Postal Privilege (Suspension) Order 1999 (Revocation) Order 1999

– in the House of Lords at 5:33 pm on 29th November 1999.

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Photo of Lord Skelmersdale Lord Skelmersdale Conservative 5:33 pm, 29th November 1999

rose to move, That an humble Address be presented to Her Majesty praying that the Postal Privilege (Suspension) Order 1999 (Revocation) Order 1999, laid before the House on 20th October, be annulled (S.I. 1999/2863).

Photo of Lord Skelmersdale Lord Skelmersdale Conservative

My Lords, in recent months, not least during the debate on the loyal Address, there have been many references to the intermediate or new House of Lords. While the theoretical constitution of the House may be different, its role remains the same--to give advice to the Government, to review the Government's actions, and, if necessary, call on them to account for those actions. It is the last function upon which today's debate concentrates.

For many years now, my family business has existed by courtesy of the Post Office, so it is hardly surprising that it is one of my major interests. When, shortly after the election, Mrs Beckett, who was then Secretary of State for Trade and Industry, announced yet another review of its workings and its relationship with government, my ears pricked up. So did the ears of others. I was asked to write an article on what I would like to see the review produce.

I shall not weary the House today with my proposals. There will be plenty of time for that during the course of the Bill, if we ever get it. The story I am about to relate makes me suspicious.

The review eventually got under way--rather slowly, I thought--in early July this year, almost two years later. It resulted in a White Paper and a Statement in both Houses. One of its surprises is found on pages 19 to 21 of the White Paper, Cmd. 4340, and concerns the statutory Post Office monopoly for letters priced at under £1. That was set as long ago as 1981 by means of the Postal Privilege (Suspension) Order, SI 1981/1483, following on the last Post Office Act of the same year.

As the White Paper fairly reveals, up to now this monopoly has been defended as necessary to enable the Post Office to benefit from economies of scope and scale and, therefore, to provide a universal service at a uniform tariff without direct public subsidy. The White Paper states:

"However, there is growing evidence from studies carried out in Europe for the European Commission that, contrary to long-held assumptions, there may be considerable scope for introducing greater competition in postal services without undermining these essential services".

The White Paper goes on to explain why in paragraphs 5, 6 and 7. To be fair, it gives a most convincing argument which time does not allow me to repeat, though no doubt other noble Lords may be tempted.

Having thus attacked the long-standing defence of the monopoly, pages 20 and 21 of the White Paper state:

"The Government's judgement is that a reduction of the monopoly is entirely compatible with the continuation of essential services; and that service levels will not only be maintained but enhanced by the introduction of greater competition to the postal sector. The Government has rejected the immediate abolition of the monopoly. It believes that the best results for consumers, including the protection of the Universal Service Obligation ... can be achieved if the Post Office is given time to respond to changes in market conditions. Liberalisation will therefore be phased. As a first step, the Government is halving the monopoly from £1 to 50p or, expressed in weight, 150 grams. So, if an item of mail is priced above 50p or weighs over 150 grams it will not be subject to the monopoly and can be delivered by any operator. It is anticipated that this reduction will not have any significant impact on the profitable delivery of USO [Universal Service Obligation] services by the Post Office. An order under section 69 of the British Telecommunications Act 1981 has been laid and, with Parliamentary approval, this reduction in the monopoly will take effect from 1 April 2000".

Indeed, it had. On 6th July this year, SI 1999/1933 was made; it was laid before Parliament on 8th July. Its relevant passage reads:

"The postal privilege"-- that is the letter monopoly--

"is hereby suspended until the end of the year 2006 in relation to the conveyance of a letter which either

(a) is conveyed in consideration of a payment of more than 50 pence made by or on behalf of the person for whom it is conveyed; or

(b) weighs more than 150 grams".

It was to come into force on 1st April 2000 and, in due course, sailed unremarked through the Joint Committee on Statutory Instruments.

All well and good. The Government had acted fast and lived up to their intentions. But--and this is the important point--those intentions in parliamentary time at least were only to last for about five minutes flat: that is, until 18th October.

