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New Clause 4 — Restriction on universal service provider disposals

Dairy Farming – in the House of Commons at 4:45 pm on 12th January 2011.

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Votes in this debate

'Any company providing a universal postal service must, prior to selling any part of its business to another entity, first report its intention to Ofcom who must certify the sale does not in any way reduce the company's ability to deliver its universal service.'.- (Mr Weir.)

Brought up, and read the First time.

Photo of Nigel Evans Nigel Evans Deputy Speaker (First Deputy Chairman of Ways and Means)

With this it will be convenient to discuss the following:

Amendment 11, page 15, line 17, clause 28, at end add-

'(c) the needs of small business users in rural and remote areas'.

Amendment 12, page 16, line 16, clause 30, leave out 'Friday' and insert 'Saturday'.

Amendment 13, page 16, line 28, leave out 'Friday' and insert 'Saturday'.

Amendment 14, page 18, line 17, leave out paragraph (b).

Amendment 23, line 25, after second 'time', insert

'but not before the date five years after this Part comes into force'.

Amendment 24, line 33, clause 33, after 'time', insert

'but not before the date five years after this Part comes into force'.

Amendment 25, line 36, clause 33, leave out

'may by order amend section 30' and insert

'shall as soon as reasonably practicable after the review of minimum requirements of the Universal Postal Service under subsection (1) has been carried out lay before Parliament a report which shall include a copy of the review.'.

Amendment 26, line 37, clause 33, leave out subsections (6) and (7).

Amendment 29, page 21, line 40, clause 37, after 'unless', insert

'it has been commercially negotiated and'.

Amendment 30, page 22, line 1, leave out lines 1 to 18.

Photo of Michael Weir Michael Weir Shadow SNP Spokesperson (Business), Shadow SNP Spokesperson (Energy and Climate Change) 5:15 pm, 12th January 2011

New clause 4 and amendments 11, standing in my name, relate to concerns about the universal service obligation. My concern throughout the Bill's passage has been that there are insufficient safeguards to ensure that, in the event of the Royal Mail's privatisation, the universal service obligation, which is so important to my constituents, is maintained.

Throughout Committee, the Minister insisted that the purpose behind the Bill was to secure the universal service obligation, but I made the point on several occasions, as I did earlier today, that far too much has been left to trust and hope-a point, indeed, that was made in our previous debate this afternoon. In many other areas, the Government are very fond of triple locks, yet on something as important as the universal service obligation, they have not put sufficient safeguards in place.

The new clause is an attempt-perhaps not a triple, but at least a lock-to provide some assurance that a privatised company will maintain the universal obligation and not seek to get around its provisions. In the event of privatisation, the privatised company will be given the obligation to provide the universal service, but it concerns me greatly that our only sanction to ensure that it does so is through the regulator, Ofcom. There is nothing specific in the Bill to prevent, for example, a privatised company from hiving off the profitable parts of the organisation, although if recent press reports are true perhaps the European Commission will have done so before the company reaches privatisation. That could leave only a shell company obliged to provide the universal service.

What would happen if the privatised company went to the Government, saying that it could no longer afford to run the service and seeking either a public subsidy or to abandon the service? We would be thrown back on the regulator alone or have to utilise the compensation fund that we debated at some length in Committee, with the other operators having to contribute and the consumer, as the Minister confirmed, perhaps having to pay substantially higher costs for the service.

I am sure that the Minister, in his usual inimitable fashion, will say that my argument is a flight of fancy, but in recent years we have seen how many large companies operate, moving, for instance, their head offices to avoid UK corporation tax, the latest example being Cadbury, after its takeover by Kraft, which is reportedly moving its head office to Switzerland. UK Uncut has staged demonstrations throughout the UK against other companies, as diverse as Vodafone and Topshop, which seem to have indulged in practices to avoid taxation.

The universal service obligation is far too important to be left to the good will of a privatised mail carrier. Far too much stock has been placed on the name and reputation of Royal Mail, but the situation after privatisation will be far different. The organisation will no longer be a state monopoly but a private company-albeit one that, admittedly under the Bill, has a high social obligation. In my experience, and as our bankers have eloquently shown in recent weeks, however, there is very little sentimentality in big business.

