Royal Mail: Universal Postal Service

Viscount Younger of Leckie Excerpts

Thursday 19th June 2014 Lords Chamber

[Lord Hoyle]

To ask Her Majesty’s Government what assurances they received from the privatised Royal Mail that they would maintain the universal postal service; and what such assurances they have given to Parliament.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)]

Royal Mail, as the UK’s designated universal service provider, is required to provide postal deliveries to all UK addresses in accordance with minimum requirements set by Parliament under the Postal Services Act 2011, and quality standards set by Ofcom, the regulator. Only Parliament can change the minimum requirements of the universal service in the UK.

[Lord Hoyle (Lab)]

I thank the Minister for that reply. Royal Mail is committed to providing a universal service. However, it is facing competition from other companies seeking to cherry pick from the direct delivery service. Ofcom has promised to review the situation but that could take at least two years. Will the Minister join me in pressing Ofcom to begin the review immediately in order to save the universal service?

[Viscount Younger of Leckie]

The noble Lord is correct: this is a matter for Ofcom. The Government’s policy on competition in the UK postal services market is clear: although competition can bring benefits to consumers, it should not undermine the provision of the universal postal service. That is why the Government have ensured that Ofcom’s primary statutory duty is to secure the ongoing provision of the universal service. However, should competition threaten the universal service, the Act is clear that securing the universal service must take precedence.

[The Lord Speaker (Baroness D'Souza)]

I hesitate to interrupt the proceedings but I am having difficulty in following them due to the continuing conversations coming from the Benches on my left.

[Lord Deben (Con)]

Does my noble friend accept that those of us who live in the country are particularly at risk should there be any diminution in the strength of the universal postal service? However, could we not be encouraged to take on board the practice adopted on the continent and in America—namely, to situate post boxes at the end of driveways? That is environmentally very friendly and entails a huge cost saving.

[Viscount Younger of Leckie]

My noble friend makes an interesting point but the minimum requirements of the universal postal service are enshrined in law, and include six-day delivery to every address, rural and urban, in the UK. I reiterate that the protections are exactly the same for rural areas as urban areas. The Postal Services Act also ensures that universal services are offered at uniform prices throughout the UK; so universal services cannot be offered at different prices in different areas around the UK.

[Lord West of Spithead (Lab)]

My Lords, why is it still called “Royal” Mail? Does this mean that any company can use that prefix?

[Viscount Younger of Leckie]

It is called Royal Mail because the universal service includes the Queen’s head, which will remain on the stamps—as set in stone.

[Lord Purvis of Tweed (LD)]

Does my noble friend agree that perhaps the biggest threat to the enshrinement of the universal postal service across the United Kingdom is the Scottish Government’s ill considered plans for independence, which would put at risk United Kingdom postal services overall? Does he also agree that perhaps the most vulnerable communities are in the most sparsely populated areas across Britain, including the Scottish borders and the rural Scottish highlands? We are already seeing some providers offer a poorer and more expensive postal service. In support, therefore, of the request of the noble Lord, Lord Hoyle, does the Minister agree that Ofcom should pay particular attention to those living in the most rural parts of the United Kingdom?

[Viscount Younger of Leckie]

This very much ties in with the question raised by my noble friend Lord Deben. I reiterate that Royal Mail cannot refuse to deliver, or stop delivering to, rural areas; nor can it introduce different prices for rural areas as part of the universal service. The minimum requirements of the universal postal service are enshrined in law and include six-day delivery to every address in the UK, urban and rural, including in Scotland.

[Lord Foulkes of Cumnock (Lab)]

My Lords, further to the question of the noble Lord, Lord Purvis, will the Minister confirm that the greatest burden on delivery is in Scotland, which represents one-third of the land area of the United Kingdom, particularly in the Highlands and Islands? Does he agree with me and others that the greatest threat to the universal postal service in Scotland would be if it were to become an independent country?

--- Later in debate ---

[Viscount Younger of Leckie]

The noble Lord draws me into a different area. We take the view that Scotland is much better off staying within the United Kingdom, so we do not see any threat to the universal service.

[Lord Skelmersdale (Con)]

My Lords, does my noble friend accept that the universal postal service obligation works only because of cross-subsidy, with money saved by urban delivery paying for rural delivery? Is not the noble Lord, Lord Hoyle, therefore, absolutely right to say that the biggest danger to all this is the cherry-picking to which he referred, which Ofcom has to consider very seriously?

[Viscount Younger of Leckie]

Yes, and I know that the chief executive of Royal Mail made a few comments about this a few weeks ago. I should, however, reassure the House that Royal Mail delivers more than 99% of all letters and 37% of parcels. Other suppliers—that is, the incoming competition—directly deliver around 24 million items per year, compared to the 55 million items per day delivered by Royal Mail. So the competition is healthy but is not a threat.

[Lord Young of Norwood Green (Lab)]

The noble Viscount said that only Parliament can change the universal postal service, but is he not concerned about the fact that we have had already one massive increase in stamp price, with a further increase being projected by Royal Mail? Should he not, therefore, take a bit more seriously the threat of competition and the way in which it emerging? I can only reinforce the point that my noble friend Lord Hoyle made about the need to ensure that Ofcom, in delaying unnecessarily the response on this vital issue, does not undermine what everyone in this Chamber treasures—the universal postal service.

[Viscount Younger of Leckie]

The restrictions were laid down by this Government when we came into power, with the Postal Services Act going much further than any restrictions put down by the previous Government. Competition is healthy, and it is very much a matter for Ofcom to review the progress of Royal Mail. Ofcom continues to do that and will give a proper, full assessment at the end of 2015.