Postal Services Bill

HL Deb 15 June 2000 vol 613 cc1762-828

3.33 p.m.

The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Sainsbury of Turville.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Baroness Miller of Hendon

moved Amendment No. 69: After Clause 67, insert the following new clause— PUBLICATION OF PARTICULARS OF ACQUISITIONS AND DISPOSALS (" .—(1) Where the Post Office company or any relevant subsidiary proposes to acquire or dispose of an undertaking or any interest in an undertaking and—

1. (a) the gross assets of that undertaking or attributable to that interest are equal to more than 10 per cent. of the gross assets of the Post Office company or the relevant subsidiary; or
2. (b) the turnover of that undertaking or attributable to that interest is equal to more than 10 per cent. of the turnover of the Post Office company or the relevant subsidiary; or
3. (c) the net profits of that undertaking or attributable to that interest are equal to more than 10 per cent. of the net profits of the Post Office company or the relevant subsidiary,

the Post Office company or the relevant subsidiary must as soon as practicable publish a notice in accordance with subsection (2). (2) A notice under this subsection must be published in the London Gazette, the Edinburgh Gazette and the Belfast Gazette in such form as the Secretary of State may prescribe and must include—

1. (a) the name of the undertaking;
2. (b) a description of the business carried on by the undertaking and, where the transaction is an acquisition or disposal of an interest in the undertaking, a description of the business attributable to that interest;
3. (c) the effect of the transaction and, in particular, the benefits which the directors expect to accrue to the Post Office company or any relevant subsidiary;
1763
4. (d) the price (or the monetary value of any other consideration) to be paid or received by the Post Office company or any relevant subsidiary and, in the case of a disposal how the proceeds of the disposal are to be applied; and
5. (e) if any securities are to be issued as a result of the transaction, the nature and amount of those securities.

(3) In this section "gross assets" means total fixed assets and total current assets."). The noble Baroness said: This amendment was debated at the very end of the previous session of the Committee stage. The debate came to an abrupt end because I was not satisfied with the answer from the Minister and I sought to test the opinion of the House. Unfortunately, the Government had not retained enough of their supporters to ensure a quorum and the House was counted out—

Lord Carter

Perhaps the noble Baroness can explain why two of her colleagues on the Back Benches, who had taken a keen interest in the Bill, did not vote on that occasion, even though they were in the Chamber?

Baroness Miller of Hendon

I am afraid I find that impossible to explain. It is quite possible that my noble friends were pleased for the House to be counted out. I know not; I am simply supposing.

I do not want to delay your Lordships by repeating everything that I said on that occasion. On re-reading the debate in Hansard, I am still utterly convinced that the principle that I was arguing was correct. That is that if the Post Office engaged in major acquisitions or disposals it should publish details at the earliest opportunity in the same way as though it was a company quoted on the Stock Exchange. I cannot see how that would put it at any disadvantage as the Minister suggested. Such details are published almost on a daily basis by ordinary plcs, if only to ensure that their shareholders are aware of what is going on before they make any decisions about buying or selling. The Government promised us openness in their dealings, and they are offering a regime whereby the public and Parliament will merely be presented with a fait accompli.

I have to tell your Lordships that certain information came to me late yesterday and I have not had a chance to verify it. I have already discussed this matter with the Minister. That information suggests that there is a cogent reason why the Government should have included this matter in the Bill themselves. I hope that the Minister will now agree that the principle is correct and, therefore, that: on Report he will put down a government amendment. I believe that it would be ridiculous to pass the Bill, in its present form and six months or a year down the line to have to bring it back to deal with this matter.

I await the Minister's response with considerable interest. I hope that he can assure me that he will be able to table an amendment at Report stage. As I told the Minister, if he feels unable to do that, I shall certainly table a re-drafted amendment myself. I accept that the amendment that I had tabled and which was drafted for me by someone who was briefing me on this matter, was rather wider than the Stock Exchange rules would require. If the Minister, on behalf of the Government, feels unable to deal with the matter I shall bring it back in a new form. I beg to move.

Lord Razzall

I assume that the answer to the question posed by the noble Baroness as to why she could not maintain the necessary quorum when the vote was taken last week was because she made the mistake of saying that this amendment was my idea, despite the fact that I happened to be out of the country. Indeed, it was a point that I made at Second Reading, as the noble Baroness kindly indicated. I agree with much of what was said in the previous debate. I also agree with the Minister's comment because the amendment, as drafted by the noble Baroness and as she has indicted, would go too far and would put the Post Office at more of a commercial disadvantage than I had intended when I made the point at Second Reading.I do not wish to detain the House and I look forward to hearing the Minister's comments.

Lord Skelmersdale

This issue appears to be a matter of timing. When we last debated this, the Minister pointed out that he was seeking to establish a level playing field with the rest of industry. I take the point and I readily understand it. None the less, as my noble friend has said, occasions do arise in a commercial situation, in particular towards the end of the process, when shareholders are informed. I see absolutely no reason why Parliament and others should not be informed at roughly the same point were a disposal, share exchange or other business move planned by the Post Office with the agreement of the Government.

Lord Sainsbury of Turville

I am sorry that the noble Baroness was not overly enthusiastic about my response when we last discussed this. However. I think that very little separates the noble Baroness and myself on this point, although we take a different view on the details.

The noble Baroness has said that the key issue here is transparency and I have no quarrel whatever with the notion that the Post Office company should be as transparent as any listed company in the kind of transactions that are described in the amendment.

Where I part company with the noble Baroness is on what those listing rules require. The listing rules require that a company, in certain circumstances, announces on acquisition, once the terms of such a transaction have been agreed. The amendment talks in terms of announcing details when the company proposes a transaction. As I said last week, no other commercial company would be required to publish its intentions to acquire or dispose of any undertaking in the way that would be required by this amendment.

In seeking to give the Post Office—and the future Post Office company—the greater commercial freedom that everyone agrees is necessary, we are endeavouring to transform the Post Office company into a commercial company, governed by normal company legislation. It is our intention that the Post Office should provide transparent information on completed acquisitions along the lines of the London Stock Exchange disclosure requirements. The Post Office is now doing so. I hope that this gives the kind of assurance that the noble Baroness seeks.

Perhaps I may make one further point very clear. If it appears that what we are proposing falls in any way short of the London Stock Exchange disclosure requirements, we shall certainly look at the issue again. I trust that this explanation gives sufficient comfort to enable the noble Baroness to withdraw her amendment.

Baroness Miller of Hendon

I have to say that I shall read yet again the remarks made by the Minister. I am not sure if what he has stated in fact guarantees that the Government will table an amendment on Report. He referred to a point that was mentioned on the last occasion; namely, that the Government expect the Post Office to be transparent and to release information according to the rules of the London Stock Exchange. But the Bill does not require that.

So far as concerns this side of the House, it is essential that this provision is written into the Bill. Perhaps the Minister did not hear what I said in my earlier remarks. I said that the amendment I have tabled today is not the amendment that I would bring back at the next stage. This amendment is rather wider than the London Stock Exchange rules. If it is necessary for me to return to this matter, I shall bring back an amendment that reflects exactly those rules so that a level playing field is established, not only for the Post Office but also for any other company that wishes to compete in this area.

I hope that the Minister will bring back a government amendment on Report, but I shall ensure that I have an amendment prepared. While not wishing to sound in any way threatening—I would not dream of doing such a thing—I shall have my amendment ready. At the appropriate time—

Lord Skelmersdale

Before my noble friend withdraws her amendment, the Minister has said that at the moment the Post Office abides by the Stock Exchange rules as a matter of form. However, is not that a voluntary action? Does the Minister agree that the Post Office should be made to do that by law? Given that, I wish only for more power to my noble friend's elbow.

Baroness Miller of Hendon

My noble friend has stated in a clearer form exactly what I was trying to say. The difference between what the Post Office may do according to custom and practice or on advice and what it would have to do according to the law are two quite different things. On that basis, I shall withdraw the amendment.

Amendment, by leave, withdrawn.

3.45 p.m.

Clause 68 [Loans by the Secretary of State to the Post Office company and its subsidiaries]:

Baroness Miller of Hendon

moved Amendment No. 70: Page 42, line 32, after ("rates") insert ("(being not less than the commercial rates generally payable in the financial markets at the time of making the loans)"). The noble Baroness said: This is a short and simple amendment that seeks to carry into law what the Government have already stated in their White Paper. For that reason, I believe it to be a very important amendment.

