Clause 45

Postal Services Bill – in a Public Bill Committee at 9:15 am on 9 December 2010.

Alert me about debates like this

Photo of Nia Griffith Nia Griffith Shadow Minister (Business, Innovation and Skills) 9:15, 9 December 2010

I beg to move amendment 121, in clause 45, page 28, line 13, leave out ‘12 months’ and insert ‘3 years’.

It is a pleasure to serve under your chairmanship again, Mr Hood. I rise to speak to clause 45 and amendment 121, which is in my name and that of my hon. Friend the Member for Ochil and South Perthshire. Clause 45 is about the report on the sharing mechanism, which is detailed in clause 44. That clause is about the contributions that Ofcom may require postal operators to make to the operator of the universal postal service, to meet some or all of the burden of providing that universal postal service. As it stands, clause 45 seems to single out the reporting on the contribution to sharing the burden of the provision of the universal service as an area that has a shorter review time than the other aspects under review. Business planning and investment needs to be made well in advance, and the universal service provider needs to have as much certainty as possible in order to make the necessary business plans.

While I appreciate the very fast-changing nature of consumer use of mail services, any changes in business practices take time to implement. In order therefore to create more stability, and to give the universal service provider—namely a newly privatised Royal Mail—the stability and certainty to plan for a longer period than just 12 months, we are suggesting that the first report should be prepared for the period of three years from  when the first regulation made under clause 44 comes into force. In other words, we are not suggesting that there should be any delay in making those initial regulations on the contributions to share the burden of providing the universal service, but we are suggesting that once those contributions have been determined, they should remain in place for longer than 12 months—for three years, in fact. The idea is to give as much stability as possible to Royal Mail for its business planning.

We certainly accept the need for reporting and reviewing, not least because the costs of providing the universal service might escalate and it may be necessary to make sure the contributions to the burden are increased accordingly. This is not about setting in stone a particular solution or set of figures for ever, but rather about being realistic about business planning time scales and increasing stability. Businesses need that certainty to plan ahead. To us, a period of three years strikes a suitable balance. It would allow a sufficiently long period of time for which the universal service provider could plan, and yet would allow a report and possible review to be made after three years, which would then allow changes in market conditions to be reflected accordingly. The last thing that a fledgling privatised Royal Mail service needs, particularly if it is encountering difficulties, is a lot of instability, with the goalposts changing all the time. It needs stability to establish itself and to continue with its modernisation plan.

We had very much hoped that our amendment 95, requiring any USP access condition to be commercially negotiated and not to undermine the universal service, would be looked on more favourably by the Government. Had the amendment been accepted, that would have helped to guarantee the creation of a more realistic financial plan for the provision of a universal service. Even then, there could have been a need for contributions to the burden incurred by the universal service provider. As our amendment was not accepted, and without assurances from the Government that they might bring forward amendments of their own that would have a similar effect, there could very well be an even greater need for the power that Ofcom has under clause 44 by which it can require contributions to the burden.

It is in the light of that need that our amendment 121 requires, before any report or review, a three-year period after the coming into force of the first regulations made under clause 44.

Photo of Edward Davey Edward Davey The Parliamentary Under-Secretary of State for Business, Innovation and Skills 9:30, 9 December 2010

I am grateful for the hon. Lady’s remarks, particularly as she is showing concern about long-term planning for business, which is what the whole Bill is about. If we are to protect the universal postal service, we need to ensure that the universal service provider is able to plan long term, so I refer the hon. Lady back to clause 28 and the duties that we put on Ofcom as it sets about regulating the universal postal service, particularly bearing in mind the need for financial sustainability. We inserted the financial sustainability duty in this Bill, which is different from the 2009 Bill. It has caused consternation in some of our previous debates, but I return to it at this point because if the hon. Lady is concerned about long-term planning, the duty on Ofcom to ensure that the universal postal service is financially sustainable gives a sense of its need to think long term,  which obviously has implications for how it regulates and how it considers investment and all the other matters that will be required to provide the universal postal service.

