Postal Services Bill

Debate between Andrew Stephenson and Fiona O'Donnell

Wednesday 27th October 2010 Commons Chamber

[Andrew Stephenson (Pendle) (Con)]

I welcome the Second Reading of the Bill and what the Secretary of State has said, which has helped to clear up a number of the points that I was going to raise.

I believe that now is the right time for a fresh debate about the future of Royal Mail, particularly the need for radical change in the way that postal services are regulated. There is an urgent need for a review of the regulations that are supposed to govern Royal Mail and the universal service but in reality prevent the company from operating in a truly competitive and open market. None of us doubts the immense service and commitment of the thousands of postmen and women and sub-postmasters across the country who work tirelessly to serve their community. I know of many in my own constituency who consistently go that extra mile not only to do their job but to serve their community in so many different ways. We owe it to these people to ensure that we get this Bill right and that that Royal Mail is given the opportunity to flourish in the future. That opportunity exists now, and we have the chance to do what the previous Government failed to do: to breathe fresh life into a national treasure that would otherwise be crushed by the weight of regulation, strangled by the noose of the historical pension deficit and starved by the absence of capital that is needed to continue the modernisation programme.

As a local MP, I know how important the universal service is; many other Members have touched on that. The one-price-goes-anywhere, six-days-a-week service to the UK’s 28 million homes and businesses has been in place since Royal Mail was established, and it is highly valued by the public and by businesses large and small across the country. However, many at Royal Mail would say that that is now threatened because of the way in which regulation is strangling Royal Mail’s ability to compete in the wider marketplace. It is also vital to note how important this service is to the men and women working in Royal Mail, who derive a great deal of job satisfaction from this part of their job.

As several hon. Members have pointed out, Royal Mail is in a precarious position: there is no hiding from the facts. Mail volumes are falling, the company has a multi-billion-pound pension deficit, and there is an urgent need for more capital to be injected into the company. I welcome the provisions in the Bill that will allow Royal Mail flexible and timely access to capital in future as it continues its modernisation to provide customers with the services they want.

That brings me to the major issue facing the Royal Mail, on which I wish to elaborate. The company is currently stifled by more regulation than its competitors, so the status quo is no longer an option. The biggest single threat to the universal service obligation, which is protected as part of the Bill, is the unfair regulatory framework in which the Royal Mail currently operates.

Deregulation of UK postal services is long overdue. I can think of no other market or industry in which a state-owned institution such as the Royal Mail is forced to offer its competitors a subsidised rate that does not even cover the cost of its business. As my hon. Friend the Member for Southport (Dr Pugh) pointed out, and as the right hon. Member for Southampton, Itchen (Mr Denham) said in his reply to the Secretary of State, Royal Mail’s rivals currently have an in-built price advantage because of the arbitrary and unfair margin that the regulator sets between the price that Royal Mail can charge its own business customers and the price that it charges competitors for the use of its network.

I am sure that the original intention of the regulations on that matter was to help encourage new providers into the market, but it seems somewhat perverse that they now mean taxpayers and Royal Mail customers are effectively subsidising foreign competitors. Those access headroom regulations allow rivals to undercut Royal Mail, no matter how efficient its business becomes. In the interest of fairness, and so that Royal Mail can operate freely and competitively, they must surely be reviewed.

[Fiona O'Donnell (East Lothian) (Lab)]

Would the hon. Gentleman like to consider the deregulation of bus services, which has not led to an increase in competition? In particular, services and competition in remote and rural areas have been reduced.

[Andrew Stephenson]

I thank the hon. Lady for that point. I believe that we need to get the right balance in regulation between protecting consumers and ensuring that we create a stable company. I therefore welcome most of the Bill’s provisions, particularly on protecting the Royal Mail’s universal service obligation.

We need to get regulation right, and I should like to ask the Secretary of State for any further assurances that he can give the House that the Bill will deliver the open, transparent, fair and competitive postal service market that is needed to allow the Royal Mail to prosper in future. I also ask Ministers to ensure that the Bill allows Royal Mail to introduce new products without always having to consult its rivals publicly for three months, as the current regulations require. That severely limits the company’s ability to innovate and compete.

It seems to me that there should be regulation and price control only where there is little or no competition. Currently, 80% of the Royal Mail’s revenues are covered by regulation, although rivals handle at least 40% of the mail, and 60% of bulk mail. Personally, I should like competitors to be given access to its network on commercial terms and at a commercial price, rather than the Royal Mail being forced to deliver its competitors’ mail at a loss.

The Royal Mail and the Post Office are key national institutions, and we must ensure that they are both on a secure and stable footing. Securing the future of the post office network is absolutely vital to me. Pendle lost 17 sub-post offices under the last Government, including, most recently, six branches in 2008. Many parts of the country fared even worse than my constituency, with the number of post offices decreasing from 17,845 in 2000 to only 11,905 today. I welcome the fact that the Post Office is not for sale as part of the Bill, and that there will therefore be no further programme of closures. That will come as a huge reassurance to numerous elderly and disabled residents in Pendle who rely on the local post office on a daily basis.

I was encouraged by what the Secretary of State had to say about investing in the network and exploring future business opportunities, and particularly by the £1.34 billion extra that he announced today. I welcome the Bill and fully support the moves that will help the Royal Mail to flourish in an open and competitive marketplace in future. I look forward to supporting the passage of the Bill, with the aim of delivering a strong and stable company for customers, the 155,000 employees, and potential future shareholders.