In an earlier debate, on Amendment 84A, I touched on our concern that Ofcom would be able to extend its regulation by means of this clause into exempted services that are currently free from any regulation. With this amendment, I should like to focus in a little more detail on the provisions of Clause 36.
I confess that the clause takes a little time to understand, since it tries to set out what differences between the UPS and another service can be disregarded from an assessment of whether the service is sufficiently like the UPS to be regulated. As I understand it, the service under question can differ from the UPS by one of the criteria set out in subsection (1)(b) and still be considered within the scope. I would be grateful if the Secretary of State would confirm that if the service differed in two respects—let us say, if under sub-paragraphs (i) and (ii) it covered only a city and delivered on only five days a week—it would not then qualify as within the scope under subsection (1)(b).
My confusion continues within subsection (1)(b)(iii), the drafting of which does not quite follow the related drafting within Clause 29(3). There, the phrase is an affordable price,
"determined in accordance with a uniform public tariff".
Here, it is drafted as,
"an affordable price in accordance with a public tariff which is uniform".
I hope that the Secretary of State can explain this difference.
There is also the matter of there being two criteria within a single sub-paragraph: that of a uniform tariff and that of affordability. Does a service qualify as within scope if it offers a uniform tariff at a much higher price than Royal Mail, or if it offers an affordable set of zonal tariffs? Or can it offer both high prices and zonal pricing and still qualify under this sub-paragraph?
I am not convinced that a service offering a uniform but much more expensive tariff should qualify as within scope. Price is a key element in assessing competitiveness and cannot be disregarded as justifiably as, for example, the question of whether the service covers the entire United Kingdom.
There is also the question of what qualifies as "affordable". Does the Secretary of State intend this sub-paragraph to relate directly to the price offered by Royal Mail under Clause 29, despite the difference in drafting? How much more expensive does the tariff have to be to count as non-affordable?
Subsection (1)(b) seems capable of being interpreted in many different ways. I hope that the Government mean it to signify that only services that differ from the universal postal service in a single, non-critical way become eligible. If that is the case, the drafting could be made much clearer to signify it. I therefore beg to move.
Clause 36 sets out when a service is within the scope of the universal service. First, a service within the scope of the universal service is one that falls within the description of a service set out in the universal postal service order made by Ofcom under Clause 29, as set out in subsection (1)(a). Secondly, it is a service which would fall within the description of a service set out in the universal postal service order, but which does not meet some of the minimum requirements of a universal service: collection and delivery are not provided on each of the days required under Clause 29, or the service is not provided throughout the UK, or the service is not provided at an affordable uniform price. This is set out in subsection (1)(b). Finally, a service is also within the scope of the universal postal service if Ofcom believes that it is interchangeable, from the users' point of view, with one set out in the universal postal service order. This is set out in subsection (1)(c).
The effect of the specific amendment of the noble Lord, Lord Hunt, is to remove "affordable" from the characteristics of a service which can be put aside when deciding whether a service falls within the meaning of,
"scope of the universal postal service".
On its own, Amendment 89A would mean that a service that is the same as a service set out in the universal postal service order, but is provided at an unaffordable tariff, may not fall within the scope of the universal service, unless it were caught by Clause 36(1)(c)—that is, if it could still be viewed as interchangeable with a service in the universal service order. Then it would still fall within the scope of the universal service. Since it is arguable that a service provider would not provide unaffordable services, this amendment may in practice achieve very little. However, what it does is to introduce substantial uncertainty and, therefore, scope for dispute over where the regulatory line is drawn, which is likely to make regulation more expensive in practice.
Crucially, along with the other amendments of the noble Lord, Lord Hunt, on Clause 36, this amendment could weaken the protection of consumers. A key reason behind Clause 36 is to protect users by enabling Ofcom to impose conditions, and requirements to contribute to any possible compensation fund, on providers which provide services which could undermine the provision of the universal service through, for example, offering competing services which cherry pick the most lucrative parts of the universal service. A first-class, uniform priced letter service provided only in London would be an example.
Noble Lords might be of the view that this clause offers Ofcom too much discretion, but it must not be taken out of context. It is right that Ofcom has the tools available to secure the provision of the universal service. There are sufficient mechanisms in place in the Bill to make sure that Ofcom will use these tools only where necessary to meet its statutory duty.