I am slightly confused by the hon. Lady’s amendment, not only because it ignores what is in clause 28, but because clause 45 is about the compensation fund. It is about the requirement for Ofcom to prepare and publish a report into the operation of that compensation fund. It mirrors a similar requirement in the Communications Act 2003. It seems reasonable that—in the unlikely event that, Ofcom having made a review on whether there is an unfair burden, a compensation fund is selected as the option for dealing with that—there should be a report on the operation of that. I should have thought that the hon. Lady—and certainly her hon. Friend the hon. Member for Ochil and South Perthshire, who always wants more reports and more parliamentary accountability—would have welcomed that. Rather than welcoming regular reports, the hon. Lady is seeking to delay the first report and only wants a report every three years. It is important to make the information public regularly, especially because other postal operators who work within the scope of the universal postal fund will be contributing to the fund, and potentially users will be doing so. The argument for regular reporting is even stronger here, so I am slightly mystified that the hon. Lady wants to take us in a different direction. Given the financial implications of the compensation to those contributing to the universal service, an annual report is absolutely appropriate.

Photo of Nia Griffith Nia Griffith Shadow Minister (Business, Innovation and Skills)

I heard what the Minister said, but I would like to point out a couple of things. First, the suggestion of a 12-month period seems to be rather a one-off, in contrast to some of the periods suggested elsewhere in the Bill. The real issue, however, arises when a fledgling Royal Mail has got itself into a situation in which there clearly needs to be a contribution to the burden of the universal service. If we are looking at and deciding on what sort of contribution is needed, and setting it for a 12-month period, and if there is then to be a very quick review of that—in other words, if a change is to be implemented at the end of the 12 months —we would want to start planning even earlier than that. If there is to be constant reviewing, therefore, it will be difficult to see whether the contribution to that burden is having the required effect in rebalancing the market.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Order. I am afraid that the hon. Lady’s intervention is too long.

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

Thank you, Mr Hood. However, I found the hon. Lady’s intervention helpful, because—

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Order. I am sure that the Minister finds it helpful, but he should not encourage Members to make long interventions when the Chair is trying to help the other way.

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

You are absolutely right, Mr Hood; I do not wish to encourage long interventions. I will now respond to the hon. Lady.

Retracing the hon. Lady’s opening remarks, she first asked why the three-year period. I am trying to deal with that in terms of the practical realities of the compensation fund and why it would need to report back on how those people’s money is being spent, but she says that the period is different from that in other parts of the Bill.

Yes, there are different time periods in other parts of the Bill, because they relate to different things, such as when a review can take place. In this case, it is a report. I refer the hon. Lady to clause 36(1)(b), under which Ofcom can, through a designated USP condition, require information from the universal service provider—it talks about publishing

“annually an independently audited performance report.”

Elsewhere in the Bill, on reporting, it is quite clear that we have in the main gone for annual reports—when it is going into the future and over a time period—so I do not really accept her argument.

I hope to disabuse the hon. Lady of her concerns. We hope that a compensation fund would not last long. We do not wish the compensation fund to happen in the first place nor, if it were to happen, for it to become a permanent feature. There is that potential, if it turns out to be the only way forward, but we hope, first, for it not to happen and, secondly, for it to be temporary—possibly not lasting for the three years. The danger in the hon. Lady’s suggestion is that the compensation fund would be set up and closed down before the first report was made. I hope she agrees that that would not be a happy course of events and I hope that she will withdraw her amendment, having received those assurances.

Photo of Nia Griffith Nia Griffith Shadow Minister (Business, Innovation and Skills)

I apologise, because I thought that the Minister had concluded his remarks and was just being super-courteous and giving me the opportunity to intervene.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Order. I thank the hon. Lady for that. I, too, thought the Minister had concluded his remarks, which was why I let the hon. Lady go on, but then I realised that the Minister had allowed an intervention, and not finished his speech.

Photo of Nia Griffith Nia Griffith Shadow Minister (Business, Innovation and Skills)

To get back to the idea of 12 months, it is of course important to have those reports and insight into how the performance indicators are progressing and so forth. My concern is that it takes a while for a compensation fund to kick in. I understand the Minister’s point that one would not want it to last for ever or be longer than it has to be. The complexities of the market are such, and the difficulties of looking at changing consumer and competitor patterns, mean it would be difficult to make a definite assessment. It would be destabilising for Royal Mail to be given such a short leash on the compensation fund that it could not plan ahead effectively.

We discussed the need not only to keep the service going, but to provide investment for future modernisation. I understand that some competitors raised concerns about subsidising an inefficient Royal Mail, but I am sure that the regulator could ensure that appropriate levels were set in the contribution. It would be helpful to Royal Mail to have a proper period in which those  contributions could work their way through, and we could see if that were the right level and would make the service operate in the interests of the consumer.

Question put, That the amendment be made.

The Committee divided: Ayes 7, Noes 10.

Division number 34 Decision Time — Clause 45

Aye: 7 MPs

No: 10 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Clause 45 ordered to stand part of the Bill.