The White Paper recognised that retained earnings would be insufficient to finance new investment. There would therefore be two means of borrowing open to the Post Office. First, up to £75 million a year for the next five years from the Government with minimal ministerial approval being required. Secondly, for anything in excess of £75 million per annum, the Government have promised, a fast track, but rigorous, Ministerial approval process". to be completed within 28 days so long as it poses no undue risk to the taxpayer. Here I detect the ability for a ministerial get-out—a large loophole—but that is not what I intend to discuss today.

The Government have argued that this additional larger-scale funding should come from the National Loans Fund, not from the commercial markets. In the White Paper the Government argued that, even though borrowing from the commercial markets would impose additional disciplines, the markets would regard the borrowing as being underwritten by the Government. Although the Government believe that borrowing from the National Loans Fund, will be more cost-effective for the taxpayer they conceded that, in order to ensure that the Post Office competes fairly with other postal operators in the private sector: and to reinforce commercial disciplines, the Post Office will borrow at a rate which is broadly comparable to the rate it would be charged in the market without an … explicit guarantee". The terms of borrowing were discussed at some length in Committee in the other place. The Minister for Competition reasserted that: Borrowing from the National Loans Fund will be at commercial rates to ensure fair competition with private sector companies. There will be no hidden advantage for any of the subsidiaries". Later in the same debate the Minister reiterated that: We will set a commercial rate through the National Loans Fund". From the White Paper onwards, including all that was said in the other place, it is absolutely clear that the Government want the borrowing to take place at commercial rates. However, although the Government have stated that, the Bill says something else. Clause 68(2) provides that: interest shall be paid on loans … at such rates as the Secretary of State may, with the approval of the Treasury, direct". Here there is no mention at all of the unsubsidised commercial rate that was referred to elsewhere, only such rates as, the Secretary of State may, with the approval of the Treasury, direct". The amendment that I ask the Government to accept today simply puts into the Bill what the Government have on numerous occasions promised Parliament that they would do. I beg to move.

Lord Sainsbury of Turville

As the noble Baroness said, the Government set out very clearly their policy on lending to the Post Office in the White Paper. In order to ensure that the Post Office and its subsidiaries compete fairly with other operators in the private sector, and to reinforce commercial disciplines, they will he required to borrow from the National Loans Fund at a rate which is broadly comparable to the rate that would apply in the market.

The Government are currently taking independent advice on the appropriate credit rating that would apply to the Post Office without an explicit or implicit government guarantee and on the appropriate borrowing rates. The rate will be applied in accordance with the provisions of Section 5 of the National Loans Act 1968 which gives the Treasury the power to set a commercial rate for sums lent from the National Loans Fund. We shall continue to take advice on the appropriate rate to set as necessary in the future and to make the necessary adjustments in the light of market changes.

The rate of interest set by a lender for a commercial company seeking to borrow would depend on the credit rating of the organisation, the exact nature of the borrowing proposal, the current situation in the market and the size and duration of the loan. We intend to replicate that commercial approach and to take these factors into account when determining the appropriate commercial rate for Post Office borrowing.

Therefore, we are already giving effect to the intent of the amendment of the noble Baroness, as we are following commercial practice in order to ensure that neither the taxpayer nor the Post Office's competitors are disadvantaged. At the same time, there is a case here for some flexibility to be available in situations where non-commercial considerations, or social considerations, could be envisaged. In such cases, we would need flexibility. That is why we are not putting this provision on the face of the Bill. However, I hope that it have reassured the noble Baroness that our existing policy achieves her desired intent. In those circumstances, I ask the noble Baroness to withdraw her amendment.

Viscount Goschen

I wonder whether the Minister could expand on the requirement for flexibility that he identified and used as his defence against putting my noble friend's specific provisions in the Bill. I trust that he will accept that having a commercialised, government-owned company such as the one that we are discussing raises a number of concerns among potential competitors because it seems that this company is to be given an unfair, state-sponsored advantage, which may cause real competitive difficulties. Does the Minister accept that that is a byproduct of the approach that this Government have pursued on the matter?

What real comfort can be given to potential competitors that the Government will not pursue the easy option and let the Post Office borrow in these circumstances on favourable rates, with an implicit government guarantee that will not be available to competitors?

Lord Sainsbury of Turville

I do not accept that there are reasons why other operators in this field feel concern about the matter. We have made our policy absolutely crystal clear from the beginning of the process; and, indeed, right throughout it. t have reiterated that policy and said that that is the basis upon which this will be done. I see no reason why there should be concern about the policy. I believe that a degree of flexibility is required in such an organisation.

Viscount Goschen

I apologise to the Committee for taking a moment or two longer on the matter. Can the Minister explain what circumstances he has in mind where such flexibility would need to be given in order to allow the Post Office to borrow on more favourable terms than those which would otherwise be available within the commercial markets? My noble friend's amendment would put what the Minister has expressed as his intention very clearly on the face of the Bill. Noble Lords on this side of the Committee would like to know under exactly what circumstances the noble Lord would need to be flexible. He has his policy, and my noble friend merely wishes to write that on the face of the Bill. The noble Lord said that competitors should not have concerns in this respect, but we need to know why not.

Lord Sainsbury of Turville

I have two points to make in response to the noble Viscount. There are obvious areas where one could envisage such a need; for example, a social issue—and we shall be dealing with that in a moment on the question of support for the network. However, if reassurance is required on the matter, I can assure noble Lords that any favourable rates would be constrained as a state aid in these circumstances according to the European situation. Therefore, such flexibility could only be used in very limited circumstances.

Baroness Miller of Hendon

I have to tell the Minister that I am not at all satisfied with his reply. The bottom line here is the fact that the noble Lord has said on numerous occasions in this Chamber—indeed, this has also been said in the other place—that such borrowing will be conducted on commercial rates. However, he has also said that we cannot put such provision in the Bill because we must have some flexibility. Quite frankly, the noble Lord's explanation as to what that might mean is similarly unsatisfactory.

Although I accept that there may have to be the opportunity for subsidies, which I believe we will deal with under Clause 102, we on this side of the Committee would point out that that is because of certain actions that the Government are taking. But, if that has to happen, there is no reason why loans should not be secured on commercial rates. The Bill is supposed not only to safeguard the universal service obligation but also to bring forward competition.

I do not see why competitors should have to borrow on different rates—and that situation could arise if the Minister invokes this flexibility provision. Clause 68(2) very clearly refers to, such rates as the Secretary of State may, with the approval of the Treasury, direct". We do not believe that to be correct. I wish to test the opinion of the Committee.

3.54 p.m.

On Question, Whether the said amendment (No. 70) shall be agreed to?

Their Lordships divided: Contents, 85; Not-Contents, 139.

Division No. 1
CONTENTS
Allenby of Megiddo, V.	Lyell, L.
Anelay of St Johns. B.	McConnell, L.
Astor of Hever, L.	Macfarlane of Bearsden, L.
Attlee,E.	Mackay of Ardbrecknish, L.
Blatch,B.	Marlesford, L.
Brabazon of Tara, L.	Mayhew of Twysden, L.
Bridges, L.	Miller of Hendon.B.
Brougham and Vaux, L.	Molyneaux of Killead, L.
Bumham, L. [Teller]	Monro of Langholm, L.
Buscombe, B.	Monson, L.
Butterworth. L.	Mowbray and Stourton. L.
Byford, B.	Moynihan, L.
Campbell of Alloway, L.	Murton of Lindisfarne, L.
Camegy of Lour, B.	Northbrook, L.
Coe,L.	Northesk. E.
Cope of Berkeley, L.	Norton of Louth, L.
Courtown, E.	O'Cathain, B.
Cox, B.	Onslow, E.
Craig of Radley, L.	Oxfuird,V.
Cranborne, V.	Park of Monmouth, B.
Dean of Harptree, L.	Plummerof St. Marylebone, L
Dealing, L.	Rees, L.
Denham, L.	Renton, L.
Dixon-Smith, L.	Roberts of Conwy, L.
Elles. B.	St John of Fawsley, L.
Elton, L.	Seccombe, B.
Fookes, B.	Selborne, E.
Gardner of Parkes, B.	Simon of Glaisdale, L.
Geddes, L.	Skelmersdale, L.
Glenarthur, L.	Soulsby of Swaffham Prior, L.
Glentoran, L.
Goschen, V.	Strathclyde, L.
Hayhoe, L.	Swinfen, L.
Henley, L.[Teller]	Tenby, V.
Higgins, L.	Thomas of Gwydir, L.
Hooper, B.	Trefgarne, L.
Howe. E.	Vivian, L.
Jenkin of Roding,L.	Wade of Chorlton,L.
Jopling, L.	Walton of Detchant, L.
Kingsland, L.	Weatherill,L.
Kirkham. L.	Wilcox, B.
Knight of CoUingtree, B.	Windlesham, L.
Luke, L.	Young, B.

