Postal Services Bill

My Lords, in responding to the last two groups of amendments, the noble Lord, Lord De Mauley, said that the Government would consider strengthening the protection for the maintenance of the current universal service. We welcome that, and thank him. This group of amendments, as we have just heard, contains a number of rather interesting suggestions for how the Government might go about that. Clause 33(5) would permit the Secretary of State to amend the minimum requirements of the universal postal service provided for in Clause 30, which, as we are well aware, provides a mail service six days a week at affordable, uniform prices throughout the United Kingdom. Under Clause 33(7)(a), such an order would be subject to an affirmative resolution procedure. Amendment 24LZA would delete Clause 33(5) in its current guise and ensure that the European Communities Act 1972, which would otherwise permit the Secretary of State to alter the minimum requirements for the universal service through the negative resolution procedure, cannot be used to reduce the universal service. The Government have stated that the protection of the universal service is at the centre of the Bill and in particular underpins the privatisation proposed for Royal Mail. On Second Reading in this House, the Minister emphasised this, saying: "““The purpose of the Bill is to secure the future of the universal service. The Government are committed to the existing service—six days a week collection and delivery of letters, at uniform and affordable prices, for all the United Kingdom's 28 million addresses. This is at the heart of our legislation. We have no intention of downgrading the minimum requirements of the universal service””." She continued: "““Crucially, this Bill gives both Houses of Parliament a say in whether the universal service can be amended in the future””.—[Official Report, 16/2/11; col. 776-77.]" Our concern is that although the Government say that they have no intention of downgrading the minimum requirements of the universal service and, indeed, have repeated that intention today, the Bill brings in a procedure for the amendment of the universal service not previously contemplated in legislation. This seems to be a bit of a problem, which we should address. Our amendment seeks to ensure that any amendment of the minimum universal service requirements can take place only as a result of primary legislation and not through an order brought in by the Secretary of State. The Delegated Powers and Regulatory Reform Committee expressed concern at the way in which Clause 33(5) contains a significant power that would allow the Secretary of State to alter the minimum requirements for a universal postal service set out in Clause 30. It is worth quoting a little more of this passage in full: "““Clause 29(1) requires OFCOM by order (subject to no Parliamentary procedure) to set out the services which a universal postal service should provide. Clause 29(2) requires the service to include, as a minimum, the services set out in clause 30””." We have touched on that before. It continues: "““The order by OFCOM cannot alter the minimum requirements””." That is a very important safeguard. The committee then says that, "““clause 33 provides a power for OFCOM to review the extent to which the minimum requirements reflect the needs of users of postal services. If OFCOM carry out a review (and they may be directed by the Secretary of State to do so) the Secretary of State may then, by order subject to affirmative procedure, amend clause 30. The Secretary of State is not constrained necessarily to follow any conclusions of the review””." The committee makes no recommendation on Clause 33(5), but draws it to the attention of the House as a significant power that would allow the Secretary of State to alter the minimum requirements for the universal postal service set out in Clause 30. We will come on to some elements of this in later amendments, but I want to pick out a particular aspect. Under the Bill as it stands, any amendment to the minimum requirements as set out in Clause 30 would be subject to an affirmative resolution procedure under which the Secretary of State would bring an order to Parliament requiring the approval of this House and the other place within 40 days. This could see a reduction of the universal letter service from six days a week to five days a week or remove certain requirements for services to be provided, including a reduced service for the blind and the partially sighted. As I have said, the 2009 Bill, which the previous Government introduced, had no special provision for altering the minimum requirements other than through primary legislation, but we think that this Bill could go further. Under the European Communities Act 1972, the Government have the power to change the requirements of the universal service under a negative resolution procedure to the levels that are set out in the third EU postal directive from 2008. This amendment invites the Secretary of State to show forbearance and removes the power to exercise that option. A privately owned Royal Mail would be under huge pressure to reduce costs. A recent report for Postcomm by Frontier Economics published in February estimated that for Royal Mail the net cost of delivering on a Saturday compared with a five-day universal service Monday to Friday was £256 million. Under private ownership, this would clearly become an issue. Moreover, the Bill sets out two separate tracts for Ofcom to recommend changing the minimum requirements for the universal service. Under Clause 33, Ofcom is required to review the extent to which provision meets user needs within 18 months of the Bill coming into force. It is not clear that a review under this clause would necessarily exclude a review of the universal service minimum requirements. The Minister has said that Ofcom could not recommend a change to the universal service under this review, and we note that. At Second Reading, the Minister referred to the requirement that within 18 months of Part 3 of the Bill coming into force, Ofcom must have conducted a market review to ensure that the services offered as part of the universal service reflect user needs. She stated: "““These are set out in statute and the review cannot recommend a downgrade of the minimum requirements after 18 months””.—[Official Report, 16/2/11; col. 777.]" Amendment 24J would make this crystal clear and I hope that the Minister will look favourably on it. Clause 43 is very clear, however, in providing for Ofcom to review the minimum requirements. This is a new, specific power. Postcomm was not specifically granted such powers under the Postal Services Act 2000 and, more worryingly, its duties gave a greater priority to protect a universal service. For Postcomm, safeguarding the universal service took precedence over the promotion of efficiency and economy, but Ofcom will be required to consider efficiency and the financial viability of the universal service as part of its duty to ensure provision under Clause 28. These new obligations to consider efficiency and the financial viability of the service are likely to shift the emphasis of the Ofcom review squarely on to downgrading services. This issue was addressed separately by Amendment 24GC, which was discussed earlier and spoken to by my noble friend Lord Young. Both these factors—the new power for Ofcom and the shift in the balance of obligations on Ofcom—are likely to increase the pressure on the