On the noble Lord's first question, the service is within scope if it does not meet one or more of the minimum requirements. In view of this, I invite the noble Lord, Lord Hunt, to withdraw his amendment.
The purpose of the amendment was really to draw out of the Government what the Secretary of State has just said, so at least we know where we are. I am concerned, as are others on these Benches, that we may be extending the jurisdiction of Ofcom into exempted services that are currently free from any regulation at all. That is a worry. Therefore, I completely agree with the Secretary of State that we have to be clearer, which was really the purport of the amendment—not to introduce uncertainty but to bring about a situation in which the drafting could be made considerably clearer. However, I shall carefully reflect on all the points that the Secretary of State has made and, in the mean time, I beg leave to withdraw the amendment.
Having dealt with paragraph (b), I turn to the interaction between that paragraph and paragraph (c). Paragraph (b) sets more or less objective criteria on which a service falls within the scope. Paragraph (c) allows Ofcom to assess whether a service falls within the scope on the basis of its interchangeability. Our next group of amendments looks at the basis on which it makes that assessment, so I shall leave my concerns about that until then. However, the current drafting appears to ensure that a service must be considered as within the scope if it fulfils paragraph (b), even if Ofcom does not consider it interchangeable. It is entirely automatic; even if Ofcom does not think that it is interchangeable—perhaps the service operates only one day a week—this clause requires Ofcom to consider it as within scope. I cannot believe that that is the Government's intention, and I look forward to reassurance from the Secretary of State. I beg to move.
I have already explained what Clause 36 does: it sets out when a service is within the scope of the universal service. The amendment of the noble Lord, Lord Hunt, would require services to meet both subsection (1)(b) and subsection (1)(c) to be within the scope of the universal service. Services would have to be both those which would fall within the description of the universal service but for the fact that they do not include specific minimum characteristics and services considered by Ofcom to be interchangeable with universal postal services from the point of view of users.
In consequence, this amendment would restrict which services can fall within the scope of the universal service. In turn, it would restrict Ofcom's ability to impose regulatory conditions on postal operators. As we discussed earlier, the main purpose behind Clause 36—indeed the main purpose behind the whole of Part 3—is to protect the universal postal service. This amendment could weaken this protection because regulatory requirements whose purpose is to protect the provision of the universal service can be imposed only on postal operators providing services within the scope of the universal service. These requirements are general universal service conditions under Clause 37, recovery of administrative charges incurred by Ofcom under Clause 38 and sharing of the burden of universal service obligations under Clause 40.
A particular aspect of the protection given by Clause 36 is that it seeks to make sure that providers cannot escape proportionate, targeted regulation protecting the universal service by providing services which have some but not all of the features of a service required to be provided as a universal service, or which are interchangeable from a user's perspective with such a service, but which cherry pick from the specifications. The most obvious features that could be cherry picked from the list of minimum requirements of the universal service set out in Clause 29 are spelt out in Clause 36(1)(b).
The postal services market is changing. We cannot predict with certainty which way this change will go. Therefore we need to make sure that Ofcom has the right regulatory tools available where this is objectively justifiable and proportionate to ensure that it meets its duties, primarily securing the provision of the universal service. This is why it is particularly important that Clause 36(1)(c) continues to stand as a separate strand of what could be included in the scope of the universal service. It gives Ofcom appropriate discretion because it is not possible to spell out in the Bill all occasions when services should be regulated for the benefit of users and to secure the universal service. In view of that explanation and reassurance, I invite the noble Lord, Lord Hunt, to withdraw his amendment.
So, the Secretary of State is saying that the only thing that he can predict, the only certainty that he can give us, is the prospect of uncertainty. He adduces in evidence that the market is changing. We are all agreed on that, just as we are all committed to the universal postal service. But how do we decide on proportionate and targeted regulation? I remind the Secretary of State that we are giving Ofcom quite substantial powers. We must, as a Committee, be persuaded that it is necessary to give it this wide range of powers, even though there may be uncertainty as to how they will operate. I hope that the Minister would also consider carefully the points that I have raised, just as I will carefully consider his. I beg leave to withdraw the amendment.