I raised the matter during the Committee's eighth sitting, when I asked the Minister whether there was anything in the Bill to prevent asset stripping. He said:

"The hon. Gentleman has anticipated where I was going, because a number of protections in the Bill will give reassurance to hon. Members who are worried about that. For example, under clause 35, Ofcom has the power to impose designated USP conditions akin to condition 16 of Royal Mail's existing licence. Condition 16 does not allow Royal Mail to pursue things, such as an asset disposal or dividend payment, if doing so would create 'any significant risk that the necessary resources will not be available' to enable it to continue its business." --[ Official Report, Postal Services Bill Public Bill Committee, 18 November 2010; c. 289.]

The Minister went on to explain that Ofcom can impose that condition, and that Royal Mail could face a very large fine for breaches of its regulatory obligations.

I am not particularly reassured, and I tabled the new clause because it seems that Ofcom has the power to react only once something has happened, when it is far too late to do very much about it. Condition 16 does not give any real protection because a gradual sell-off of assets would not necessarily mean that Royal Mail was unable to continue in business, although it might undermine its ability to continue parts of its business, which is completely different.

Photo of Edward Davey Edward Davey The Parliamentary Under-Secretary of State for Business, Innovation and Skills

The hon. Gentleman will know from the debate in Committee that there is the potential for Ofcom to put a fine on the universal service provider of up to 10% of its turnover. At the moment, that would be a fine of £650 million. Does he not think that that is a disincentive?

Photo of Michael Weir Michael Weir Shadow SNP Spokesperson (Business), Shadow SNP Spokesperson (Energy and Climate Change)

The Minister is forgetting my point. If a privatised operator has got rid of many of the profitable parts to simply leave a shell, what is £650 million to a company that effectively does not exist other than as a nameplate? That could happen. This new clause is designed to stop such things happening.

Photo of Tony Lloyd Tony Lloyd Labour, Manchester Central

As the hon. Gentleman is helping the House, will he help me by saying whether there is a duty on Ofcom to insist on the universal service provision? If not, it makes no real difference whether there is the capacity to levy a fine or not.

Photo of Michael Weir Michael Weir Shadow SNP Spokesperson (Business), Shadow SNP Spokesperson (Energy and Climate Change)

There is a duty on Ofcom to ensure the universal service. However, as I was trying to explain, the problem is that Ofcom's only sanction is to act after something has happened. If the conditions have been breached, Ofcom can take action-it can fine the company a very substantial amount or it can impose other conditions. That is very much a reactive rather than a proactive sanction. If there is nothing there to fine or there is nothing left, it makes no difference whether the fine is £650 million or £20 trillion.

Photo of Tony Lloyd Tony Lloyd Labour, Manchester Central

What the hon. Gentleman is confirming is that there is, in fact, no duty on Ofcom other than a retrospective duty. That is not a duty, is it?

Photo of Michael Weir Michael Weir Shadow SNP Spokesperson (Business), Shadow SNP Spokesperson (Energy and Climate Change)

Indeed. I would put it a different way. There is no effective sanction available to Ofcom to deal with something after it has happened to the detriment of the USO. It is only able to impose conditions or a fine, and fining a shell company is no good. Ofcom cannot prevent the sale; it can react only if what is happening turns out to undermine the ability to provide the USO. As I said, if the company has already sold off all its profitable parts leaving only a shell, what is the point of a large fine that it is not in a position to pay?

The Bill must provide the power to allow Ofcom to take action before a sale is proceeded with and to ensure that the privatised company cannot dispose of all profitable assets to avoid the duty of the USO. I am sure that the Minister will say that that is a burdensome hurdle, but it is not. It is not the first sale that would be required to clear a regulatory hurdle before going ahead-indeed, many deals are done subject to regulatory approval. I am sure that the Secretary of State for Business, Innovation and Skills is only too well aware that the BSkyB case had to go to the European Commission to determine whether it would be blocked at that level before the remaining shares could be put forward.

If the new clause was passed, Ofcom could look at the proposal and ensure that the assets of the company remained sufficient to meet the needs of its social obligation. In most cases, that would be a relatively quick process. However, it would give the reassurance that once there is a privatisation-if that disaster should happen-there would at least be something in place to ensure that the universal service continues in all circumstances. I ask hon. Members to support the new clause to give that extra protection.

Time is short, but I would like to mention briefly the other amendments in my name. Amendment 11 would add to the Bill a reference to

"the needs of small business users in rural and remote areas" and make it a specific matter to which Ofcom must give concern in considering the USO. The reason is simple. We need to ensure that the universal service obligation is secured for small businesses in rural areas if we are to have any chance of creating new employment opportunities in our rural communities. On Second Reading, Scottish National party Members tabled an amendment supported by Plaid Cymru and all the parties of Northern Ireland because of our huge concern that the Bill would have profound implications for that ability to continue the USO.

