Royal Mail

Paul Scully Excerpts

Thursday 17th 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 McDonagh. I thank my hon. Friend the Member for Wantage (David Johnston) for securing today’s important debate about the performance of Royal Mail.

I echo all the thanks and admiration of the important role that postal workers have played in serving customers and supporting local communities right across the UK, in normal times and, clearly, during the coronavirus pandemic. Their willingness to maintain deliveries and do their day-to-day work at a time of increased social isolation, when many people could not leave their homes, has been vital. The Government have relied on their continued service to keep people connected across the country, delivering the letters and parcels that are so important to everyday life and supporting the economy in these unprecedented times.

My hon. Friend talked about the importance of post, as did the hon. Member for Hornsey and Wood Green (Catherine West), whether it is cards for life events— celebrations, commiserations and condolences—or important issues around tax, insurance and hospital appointments. I hope that his constituents who celebrated their 65th wedding anniversary—please pass on my best wishes to them—got their cards in the end. I suspect, having reached their 65th wedding anniversary, they know how to practise patience and forgiveness, so I am sure that they were in good stead while waiting to get to that point.

I want to talk a bit about the situation of the service, and the context of where we are at the moment, before I answer some of the points that have been raised. Royal Mail has well-established contingency plans to mitigate disruption to postal services. As we have heard, those plans are overseen by Ofcom, which is the independent regulator. It is important to remember that it is an independent regulator, because that independence is key to ensuring that Ofcom keeps Royal Mail on its toes and does its job as an effective regulator.

Royal Mail has reassured the Government that it has been doing everything it can to maintain service levels during this period and that it continues to keep Ofcom informed, but as we have heard, there are issues that still need to be addressed. We will continue to challenge Royal Mail, and I will expect Ofcom to be doing exactly that under the framework, but I will talk a bit more about the regulatory framework in a second, in response to some of the questions that have been raised.

The changes made to Royal Mail’s operations due to disruptions are an operational matter for Royal Mail. Therefore, it is up to Ofcom to monitor those service levels in the first instance. In November 2020, Ofcom published its user needs review of postal services. In that report, Ofcom noted that the majority of users are satisfied with the postal services that they receive from Royal Mail. Among residential users, overall satisfaction has remained over 80% in the past few years. Among SME users, overall satisfaction with the quality of services they receive has increased markedly since 2012. That is the important thing. I understand the ideological debate about privatisation, but studies of postal services around the world considered Royal Mail to be 40% less efficient than other national equivalents at that time. As the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) said, we have seen £2 billion invested since then, and an extra £1.8 billion has been promised for further investment.

In 2010, a mere 8% of post was sorted by machine, compared with 85% for leading EU operations. The figure is now 90%. Imagine having a nationalised Royal Mail at this point in time, when it is competing for the funds its needs against schools, hospitals and all the other services that the public sector has to provide. The extra money that has come in for investment is clearly to be welcomed.

The regulatory conditions that require Royal Mail to deliver letters six days a week as part of the universal postal service also provide that Royal Mail is not required to sustain those services without interruption, suspension or restriction in the event of an emergency. Ofcom has acknowledged that, in the context of the covid-19 pandemic, it is indeed an emergency. As such, the regulatory framework allows Royal Mail to modify its obligations. That includes the temporary reduction in the frequency of the delivery of letters, which Royal Mail implemented for six weeks in 2020 without formal authorisation, because it considered it necessary to respond to the challenges faced in maintaining the postal services at the height of the pandemic. Ofcom published a statement on its website in April 2020, and a further statement in January this year, clarifying that the regulatory framework supported Royal Mail’s actions.

Throughout the pandemic, Royal Mail has been transparent with the public about any changes to the services it provides, and the information can be found on the Royal Mail website. We have heard about the dangers of the digital deficit, and clearly there is always more that we can do to ensure the information gets to people, rather than people having to find it. We will always work on that, and it is incumbent on all of us, as elected leaders in our communities, to ensure that we get the information to colleagues across the House, so that we can help amplify those messages to our constituents. These are clearly areas that we can look at.