Amendment 89B withdrawn.
Moved by Lord Hunt of Wirral
Amendments 89C and 89D look at the criteria by which Ofcom can consider a service to be interchangeable. The previous amendment considered the possibility that Ofcom would be forced to consider a service to be within scope, even if it knew that it was not interchangeable. These amendments look at what sort of services it might willingly consider to be interchangeable.
Interchangeability is a key feature of the postal services directive. However, as we all know, the simple repetition of a word from a directive does not mean that all the associated meaning is carried down. The clause gives no indication of the grounds on which Ofcom will be assessing the interchangeability of the service. As we have explored, paragraph (b) has no impact on paragraph (c). The safeguards on Ofcom's behaviour that are set out in Schedule 6 apply only to the imposition of regulatory conditions. While those safeguards are, of course, welcome, the inclusion within scope, even if Ofcom decides to hold off the actual imposition of a condition, must be worrying to an operator. In a sense, the clause gives Ofcom the ability to hold a Damoclean sword over the head of an operator without being required to justify its assessment, since a decision to impose a condition has not yet been made. Schedule 6 therefore does not yet come into operation. Will the Secretary of State justify this? If he is unable to do so, will he find ways by which we could make the situation more proportionate and targeted? I beg to move.
Amendments 89C and 89D add specific matters to what Ofcom must take into account before coming to the view that a service is interchangeable from the point of view of users, with a service set out in the universal postal services order: namely, the characteristics of the services, including added-value features, as well as the intended use and the pricing.
That would introduce a higher test before a service could be said to be interchangeable with a service in the universal postal service order. This has a knock-on effect on Ofcom's ability to impose certain conditions, notably general universal service conditions that Ofcom may consider necessary to ensure that a universal service is provided in accordance with the required standards under Clause 37.
In this instance, restricting Ofcom's discretion to regulate can only weaken the protection of the universal service. This is because, as I explained earlier, Clause 36, in conjunction with other clauses, seeks to ensure that Ofcom regulates where this is proportionate, targeted and protects the universal service.
The Bill as it stands gives Ofcom the right amount of discretion. Ofcom can impose regulatory conditions only when this is proportionate and objectively justifiable under Schedule 6. There are also tests as regards when particular conditions can be imposed set out in the clauses themselves. As I have said before, Ofcom is an experienced regulator with targeted, transparent and proportionate regulation at the heart of its decision-making.
In addition, the language used in this amendment is not clear. I accept that the words used come from a recital of the most recent postal services directive—a recital that we have borrowed from in using the phrase "interchangeable with a service" of a description set out in the universal postal service order. I believe that we have taken the meaning of the recital and made it into a provision which is clear. We expressly chose not to include the words set out in this amendment as they do not add clarity to the provision but, rather, introduce undefined and unclear terminology. That is not in the interests of anyone.
I reassure your Lordships that Ofcom will objectively assess which services are in the scope of the universal service, and therefore what could potentially be regulated. The scope of the universal service is defined primarily by reference to the universal service order. As we have previously discussed, to decide which products should be provided as a universal service, Ofcom will carry out a thorough market assessment and a robust consultation. In turn, this will provide a strong evidence base for the scope of the universal service. In any event, Ofcom must regulate proportionately. Ofcom will need to target the regulation of the services within the scope of the universal service very carefully. In addition, according to Schedule 6, Ofcom can impose regulatory conditions only when this is objectively justifiable. Therefore, there is no reason to assume that merely because a service can be regulated it will be regulated. We have made sure that a service cannot be regulated unless Ofcom can show that the tests required by the Bill are met. As regards safeguards, Section 3 of the Communications Act on better regulation applies. In view of this, I ask the noble Lord to withdraw his amendment.
This, has been another useful opportunity to look at the text of the Bill to scrutinise its effect. The Secretary of State rightly identified my source. I proudly admit that I took it from the recital. However, there is still no indication of the grounds on which Ofcom will assess the interchangeability of the service. We have reassurances from the Secretary of State, which I shall consider carefully, that Ofcom will utilise its powers proportionately and in a targeted way. Service providers should have greater clarity about what will need to be proved in assessing the interchangeability of the service. I shall consider carefully all that the Secretary of State has said and I hope that he will consider introducing greater clarity. In the mean time, I beg leave to withdraw the amendment.