It is vital to bear in mind that not only residential but small business customers rely on Royal Mail. They do not have any real options and cannot access the deals that may be on offer from alternative carriers. In the parcels market, if one can get anyone to deliver to large parts of Scotland at all, it is only at a vastly increased price. Not so long ago, the then management of Royal Mail proposed a zonal pricing structure that would have created different prices for different areas of the United Kingdom. In the recent spate of bad weather in Scotland, many of the alternative carriers simply gave up, and several publicly stated that they would not attempt deliveries in Scotland at all.

Throughout this time, Royal Mail did its best to ensure that the mail got through, with postal workers struggling in very difficult conditions to ensure that the mail was delivered. Although there were delays and although, for obvious reasons, some areas could not get mail, most of the mail got through. We should congratulate Royal Mail and its workers on doing that. It shows the difference between a dedicated public company service and the privatised services that operate elsewhere. Amendment 11, allied with the others in the group, is simply an attempt to ensure that if the disaster of privatisation befalls Royal Mail, as much as possible is done to ensure that the USO is watertight and that the interests of all users are adequately protected.

Amendments 12 and 13 are linked, in that the purpose of both is to ensure that the universal service obligation for postal packets is a six-day service.

Photo of Alan Reid Alan Reid Liberal Democrat, Argyll and Bute

The hon. Gentleman has a point. Although the USO for parcels is currently only five days, and the Bill does not change that, I hope that the Minister will consider increasing the USO to six days for parcels. He has improved the USO in many ways in the Bill, but I ask him to take this away and look at it again, because I am concerned that if we do not have a six-days-a-week USO for parcels, Saturday parcel deliveries in the highlands and islands will end.

Photo of Michael Weir Michael Weir Shadow SNP Spokesperson (Business), Shadow SNP Spokesperson (Energy and Climate Change)

The hon. Gentleman is perfectly right. I hope that he will follow up that strong support for the proposal by coming through the Lobby and voting for it in order to send an additional message to his Minister.

As the Bill stands, we have a six-day service for letters but only a five-day service for postal packets. I am at a complete loss as to the logic behind the differences between the two. One thing that came through loud and clear from Richard Hooper's report, on which the Government have relied, is that the market for letters is declining substantially. The bulk of private letters are now being sent around Christmas, and they will mostly be Christmas cards. I suspect that I am not the only one who has noticed that the rise of the e-card is biting even into this market, with fewer cards being sent through the post, or perhaps it is just that I have fewer friends this year-I do not know. In any event, the one area where there is real scope for building the business is what we are now told we should call e-fulfilment-in effect, the delivery of orders made over the internet. This is a two-way process. In my constituency, for example, there are businesses in rural areas who sell over the internet and send out packages on a regular basis. They rely on the universal service obligation to ensure that they have access to the postal service at a reasonable cost and that allows them to operate at a reasonable cost.

Interestingly, in research on the business market carried out by Postcomm, more than half the businesses surveyed were of the opinion that they will use the internet more in future, but the vast majority-93%-believe that they will always need to send some things by post. Half of businesses expect more customers to order products online in future, indicating a belief that the market will grow further. Digging down into the figures, it appears that of those who spend between £100 and £500 a month on mail-basically small businesses-72% have either stayed at the same level of usage of Royal Mail or have increased it in the past year.

That is the one growth area within Royal Mail, and not having the universal service obligation cover it in the same way as in the letters market does not appear to make any great sense. Again, I point out that if we are to grow private businesses in rural areas, we need to have the infrastructure to allow them to flourish, and that includes a reliable six-days-a-week postal service.

Photo of Alan Reid Alan Reid Liberal Democrat, Argyll and Bute

I am grateful to the hon. Gentleman for giving way again. I reinforce my earlier point that I am concerned that if the USO for parcels is not extended to six days a week, parcels will not be delivered in the highlands and islands on Saturdays. As he said, the delivery of parcels in response to internet selling is such an important growth area that the highlands and islands would miss out if parcels were not delivered on Saturdays.

Photo of Michael Weir Michael Weir Shadow SNP Spokesperson (Business), Shadow SNP Spokesperson (Energy and Climate Change) 5:30 pm, 12th January 2011

I reiterate that the hon. Gentleman may have a chance to vote for that later and to help the Minister make up his mind.