It should therefore come as no surprise that when Royal Mail published its quality of service results last month, it had not met the universal service obligation targets for the delivery of first and second-class mail. Royal Mail reported that that was due to high levels of covid-related absences and shielding; the introduction of social distancing in its operations, as we have heard; no shared vans; and the increase in parcel volumes, which went up an incredible 32%. As has been said, the change in postal services over the past few years is that parcels are driving profits among Royal Mail’s competitors. Indeed, that is a main contributing factor to the financial performance of Royal Mail in recent months.

In light of all those factors, it acknowledges that at times its quality of service has not always been how it might have wished, especially in areas with higher levels of local covid infections. Despite that, clearly, postmen and women worked exceptionally hard to ensure that the delivery of covid-19 test kits were prioritised. Royal Mail implemented Sunday deliveries and collections, resulting in next-day delivery for covid-19 test kits exceeding 98%. In addition, it prioritised the delivery of NHS vaccination letters and election mailing, doing its best to ensure that service delays did not have an impact on those important communications.

Let me take some time to say something about the particular concerns of my hon. Friend the Member for Wantage about the delivery service in his constituency. I must admit that, in the lead-up to the debate, I spoke to my two-man focus group in Great Coxwell—my former parents-in-law—and they said they were sometimes a few days behind during covid. In general, it has been okay, and is now back to pre-covid levels. That goes to show that, even within a constituency, there are patches where things are seemingly okay and clearly patches where there are still significant issues, as my hon. Friend eloquently highlighted, and we need to tackle them. We cannot look at one area in isolation, so he is right to drill down into those areas.

I have been informed by Royal Mail that the service in the Wantage area was disrupted due to sickness absence levels in some parts of the operation remaining higher than normal. That was exacerbated by necessary changes to the business operations and difficulty with additional recruitment. There are 10 postcode areas in Wantage and 10 delivery offices to service them. In the Wantage area itself, sick absences peaked at 15%. I am pleased to report that, as of last week, that absence rate has gone down significantly and is at levels that Royal Mail expects at this particular time of year.

To provide a snapshot of disrupted service levels and how far more Royal Mail has come to improve them, let me cover three areas quickly. Per day, the Wantage delivery office covers 29 delivery rounds. In December, on average, seven delivery rounds could not be completed per day; in April, that was at most one delivery round per day. The Didcot delivery office, which my hon. Friend mentioned, per day covers 38 delivery rounds. In December, on average, 10 delivery rounds could not be fully completed per day; in April, that was at most three delivery rounds. The Wallingford delivery office has 39 delivery rounds. In April, there was a high level of sick absence, and that clearly had an impact on mail deliveries and deliveries were rotational, happening every other day. As of May, however, mail deliveries have been taking place six days a week to all addresses served by all three of those delivery offices.

In addition, Royal Mail continues to use agency support, as well as to hire vehicles to alleviate any pressure on staff, so that it can maintain the best possible service. At the Wantage, Didcot and Wallingford delivery offices, 14 permanent roles have been created and, to date, six of those new recruits are in post. Clearly, however, when I asked those questions, Royal Mail also assured me that if for any reason an address does not receive a mail delivery one day, it will be a priority for the next working day.

Royal Mail is open to engaging with the public and, indeed, with all MPs about delivery services in their respective constituencies and across the UK. I enjoy going to my local delivery offices whenever I can in Sutton. I am pleased to hear that my hon. Friend the Member for Wantage is going on a site visit tomorrow in Didcot, so I hope that he finds that productive in following up this conversation and this discussion, because it is important that we scratch beneath the surface. Yes, we get the assurances, but it is only by going to see people with those further questions that I hope he will get the answers that he needs and that he will be able to put his constituents’ views—as I know he will, admirably —to the managers in that delivery office.