Amendment 89C withdrawn.
Amendments 89D and 89E not moved.
Clause 36 agreed.
Clause 37 : General universal service conditions
Moved by Lord Carter of Barnes
89F: Clause 37, page 21, line 26, leave out subsection (2)
Amendments 89F, 89H 95B, 95C and 95D relate to general universal service conditions. The Bill currently requires that a universal service must include a collection of letters from every access point on every working day. Access points include, for example, post boxes. These amendments clarify that where there is a designated universal service provider it is only that provider that needs to ensure collections from its access points. Were these requirements to apply more widely, this would have a disproportionate effect on competition and may discourage operators from entering the market. We need at least one service which includes such a daily collection, and it is right that this service should be provided by the designated universal service provider.
These amendments also seek to ensure that Ofcom has the power to impose requirements on all operators to take steps for guarding against loss or damage to postal packets, and ensuring that all postal packets are delivered to the intended addressee. Currently, Clause 37 provides that a general universal service condition may require persons to take steps for guarding against loss or damage and ensure that all postal packets are delivered to the intended addressee. However, before such a general universal service condition can be imposed, Ofcom must consider it necessary for the purposes of securing that the universal service is provided to the required standard.
Furthermore, conditions under Clause 37 can only be imposed on providers of services within the scope of the universal service. We believe that this is too restrictive and that all users of all postal services are right to expect that their packets will arrive at the intended address intact and undamaged. Therefore, we are seeking to amend the Bill to allow Ofcom to impose conditions where it is proportionate to do so for the purposes of ensuring that postal packets arrive undamaged and to the right address on any postal operator.
Amendments 99, 100 and 105 relate to the postcode address file, or PAF as I will henceforth refer to it, which contains the postcode used by the Royal Mail to provide postal services. As part of the transition from Postcomm to Ofcom, this Bill gives powers relating to the PAF to the new regulator. These powers allow Ofcom to enforce access to the PAF as well as to give directions in respect of the terms in which Royal Mail is to make the PAF available. These provisions are at paragraph 39 of Schedule 10 and reflect the current arrangements under the Royal Mail licence.
Postcomm currently has the ability to direct Royal Mail on the issue of compliance with and modification of a code of practice through licence condition 22 of Royal Mail's current licence. The code of practice covers procedures for ensuring that persons affected by changes to the postcode address file are notified, as well as procedures for ensuring that the holder is made aware of users' views. As a result of the more general move within this legislation from a licensed to a general authorisation regime, Ofcom requires the power to ensure continuation of these arrangements through a different mechanism provided by these amendments.
First, these amendments allow Ofcom to require the owner of the PAF from time to time to have in place a code of practice approved by the regulator. Secondly, they require the owner to comply with any such code of practice. Thirdly, these amendments allow Ofcom to enforce the code of practice through the Schedule 7 enforcement mechanism in the same way as any other regulatory condition.
A final group of minor and technical amendments deals with errors in the current draft of the Bill. Amendment 104 relates to Section 95 of the current Postal Services Act. It is consequential to a change widening the scope of Schedule 5 to that Act. Its effect is to alter Section 101(2) of the current Postal Services Act so that it refers to Ofcom rather than Postcomm.
Amendment 106 seeks to amend the list of references in Section 122(10) of the Postal Services Act to sections which are being omitted. The list should also omit,
"paragraph 4 of Schedule 7", because Schedule 7 of the Postal Services Act is being repealed.
Amendment 107 amends the definition of "the Postal Services Directive", in order that it picks up amendments made by the 2008 directive and any subsequent directive.
Amendment 108 makes a correction to Schedule 10 so that it refers to the correct part of the Postal Services Bill.
The final amendment, Amendment 109, is to the reference in Section 16 of the Consumer, Estate Agents and Redress Act 2007 as to the meaning of "public post office", so that it refers to Section 125(1) of the Postal Services Act 2000, rather than the Postal Services Act 2009.
I hope that I have provided a clear or sufficient description of this group of government amendments, which are important to ensure that the Bill functions as intended. I beg to move.