Goods not only go out by post, but are received by post. Raw materials may come in by post. For many constituents, no one is at home during the day from Monday to Friday. I am sure that such people would like packages to be delivered on a Saturday, when they actually might be in and would not have to travel to collect them at the nearest sorting office, wherever that may be after privatisation. If we are serious about increasing business and ensuring that every area of the country has access to a reliable, reasonably priced postal service, it would be daft to exclude from the universal service the one area that has potential for substantial growth.

Finally, amendment 14 would remove Ofcom's ability to use geographical criteria to suspend the universal service. That has long been a contentious issue, even under the current framework. Households that are difficult to reach can have delivery suspended. The condition in the Bill is far too wide and could result in whole isolated mainland or remote island communities being removed from the universal service. That would be a travesty and lead to a huge increase in costs for such communities. There may always be some individual dwellings where the mail simply cannot be delivered, but those should be looked at on an individual level.

I urge all hon. Members to support the proposals, which all attempt to strengthen the USO and to recognise that the highest priority for the Royal Mail, whether it continues as a publicly owned company, as I hope, or becomes a privatised company, is to deliver to all our citizens.

Photo of Alan Reid Alan Reid Liberal Democrat, Argyll and Bute

As I said in my interventions on Mr Weir, I hope that the Minister takes away the proposal in amendments 12 and 13 to extend the universal service obligation for parcels to six days a week. As I said, I am concerned that parcels will not be delivered on Saturdays in the highlands and islands without such an extension. Apart from that one remaining concern, I think that the Minister has done a great job in the Bill to strengthen the USO in many ways, which is so important for the highlands and islands.

Amendment 14 deals with the hon. Gentleman's concern that the geographical exceptions clause will be used to remove large parts of the highlands and islands from the universal service obligation. I do not share that concern. The wording is the same as that in the Postal Services Act 2000. The regulator, Postcomm, has used that exception only in a small number of cases, such as for islands that do not have a daily ferry service. Obviously, it would be nonsense for Royal Mail to charter a boat to an island to which Caledonian MacBrayne does not have a daily ferry service. The solution is for Caledonian MacBrayne to improve the service so that islands such as Tiree, Coll and Colonsay have a daily ferry service, but it is not for Royal Mail to charter special boats. Postcomm has also introduced exceptions on health and safety grounds, such as dangerous dogs. Under amendment 14, Royal Mail would have to deliver to houses with a dangerous path or animal. The wording in the Bill, which is taken from the 2000 Act, is satisfactory. I questioned Postcomm and Ofcom in the Scottish Affairs Committee and Ofcom gave an assurance that it will maintain Postcomm's regulatory regime for geographical exceptions. Given those assurances, amendment 14 is not necessary.

Photo of Gordon Banks Gordon Banks Shadow Minister (Business, Innovation and Skills)

I wish to speak to amendments 23 to 26, which we have tabled. Amendments 23 and 24 are similar to those tabled in Committee and are intended to ensure that no review of the universal service obligation can take place for at least five years after the date of clause 33 being enacted. I note that Mr Binley tabled a similar amendment that was not selected, and I commend him for doing so. I trust that he will be able to support us in our aspirations tonight.

The minimum service requirements laid out in clause 30 are exactly the same as those set out in the Postal Services Act 2000. However, as my hon. Friend Nia Griffith said in Committee, clause 33 will allow them to be eroded. The Bill sets in train a range of processes to reduce the universal service obligation, and I imagine that many Members fear that we cannot even be sure to which Secretary of State the powers in clause 33 will fall. Perhaps it will not be the Secretary of State for Business, Innovation and Skills, and who knows, it may even be the Secretary of State for Culture, Media and Sport. Perhaps, if time allows, the Minister will be able to tell us which Secretary of State will inherit those powers if the Bill is passed, and then I will leave it to my hon. Friends to determine whether that is a good thing.

Photo of Alan Reid Alan Reid Liberal Democrat, Argyll and Bute

I point out to the hon. Gentleman that clause 33(7)(a) states that the review of the minimum requirements would be subject to the affirmative procedure, so it would require a vote of both Houses of Parliament. The Secretary of State could not take the decision on his own. Is that not adequate security?

Photo of Gordon Banks Gordon Banks Shadow Minister (Business, Innovation and Skills)

No, it is not, and I will come to that if I have time. The Minister will be aware of my office's deliberations with him on parliamentary scrutiny when the Bill was in Committee, and I will deal with that matter if I can.

We believe that it would be better to relieve both potential contenders of the powers to be granted under clause 33(5). At least the current Secretary of State for Business, Innovation and Skills would then know about that change in advance, and it would have been made through the democracy of Parliament and not by the Prime Minister as punishment.

