us all connected. I thank the hon. Member for Caithness, Sutherland and Easter Ross once again for bringing this important debate to the House, and you, Ms Rees, for chairing it. I look forward to continuing to work on this issue. I know we will be back here again to speak on behalf of the hon. Gentleman’s constituents and others in the affected areas.

Question put and agreed to.