NOT-CONTENTS
Acton, L.	Hunt of Chesterton, L.
Addington. L.	Hunt of Kings Heath, L.
Ahmed, L.	Irvine of Lairg, L.(Lord Clumcellor)
Alderdice, L.
Alli, L.	Jay of Paddington. B. (Lord Privy Seat)
Amos, B.
Andrews, B.	Jeger, B.
Archer of Sandwell, L.	Jenkins of Putney, L.
Ashley of Stoke, L.	King of West Bromwich, L.
Ashton of Upholland, B.	Laird, L.
Bach, L.	Lea of Crondall, L.
Barker, B.	Levy.L.
Bassam of Brighton, L.	Lipsey, L.
Berkeley, L.	Lockwood, B.
Bernstein of Craigweil, L.	Macdonald of Tradeston, L.
Billingham, B.	Mclntosh of Haringey, L.
Borrie, L.	Mclntosh of Hudnall, B.
Bradshaw, L.	MacKenzie of Culkein. L.
Brennan, L.	Mackenzie of Framwellgate, L
Brooke of Alverthorpe, L.	McNally, L.
Brookman, L.	Marsh, L.
Bruce of Donington, L.	Massey of Darwen, B.
Burlison, L.	Milner of Leeds. L.
Carlile of Berriew, L.	Mishcon, L.
Carter, L.[Teller]	Mitchell, L.
Christopher, L.	Newby, L.
Clarke of Hampstead, L.	Northover, B.
Cledwyn of Penrhos, L.	Oakeshott of Seagrove Bay, L.
Clement-Jones, L.	Patel of Blackburn, L.
Clinton-Davis, L.	Peston, L.
Cocks of Hartcliffe, L.	Phillips of Sudbury.L.
David, B.	Pitkeathley, B.
Davies of Coity, L.	Plant of Highfield, L.
Davies of Oldham, L.	Ponsonby of Shulbrede, L.
Desai, L.	Prys-Davies, L.
Donoughue, L.	Ramsay of Cartvale, B. [Teller]
Dormand of Easington, L.	Randall of St. Budeaux, L.
Dubs, L.	Razzall. L.
Elder, L.	Rea, L.
Evans of Parkside, L.	Redesdale, L.
Evans of Watford, L.	RendellofBabergh.B.
Ezra, L.	Rennard, L.
Falconer of Thoroton, L.	Richard, L.
Falkland, V.	Rodgers of Quarry Bank, L.
Farrington of Ribbleton, B.	Roper. L.
	Russell, E.
Faulkner of Worcester, L.	Sainsbury of Turville. L.
Filkin, L.	Scotland of Asthal, B.
Gale, B.	Serota. B.
Geraint, L.	Sharman, L.
Gibson of Market Rasen, B.	Shore of Stepney, L.
Gilbert, L.	Simon, V.
Goldsmith, L.	Smith of Gilmorehill, B.
Goodhart, L.	Stone of Blackheath, L.
Gould of Pottemewton, B.	Strabolgj, L.
Graham of Edmonton, L.	Symons of Vernham Dean, B.
Greaves, L.	Taylor of Blackburn, L.
Grenfell, L.	Thornton, B.
Hardy of Wath,L.	Tomlinson, L.
Harris of Greenwich, L.	Tordoff.L.
Harris of Haringey, L.	Turner of Camden, B.
Harris of Richmond, B.	Uddin, B.
Harrison, L.	Warner, L.
Hayman, B.	Warwick of Undercliffe, B.
Healey, L.	Watson of Richmond, L.
Hilton of Eggardon, B.	Whitaker, B.
Hollis of Heigham, B.	Whitty, L.
Howells of St. Davids, B.	Wilkins, B.
Howie of Troon, L.	Williams of Elvel,L.
Hoyle, L.	Williams of Mostyn, L.
Hughes of Woodside,L.	Woolmer of Leeds, L.

Resolved in the negative, and amendment disagreed to accordingly.

4.5 p.m.

Clause 68 agreed to.

Clause 69 agreed to.

Clause 70 [Extinguishment of certain liabilities]:

Lord Sainsbury of Turville

moved Amendment No. 71: Page 44, line 12, leave out ("this section") and insert ("subsection (1), (2) or (5)"). The noble Lord said: This is a minor tidying-up amendment to make it clear that there is no requirement for the Secretary of State to obtain the consent of the Treasury before he consults with the Post Office company—and its subsidiaries, as appropriate —about the exercise of his powers under the clause to extinguish the liabilities of the Post Office company or its subsidiaries. Clause 70 is intended to facilitate the restructuring of the Post Office company's balance sheet on 1st April 2002, as announced in the White Paper.

The requirement for Treasury consent in the clause is there to ensure that the department with the responsibility for the management of public finances gives its consent before any action is taken which might have an effect on the public purse. The amendment ensures that it is only the extinguishment of any liabilities under subsections (1) and (2) and the repeal of the whole clause under subsection (5) which require Treasury consent and not the preceding consultation with the Post Office company. I beg to move.

On Question, amendment agreed to.

Clause 70, as amended, agreed to.

Clause 71 [Limit on loans and other arrangements with government]:

Lord Dearing

moved Amendment No. 72: Page 44, line 33, leave out paragraph (f). The noble Lord said: In moving my maiden amendment I shall not presume to divide the Committee on this great matter. Nevertheless, I shall seek to persuade the Minister.

The paragraph that the amendment would delete has the effect, as I understand it, that the equity that the Government put into the new company shall count against the limits on the Government's financial arrangements set out in subsection (1). My concern, which I am sure many Members of the Committee, if not all, will share, is that when the company is created it should be one that will emerge in the liberalised postal market of Europe as one of the main successful players. If we are to achieve that, and if the Post Office is to enter into partnership agreements with other players, it must do so from a position of negotiating strength, and to that end it will need a strong balance sheet.

I asked the Government whether they would look at this issue when they decided the balance sheet, and I obtained assurances from the noble Lord which I welcomed. Perhaps I owe him an apology for pushing the matter again today. But on rereading the White Paper and what I interpret the Government had to say, and in view of the recent announcements by the commission on its intentions to reduce the monopoly far more than the Government had intended, I thought that we had a new situation and that we ought to think about it.

As I understand it, the White Paper said that the Government were minded to pull out of the Post Office balance sheet the £1.8 billion of retained earnings which have been invested in the National Loans Fund or other government assets over the years and to deprive the Post Office of the income of 107 million a year that derives from those investments.

If that were to happen, then it follows that the balance sheet of this Post Office company, which is going into a much more competitive world, will be much weaker than the present balance sheet. The main British competitor in that market would be correspondingly weakened and, in my view, we should be doing the national interest a disservice.

The world in which the Post Office will be operating will be an increasingly competitive one. There will be growing competition from the new technologies. Twelve years ago, when I was chairman, I was already apprehensive about the long-term implications to the post of new technology. It can only be a matter of time before it begins to impact.

The new technology is disturbing the operations of the post offices and sub-post offices. We expressed concern at Second Reading about the intentions of the Department of Social Security to pay people's pensions through the banks. I read that it places one third of Counters business at risk. It is a serious competitive issue. But the competitive issue I have in mind in the light of the aspirations of the Commission relates to the core postal business.

The Post Office said in a public statement on 30th May that if the Commission has its way—that is, it reduces the monopoly to 50 grams compared with the Government's intention of 150 grams (the present weight is 350 grams)—then the Royal Mail would lose all its profit. If, at the same time, we are weakening the balance and taking away an income of £107 million., how will the Post Office compete effectively? How will it enter into negotiation with collaborative businesses from a base of strength? FedEx has a capitalisation of £7 billion; UPS has a capitalisation of £45 billion. I remember from my days in the Post office that the Dutch Post Office was a particularly entrepreneurial, strong, competitive organisation. Now it has acquired TNT it is doubly strong.