In a letter to the Public Bill Committee, the Minister mentioned the failsafe of clause 29(5), which is relevant to clause 33. However, that failsafe could work only if one had faith in the actions and intentions of the relevant Secretary of State, and we do not.

Restrictions to ensure that there could not be a review before five years had passed would provide important stability to both the business and customers following privatisation. The universal service obligation is of such immense importance that it will need that period to bed down under a new, private provider. I am afraid that throughout the Committee stage, the Minister was unable to convince my hon. Friends and myself of why a review should take place after 18 months. We want a statutory period of five years, during which everyone would know that today's universal service obligation was in place. We want the consumer to be protected. As it stands, the inter-business agreement could be subject to review after 18 months, when an Ofcom review of the USO could also be ongoing. That would mean turmoil. As the Minister heard in Committee and from some of my hon. Friends today, we have only his best interests at heart. I am trying to save him from that turmoil and that caused by the Secretary of State.

The Secretary of State told Members on 27 October last year:

"The Bill will maintain the universal postal service at its current levels...I have no intention of downgrading this service."-[ Hansard, 27 October 2010; Vol. 517, c. 360-361.]

That does not square with the Bill's contents, and the Secretary of State needs to come clean. If he has no intention of downgrading the service, why does he need a review within 18 months? In fact, the Bill is riddled with review opportunities. There are three-in clauses 29, 33 and 42. It is obvious that the Secretary of State's actions in promoting the Bill do not live up to his words. Maybe, in line with other matters that he has promoted, he does not really support the Bill anyway.

We would argue that the modernisation programme under way in Royal Mail needs to be completed and bedded down before any review of the USO takes place. It is only a few months since Postcomm and Consumer Focus completed a review of customers' universal service needs, and it is against that backdrop that the Government are proposing the minimum service levels in the Bill. There is therefore no good reason to recommence the review process within 18 months of the Bill being passed.

We do not believe that such a review at this time would be in anyone's interests other than those of the provider, who may want to downgrade the service for a bigger shareholder return. More than anything, we want to protect the interests of the consumer. I believe that, in principle, the amendments have cross-party support. Whereas our appeals to the Minister and his colleagues in Committee fell on deaf ears, I am a little more hopeful today. Indeed, in accepting our amendments 23 and 24 today, the Minister would be committing himself to recognising the value of the current USO, while also alerting potential bidders of his clarity on the matter-after all, we are always told that that is what business wants these days. Our amendments will offer that.

It would be wrong for a business to purchase Royal Mail with the intention-or should we say the hope?-that a quick review by Ofcom and a stroke of the pen by the Secretary of State, or perhaps by some other Secretary of State, would lead to a better deal. Why do we have such fears? It is because we can see how committed the private sector is to the universal service obligation.

The Minister regaled the Committee on more than one occasion with his international understanding of postal services. I would therefore like to refer him to an article in Holland's De Telegraaf on 9 June last year, so that he can test his Dutch reading skills, as opposed to his usual double-Dutch Government jargon. In that article, Pieter Kunz-I do hope that I have pronounced that gentleman's name accurately-who is the managing director of TNT's European mail networks, said that his company planned to cut 11,000 employees from its Dutch mail operations and wanted to move to a three-day-a-week delivery service. Mr Kunz went on to say that collection and delivery services would be outsourced, and that TNT would become managers of mail. However, the worrying bit about how the private sector sees the USO in the round came when Mr Kunz stated that the universal service obligation was

"a kind of Jurassic Park and we should get rid of it".

The worry is accentuated by the possibility that TNT could be the successful bidder for a privatised Royal Mail.

Although Mr Kunz might think of the USO in such terms, my constituents and the businesses in my constituency see it as a valued, necessary and fundamental service. We want to prevent any such erosion wherever possible. I wish that we had an opportunity to guarantee the current service levels indefinitely, but I recognise that this is not the Government's will. However, we want the minimum five-year period to be included in the Bill, I suppose for the very same reasons that Mr Kunz-and perhaps the Minister-do not.

Amendments 23 and 24 would allow the newly privatised Royal Mail to be secure in the current service delivery levels for the next five years without change. As the Bill stands, the first review could come along at any time and have far-reaching effects. I referred earlier to our time in Committee, where my hon. Friend Karl Turner said that a similar amendment was

"a reasoned amendment that turns on the issue of speed versus proper consideration." --[ Official Report, Postal Services Public Bill Committee, 7 December 2010; c. 592.]