Imagine my amazement when I discovered that the Postal Privilege (Suspension) Order 1999 (Revocation) Order 1999--the subject of my Prayer this evening--had been made on 19th October and was coming into force on 1st December. Noble Lords who have read it--it is about as terse as a statutory instrument can be--will see that it states baldly:

"The Postal Privilege (Suspension) Order 1999 is hereby revoked"; in other words, as the explanatory note says--incidentally, in almost twice as many words--

"This Order revokes the Postal Privilege (Suspension) Order 1999 which would have suspended, with effect from 1st April 2000, the exclusive privilege of the Post Office with respect to the conveyance of letters in the case of letters costing more than 50p or weighing more than 150 grams. Consequently it preserves the Postal Privilege (Suspension) Order 1981 (as amended by the Postal Services Regulations 1999 (S.I. 1999/2107)) which suspends the privilege until the end of the year 2006 for letters weighing not less than 350 grams or costing not less than £1 so permitting persons other than the Post Office to convey such letters".

In short, it ain't going to happen; it is a government U-turn. In a word, why? To the best of my knowledge, no explanation has ever been given to either House of Parliament. It cannot be that the order was technically deficient; otherwise, an amending order would have been laid. This happens all the time. I see these instruments in my work on the Joint Committee on a fairly regular basis. The only explanation is that the Secretary of State had been got at over the Summer Recess.

It is true that the DTI now has its third Secretary of State since the general election. Mr Byers may have been self-activating, but I doubt it. It is much more likely that he has caved in to someone, or perhaps some body. Was it the Post Office board, a group of Back Benchers, the Labour Party conference, or the union representing Post Office workers?

As I said when I opened, this House has a duty to call the Government to account for their actions. All the Minister has to do this evening is answer the question: who was it? Or, pace the comments of the Solicitor-General earlier today, who knows what the new House will decide to do at the end of the debate. I beg to move.

Moved, That an Humble Address be presented to Her Majesty praying that the Postal Privilege (Suspension) Order 1999 (Revocation) Order 1999, laid before the House on 20th October, be annulled (S.I. 1999/2863).--(Lord Skelmersdale.)

Photo of Lord Newby Lord Newby Liberal Democrat 5:45 pm, 29th November 1999

My Lords, I thank the noble Lord, Lord Skelmersdale, for moving this Motion. We on these Benches have possibly two reasons for welcoming the introduction of this statutory instrument. The first is a matter of principle. We have regularly argued during the passage of legislation through your Lordships' House that the Government are unduly inflexible when faced with strong and compelling arguments in the opposite direction to that in which the legislation is justified. We are very pleased that in this very unusual case the Government have listened to the arguments, found them compelling and changed their mind.

We are slightly less pleased to find that the compelling arguments are put primarily by the Communication Workers Union. While we do not disagree with them, this is a case of a government bowing to pressure from outside when very often, faced with similarly compelling arguments within the House, they find it impossible to move. We hope that the flexibility that the Government have found, jolted very substantially by the Communication Workers Union, now extends more generally to the pursuit of their business and that when in future we on these Benches make compelling arguments they will be dealt with and responded to positively.

My next point has to do with the substance of the matter. Were the Government right to make the change? On balance we believe that they were. The Government have argued that there should be careful and phased liberalisation of the monopoly. Since 1981 there has been a careful and phased liberalisation by way of inflation. The extent of the monopoly in real terms has fallen by more than 50 per cent over the period. Therefore, each year little by little the monopoly has been undermined. The question is whether at this stage, given all the changes that are planned for the Post Office, it is sensible to have such a large reduction in one go.

We have studied the report of the Select Committee. We accept its argument that, just at the point when the Government are due to set up a postal services commission, it seems rather strange to pre-empt the decision of that body by taking such a major step, particularly given the potentially wider ramifications than simply the flow of revenue into the postal system.

The noble Lord, Lord Skelmersdale, referred to the universal service obligation. I suspect that we shall hear much more about that in the coming months as we debate the Bill. Any change to any aspect of Post Office administration and charges or its monopoly will give rise to a key issue. It is sensible that when established the postal services commission should look at that as part of its consideration of the issue. For those two reasons we welcome the statutory instrument, albeit we slightly raise our eyebrows at the way it has been introduced.

I put just one question to the Minister. When might we expect the establishment of the postal services commission and appointments to it?

Photo of Lord Northbrook Lord Northbrook Conservative

My Lords, the Labour Party manifesto gave a commitment to provide greater commercial freedom to the Post Office. In December 1998, the then Secretary of State, Peter Mandelson, proposed the phasing out of the Post Office's monopoly over letters costing less than £1. He said:

"I am proposing to reduce significantly the Post Office's monopoly activities".