The postal market of Europe will be highly competitive. In a few years there will be only three or four major players. My concern is that Britain should have one of those major players. Directly relevant to that is the strength of the balance sheet. I am sure that the Government will take a forward-looking view rather than looking to the past; that they will want to ensure that the Post Office is strong and that they will want to take into account the implications of the Commission's proposals and thus what may happen to the Counters business. I hope that they will reflect on whether it is right to withdraw that £1.8 billion or, if they must withdraw some, will only withdraw that element of it which they have said it would be right to take as dividends in the future; that is, 40 per cent, perhaps abated by the 20 per cent that has already been taken.

That is my main point of substance. Of course, the amendment seeks to omit the paragraph. Perhaps that is a touch optimistic. But if we want this to be a strong balance sheet, we should not count against that limit the initial capitalisation of the Post Office in setting up the company and regard that limiting sum as available for subsequent injections.

I cannot compete in knowledge with the Minister on balance sheet structuring. I am an amateur. But I have a certain amount of Treasury experience. One can liken the Treasury in mythology to the dragon Fafner. But where is the Siegfried who can outface the dragon once it has taken the reserves of the Post Office? The dragon defends the public sector borrowing requirements against all Siegfrieds. So have a care in sacrificing the Post Office.

If the Treasury dragon were the only one, terrified though I am of its powers, I would be less anxious. But I am aware that the UPS has appealed to the Commission in relation to what it alleges to be unfair support from the German Government to the Bundespost. It will be vigilant about any new capital that the Government puts in. So if they wish to serve the national interest well, they will take care to ensure that the balance sheet of the new company is a strong one. We hope that they will be prepared to learn from Europe and be much as the French Government are as Europeans; that is, concerned at all costs to serve their national interest. In our case, that is the British interest.

4.15 p.m.

Lord Sainsbury of Turville

I know that the noble Lord, Lord Dearing, wants the Post Office company to emerge from the current reform process in a strong position to recapture the commercial ground it has lost in past years and with the ability to become one of the most successful postal operators in Europe. I agree that we need to look forward to the situation in the future, rather than backwards to the history of the Post Office in the past.

The noble Lord also expressed his concern during the Second Reading debate that whether or not the Post Office company is able to be successful in the new environment will depend very much on the framework within which it will operate. That is correct.

As I said when I repeated a Statement to the House in December 1998, and the Government restated in the White Paper in July 1999, the Post Office company's balance sheet will be restructured by 1st April 2002 in order to place the company on a more commercial footing, and one where it can be better benchmarked against its competitors. We have had preliminary discussions with our advisers about the issues involved with the restructuring and agreed a preliminary workplan. I emphasise, however, that no decisions have been taken at this early stage as we intend to consider all the issues thoroughly and to hold discussions with the Post Office before reaching any final conclusion.

We will also need to consider how the development of the Post Office's business between now and the deadline for restructuring on 1st April 2002 might affect the final decisions about the shape of the balance sheet. I therefore cannot speculate at this stage on what the final outcome might be. But we understand that the Post Office company must be equipped to develop its business if it is to provide the postal services that will be needed by its customers. That may well involve forging new alliances and commercial partnerships with those having complementary skills.

So we are fully aware of, and committed to, the need for the Post Office company to have a fair commercial balance sheet which gives it both the incentive to perform and the financial scope to enhance its business. In those circumstances, some might ask why we intend to deprive the Post Office company of previously earned assets as part of the restructuring exercise. But, as I said earlier, we intend to put the Post Office company on a more normal commercial footing. In a normal business, money that the Post Office has put into gilts and other deposits with the National Loans Fund would have been paid to the owner as dividends, rather than being allowed to accumulate on the balance sheet. The Post Office company will therefore cease to hold, and have access to the interest from, the present level of accumulated EFL surpluses as part of the exercise to restructure the balance sheet. The business will then operate and report on the same basis as a private sector one. But as I have already said, no decisions have been taken at this early stage.

Under the policy of allowing the Post Office greater commercial freedom, we have already put in place the new financial regime which will provide the opportunity for the Post Office to fund its commercial development, allowing the Post Office to retain more of its profits; to have automatic access to £75 million each year to fund growth investments and to borrow larger sums to fund growth investments providinv, the proposals are consistent with the strategic plan, commercially robust and pose no undue risk to the taxpayer. These provisions already provide the Post Office with the springboard to move towards its goal of becoming a world-class distribution company.

There should also be no anxiety about whether the current ceiling on the financial arrangements with government would be sufficient to allow the Post Office company to make a major acquisition. The figure of £5,000 million is a sensible limit, based on a commonly used formula for the present time and the foreseeable future. But we have built flexibility into the clause by providing that the limit may be increased by an order approved in draft for the House of Commons, should this prove necessary in the future. Such an increase would depend on whether it was considered at the time that the Post Office company could sustain a higher limit. I cannot speculate at this stage as to what such a limit might be or the circumstances in which the Post Office company might request the increase. It is worth remembering that not all transactions may be funded by cash but that exchanges of equity might be used to cement alliances.

Perhaps it would be helpful to explain the nature of the purpose of the provision that the noble Lord is seeking to delete. For the purposes of calculating the amount of the outstanding indebtedness to government, Clause 71(2)(f) provides that: sums paid or treated as paid by or on behalf of the Treasury or the Secretary of State in respect of the issue of securities in pursuance of section 63 of this Act or the acquisition of securities in pursuance of section 64 of this Act", shall count towards the limit.

Any money required by the Secretary of State or the Treasury to acquire securities or the rights to subscribe to securities will be provided by Parliament. Under company law, the company has a liability to repay the face value of a security to its holder in a similar way to its liability to repay a loan. So in the same way as a loan from the National Loans Fund to the Post Office company or any of its subsidiaries will count in the overall calculation of indebtedness to government, any public money invested in securities of the Post Office company or its subsidiaries will also count in the overall calculation of indebtedness to government, as the face value of the security is effectively repayable to the Government.

However, in the light of the noble Lord's amendment, we are considering whether to bring forward an amendment to modify Clause 71(2)(f) so that sums paid or treated as paid in respect of securities which have been disposed of under Clause 67 do not continue to count against the limit. It would seem wrong in such circumstances that such sums should continue to count against the limit after they have been disposed of and value obtained for them.

I should also like to look further at the interaction between the clause and the shareholders' funds. We need to ensure that there is a limit on the debt owed to government while still allowing the Post Office company sufficient scope for borrowing to develop its business. We will double-check to see whether these provisions are entirely satisfactory.

I hope that that gives the noble Lord some comfort. I hope that I have reassured him that our intention for the restructuring of the balance sheet is to place the Post Office company on a firm but fair commercial footing, and that we have already put in place provisions for the Post Office company to be able to develop its business and to achieve its strategic objectives. I hope that the noble Lord will continue to want to withdraw his amendment.

Lord Skelmersdale

Before the noble Lord, Lord Dearing, rises, perhaps I may say that I am absolutely amazed by the Minister's answer. I said rather cheekily on Second Reading that I had the habit of privately marking his speeches. I shall not bore the House with the mark that I have given the one we have just heard, but he made the most extraordinary comment. He said that the balance sheet would be restructured, as we all know, by 2002. He then said that no decisions had been taken at this early stage. "No decisions" presumably means no decisions. Why then are the Government boxing themselves in by including anything at this stage in subsection (2)? Why are they not reserving their position and doing so by order when they believe it to be necessary much later in the process?

Viscount Goschen

Further to the points made by my noble friend Lord Skelmersdale, the Minister explained briefly where the figure of the £5 billion came from. He said that it was the result of a commonly used formula. Perhaps the Minister would let the Committee know, in slightly more detail, where the £5 billion comes from, because I believe that without that it is very difficult to interpret the degree to which subsection (2)(f) is important and what percentage of the total that might comprise.

Lord Dearing

I owe the Committee an apology. Before speaking I should have declared an it serest as a Post Office pensioner. I now do so. In thanking the Minister—and I do so most sincerely because I welcome his agreement to look at a couple of points — I should like to ask him not to give an answer now but to reflect on whether a private sector company, such as one he knows well, would have distributed that £1.8 billion or whether it is more normally the custom of such companies to retain perhaps 60 per cent—a goodly percentage—of the surpluses for future investment; and, believe me, the Post Office will need to make major investments.

Baroness Miller of Hendon

Before the noble Lord withdraws his amendment, will the Minister answer the question that my noble friend Lord Goshen asked a few moments ago?

