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Post Office Closures

Part of the debate – in the House of Commons at 5:01 pm on 15th May 2002.

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Photo of Geraldine Smith Geraldine Smith Labour, Morecambe and Lunesdale 5:01 pm, 15th May 2002

I certainly believe that it is important to have a Post Office regulator, and I supported the Postal Services Act. However, the regulator has to be accountable to someone. I cannot sit back, say nothing and allow the regulator to make proposals that could jeopardise the future of the postal industry, just because I believe in the principle of having a regulator. That would be quite wrong.

As I said, Consignia has made it clear that it would welcome the gradual introduction of more competition. The impact of each step in the process on the ability to provide a universal service must be assessed before the next step is undertaken. I fully support that.

The gradual approach is acclaimed across Europe and was supported by the Government at the Council of Ministers in autumn 2001. I believe that it is the appropriate model for the UK too, especially as the Government have determined that the achievement of essential social obligations such as the universal service and the uniform tariff structure should override the introduction of a fully competitive market.

Although other companies should be allowed to collect, sort and transport mail for delivery over "the final mile" by Royal Mail's nationwide network of delivery offices, Consignia should be adequately compensated. The price that Consignia gets for such access should be in line with the principles set out by the European Commission in its draft postal directive, which is supported by all postal operators throughout the European Union and all member state Governments. That approach recognises that the access price should be set on the basis of standard public postal prices, minus the savings made in the long run as a result of Consignia having avoided costs in the collection, sortation and transportation of mail. That retail-minus basis will ensure that rivals taking advantage of access to Royal Mail's delivery network have to be efficient.

Deliveries are by far the most expensive part of Royal Mail's operation. Access prices would depend on the weight and size of individual items as well as where they were posted in the network. For a basic letter weighing up to 60 g, posted in Consignia's network immediately prior to final delivery, the level of access price would need to be about 20p at today's prices. That, most importantly, would ensure that Consignia could continue to meet its universal service and uniform tariff obligations. However, Postcomm is silent on this crucial issue; it has not said a word. Nor has it yet defined precisely what will be protected by the universal service and tariff obligations. Will the Minister clarify what we are talking about? Are we talking about a basic one delivery and one collection per day under the universal service obligation? If so, that would represent a greatly worsened postal service for many people.

The regulator has not yet announced the pricing system within which Consignia will be expected to operate. However, Postcomm has misinterpreted the Postal Services Act, although I am not sure whether it has done so through dogmatic arrogance or incompetence. When I and a number of colleagues from the House met representatives of Postcomm, they displayed little knowledge of the workings of the postal industry and failed to answer the many pressing questions that we asked. They appeared to display a dogmatic arrogance, they appeared incompetent and they appeared not to understand the postal industry.

Postcomm appears to believe sincerely that it has a duty to introduce competition into the reserved area wherever it is possible to do so. It does not have such a duty, only a requirement to introduce competition where it is appropriate, after ensuring that the universal service and tariff obligations are secure.

Postcomm's first obligation is to protect the universal service, yet its approach is to reverse the criteria and put the introduction of competition at the top of its agenda. To this end, it has made proposals that threaten the universal service and tariff obligations and introduce competition further and faster than the rest of Europe, thereby making Consignia vulnerable to foreign competition because it does not have reciprocal arrangements.

Postcomm has introduced proposals that target the most profitable areas of the postal business and could, indeed, lead to the collapse of Consignia. The profitable areas of the Post Office support the rural network. Competitors will not step in and take over the small rural post offices, which do not make much money. They are not the part of the Post Office that private competitors want. The cross-subsidy keeps the Post Office in business, and it is so important.

Postcomm's proposals have been based on a financial model that had built into it woefully inadequate and incomplete data and assumptions about future growth, revenue and cost that bordered on the ridiculous. They were arrogantly presented to Consignia, with a wholly unacceptable period of only six weeks allocated for the company's response.

Where was the consultation with the general public? Where was the consultation with district and parish councils? Many parish councils in my constituency were not even aware of Postcomm's proposals. That is wrong. When I tabled parliamentary questions on Postcomm, they were not even answered because Postcomm is, supposedly, an independent regulator—but it is also accountable to Parliament, so why can we not obtain answers to our questions?

There is no doubt that if the proposals are implemented they will be disastrous for our postal services, for many of my rural constituents living in villages and for many of my constituents who currently receive a good service from the Post Office. The Post Office is not in a shambles—it is not in a mess; all it needs is the ability to raise prices. If the regulator allows it to increase prices so that it can once again be profitable, we will have the postal service that our constituents want and deserve. Postcomm's proposals are disastrous and they should be opposed.