The Government took seven months to follow up Mr Mandelson's statement with a White Paper in July 1999. The White Paper proposed that the Post Office's legal monopoly over deliveries costing less than £1 would be reduced to letters costing 50p or less, and a statutory instrument giving effect to the recommendation was laid in the same month.

So far the plot is clear, but what has happened since has made it extremely murky. In October a second statutory instrument was laid, the effect of which was to revoke the first. This means that the monopoly threshold remains at £1. To explain a key possible reason for the revocation of the first statutory instrument we must look at reaction to the July White Paper. I am sure that noble Lords will not be surprised to hear that one of the first people off the starting block was Derek Hodgson, General Secretary of the Communication Workers Union (CWU). In a letter dated 2nd July to all MPs he wrote:

"I thought that the days of finding it necessary to write to Labour MPs about the future of the Post Office had gone when jointly with the Labour Party we defeated the Tories when they tried to privatize the Post Office".

He went on to say that he felt the Government's success at the general election had also quashed the scheme. The CWU itself said in a briefing on the White Paper:

"We believe that the Government's package is fundamentally flawed in two respects--the intention to turn the Post Office into a plc and the move to reduce the reserved area to 50p or 150 grams".

I return to Derek Hodgson's reactions to events. He commented in a letter dated 5th July to all Labour MPs:

"We cannot stand silent if the Government announces that it intends to push ahead now with ... a reduced monopoly".

Thus, we can see how the union tail is wagging the Labour dog as this veiled threat obviously was enough to persuade the Government to back down on their change to the monopoly.

On the other hand, the Conservative Party believes that in principle the Post Office should be privatised so that it has full commercial freedom to compete on a level playing field with the German and Dutch post offices. The Conservative Party's policy would include minimum standards to ensure universal next-day delivery. We believe that the Government are unable to privatise the Post Office because Labour is in hock to the unions. We also argue that without full commercial freedom, including the right to borrow along commercial lines, the Post Office cannot hope to compete on a level playing field; for example, the Dutch Post Office has been privatised and has the capacity to take advantage of a global market.

Although we welcome the Government's decision to grant the Post Office plc status, we believe that it does not go nearly far enough. The Post Office will still be subject to PSBR borrowing limits.

In summary, the proposal to reduce the monopoly price was welcomed by all, with the exception of the Communication Workers Union. The Post Office itself was happy with the reduction to 50p but the Government are backing down on their proposal to reduce the monopoly price. This can be only as a response to pressure from the Communication Workers Union. It is the only group that has consistently opposed the reduction. We therefore find this U-turn an extraordinary turn of events.

Photo of Lord Clarke of Hampstead Lord Clarke of Hampstead Labour

My Lords, under the procedures of the House I am not sure whether I am allowed to speak without having given notice. However, having heard the previous contribution and with due respect to all Members of the House, I should like to draw a distinction between the Motion and the remarks of previous speakers. The debate is not about privatisation. I should declare an interest as a retired officer of the Communication Workers Union--in my day it was the Post Office Workers Union--and having spent over 50 years of my life working directly with the Post Office.

I wish to make this point clear. The situation has not been brought about just by union pressure, but because there is an opportunity for sober reflection and to consider what the reduction of the monopoly could mean to the universality of the service to the British people. The monopoly exists simply to ensure that the Post Office is able to give a service at a universal rate throughout the United Kingdom.

This Motion is not about commercial freedom. We are not talking about possible privatisation. We shall have an opportunity to discuss those issues at a later date when the post office Bill comes before this House.

It is not true that just one demon union has suggested that we should hold our fire (to use the analogy of the previous debate about military discipline). There will be a commission and a regulator to consider the effects of the monopoly on the universality of the service provided in this country. A number of people are examining whether it is possible for the Post Office to continue to provide that service with a reduction in the monopoly, whether on the tariff or the weight limit.

I am sorry that I have intervened in a garbled manner. However, I believe that it is right that we should talk today to the Motion and not about general privatisation of commercial freedom. Some of us may have something to say about that at another time. At the moment I ask all noble Lords to bear in mind that there will be a proper examination of the effects of the postal monopoly on the universality of the service provided. I believe that that is where we should leave the matter today.