Lord Sainsbury of Turville

I should be delighted to do so. Let me first of all deal with the point that the noble Lord, Lord Dearing, made about the payment of dividends. Except in the case of a private company, most of those sums of money would have been paid out as a dividend. But clearly some of it would have been retained for the purposes of investment. I do not think that that is in dispute between us. That is why a careful decision has to be made about where the line is drawn on this issue.

I turn to the question of how we arrived at the figure of £5,000 million as the current limit on the total indebtedness to the Government. We sought advice from our financial advisers, Deloitte & Touche, as to an appropriate figure for the limit on the total indebtedness to the Government. I think that one will find that a conventional indebtedness restriction imposed by the articles of association of nearly all public companies is a multiple of their adjusted share capital and reserves. Typically, large companies have multiples of between 1.75 and 2.5 times that baseline.

The report and accounts of the Post Office for the year ended March 1999 shows that there were reserves of approximately £4,300 million, including holdings of National Loans Fund deposits and gilts of about £2,500 million. In advance of any detailed decisions on the agreed restructuring of the Post Office company's balance sheet, we took it as a reasonable assumption that the balance sheet would have neither investments nor debt at the time of its reconstruction. This would imply shareholders' funds of about £2,000 million, assuming no further revaluation of assets. Taking the usual multiple of 2 to 2.5 times shareholders' funds produces a range on the indebtedness limitation of £4,000 million to £5,000 million. We have taken the top end of that range for the purposes of the Bill.

Lord Skelmersdale

The Minister was generous in answering my noble friend. I did actually ask him why subsection (2) was needed at all.

Lord Sainsbury of Turville

It is a matter of common prudence that there should be restrictions on this process, even if there is considerable room within those restrictions. We cannot have a situation where there is no limitation on the amount of money that could be put into the Post Office. That would seem to me to show a complete lack of regard for financial control from the Government.

Lord Skelmersdale

I did not make myself clear the first time. Given that the restructuring is not going to be completed and the Government will not have made a decision until the spring of 2002, why are they boxing themselves in now; why do they not reserve the power to themselves to do this by order at a later stage when they do know what they are doing?

Lord Sainsbury of Turville

It seems to me sensible. Again and again in this Chamber, the issue has been raised that certain parameters should be put around these issues. This is a clear and sensible parameter in view of the general situation. Within those general parameters there is scope to have a series of different combinations of debt and equity in the balance sheet. At one and the same time, that provides flexibility in the light of what we might want to do at a particular moment and keeps parliamentary control over the total sum involved.

In answer to the noble Lord's amendment, I have agreed to look at the matter again in order to ensure that the interaction between the clause he highlighted and the overall figure made sense in the total picture.

Lord Skelmersdale

As far as we can tell at the moment.

Lord Sainsbury of Turville

Within the sensible parameters that we have laid down.

Lord Dearing

Duly impressed by the sensible parameters, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Clause 71 agreed to.

4.30 p.m.

Clauses 72 to 81 agreed to.

Schedule 4 [Transfer to the Post Office company: tax]:

Lord Sainsbury of Turville

moved Amendment No. 73: Page 82, line 5, at end insert— (" Value added tax The Post Office company shall, on and after the appointed day, be treated for all purposes of value added tax as if it were the same person as the Post Office."). The noble Lord said: In moving Amendment No. 73, I shall speak also to Amendments Nos. 128, 133 and 134. They relate to tax provisions, in particular value added tax. The purpose of the tax provisions is to ensure that the transfer of properties, rights and liabilities from the Post Office to the Post Office company under Clause 62 are tax neutral. This means that under the provisions, the Post Office company will not receive any tax disadvantage as a result of the transfer or any tax advantage.

Amendment No. 73 is a deeming provision which has the effect that, on or after the appointed day mentioned in Clause 62, the Post Office company will be treated for all purposes of value added tax as if it were the same person as the Post Office. This will mean, for example, that no charges will arise from changes to the Post Office's VAT group.

Amendment No. 133 amends the references to the "Post Office" in the Value Added Tax Regulations 1995 to the "Post Office company". Amendment No. 128 means that any amendment made to subordinate legislation by virtue of Schedule 8 to the Bill, such as the amendment to the VAT regulations 1995, does not prejudice the ability to make future changes to that subordinate legislation under existing powers

Amendment No. 134 relates to rural rate relief for post offices under the Local Government and Rating Act 1997 that applies to Scotland. This amendment substitutes references to the Post Office and the Post Office Act 1953 which are used to define a post office qualifying for rural rate relief with, a universal service provider (within the meaning of the Postal Services Act 2000) and in connection with the provision of a universal postal service (within the meaning of that Act)". The amendments should ensure that existing post offices operated by the Post Office continue to be eligible for rural rate relief after the transfer to the Post Office company. Furthermore, a post office established by any universal service provider would also qualify for relief.

Equivalent amendments to the Local Government Finance Act 1988 for England and Wales and the Rates (Northern Ireland) Order 1977 in respect of Northern Ireland have been included in the Bill at Schedule 8. I beg to move.

Lord Skelmersdale

In the light of my interest in statutory instruments, perhaps I may ask a question on Amendment No. 128. I am not sure how the grouping arose, because that amendment is erratic as it concerns money while the rest concern the Government's ability to amend with an amending order any statutory instrument comprised in Schedule 8.

I was somewhat confused because I cannot see in Schedule 8 a single statutory instrument that is done away with. I can see all kinds of enactments which are changed by virtue of Schedule 8, but with the exception of the Rates (Northern Ireland) Order, which is the equivalent of a Northern Ireland Act of Parliament, I can see nothing. Can the Minister help me out?

Lord Sainsbury of Turville

Amendment No. 128 means that any amendment made to subordinate legislation by virtue of Schedule 8 to the Bill, such as the amendments to the VAT regulations 1995, does not prejudice the ability 10 make future changes to that subordinate legislation under existing powers. Therefore, it refers to an amendment, of which Schedule 8 almost entirely comprises.

Lord Skelmersdale

Given what the Minister and I have said, and given the fact that at any point any amending order can be made to a previous order, why is the amendment necessary? I do not understand.

Lord Sainsbury of Turville

It is necessary in order to ensure that the ability to make future changes is not prejudiced. It is limited in that way.

Lord Skelmersdale

Why should it prejudice? I do not understand.

Lord Sainsbury of Turville

Perhaps I may take that point away and write to the noble Lord about it or return to it at the Report stage.

Lord Skelmersdale

I am grateful.

On Question, amendment agreed to.

Schedule 4, as amended, agreed to.

Clause 82 agreed to.

Clause 83 [Interfering with the mail: postal operators]:

Lord Sainsbury of Turville

moved Amendments Nos. 74 and 75: Page 49, line 39, after ("or") insert— ("(b) intentionally opens"). Page 49, line 39, at end insert— ("(1A) Subsection (1) does not apply to the delaying or opening of a postal packet or the opening of a mail-bag under the authority of—

1. (a) this Act or any other enactment (including, in particular, in pursuance of a warrant issued under any other enactment), or
2. (b) any directly applicable Community provision.

(1B) Subsection (1) does not apply to the delaying or opening of a postal packet in accordance with any terms and conditions applicable to its transmission by post. (1C) Subsection (1) does not apply to the delaying of a postal packet as a result of industrial action in contemplation or furtherance of a trade dispute. (1D) In subsection (1C) "trade dispute" has the meaning given by section 244 of the Trade Union and Labour Relations (Consolidation) Act 1992 or Article 127 of the Trade Union and Labour Relations (Northern Ireland) Order 1995, and the reference to industrial action shall be construed in accordance with that Act or (as the case may be) that Order."). On Question, amendments agreed to.

Clause 83, as amended, agreed to.

Clause 84 [Interfering with the mail: general]:

Lord Sainsbury of Turville

moved Amendments Nos. 76 to 78: Page 50, line 5, after ("or") insert— ("(b) intentionally opens"). Page 50, line 5, at end insert— ("( ) Subsections (1A) to (1D) of section 83 apply to subsection (1) above as they apply to subsection (1) of that section."). Page 50, line 8, at end insert— ("( ) Subsections (1A) and (1B) of section 83 (so far as they relate to the opening of postal packets) apply to subsection (2) above as they apply to subsection (1) of that section.") On Question, amendments agreed to.

Clause 84, as amended, agreed to.