I am grateful to the Minister for explaining these amendments. While we are looking at Clause 43, I hope he can provide some clarification about the powers that the Government are giving Ofcom to regulate, as he has explained, all postal operators on certain matters. Clause 37(2) sets out the conditions for protecting against theft, loss and so on, while Clause 43 deals with what the Bill calls the "essential conditions" on matters such as confidentiality. Can he give us a little more information on these safeguards? Our concern is that they are largely covered by existing law and may be duplications. Can he expand on why it is necessary for the regulator to get involved in ensuring that private companies deliver a non-universal service package to the correct address? How much involvement does Postcomm currently have in these areas?
I thank the noble Lord for his three questions. I do not know the specific answer to the question about the extent of Postcomm's writ in relation to the activities of so-called private companies. However, he also asked a specific question which has been a feature of a series of amendments which he and his colleagues have tabled on the legitimacy and value of extending or defining Ofcom's remit in relation to companies other than Royal Mail. It would be helpful if the Government wrote to the noble Lord and laid out clearly in chapter and verse where those extensions are, where there are changes to the current regime and why those changes are proportionate and necessary to provide the new regime with a functioning set of rules.
Amendment 89F agreed.
Moved by Lord Hunt of Wirral
89G: Clause 37, page 21, line 31, at end insert "(to the extent they provide such services)"
I very much welcome the Minister's words a few moments ago. The Committee would certainly find it very helpful if such a letter could be written and a copy placed in the Library, if not in the Printed Paper Office, so that everyone could share in the knowledge that he has agreed to give us.
Amendments 89G, 89J and 90A are the first of several groups of amendments relating to the imposition of a levy on postal operators in order to share the burden of providing the universal postal service. Many of us were unaware that that was proposed until we received the department's document in February setting out the Government's policy on the future of the universal postal service in the UK. Our amendments in this group seek to ensure that, in the event that a levy is considered necessary, postal operators become liable for such a levy only to the extent that they provide services within the scope of the universal service. As Ministers have already concluded and admitted today, as the Bill is drafted, Ofcom is given a great deal of discretion over the method of distributing the liability, as well as over a number of the other issues that we have been raising.
Of course, there are safeguards against discrimination and the distortion of competition and so on in Clause 40(6), but there seems to be nothing in the proposed legislation to prevent the levy being awarded on, for example, an assessment of each company's ability to pay. I hope that the Minister will be able to give us a little more clarity on how a levy would be imposed on operators and on what criteria the division of liability might be made. I beg to move.
I fear that I am going to disappoint the noble Lord in providing the level of clarity that he is looking for but I shall try.
These amendments relate mainly to contributions from other postal operators to any scheme set up to share the burden of providing any universal service as defined by the regulator. They relate to both Clause 37 on general universal service conditions and Clause 40, headed "Sharing of burden of universal service obligations".
One purpose of Amendment 89J appears to be to ensure that Ofcom gives consideration to the extent to which operators provide services within the scope of the universal service before imposing conditions necessary to secure the universal service. This amendment is, I am afraid, unnecessary. Ofcom can impose these general universal service conditions only to the extent necessary to secure that the universal service is provided to the required standard and not for any other reason. Furthermore, as with all conditions, Schedule 6 requires that Ofcom can impose conditions only where it is objectively justifiable, not unduly discriminatory, proportionate and transparent. The other type of condition that can be imposed, under Clause 37, is for the purpose of sharing the burden of universal service obligations—the compensation fund.
The amendments proposed by the noble Lord, Lord Hunt, would require that, if any such condition were imposed on postal operators, Ofcom would have to give consideration to the extent that the operator provided such services. In essence, we would interpret that as, again, a point about proportionality.
Clause 40(6) is already explicit in requiring that any compensation scheme operates in a proportionate manner, including the source of its funding. Further, it states that it must not involve or give rise to any undue discrimination against particular postal operators. Schedule 6 is also clear that, when imposing or modifying any regulatory condition, Ofcom must ensure that it is proportionate. Furthermore, under Section 3 of Ofcom's founding statute, the Communications Act, Ofcom is required to follow the principles of best regulatory practice when carrying out its functions. Again, this expressly includes proportionality. Therefore, there would in effect be a triple lock of proportionality on exercising the allocation of those costs if that were to happen.