He recognised that such a safeguard would prevent Royal Mail's new owner or owners from exerting any pressure on Ofcom to re-examine the minimum requirements straight after a sale, as a way of trying to secure bigger returns for shareholders. However, he and other members of the Committee recognised too-I hope that other Members will recognise this today as well-that such a safeguard would also prevent Ofcom from undertaking a hasty review before the full effects of privatisation and modernisation were understood and their impact on the service evaluated.

It is not just those on this side of the House who want to protect the USO in the long term. The Federation of Small Businesses also believes that the USO

"must be protected and services must not diminish", stating:

"Any change to the scope of the USO could have a negative impact on small businesses."

Indeed, FSB members have shown their further concern, in that 82% of small businesses want to keep the single UK-wide pricing structure. Then we have the National Federation of SubPostmasters, which has said that

"communities across the UK depend"- that is the key word-

"on the six-days-a-week collection and delivery at a uniform and affordable price".

Indeed, in their recent report, that august group of cross-party and pan-UK parliamentarians known as the Scottish Affairs Committee also expressed alarm about

"the Bill's requirement for Ofcom to review the minimum requirements for the USO within 18 months. We fear this may be seen as an opportunity to decrease the requirements of the USO."

Many Opposition Members get fed up with listening to the Government telling the country what they are doing to help small business, when there is precious little sign of such help in the real world. Here is an opportunity for the Government to do just that-help small business, support these amendments and support the Federation of Small Businesses.

The Minister's previous argument that clause 30 enshrines the minimum requirement and clause 33 enhances the safeguards against changes to those minimum requirements is, quite frankly and at best, smoke and mirrors. He said in Committee that under the European Communities Act 1972, the Government already have the power to change the minimum requirements of the universal service to the level required by the directive, which is five days a week, by way of negative resolution. Of course, he is correct, but he went on to say that that was not acceptable. Quite frankly, the change he proposes in the Bill is little better.

We believe that our amendment 25 is just, as it prevents the Secretary of State from moving changes through this Bill as a result of Ofcom's reviews. It would empower the Secretary of State only to lay the report before Parliament, whereas amendment 26 would remove the need for any approval process as the power to amend section 30 through this Bill would be removed by amendment 25. This would, we calculate, lead to the need for new primary legislation, with all the necessary parliamentary scrutiny that accompanies it, before any Ofcom-proposed service reductions could be instigated.

The Minister will remember that I tried on numerous, if not dozens, of occasions in Committee to enhance parliamentary scrutiny of these proposals, but he chose to ignore my good and kind offers. He has another opportunity here tonight to add parliamentary scrutiny to the Bill and he should do so by accepting amendments 25 and 26.

Other hon. Members are waiting to speak on these and other amendments, so I would like to speak very briefly about amendment 29, particularly about what we call the final mile. We moved a similar amendment in Committee and we will support this amendment tonight.

Mr Weir has regaled us with the reasons behind new clause 4. I am glad that he has had that opportunity, which he did not have in Committee, as his was the only new clause that we were unable to discuss because we ran out of time on the final day. The proposal is of merit; it provides another opportunity to protect the universal service obligation. The hon. Gentleman put forward a strong argument. Anything that protects the USO can only be a positive proposition.

To conclude, amendments 23 and 24 would provide a five-year buffer before any Ofcom USO review, and amendments 25 and 26 would remove the Secretary of State's ability to alter the USO through the powers in this Bill. If the Minister believes the words of his Secretary of State that he has

"no intention of downgrading this service"-[ Hansard, 27 October 2010; Vol. 517, c. 360.], he must accept these amendments. He will have an opportunity to vote for amendment 23, which we intend to press to a Division if he does not accept it. If he does not accept and support these amendments, he will be saying that one of two things will apply. Either the Minister does not believe the Secretary of State or the Secretary of State's words are an empty promise-which is it?

Several hon. Members:

rose -

Photo of Lindsay Hoyle Lindsay Hoyle Chair, Panel of Chairs, Deputy Speaker and Chairman of Ways and Means, Chairman of Ways and Means

Order. There are just a couple of minutes before I will invite the Minister to speak. I am sorry that there is not much time left for Katy Clark to speak, but I must bring the Minister in at 5.50 pm.

Photo of Katy Clark Katy Clark Labour, North Ayrshire and Arran

Thank you, Mr Deputy Speaker, for giving me the opportunity to speak to amendments 29 and 30. I fully appreciate the time constraints, given that the Minister must be brought into the debate.