Baroness Miller of Hendon

moved Amendment No. 79: After Clause 84, insert the following new clause— DEFINITION OF "REASONABLE EXCUSE" (" . In sections 83 and 84 "reasonable excuse" includes intentionally delaying or opening a postal packet in the course of its transmission by post—

1. (a) pursuant to a request from any constable or the Commissioners of Customs and Excise, or
2. (b) if a person reasonably suspects that the postal packet contains goods which may be illegal."

The noble Baroness said: An identical amendment to this was tabled before the Committee of the other place by my honourable friend the Member for South West Hertfordshire.

The Minister for Competition indicated that he accepted that this Bill might need further clarification as to what constituted reasonable excuse, but as he considered that the drafting of this particular amendment needed some improvement my honourable friend withdrew it against the Minister's promise to consider the issue carefully with a view to making amendments on Report. On Report and at Third Reading the Minister said that he would have been delighted to have come to Report stage 'with the required amendment because we need one. He then apologised for not having the amendment ready at that stage. He said that they would do so in another place.

Before the Government tabled their long-awaited amendments, (Amendments Nos. 74 and 76) which were agreed to a few moments ago, the Bill provided no guidance as to what would constitute a reasonable excuse. I agree that the Government's amendments that we have just dealt with do go a long way towards meeting our concerns and adopting the constructive amendment put down by my honourable friend in the other place. However, I feel that our amendment improves and clarifies the Bill still further.

Due to the technical nature of the provisions of Amendment No. 75, commercial operators may still not be entirely clear what would be the scope of their responsibilities and powers. What would they do if they thought that a packet contained, for example, a bomb or drugs or pornographic material? The current provision could lead to considerable uncertainty until the matter came before a court, which is clearly undesirable.

The proposed amendment would provide additional guidance as to what might be a reasonable excuse without limiting the court's power to extend the definition. The amendment would reduce the risk to some slight extent that a postal operator's actions, however well intentioned, might be considered unlawful.

I hope that the Government will accept my amendment as a constructive addition to the very necessary provision that they brought forward and added to the Bill, at our suggestion, much earlier during its passage. I beg to move.

4.45 p.m.

Lord Sainsbury of Turville

I understand that in the other place an amendment similar to this sparked a useful discussion over these clauses. The Government promised to bring forward amendments to clarify what would be a "reasonable excuse" for the purposes of Clauses 83 and 84 and they have now done so. These are Amendments Nos. 74 to 78 and they have already been approved. They take care of the position of any constable or the Commissioners of Customs and Excise that are mentioned in this amendment.

However, we do not believe that it would be right to allow specific exclusion from committing an offence to persons generally, whether engaged in the business of a postal operator or not, who open postal packets because they suspect they contain goods which are illegal. There is already provision in Clause 105 for a postal operator to detain and open a postal packet if he knows or reasonably suspects that it is being sent in contravention of Clause 85 of the Bill, which would cover many illegal goods. As regards the public generally, I am not saying that there may not be cases where suspicion that the packet contains illegal goods would be regarded as a reasonable excuse for opening a packet, but it would depend on the circumstances of the individual case. This is already provided for in Clauses 83 and 84. However, this amendment would provide an easy defence to anyone who wished to open a postal packet. It would be difficult to prove that a person did not have a suspicion if that is what they claimed. The public has a right to expect that their postal packets will only be opened by responsible authorities or in exceptional circumstances. This amendment would threaten that. I therefore ask the noble Baroness, Lady Miller, to withdraw the amendment.

Baroness Miller of Hendon

I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Clauses 85 and 86 agreed to.

Clause 87 [Prohibition on misleading descriptions]:

Baroness Miller of Hendon

moved Amendment No. 80: Page 51, line 23, at end insert (", or (c) the words "Post Office" or any words, letters or marks which signify or imply or may reasonably lead the public to believe that any house or place is a post office operated by or with the sanction of the company nominated by the Secretary of State pursuant to section 62"). The noble Baroness said: In moving the amendment, I speak also to Amendment No. 81.

The system whereby the King's letters to his subjects were carried by relays of couriers was instituted as long ago as the 15th century. It was first organised on a regular basis in 1510, when Sir Brian Tuke was appointed as "Master of the King's Post". Please note the phrase "The King's Post".

In 1591 regulations were published confining the right to carry mail to authorised persons only. This developed into a monopoly in 1609 when it was decreed that only persons directly authorised by the Postmaster General could carry or deliver letters. The Postal Act 1635 confirmed the monopoly in 1609.

I interject here to say that I very much enjoyed doing the research and finding out so much more about the Post Office, when I decided to put down these amendments.

As a result of proposals put forward by Thomas Witherings, then the postmaster in charge of letters sent abroad, this royal postal service was made available to the public and a Post Office for Inland Letters was established.

Thomas Witherings organised a system of routes providing a weekly schedule for the larger cities, and twice weekly to Edinburgh.

"Common carriers" were still permitted to convey letters on routes not covered by the royal system. That monopoly of 1609 has existed until this present day, although it has been eroded in the past.

In 1660 the General Letter Office was established and later became the General Post Office, or the GPO. That event was celebrated by a special issue of stamps in 1960.

The ancient title of "Postmaster General", a high sounding but lowly ministerial office, was abolished in 1969. The office of Postmaster General was replaced by the Minister of Posts and Communications, whose functions were in turn transferred to the Secretary of State at the DTI. No doubt that is why the Minister is sitting opposite dealing with this Bill today.

Going back to the Act of 1660—or even the proclamation of 1635, or even earlier, to the 15th century—the Post Office must be regarded as one of the earliest, if not the earliest, government agency. At some stage during the 340 years since the 1660 Act—and I am very sorry to tell you that my researches have not discovered when—the service became known as "The Royal Mail", and, apart from using that name, the General Post Office was permitted to use the Crown and Royal Cypher.

The Post Office Act 1969, which was one of the many affecting the Post Office over the centuries, was the one which established the existing public corporation which this Bill will be replacing with the new plc.

The reason why I have troubled your Lordships with this long history is this: the 1969 Act was preceded by the inevitable White Paper. The White Paper contained the same provisions about the continued use of the words "Royal Mail". the Crown and the Royal Cypher, and the depiction of the Queen's head on postage stamps as appears at the end of the current White Paper.

The purpose of Amendment No. 80, is to ensure that the ancient title of "Post Office" should only be used by the new plc to be established under Section 62 of this Bill. It cannot be right that any new universal postal provider authorised by this Bill should attempt to describe itself as "the Post Office" or even "a post office" and thereby mislead the public into believing that they are the Post Office—the successor to 340 years of trading by the current Post Office and its predecessors.

Although the words prohibited by subsection (1) of Section 87 are the same as in previous legislation, they do not cover the situation that has never existed during all the centuries about which I have spoken. There were no other universal service providers apart from the General Post Office. But now there may very well be.

This amendment is intended to ensure that whatever happens to any new commercial universal providers or licensees, nobody will be able to confuse it with the new plc, the successor to a long line of public corporations.

Several times during the course of this Bill in the earlier stages I talked about a level playing field and the need to ensure that others coming into this marketplace have the opportunity of it being a level playing field and talking about competition. But the fact remains that the Post Office is the Post Office; and I think in this particular regard it needs to ensure that it is the only body that can use that name.

Throughout the entire world there is only one post office per country. Whatever any new competitor may choose to call itself, and any of its public offices, there is and can be only one Post Office.

Amendment No. 81 creates three new offences in addition to those contained in subsection (4). I have to say in passing that the scale of penalty contained in the current subsection (5) is derisory considering the vast amounts of money involved and the size of businesses that may be committing the offences. Offences under Clause 84 carry penalties at level 5. Perhaps the Minister will tell us the reason for the distinction so that we can consider that before the next stage of the Bill.

The three new offences are separate and distinct. The first prohibits the use of the words "Royal Mail" and/or the Royal Cypher without the consent of Her Majesty. It will be recalled that in the White Paper from which I have just quoted it was necessary for Her Majesty to give her express consent for the present Post Office corporation when it was created in 1969 to continue to use the words and devices. She has just graciously agreed that the privileges shall be granted to the new plc. I am certain that the Minister will tell us that the prohibition is unnecessary because it is already not lawful, for some reason or other, to do so. I do not need to say that "I suspect" the noble Lord will tell me that although I always hope that by using that phrase it might persuade the Minister to reply using a word other than "unnecessary".

