Postal Services Bill

Debate between Lord Stevenson of Balmacara and Lord Christopher

Wednesday 6th April 2011 Lords Chamber

[Lord Stevenson of Balmacara]

The amendment introduces an additional objective for the postal administration so that the main aim should be to rescue as a going concern the company that is subject to that order. This means that, instead of staying neutral as to whether the current universal service provider should be allowed to fail and should be replaced by an alternative or whether the company should be saved, the postal administrator would have a primary duty to seek to save the company.

When this issue was raised in the House of Commons Public Bill Committee, Mr Ed Davey said:

“We hope that we never find ourselves in either of those scenarios, and we do not expect that we will. Both procurement determination and the special administration provisions are genuine backstops, only to be used if the future of the universal service is at risk”.—[Official Report, 7/12/10; Commons, Postal Services Bill Committee, col. 602.]

While it is reassuring to read what the Minister said and that backstops will exist, it is essential that the Bill properly reflects this intention.

Transferring all or part of the universal service provider to another company, should it find itself in financial difficulty and subject to a postal administration order, would be hugely disruptive to customers, to service provision, to the company and to its staff. While it may not always be possible to support the company and help it become a going concern, there should surely be a presumption that this is the first and least disruptive course of action to be pursued. If this is not possible, the option to pursue a relevant transfer of course remains.

Royal Mail operates on a huge scale. While the business is modernising successfully, should it find itself in financial difficulty, this would likely be attributable to significant market changes and potentially an unsympathetic regulatory regime which exacerbated the problem rather than supported the company as a universal service provider. Therefore, we propose a further amendment, Amendment 25E, to ensure that the postal administrator takes into account the interests of employees of the company. Should the business go into administration, it is hard to see that passing all or some of the business to an alternative mail operator would be good for the employees. It would clearly, where possible, be preferable to re-establish the business as a going concern, and that is why we make these proposals.

Amendment 26A refers to the regulatory powers exercisable during postal administration. We note that Clause 80 creates a huge power, including in Clause 80(5), which says:

“The Secretary of State may by order amend section 30”.

The regulatory regime—in particular, access pricing—has been one of the most contentious areas of regulation since the introduction of competition into the United Kingdom. Indeed, the updated Hooper review of 2010 recommended the introduction of a new access regime to ensure the right balance between competition and the financial sustainability of the universal service.

It is rare for regulators to be loved and it is clear that Postcomm did not get the balance right. Among the outcomes of its tenure is the fact that Royal Mail’s competitors now have more than 60 per cent of the pre-sorted, “upstream”, bulk mail market, the most profitable business sector of the letters market. So we can certainly see how regulation can go wrong.

Unless the right balance is struck in pricing, there are likely to be further reductions in the universal service, at great cost to the public. The amendment would restrict the Secretary of State's hand so that an order to amend Section 30 may not do so in way which reduced the extent of the minimum requirements of the universal postal service. We hope that the Government will see this is a reasonable provision and support it.

Amendment 25F deals with postal transfer schemes and stems from the report of the Delegated Powers and Regulatory Reform Committee of this House, which invited the House to consider whether the Secretary of State’s approval, so far as it relates to the exercise of power in paragraph 9 of Schedule 11, should be subject to the negative procedure. Schedule 11 contains provisions for transfer schemes to achieve the objective of a postal administration. New paragraph 9(4), proposed by the amendment, would set out the conditions for approval and modification of a postal transfer scheme by the Secretary of State. The Secretary of State has to have regard to the public interest and must consult Ofcom prior to any modification of the scheme, but there is no requirement to consult Parliament. The amendment would therefore strengthen oversight and accountability for the Secretary of State’s approval or modification of postal transfer schemes. As the Bill stands, the Secretary of State has complete discretion to approve or modify a postal transfer order without any reference back to Parliament. The amendment would make such a decision subject to the negative resolution procedure as recommended by the committee. I beg to move.

[Lord Christopher]

These amendments certainly deserve support. One of the problems with writing the law is that you do not necessarily relate it to what is going on in the global economy. As I have said before, one should not rule out the prospect that whoever buys Royal Mail may get into difficulties and present you with considerable problems.

There are two examples at the moment, one of which is certainly ongoing and the other is, apparently, temporarily resolved. Not many people know that all the fire engines in London are owned by a company called AssetCo, which recently got into significant financial difficulties. I am told that it will be all right on the night but I have never seen anything to give me assurances about that. It certainly begs a question in my mind as to what would have happened if AssetCo had gone into administration or whatever. The other case, which is certainly continuing, concerns Southern Cross, one of the largest care home companies in Britain, with 31,000 residents in 750 homes. As I understand it, it is owned to a substantial degree by a company in the Middle East. I am not sure what would happen if the worst came to the worst in respect of these. It is therefore appropriate for the Government to place within the Bill sufficient provision to ensure not only that the service continues but that the staff are looked after and their future provided for. I can see no reason why these amendments should not be accepted.