Photo of Lord Sainsbury of Turville Lord Sainsbury of Turville Parliamentary Under-Secretary (Science and Innovation), Department of Trade and Industry, Parliamentary Under-Secretary (Department of Trade and Industry) (Science and Innovation)

My Lords, I agree that we should stick to the issue before us today. It is important that I emphasise at the start that the overriding consideration of the Government has always been to preserve the universal service obligation. I was delighted that the noble Lord, Lord Newby, reinforced that point. The delivery of letters and parcels to any part of the United Kingdom at a uniform tariff is of enormous importance. We place great weight on the value of that obligation. We agree that any greater competition must not undermine these services. That, above all, is what consumers want.

I listened with interest to the comments made in the debate. I think that it will be helpful if I set out the facts as I see them. The monopoly was last adjusted in 1981 with the Postal Privilege (Suspension) Order 1981, which suspended the Post Office's monopoly of postal business in respect of items costing £1 or more to post. That reduction has not affected the delivery of the universal service; and indeed many consumers have benefited from the delivery services for express parcels and letters that have developed.

On 27th July of this year, after a short period of consultation, we laid the Postal Services Regulations 1999 before Parliament. One of the provisions of those regulations was to introduce a weight element to the monopoly of 350 grammes in order to comply with the EU postal services directive. This new weight limit came into effect on 1st September 1999.

Earlier, when we published the White Paper on reform of the Post Office on 8th July, we laid the Postal Privilege (Suspension) Order 1999 to reduce the monopoly to 50p in price and 150 grammes in weight from 1st April 2000. The intention was that this would be a first step in a phased reduction in a postal services monopoly and that the new Postal Services Commission which we are establishing would be responsible for future phased reductions in the monopoly, subject, I emphasise, to a duty to ensure adequate funding for the provision of the universal service at a uniform tariff.

I should say to the noble Lord, Lord Skelmersdale, that there is no doubt about what was said then. But I have to say also that he does not seem to have followed the events which have occurred since then.

On 14th September, the Select Committee on Trade and Industry published its 12th report on the 1999 Post Office White Paper. We take seriously the advice of the Trade and Industry Committee; and I hope that noble Lords would not suggest that we do otherwise. I am grateful to members of that committee for the work they put into their report. Indeed, the Government have been appreciative of the helpful reports made by the committee during the course of the Post Office review, which have helped in the development of the Government's policy. The Government appreciate the committee's welcome to the general thrust of the reform package set out in the White Paper.

In its report, the Select Committee on Trade and Industry recommended that the Government consider withdrawal of the order reducing the monopoly to 50p so that the Postal Services Commission can consider evidence put to it of the effect of a reduction in the monopoly threshold and recommend to the Government an appropriate monopoly threshold. After careful consideration, we accepted that recommendation. We shall be remitting the issue to the Postal Services Commission as soon as possible, urging it to treat the matter as a high priority. In the meantime, we have laid the revocation order which we are debating today. This order is necessary to ensure that the outcome of the commission's review is not prejudged. Having accepted the Trade and Industry Committee's recommendation, it would clearly be wrong simultaneously to press ahead with a cut in the monopoly. However, we remain firmly of the view that greater liberalisation is both necessary and desirable.

The Government remain totally committed to greater competition in postal markets. Greater competition is an essential component in ensuring that the new Post Office is a success. Together with better regulation, and new commercial freedoms, greater competition through liberalisation is needed to ensure that the Post Office is sufficiently challenged to turn itself into a world class company; and greater competition in postal services will be a spur to efficiency which should bring benefits to consumers in terms of choice, price and quality.

The revocation of the order reducing the monopoly to 50p results directly from our acceptance that in this important area there would be benefit from the new regulator also considering the issue before final decisions are made, in particular to ensure that the universal service will not be threatened by any changes. In no way does it mean that we are no longer committed to competition.

Inevitably, acceptance of the recommendation of the Select Committee on Trade and Industry will mean some delay in opening up the market, but we do not think that that will alter fundamentally the course of the process of liberalisation. It is 19 years since the monopoly was last reduced. A few months delay will, in the scheme of things, make little practical difference.

I am sure that the Postal Services Commission will press forward with liberalisation as fast as can safely be achieved, consistent with the preservation of the high standards of the universal service which I know consumers have come to expect in their postal services.

