New clause 4 and amendments 11, standing in my name, relate to concerns about the universal service obligation. My concern throughout the Bill's passage has been that there are insufficient safeguards to ensure that, in the event of the Royal Mail's privatisation, the universal service obligation, which is so important to my constituents, is maintained.
Throughout Committee, the Minister insisted that the purpose behind the Bill was to secure the universal service obligation, but I made the point on several occasions, as I did earlier today, that far too much has been left to trust and hope—a point, indeed, that was made in our previous debate this afternoon. In many other areas, the Government are very fond of triple locks, yet on something as important as the universal service obligation, they have not put sufficient safeguards in place.
The new clause is an attempt—perhaps not a triple, but at least a lock—to provide some assurance that a privatised company will maintain the universal obligation and not seek to get around its provisions. In the event of privatisation, the privatised company will be given the obligation to provide the universal service, but it concerns me greatly that our only sanction to ensure that it does so is through the regulator, Ofcom. There is nothing specific in the Bill to prevent, for example, a privatised company from hiving off the profitable parts of the organisation, although if recent press reports are true perhaps the European Commission will have done so before the company reaches privatisation. That could leave only a shell company obliged to provide the universal service.
What would happen if the privatised company went to the Government, saying that it could no longer afford to run the service and seeking either a public subsidy or to abandon the service? We would be thrown back on the regulator alone or have to utilise the compensation fund that we debated at some length in Committee, with the other operators having to contribute and the consumer, as the Minister confirmed, perhaps having to pay substantially higher costs for the service.
I am sure that the Minister, in his usual inimitable fashion, will say that my argument is a flight of fancy, but in recent years we have seen how many large companies operate, moving, for instance, their head offices to avoid UK corporation tax, the latest example being Cadbury, after its takeover by Kraft, which is reportedly moving its head office to Switzerland. UK Uncut has staged demonstrations throughout the UK against other companies, as diverse as Vodafone and Topshop, which seem to have indulged in practices to avoid taxation.
The universal service obligation is far too important to be left to the good will of a privatised mail carrier. Far too much stock has been placed on the name and reputation of Royal Mail, but the situation after privatisation will be far different. The organisation will no longer be a state monopoly but a private company—albeit one that, admittedly under the Bill, has a high social obligation. In my experience, and as our bankers have eloquently shown in recent weeks, however, there is very little sentimentality in big business.
I raised the matter during the Committee's eighth sitting, when I asked the Minister whether there was anything in the Bill to prevent asset stripping. He said:"““The hon. Gentleman has anticipated where I was going, because a number of protections in the Bill will give reassurance to hon. Members who are worried about that. For example, under clause 35, Ofcom has the power to impose designated USP conditions akin to condition 16 of Royal Mail's existing licence. Condition 16 does not allow Royal Mail to pursue things, such as an asset disposal or dividend payment, if doing so would create 'any significant risk that the necessary resources will not be available' to enable it to continue its business.””––[Official Report, Postal Services Bill Public Bill Committee, 18 November 2010; c. 289.]"
The Minister went on to explain that Ofcom can impose that condition, and that Royal Mail could face a very large fine for breaches of its regulatory obligations.
I am not particularly reassured, and I tabled the new clause because it seems that Ofcom has the power to react only once something has happened, when it is far too late to do very much about it. Condition 16 does not give any real protection because a gradual sell-off of assets would not necessarily mean that Royal Mail was unable to continue in business, although it might undermine its ability to continue parts of its business, which is completely different.
Postal Services Bill
Proceeding contribution from
Mike Weir
(Scottish National Party)
in the House of Commons on Wednesday, 12 January 2011.
It occurred during Debate on bills on Postal Services Bill.
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2010-12Chamber / Committee
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