I hope that I have provided the noble Lord with some reassurance on this point and I therefore ask that at this stage he withdraw his amendment.
At this stage, I will. I beg leave to withdraw the amendment.
Amendment 89G withdrawn.
Moved by Lord Carter of Barnes
89H: Clause 37, page 21, line 35, at end insert—
"(3A) At any time when there is a postal operator designated as the universal service provider under section 31, nothing in subsection (1)(a) is to be read as authorising the imposition of a condition requiring a person—
(a) to deliver or collect letters or other postal packets as mentioned in section 29(3)(a) to (d),
(b) to provide a service throughout the United Kingdom, or
(c) to provide a service at an affordable price in accordance with a public tariff which is uniform throughout the United Kingdom."
Amendment 89H agreed.
Amendment 89J not moved.
Moved by Lord Hunt of Wirral
89K: Clause 37, page 21, line 41, leave out subsection (5)
This is a simple probing amendment to clarify what effect subsection (5) has on the provisions earlier in the clause. When I used to have to carry through legislation, I was always questioned on any provision as general as this one. I did not want to disappoint the Minister on this occasion.
I remind the Committee that Clause 37(5) states:
"Nothing in this section is to be read as restricting the generality of the provision that may be included in general universal service conditions".
I also ought to point out that the drafting of the subsection is repeated at intervals throughout this part of the Bill and seems to imply that any limitations imposed on Ofcom earlier in the clause are not actually limitations at all. I look forward to the Minister reassuring the Committee on that.
In general, this provision seems to be included only where the Bill gives examples of what may be included in a condition rather than limitations about what may not. However, is the requirement in subsection (3)(a), to abide by a scheme under Clause 40, not a restriction? I hope the Minister can give a little more explanation about this subsection and what it means. I beg to move.
Securing the provision of the universal service is, as we have discussed on a number of amendments, at the heart of the Bill. Clause 37 provides for general universal service conditions and recognises that to secure the provision of the universal service it may not be sufficient to impose conditions solely on the universal service provider—if not now, then at some probably surprising date in the future—and that therefore other postal operators providing services within the scope of the universal service may also have to have conditions imposed on them.
The purpose of subsection (5), which this amendment seeks to leave out, is to make clear that while the clause does specify that certain matters can be included in general universal service conditions, this does not mean that other matters cannot. It is, as the noble Lord rightly points out, to ensure that Ofcom has a degree of discretion—not a limitless discretion, but a degree of discretion—as the guardian of the universal postal service under this regime, thereby giving it the scope to do the task at the heart of the Bill, namely to secure the universal service. The amendment would remove that discretion from Ofcom. It would not in future be able to impose any other conditions even if it judged them to be necessary for the purpose of securing the universal service. Perhaps I may digress from my speaking notes to say that in telecommunications, for example, the regulator has a similar discretion albeit it is subject to the same restrictions of proportionality.
We know and have discussed that the postal market is changing very quickly. In those circumstances, this restriction could in future threaten the universal service. I also remind your Lordships that for the imposition of any regulatory conditions there are strict tests that Ofcom is required to have met. It is not our view that this subsection either removes or in any way reduces the need for those strict tests to be met.
I hope I have provided the noble Lord with reassurances that Ofcom already must meet tests before imposing regulations. To tie its hands now could put the universal service at risk in the future, or at worst slow it down in the process of reassessing the need for its provision. I would therefore ask the noble Lord to withdraw the amendment.
I have followed very carefully what the Minister has said, but I did not quite understand what he meant by "some surprising date in the future". Perhaps he could clarify what the word "surprising" means in this context.
I was just trying to surprise the noble Lord. My point was that it is an unpredictable date. The purpose of allowing the regulator the opportunity to exercise discretion is to be able to adapt at speed to a market that may change at a faster rate than we, with all our collective wisdom, may be able to predict in 2009. To underscore the central point—which perhaps does not need to be said but is worth placing on the record—all decisions of public bodies, particularly statutory competition regulators, must be reasonable or they will be challenged in the courts. Indeed, they have been.
I am very grateful to the Minister. He will understand that I know the procedure for judicial review; no doubt we will come back to that at some stage. I am grateful for his clarification.
