Postal Services Bill

Viscount Eccles Excerpts

Tuesday 17th May 2011 Lords Chamber

[Lord Young of Norwood Green]

My Lords, we welcome government Amendments 59 and 62, which would allow Ofcom to establish the timescale for the universal service provider to achieve the levels of efficiency which it is reasonable to expect. This is a recognition that Royal Mail is going through the difficult process of modernisation. The amendment acknowledges this process, which is entirely welcome. Government Amendment 61, which is also most welcome, recognises the universal service provider is entitled to achieve a reasonable commercial rate of return in the provision of the universal postal service, as indicated by the noble Baroness.

Amendment 60 seeks to prevent unnecessary regulatory intervention in areas of the market where effective competition exists. According to the regulator Postcomm, Royal Mail has complained of considerable overregulation since 2006, with approximately 80 per cent of Royal Mail letters revenue subject to price controls. A range of changes introduced in April this year has reduced this figure by just 5 percentage points. For example, Postcomm had previously proposed to remove regulation from pre-sorted bulk packets and parcels of more than 500 grams, but when Postcomm reached its final decision, it deregulated only for items above 1 kilogram. This was despite Royal Mail evidence suggesting that there was significant competition in the market for items weighing less than 1 kilogram. Preventing overregulation is seemingly a shared aspiration, and therefore I hope that Amendment 60 will find favour. The current regulator is clear that it would rather not regulate where Royal Mail faces competition; our Amendment 60 will make it imperative that Ofcom does not do so.

[Viscount Eccles]

My Lords, I am a bit bothered about the amendment that the noble Lord, Lord Young, spoke to because of the great difficulty for anybody to define “effective competition” in a statutory way. The competitive market for communications is very complicated. Ofcom is a very big and well established regulator that no doubt understands that market better than Postcomm did, but Ofcom still has to determine the regulatory framework that it is to follow. Work is going on in the last days of Postcomm that will not be completed until next year.

That is not the only point. Effective competition includes digital competition. Many other means of communication have been developed that have superseded the forked stick, and I think that this amendment is a step too far. I cannot support it.

[Baroness Wilcox]

My Lords, Amendment 60 would place a new duty on Ofcom to have regard to the need to avoid regulation where market forces and effective competition allow. I understand the rationale behind this amendment. Indeed, the Government firmly believe that the regulatory regime going forward needs to be as light touch as possible. This was made clear by the Secretary of State for Business, Innovation and Skills who, in a recent letter on the subject to the chairs of Ofcom and Postcomm, stated:

“Given the seriousness of the problems facing Royal Mail, I believe that a comprehensive reassessment of the regulatory regime is required in the light of developments in the postal and communications sectors to … look again at where regulation is needed”,

and,

“determine what form that regulation should take if required”.

While sharing the view that regulation must be as light touch as possible, we believe that a duty such as the one imposed by Amendment 60 goes too far and could have some very undesirable consequences. These undesirable consequences could come about because there may be real reasons why it might not always be possible for the universal service provider to be allowed to respond to market dynamics, as my noble friend Lord Eccles has said. For example, there is the requirement to provide the universal service at an affordable and uniform price. However competitive the market may be, it is by no means certain that market dynamics would force the universal service provider to meet those requirements. As such, Ofcom may need to regulate to some degree to ensure that these requirements are met even if there were a fully competitive market across the full range of postal services.

Finally, I would like to remind your Lordships that Ofcom is already under a duty to keep regulatory burdens to a minimum under Section 6 of the Communications Act 2003. I hope that this will reassure the noble Lord, Lord Young, and that he will feel able to withdraw this amendment at the appropriate time and to support the government amendment in this group. I beg to move.