However, when we realise that overseas corporations may be involved in the provision of postal services, and when we see recent events of Internet piracy, I do not think that it is unreasonable to spell out a specific offence in relation to postal services without a potential offender having to scour the statute books to find out that his actions may be unlawful. Whether or not it is necessary, spelling out a specific offence can do no harm.

The second offence involves the prohibition of any universal postal provider other than the new Post Office plc issuing postage stamps. The White Paper says: A depiction of [Her Majesty's] head should continue to appear on all stamps issued by the Royal Mail". I am sure that I shall be accused of being unduly suspicious, but I want the Bill to make it clear that no one except the new plc, the successor to the Royal Mail, will issue any postage stamps. Collecting postage stamps has been a world-wide hobby, I imagine from close to 6th June 1840 when the first adhesive stamps were issued. It is now a considerable source of funds to post offices, and hence governments around the world issue large numbers of stamps to collectors. Those are stamps for which the post office concerned never has to deliver a service because the expensive slips of paper are forever put away in albums.

However, more and more, national post offices are taking advantage of this source of funds by issuing new commemorative stamps to celebrate events of often considerable inconsequence; or on themes such as flowers, animals and so on. Some countries derive a large part of their national income from these issues. Our own Post Office is not immune from this practice, or that of changing colours at frequent intervals. All of that is bad enough, but it is by now a well established method of raising funds.

The subsection prevents any universal provider, other than the Post Office corporation from issuing postage stamps to collect its fees in advance. It will debase British stamps out of all recognition and turn us, philatelically speaking, into—it is a slight exaggeration—another banana republic.

There is another even more important reason. On 1st July 1878 what is now known as the Universal Postal Union was established by treaty. It provides for a uniform framework of rules and procedures for the exchange of international mails. This includes a basic consideration such as which post office has what share of the stamp paid for in which country. There is no need for me to go into details of a complex commercial arrangement. It is sufficient to say that the arrangement is between the official post offices—that is, the agencies—of sovereign states. It does not include courier services. I do not say that in any derogatory sense because there are world-class services whose efficiency matches some national post offices, and may be better. I cannot imagine what the post office of, let us say, Albania might want to do when faced with an envelope franked by an ordinary commercial concern.

That brings me to the final offence created by the amendment. The monarch's effigy currently appears on every postage stamp and will continue to do so after the passing of the Bill. This country is unique throughout the world as being the country which invented the postage stamp. The name of the country does not appear on our stamps. The monarch's effigy is the sole indication that this country is the country of origin. Are we to lose that privilege because some commercial company decides to issue its own stamps? Alternatively, is the monarch's effigy to go on as a kind of royal endorsement to what, after all, will be nothing but an advertisement for a commercial concern?

I have taken some time on the amendments because I believe that despite the Government's foresight, on which I congratulate them, in discussing these matters with Her Majesty, there is a serious omission in the Bill in the Government's failure to deal with what are practical aspects of the Government's plan drastically to re-organise a major and vital public service.

I believe that these amendments do no more than strengthen the Bill and help produce greater clarity, close potential loopholes and help to secure objectives which I believe both sides of the Chamber desire to achieve for the new post office. I beg to move.

Lord Dearing

I feel utterly ashamed not to have proposed the amendments myself. The Minister must accept them!

Lord Sainsbury of Turville

I have a more limited goal in not using the word "unnecessary" in my reply.

I thank the noble Baroness for her interesting historical digression. When I sat on the Post Office committee of review in 1978 I was sent by a friend a list of all the previous Post Office inquiries which even at that stage stretched back over the centuries. I learned then that whenever one talks about the Post Office one is in a long tradition of discussion on these issues. I also learned that the issue of stamps is extremely important to many people in this country.

I fully understand the desire of the noble Baroness to protect the certain words, marks and effigies used by the Post Office, in particular in relation to the Crown. The Government considered, in consultation with the Post Office, whether it was necessary to provide specific protection in the Bill and concluded that it was not.

The Government reached this conclusion on the grounds that the Post Office advised that it was content that its name was broadly protected as a trade mark. Similarly, the words "Royal Mail" are a registered trade mark of the Post Office. The Lord Chamberlain's Office advised that the Crown and Royal Cypher are protected under Section 99 of the Trade Marks Act; and the Queen's effigy, as it appears on stamps and, indeed, on coins, is protected by Crown copyright. We do not, therefore, believe that it is necessary to include the offence relating to the use of the words "Post Office" and "Royal Mail" or the Crown, Royal Cypher or the Queen's effigy in the Bill.

With regard to the proposed offence relating to the issuing of adhesive postage stamps, label for payment or prepayment for any postal services, the Government do not believe that these are appropriate. We believe that it is unlikely that other postal operators would wish to issue stamps or other methods of prepayment but if they so wished we would not want to inhibit competition by interfering in their commercial decision to do so. The noble Baroness has spoken constantly throughout these debates about competition and level playing fields. Those principles, with which we agree, should be applied here as well.

If another postal operator were to issue stamps as a method of pre-payment for its own services these would, of course, need to be distinguished from the Post Office's stamps, or those of any other operator. This would clearly be in everyone's interest. It would be at the Queen's discretion as to whether such operators could use her image.

As far as concerns the Universal Postal Union, the stamps of other postal operators would not be recognised for the purposes of the UPU unless and until negotiation had been completed for such recognition. Changes around the world in postal markets will inevitably have repercussions for the UPU versus generally recognised postal services provided by a single postal authority in each country. If the concern of the noble Baroness is about the possible forgery or passing off by one operator of its stamps as that of another, this, of course, would be subject to various criminal offences in the Forgery and Counterfeiting Act 1981. As regards the penalties, these would be level 3 which is, I think, £1,000. I think that, given the range of offences under this particular clause, that is not unreasonable.

I hope that the noble Baroness will be prepared to withdraw her amendment.

5.00 p.m.

Baroness Miller of Hendon

My Lords, the Minister can be satisfied that I will withdraw my amendment. I suppose that I should be satisfied that he did not use the word "unnecessary", and I thank him very much for that.

However, I am very disappointed by what he said. I have to say that I was even more disappointed when he said that he had consulted with the Post Office and the Post Office did not see any need for the amendments that I am proposing. I am very grateful to the noble Lord, Lord Dearing, with his great experience in the Post Office, for saying that he wished he had proposed those amendments.

I did divide the House earlier on and I lost quite heavily. I shall want to consider these matters and, if necessary, bring them back at Report stage.

I will not waste any more of your Lordships' time. I beg leave to withdraw that amendment.

Amendment, by leave, withdrawn.

[Amendment No.81 not moved.]

Clause 87 agreed to.

Clause 88 agreed to.

Clause 89 [Schemes as to terms and conditions for provision of a universal postal service]

Lord Sainsbury of Turville

moved Amendment No. 82: Page 52, line 34, at end insert ("(so far as not otherwise agreed)"). The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 110, 111, 112, 130A,, 131, 134, 135, 137 and 147. These amendments make provision for postal and money orders issued or handled by the Post Office company. They translate into the Bill the provisions that presently apply to the postal and money orders in the Post Office Acts of 1953 and 1969. The Government believe that it is appropriate to include these provisions in the Bill. There have been provisions in law covering these orders for over 100 years.

While the use of these orders has declined in recent years, postal orders in particular remain an important method of payment by post for members of the public who do not have bank accounts. The amendments protect the Post Office company and bankers by limiting liability in certain circumstances. They allow the Post Office company to make schemes in relation to postal and money orders, make provisions for the recoupment of losses and money orders wrongly paid to bankers and set out the treatment of special money orders issued by the Post Office company under an arrangement with a foreign government or postal administration.

A number of minor amendments to the Bill are necessary as a result of the insertion of the postal and money order clauses. These amendments—Nos. 121, 124, 145, 127 and 147— deal with matters such as adding new expressions to the list of expressions in the Bill and adding the new clauses to the provision on the commencement.

I hope the noble Lords will accept these amendments that the Government believe are important to the continuation of a unique service to those members of society who do not have hank accounts and wish to transmit money through the postal system safely. I beg to move.

On Question, amendment agreed to.

Lord Sainsbury of Turville

moved Amendment No. 83. Page 53. line 17, after ("concerned") insert ("and in England and Wales and Northern Ireland may be so recovered"). On Question, amendment agreed to.

Clause 89, as amended, agreed to.