I feel that we need more information. I sense that the Minister is beginning to understand why we are pressing him on these points. I am sure that we will return to them later, but, in the mean time, I beg leave to withdraw the amendment.
Amendment 89K withdrawn
Clause 37, as amended, agreed.
Clause 38 : Recovery of administrative charges incurred by OFCOM
Moved by Lord Hunt of Wirral
89L: Clause 38, page 22, line 2, after "impose" insert "proportionate"
Our amendments in this group are intended to ensure that postal operators providing services outside the universal postal service order are not expected to bear a disproportionate administrative burden—or any burden at all where it would be inappropriate. I should also like to take the opportunity to probe a little further some of the specific requirements in Schedule 4.
My first amendment ensuring that the charges are proportionate is slightly otiose as the word appears in Schedule 4, but I wanted to ask the Minister on what basis the charge is to be proportionate. The word "proportionate" is one that he has already used on several occasions—indeed, the Secretary of State used it earlier—but it can mean different things. One can conceive of two companies, one big and one small, both providing services eligible for an administrative charge. I hope that the charge would not be proportionate to the entire company turnover but instead will be calculated considering only the relevant service.
Schedule 4 also raises some questions. In paragraph 1(1), it restricts the administrative charge to be eligible only on postal operators providing services within the scope of the UPS. That is quite correct, as Ofcom should only be regulating those services, but later it makes it clear that that charge is to cover Ofcom's postal services functions, which can under paragraph 2(2) include setting up mechanisms for resolving disputes between postal operators and users. We will later come to the nitty-gritty of a consumer protection condition, but the dispute mechanism that Ofcom is expected to set up under this condition will presumably fall under the Schedule 4 description of postal services function. That condition is to fall on all postal operators and all services, not just those falling within the scope of the UPS. Does that mean that regulated operators will have to bear the burden of costs partly resulting from non-regulated operators?
I also ask your Lordships to note that Schedule 4 contains powers for Ofcom to impose penalty charges. Again, those are restricted to being appropriate and proportionate, but they could be significant, especially if a dispute reaches the level covered by paragraph 7, where Ofcom has the power to prevent an operator from providing the service at all. Will the Minister therefore clarify whether Ofcom could direct the operator to stop services falling outside the scope of the UPS? There seems to be nothing in the Bill to stop Ofcom getting involved in any area of the operator's business. In addition—again we will turn to this issue later—there is no right of appeal. There is merely the right to make representations.
I hope we are talking about only small amounts of money here, but when the regulator has as much power as is being given to Ofcom in this case, would it not be better to allow for the penalty regime to have a right of appeal, as is usually the case? I know that in other legislation your Lordships have felt strongly about that. Therefore, I hope that the Minister will consider it. I beg to move.
My Lords, I agree with the noble Lord that that amendment probes a number of areas, some of which I hope I can give him some reassurance on; we may need to clarify others in writing. The specific amendment relates to Clause 38, which, as the noble Lord rightly points out, allows Ofcom to impose charges on postal operators providing services within the scope of the universal service and to meet the reasonable costs that Ofcom, as the proposed sector regulator, may incur in carrying out its postal functions.
Proportionality, which both these amendments promote, is, as the noble Lord has already accepted, a central tenet that Ofcom must follow when regulating and would apply to its costs and the allocation of its costs. As a point of record, it is my understanding that it would be required to consult on its charging regime and on the allocation of costs within that charging regime. It is also the case that Ofcom has committed itself to a level of efficiency and cost reduction over the period, which will have the effect of reducing in absolute terms the costs in total, although I understand the noble Lord's point about to whom the costs are allocated. Those requirements are provided for in the original Communications Act, Schedule 6 to this Bill, and, specifically in relation to recovering administrative charges, paragraph 1(3)(b) of Schedule 4.
I therefore say to the noble Lord that his amendments, while laudably seeking to minimise regulatory costs, are unnecessary. I hope that he will see fit not to press them.
If the Minister will allow me, I will take that as praise for my having moved the amendment, because we have raised some important points. I would now like the opportunity of considering carefully what the Minister has said. In the mean time, I beg leave to withdraw the amendment.
Amendment 89L withdrawn.
Amendment 89M not moved.
Clause 38 agreed.
Schedule 4 agreed.