Postal Services Bill

My Lords, I beg to move Amendment 59 and in doing so speak to Amendments 61 and 62 in my name. We must strike the right balance between promoting competition and protecting the universal service, and I thank your Lordships for the many important contributions on this issue. However, the Bill by itself will not secure the future of the universal postal service or Royal Mail. To achieve that, Royal Mail needs to become financially self-sustaining. Therefore there needs to be certainty that, just as has been done in other sectors, Ofcom will have regard to the need for the provision of the universal service to be financially sustainable in establishing the regulatory framework. Amendment 61 adds flesh to this requirement, specifically that ““financially sustainable”” should include, "““the need for a reasonable commercial rate of return for any universal service provider on any expenditure incurred by it for the purpose of, or in connection with, the provision by it of a universal postal service””." The intention of this amendment is to allow the company the opportunity to earn a reasonable return on all expenditure incurred in providing the universal postal service and any regulated access services, in so far as they make use of the universal postal service network. The term ““reasonable commercial return”” in the amendment is intended to mean simply that in applying this duty Ofcom could, among other things, and when it deems it appropriate, take into account private sector international operators in the postal market, their respective levels of efficiency and the different markets they are operating in, as well as regulated commercial companies in other regulated sectors. To be clear, it would be for Ofcom to determine exactly what to take into account when considering what constitutes a reasonable commercial return. This requirement is in the context of the need to ensure that provision of the universal service is, and remains, efficient after a reasonable period. Obviously, it is not within the gift of the regulator to determine precisely what returns Royal Mail can make; that should depend on the market and the company’s performance. However, it is essential that the regulatory framework should provide the space and incentives for Royal Mail to be successful, to make the necessary efficiency improvements and to allow for good performance to be rewarded, without regulation eroding the effect of increased efficiency. The Government believe that, in the long term, the universal service should be both financially sustainable and efficient, and that this will be possible if Royal Mail continues with the good progress it has made in modernising. But of course this takes time. We have therefore tabled two other amendments to Clause 28 to specify that the requirement for efficiency should be, "““before the end of a reasonable period””," to give Royal Mail time to continue its vital modernisation. The amendments to Clause 28 constitute a major strengthening of the Bill. They provide even greater security for the universal service. I hope your Lordships will be able to support them.