The amendments are designed to look at the issues surrounding regulation, particularly at the legal requirements that oblige Royal Mail to process and deliver its competitors' mail. Many hon. Members will be fully aware of this problem as whenever they attend a postal delivery depot, postal workers will advise them forcefully about it. At the moment, the reality is that on average every letter that Royal Mail delivers for its competitors leads to a loss of 2.5p to Royal Mail. Amendment 29, which was tabled with the support of communication workers and which I would like to put to the vote if given the opportunity, is designed to address that issue.

Briefly, we have a fully liberalised market, but the way the current system operates goes way beyond that required by the European directive. It requires compulsory access to competitors to every point of the Royal Mail's network and it provides a guaranteed margin for them. Amendment 29 would ensure that the regulator no longer had the power to set that price. There would be a commercial negotiation, and the price established would mean that it was in Royal Mail's interest to deliver the correspondence.

At present, a competitor will collect letters from customers who make bulk postings. Those letters will be part-sorted, and branded with the competitor's stamp. The competitor will then drive the letters to a Royal Mail sorting office, where Royal Mail will sort them and deliver them at a loss.

I know that we have a problem with time, so I shall end my speech now. I ask the House to support the amendment, which seeks to ensure that Royal Mail is able to negotiate freely and deliver letters at a profit.

Photo of Edward Davey Edward Davey The Parliamentary Under-Secretary of State for Business, Innovation and Skills

Because of the shortage of time, I shall begin with a brief overview of our reaction to the new clause and amendments.

The Government have introduced more protections for the universal service than currently exist, and more than the last Government proposed in their 2009 Postal Services Bill. We have strengthened the existing protections. The amendments tabled by the hon. Members for North Ayrshire and Arran (Katy Clark), for Ochil and South Perthshire (Gordon Banks) and, indeed, for Angus (Mr Weir) would weaken those protections, and would serve the consumer very poorly.

I entirely see what the hon. Member for Angus is getting at in new clause 4. As he said, we discussed it in Committee. As I told him then, however, I believe that the Bill provides the protection that is needed. I told him that the Bill gives Ofcom the power to impose a designated universal service provider condition similar to the condition 16 requirement in Royal Mail's existing licence. That prevents Royal Mail from doing anything-such as transferring assets or paying out dividends-that

"creates any significant risk that the necessary resources will not be available" to carry on its business.

If the universal service provider put itself in breach of its obligations through, for example, the sale of part or all of the business in a way that no longer enabled it to fulfil the universal service requirement, Ofcom could take enforcement action. As I said in my intervention on the hon. Gentleman's speech, it could fine the universal service provider up to 10% of the turnover of its postal business in the relevant year. On the basis of Royal Mail's current turnover, that would be more than £650 million. He seems to think that it is an insignificant return, but I disagree. Moreover, he did not mention-although I had told him in Committee-that there are additional protections in company law relating to what the pensions regulator can do.

In my view, new clause 4 is not needed. We already have the necessary protections, and I hope that the hon. Gentleman will at last be reassured and will withdraw the new clause.

In amendment 11, the hon. Gentleman seeks to ensure that the needs of small businesses in rural and remote areas continue to be met, and are taken into account in all of Ofcom's actions relating to postal services. I agree that both those protections are vital, but again he need not worry, as there is already ample provision in the Bill. Section 3(4)(l) of the Communications Act 2003 requires Ofcom to take into account the needs of

"the different interests of persons in the different parts of the United Kingdom...and of persons living in rural and in urban areas".

We are extending those duties to Ofcom's functions in respect of post: "communications matters" in section 3(1)(a) of the 2003 Act will now include postal matters.

Photo of Michael Weir Michael Weir Shadow SNP Spokesperson (Business), Shadow SNP Spokesperson (Energy and Climate Change)

The Act refers to

"persons living in rural...areas", but my amendment refers to businesses. That is the important point in this context.

Photo of Edward Davey Edward Davey The Parliamentary Under-Secretary of State for Business, Innovation and Skills

It has been well established that, in the Act, "persons" also means businesses.