Things will not happen as quickly as the committee had anticipated. It reported that the regulator might be in office in the autumn. Our intentions, as set out in the Postal Services Regulations 1999, are that it should start work next spring. Clearly, there has been some difference in interpretation about the likely starting date of the commission.

Accepting the advice of the Department of Trade and Industry will mean that a decision will be delayed only for a few months and I believe that the House should not oppose that added period of consideration. It would be extraordinary if this House, which has so often urged Ministers to listen to the advice of Select Committees, sought to overturn the action of the Government when they did so. I am delighted that the noble Lord, Lord Newby, made the point about considering such views flexibly and I hope he will consider that the House of Commons should be one of the bodies able to suggest such flexibility.

I assure the noble Lord that good progress is being made in setting up the regulator to assume its functions and duties from 1st April 2000 under the Postal Services Regulations 1999. We intend that a nucleus of people will be undertaking pump-priming work before 1st April. We are planning for the commission to comprise five people, who will be drawn from a range of backgrounds relevant to postal services. This approach will bring a range of views and expertise to bear on any questions and I hope that that will be welcomed.

We hope to make an announcement about the appointment of a chairman of the commission in January. The post was advertised in September and good progress is being made with the selection process. We are also recruiting other members of the commission and staff and expect to be advertising for these posts soon. We are therefore making good progress towards the commission being ready in good time for 1st April 2000.

We envisage that once people are on board they will begin tackling this issue. It will of course be for the commission to tell us the timescale in which it can deliver a review and I am confident that it will do a good job. An overriding duty on the commission is to promote the delivery of the universal service obligation. That is in essence what the revocation order is about.

It is vitally important that all customers, wherever they work or live in the UK, should be assured of a world-class level of postal service provided at a reasonable price. For the first time, we have enshrined the universal service obligation in law. The Government are committed to its continuation. Revoking the order while the Postal Services Commission does its work is a sensible step. I listened to the points made in the debate, but remain convinced of the need for the order. I hope that the House will support me in opposing the Motion.

Photo of Lord Skelmersdale Lord Skelmersdale Conservative

My Lords, I am most grateful to all noble Lords who have taken part in this short debate. It was slightly shorter than I, and possibly the usual channels, intended. But that is no reason for me to filibuster at this stage. However, it would be only right and proper for me to comment on the points that have been made.

It is interesting that the noble Lord, Lord Newby, and my noble friend Lord Northbrook, reached the same conclusion in answer to my question; that it was the unions. I believe that that is a fair reflection of what they said. It was particularly interesting to hear the reaction of the noble Lord, Lord Clarke of Hampstead, with his experience in the Post Office. I hope that he will not accuse me, in my very carefully worded speech, of straying into matters which are more proper for the Second Reading of the Bill. Indeed, I bent over backwards to avoid that particular trap--of course, not that I knew he would produce it for everyone else to fall into!

The noble Lord gave the reason why the unions have reacted in such a way. They believe that it is sensible to wait for the regulator. I can tell the Minister that I was well aware of the contents of the report of the Department of Trade and Industry and the action taken by the Select Committee of another place. It agreed with the noble Lord, Lord Clarke, and, essentially, with the unions. But the question remains; why on earth did not the Government consider this issue previously? Between publishing the White Paper and withdrawing the order under discussion tonight, the Postal Services Regulations 1999 were laid and, as the Minister explained at length, the Government are pressing on with acting upon them. They are setting up the commission--which means the regulator of the Post Office, although one is not allowed to call him that--presumably until we pass the Bill. The Minister and his department could well have foreseen the objections of the Select Committee, especially having taken steps to set up the commission.

I was particularly interested in the Minister's comment, which is not contained in the White Paper, that the 1981 rejection did not affect the universal service obligation, which we all agree is vitally important to all receivers and senders of letters in this country. I should not disagree with any noble Lord on that issue.

On reflection, I believe that the Select Committee's point of view, the unions' point of view and now the Minister's point of view--although it was not a year or even three or four months ago--is right and we should wait for the regulator. However, I believe that the debate has been worth while. We have received a reasonable explanation from the Government and I am grateful to the Minister for giving it to us. On that basis, I beg leave to withdraw my Motion.

Motion, by leave, withdrawn.

House adjourned at seven minutes past six o'clock.