The postmen and women who serve Wantage and across the UK have continued to dedicate themselves to providing a key public service. Royal Mail more broadly, has done its utmost to deliver on its universal service obligation, while observing health and safety advice. Royal Mail has been transparent about changes to its service, as I said, but it acknowledges some disruptions to delivery, mainly but not solely—as we heard—due to the extenuating circumstances generated by the pandemic. However, we have also seen changes in consumer behaviour, including the rise in online shopping. Royal Mail’s financial report, published last month, highlighted that parcels represented 72% of its UK revenue in the previous financial year, increasing from 63% in the financial year 2019-20. That has largely been driven by changes in behaviour through the pandemic. Increases in e-commerce have further added to the demand for parcel delivery services: a study by Royal Mail found a 7% increase in company start-ups in March to July 2020, compared with the same period in 2019. Of 315,000 new companies, nearly 16,000 were e-commerce.

The pandemic is an emergency situation that has required Royal Mail to be flexible, make the necessary adjustments and respond effectively to demand. Royal Mail has clearly done its best to maintain service levels during a situation outside its control, but that is why the regulatory framework provides that flexibility to manage emergency situations, and why Ofcom indicated its support for the measures Royal Mail has taken to respond. Ofcom also noted that Royal Mail did not meet its quality of service standards in 2020, but that performance has improved considerably in recent months as covid impacts have started to recede. Ofcom considers that timings for a return to pre-covid performance standards are likely to align with further guidance on social distancing; indeed, I spoke to its chief executive about that just yesterday. Ofcom has reassured me that it continues to scrutinise performance closely, and that Royal Mail is actively implementing a recovery plan that includes operational changes and the use of additional frontline staff.

When looking at the future regulation framework, Ofcom clearly needs to ensure that postal regulation keeps pace with changes in the market and remains relevant, a point raised by the hon. Member for Dulwich and West Norwood (Helen Hayes). We last reviewed the regulatory framework for post in 2017, and agreed at the time that it should remain in place until 2022. Ofcom is now carrying out the review of the future regulatory framework for post, which it aims to complete in 2022. As part of that review, Ofcom will consider whether extra consumer protections may be required, and is seeking views on the future regulation of the parcels market: a call for inputs closed in May 2021. Ofcom will publish a full consultation on the future regulation of postal services later this year.

The hon. Member for Newcastle upon Tyne Central talked about postcode data, which is something we have spoken about in the past. It is a really interesting point that we need to work on, because in the era of open data, we have to make sure that that open data is available, without one company seeking to profit from intellectual property that has been developed over a period of time. I am looking forward to continuing that discussion with her.

The hon. Member for Hornsey and Wood Green raised issues about the N8 area, as she has done before. I know that people at Royal Mail—I was going to say “avidly read Hansard”, but that is a little bit much. [Laughter.] It is essential lockdown reading. However, I know that they look at the coverage and debates in this House, so they will have heard about the campaign that the hon. Lady has been running to make sure that her constituents in the N8 area and the surrounding area are well served. I believe the last time we spoke about the SE22 area was in November 2020, when I participated in a debate led by the hon. Member for Dulwich and West Norwood. It was interesting to hear the update about what is happening in that area with her constituents, and I know that the hon. Lady will continue to lobby and campaign on behalf of those constituents to make sure they get the service they deserve.

We know that the Royal Mail needs to continue to modernise as people are moving towards parcels, but we cannot forget those essential letters and that essential correspondence. Yes, fewer people are relying on them, but those who are relying on them are in many cases the most vulnerable in society and the most dependent on that social contact and social value, as well as the essential services that are still provided by post. Clearly, delays in postal service deliveries can be frustrating, and they can have serious consequences. We have heard some examples from those who are reliant on the post for important information, including for start-ups and small businesses, who are trying to build their businesses and develop a reliable, remote offer to their customers.

Following the debate we had here last week, I do not doubt the issues in the highlands and other remote areas about the cost of delivery for parcels. The service for letters must also remain, through the universal service obligation.

The past year and a half has presented exceptional challenges and has led to the disruption of services, but the postal system has continued to operate, and Royal Mail is able to resume service levels now that absence levels are closer to normal and the business has adjusted to operational changes. On behalf of the Government, I thank once again all the Royal Mail postal workers and Royal Mail itself for the dedication and commitment shown while providing continued service throughout the pandemic.