On amendments 12 and 13, Members will be aware that the market is undergoing big structural changes. Volumes have declined by 15% in the last five years, and Richard Hooper predicted declines of up to 40% in the next few years. Surely we all agree that action must be taken to protect the universal postal service. Clause 30 sets out the minimum requirements of that service, which are identical to those set out in the Postal Services Act 2000. They are also identical to the minimum requirements proposed by the Opposition in their 2009 Bill. They gold-plate the minimum requirements of the European postal services directive. The amendments would impose additional regulation on top of that gold-plating, and thus risk undermining the provision of the very universal service that we are trying to save. In its evidence to the Bill Committee, Royal Mail spoke of the need for deregulation in competitive parts of the market if it is to survive. The most competitive part of the market is packets and parcels. I am afraid that the hon. Gentleman is not looking at what is happening. Royal Mail is competitive, and despite there being no requirement, it is delivering six days a week. The 2000 Act does not require that, nor does the European postal service directive. The last Government did not seek to require it either, and Postcomm does not require it in its licence. Yet Royal Mail provides a six-day-a-week parcel service. Why does it do that? The simple answer is because it makes commercial sense. That is the best incentive for any business.

This Government are committed to reducing regulatory burdens. We do not wish to impose regulation where it is not necessary. It is vital that businesses can operate free from the spectre of excessive bureaucracy that serves no purpose.

Photo of Edward Davey Edward Davey The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I want to make some progress, as I have a lot of amendments to deal with.

I was grateful to my hon. Friend Mr Reid for his welcome for most of the aspects of regulation in the Bill and for how we have sought to ensure that remote rural areas, particularly in Scotland, have the protections they need. However, I gently say to him that there is the requirement for letters to be delivered six days a week. If a parcel is ready to be delivered on a Saturday, Royal Mail will deliver it because a postman or postwoman would be going to that address anyway to deliver letters. I ask him to think about the practicalities of that. Where they are delivering in remote places to remote addresses, they deliver letters in vans. Where they are delivering in towns, increasingly in future, because of the roll-out of this programme, posties will use delivery trolleys. Those are being introduced as a deliberate reform in the way that letters and parcels are delivered. They are being brought in partly to ensure that posties can deliver parcels as well as letters. Given that there is already the minimum service requirement of six days a week for letters, I think my hon. Friend will be reassured on this point.

Amendment 14 to clause 32 is unworkable. It would add disproportionately to the burdens on the universal service provider and it would put at risk the health and safety of hard-working postmen and women. I am surprised the hon. Member for Angus wishes to do that. The exception in clause 32 has been in place for many years. It is in the European postal service directive. Removing it would put at risk the health and safety of Royal Mail men and women. I think he should think very seriously about that.

On amendments 23 to 26 to clause 33, the Bill is about protecting the universal service. Clause 30 enshrines the same minimum requirements in this Bill as are in the current legislation. The power in clause 33 to review the minimum requirements enhances the safeguards against changes to those minimum requirements. As Gordon Banks had to admit, at the moment-his Government failed to acknowledge this-there are powers for the Government in this regard. We could, by negative procedure, move the current minimum service requirements down to the level of those in the European postal service directive. I think that is unacceptable, however, which is why we have added extra safeguards to the Bill. They include the requirement that should Ofcom make a judgment that it is in the consumer's interests for there to be changes, and should the Secretary of State accept that, there would have to be votes in both Houses of Parliament. That is a very strong protection, and he ought to welcome it. Is he going to welcome it?

Photo of Gordon Banks Gordon Banks Shadow Minister (Business, Innovation and Skills)

No, but what I am going to do is ask the Minister whether he agrees with the Secretary of State that he has no intention of reducing the level of service. If that is the case, the Minister should support our amendments, not talk about what he has put in the Bill.

Photo of Edward Davey Edward Davey The Parliamentary Under-Secretary of State for Business, Innovation and Skills

The problem with the hon. Gentleman's amendments is that they are very confused. For example, in proposing a review after five years in respect of Ofcom, rather than 18 months, he does not seem to understand how the universal service regulations work. We have the minimum service requirements in clause 30, but there is also clause 29, and the reason why there is an 18-month review is to allow the universal postal service order to be brought in so that the sorts of requirements and the level of universal service that exist at present can be introduced quickly. I would have thought that the hon. Gentleman would welcome that. The fact that he does not shows that, despite all our work together, he still does not understand the Bill.

Amendments 29 and 30 are very important, but I am not going to be able to give them the time that they deserve. I simply say to Katy Clark that if we were to accept them, they would remove important safeguards for competitors and consumers, and that would not be welcomed by people at large. It would undermine competition and the incentives for efficiency. Our Bill, unlike the one in 2009, seeks to change the regulatory system-

Debate interrupted (Programme Order, 27 October ).

The Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83E), That the clause be read a Second time.

The House divided: Ayes 240, Noes 315.

Division number 164 Dairy Farming — New Clause 4 — Restriction on universal service provider disposals

Aye: 240 MPs

No: 315 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

The Speaker then put forthwith the Question s necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).