universal service and make this less secure than under the current regime. We argue that the universal service is a valued public service for individuals and businesses. It supports the economy, provides a basic form of communication and access to services, and prevents social exclusion and marginalisation from society. Clause 33(5) would merely provide a 40-day time limit on scrutiny to any proposals to change the service, following an order from the Secretary of State. This is inadequate. There must be proper debate and scrutiny of any proposals to cut the universal service, opportunity for their amendment and time provided for them in both Houses of Parliament. The Minister stated at Second Reading in this House that there was a pressing need to bring stability to Royal Mail, but it is far from clear that this would be delivered for the universal service. Amendment 24PC seeks to make it clear that in any review of the universal postal service, the principle of one price goes anywhere in the UK is maintained. Clause 33(5) permits the Secretary of State by order to change the minimum requirements of the universal postal service as set out in Clause 30. At present, a first-class stamp gets a letter to Balmacara, Ross-shire, in just the same way as it does to Land’s End, Bangor in Northern Ireland and Bangor in Wales. This is important to business and important to the general public. Clause 33(6) states: "““The provision that may be made by an order under subsection (5) does not include the making of different provision in relation to different places in the United Kingdom””." However, the words do not mention a universal or uniform tariff specifically. We know that the European standard does not require a uniform tariff in each country. Imagine just for a moment a hypothetical case in which a price per distance was being charged—say, 54p for the first 400 miles and then 64p beyond that. This would not be discrimination by geographical area as such, but it would not represent a uniform tariff for England, Scotland, Northern Ireland and Wales. Clause 35 describes the USP conditions that Ofcom can place on a universal service provider. The USP conditions can require it to provide all or part of a universal service, to provide or make arrangements for the provision of access points, and to provide specified information about the services it provides. Subsections (4) and (5) provide that the designated USP condition can also set prices for the provision of a universal service and that Ofcom must ensure that they are affordable, take account of the cost of providing the service, and ensure that they incentivise a service to provide efficiency. However, Clause 35 does not specify that the prices imposed as part of a USP condition be universal. The clause does not clearly state that prices must continue to be ““one price goes anywhere””. Whether you send a letter within London or to Balmacara in the west highlands, the stamp price has to be the same. A uniform tariff is an essential part of the universal service. It allows all citizens equal access to the postal network for communications and engagement in economic activity, regardless of where they live. It is a component of our citizenship of the United Kingdom. Our amendment seeks to confirm that a USP condition must maintain the universal service at a uniform tariff. This is consistent with the minimum requirements of the universal service, as set out in Clause 30’s requirement 3 for: "““service … at affordable prices in accordance with uniform public tariff””." When discussing Clause 30 at the Public Bill Committee, the Minister for Postal Services stated that: "““with respect to letter mail, for example, which goes across the country, there is a uniform price and a uniform service. Nothing in the clause would undermine that””.—[Official Report, Commons, Postal Services Bill Committee, 9/12/2010; col. 662.]" Our amendment seeks to confirm the position expressed by the Minister, and it is important, given the tension between the provision of a uniform tariff and the requirement in Clause 35 that prices take account of the cost of providing the service. The latter requirement could be interpreted as meaning that the price of specific geographic services should take account of the cost of their provision, rather than the cost of the universal service as a whole being reflected in overall prices. It was claimed in earlier debates that there is no difference between the cost of delivering a letter to the Scottish highlands and within London. We now know that this is not the case, and the Minister has circulated a letter that we were grateful to receive, setting out her understanding of the situation. It is therefore right to be concerned that Clause 35 might imply that, in order for prices to reflect costs, non-uniform tariffs might be applied. Our amendment seeks to ensure that this is not the case. Its adoption should not be controversial, given that it ensures simply that the principle outlined by Ministers applies to not only Royal Mail, as a universal service provider, but any other operator that may be subject to USP conditions. Turning to other amendments in the group, we wait to hear what the Minister has to say about the probing amendment moved by the noble Viscount, Lord Eccles. We are pleased to support Amendments 24M and 24N, which were powerfully spoken to by the noble Lord, Lord Laird. The requirement for further review and reports is an important part of the process. Amendment 24K, spoken to by the noble Viscount, Lord Tenby, is very important, and seeks to maintain the current minimum requirements for the universal postal service for at least five years. Amendment 24L, spoken to by the noble Lord, Lord Laird, seeks a period of at least six years. We therefore have two options to consider. If Ministers insist on keeping the power of the Secretary of State to reduce the universal service requirements by order, the case for having an initial period of stability is surely compelling. Clause 33 contains no timescale for an Ofcom review of the minimum requirements and no timescale in which the Secretary of State can change the requirements by order. That could happen within a year or 18 months of the Bill becoming law. The shortest assessment of the timescale for selling Royal Mail is 2012. Imagine the turmoil and uncertainty if Royal Mail were to be privatised, only to have a universal service provision thrown into complete doubt during its first few months and years as a private company. A period of calm has much to be said in its favour, and we support a period of stability, as proposed. To be clear, our Amendment 24LZA seeks the still firmer protection of maintaining the universal service requirements, unless Parliament decides otherwise by primary legislation. In conclusion, the Bill rightly enhances the parliamentary approval required for any changes to the universal service. Several of the amendments in the group would go further and make sure that Parliament and the public are given a proper say before any reduction can be made—or at least secure the current levels for a number of years. Ministers say that they want to retain the universal service for six days a week and at ““one price goes anywhere””. This is a real test of the Government’s commitment to the current requirements of a universal postal service. If the Government really mean what they say about protecting the current universal service, I hope that they will look favourably on these amendments.