Clause 90 [Exclusion of liability]:

Lord Sainsbury of Turville

moved Amendment No. 84: Page 53, line 21, after ("lie") insert ("or, in Scotland, be competent"). On Question, amendment agreed to.

Clause 90, as amended, agreed to.

Clauses 91 to 93, as amended, agreed to.

Lord Sainsbury of Turville

moved Amendment No. 85: After Clause 93, insert the following new clause— POWER TO REQUIRE CARRIAGE OF MAIL-BAGS BY SHIP OR AIRCRAFT (".—(1) A universal service provider may, far any purpose in connection with the provision of a universal postal service, require by notice the owner or operator of a relevant ship or aircraft to carry mail-bags in the ship or aircraft. (2) In subsection (1) "relevant ship or aircraft" means any ship or aircraft which carries on regular communications between two places in the United Kingdom, one of which is not readily accessible by road. (3) The remuneration for any services provided in pursuance of this section shall he determined—

1. (a) by agreement between the universal service provider and the owner or operator concerned, or
2. (b) in the absence of agreement, by the Transport Tribunal or, where both places between which the ship or aircraft carries on regular communications are in Northern Ireland, by the Department for Regional Development in Northern Ireland.").

The noble Lord said: This clause replaces provisions in the Post Office Act 1953 and enables a universal service provider to require the owner or operator of a ship or aircraft to carry mailbags in connection with the provision of the universal service. It also provides for an appeal mechanism where the remuneration for providing such a service cannot be agreed. The clause proposed updates the provisions in the Act of 1953 so that they apply to universal service providers and apply only in those areas where such provision is still thought to be justified, that is, where ships and aircraft are operating to places not readily accessible by road. On some air and sea routes there may be a single provider.

Unless the prices charged to universal service providers are reasonable, this will put up the cost of delivering postal packets to remote areas and could threaten the maintenance of the universal service at a uniform tariff. If remuneration cannot be agreed, the appeal body is the Transport Tribunal, except in relation to journeys taking place wholly in Northern Ireland where the Transport Tribunal has no jurisdiction, so separate amendments have to be made. I beg to move.

On Question, amendment agreed to.

Clause 94 agreed to.

Schedule 5 [Acquisition of land]:

Lord Sainsbury of Turville

moved Amendment No. 86: Page 82. line 44. at end insert— ("( ) Section 114(1) does not apply to an order of the Secretary of State under this paragraph."). The noble Lord said: The purpose of Amendment No. 86 is to make it clear that the vesting order of the Secretary of State referred to in paragraph 3 of Schedule 5 is not a statutory instrument. Without this amendment the order would be caught by Clause 114(1) of the Bill which states that order-making powers in the Bill are exercisable by statutory instrument.

Amendment No. 87 is a minor drafting amendment that deletes paragraph 20 of Schedule 5 to the Bill. This paragraph was intended to modify paragraph 12 of Part III of the First Schedule to the Acquisition of Land (Authorisation Procedure) (Scotland Act) 1947 which sets out the requirement for special parliamentary procedure, and other special provisions, in the case of acquisition of certain descriptions of land.

We understand that paragraph 12 was repealed by the Ancient Monuments and Archaeological Areas Act 1979 and therefore the modification in paragraph 20 of Schedule 5 is superfluous. I beg to move.

On Question, amendment agreed to.

Schedule 5, as amended, agreed to.

Schedule 6 agreed to.

Clause 95 [Inviolability of mails]:

Lord Sainsbury of Turville

moved Amendment No. 88: Page 55. line 31, leave out subsections (1) to (3). On Question, amendment agreed to.

Clause 95, as amended, agreed to.

Clauses 96 to 99 agreed to.

Clause 100 [Directions in interests of national security etc.]:

Lord Sainsbury of Turville

moved Amendment No. 89: Page 59, line 21, leave out subsection (2) and insert— ("(2) Directions under subsection (1) may, in particular, require the Commission—

1. (a) to do or not to do a particular thing, or
2. (b) to secure that a particular thing is done or not done.").

The noble Lord said: I beg to move Amendment No. 89 and in doing so I should like to speak to Amendment No. 90. These are technical amendments. Amendment No. 89 brings subsection (2) in line with subsection (4). This amendment clarifies the width of the power at subsection (2) and ensures consistency.

Amendment No. 90 amends Clause 100(6). It clarifies the fact that the references in subsection (6) to a particular licence holder do not include a reference to a description of licence holders.

On Question, amendment agreed to.

Lord Sainsbury of Turville

moved Amendment No. 90: Page 59. line 36, after ("generally") insert ("or any description of licence holders)"). On Question, amendment agreed to.

Clause 100, as amended, agreed to.

Clause 101 [Power to ensure compliance with the Postal Services Directive]:

Baroness Miller of Hendon

moved Amendment No. 91: Page 60, line 29. leave out ("may") and insert ("shall"). The noble Baroness said: I should like to speak to Amendments Nos. 91 and 92 together. Clause 101 gives the Secretary of State the power to ensure compliance with the Postal Services Directive of the EU. The directive is another interference with what should be an entirely domestic matter: namely, an independent state's postal service.

International postal services have, almost since the invention of the postage stamp, been controlled by international agreements between individual post offices forming the Universal Postal Union, an organisation whose existence in Britain has been promoted several times by the issue of commemorative stamps dedicated to it. However, we now have to live with the directive. This group of amendments is designed to ensure compliance with our obligations under the directive.

Amendment No. 91 alters "may" to "shall", and this is to remove a sort of double-whammy in subsection (2). This refers to provisions that the Secretary of State, considers appropriate to ensure that the obligation under the directive is or will be complied with". Once the Secretary of State has made the decision that the directive is not being complied with, clearly he is under a duty to ensure that it is. That is why we say that he "shall", not "may", make an order. If he does not want to make an order then he should not make the decision in the first place that the directive is not being complied with or that a particular course of action is appropriate to remedy a breach.

Amendment No. 92 is designed to correct a piece of overkill in the Bill. As provided at present, an order made under subsection (2) by the Secretary of State applies to, any postal operator or operators". I repeat, "any postal operator", and not merely one working within the licensed area. A postal operator is rather unhelpfully defined in Clause 117(1) as, a person who provides postal services". So what are postal services? The same subsection means, the conveying of postal packets from one place to another by post", and the incidental services of receiving and delivering such packets. To complete the circle, a postal packet means a letter, parcel, packet or other article that is transmissible by post.

The ability to provide postal services is not limited to those licensed under Clause 6. Under Clause 7 there are exceptions: 18 of them, including the two all-important ones where the cost or the weight is outside the limits provided for in Clause 7(1). The other 16 are of varying importance or relevance to this amendment. Clearly, personal delivery by the sender is not a postal service. However, some of the 16, and certainly those not requiring a licence because they are outside the price or weight limits, are nevertheless postal services.

With that long preamble, I should like to explain that our object is to ensure that the Secretary of State cannot make orders which are outside the licensed area, even if the unlicensed person is legitimately running what is a postal service within the convoluted and circumlocutory definition contained in this Bill. I believe that this is an intrusion and an attempt by the state to control businesses which, by definition, are falling outside this Bill. The amendment restricts the power to make an order simply to universal service providers. I beg to move.

5.15 p.m.

Lord Sainsbury of Turville

Clause 101 provides a power for the Secretary of State to ensure compliance with the EU postal services directive. The purpose of this power is to ensure that the Government can always meet their obligations in particular in the event that the reserved area is removed and with it the ability to impose the universal service obligation and related requirements through licensed conditions.

It is, as I hope is well understood, an emergency power and not a power on which the provision of a universal postal service is intended to rely. The Government place an enormous weight on the value of the universal service obligation. It is the primary duty of the commission to ensure that it is delivered as set out in Clause 3. The intention is that it will do so through the licensing regime, in particular by imposing as a condition of licence on one or more operators a requirement to provide a universal service or part of such a service. It is also intended that the requirements on universal service providers, such as quality of service standards, regulatory accounts, complaints and compensation schemes, will all be imposed and enforced through the licensing regime; and the Bill is built on this foundation.

One reason why Clause 101 contains a power and not a duty to make an order is that the power can either be used in conjunction with the licensing scheme or when it has been suspended. If a licensing regime has been suspended there would be two options available to the Secretary of State to try to ensure that the community obligation is fulfilled. The first would be to use the Clause 101 power. The second would be to remove the suspension of the licensing regime.

Perhaps I could refer to that point again, because it is absolutely central to the argument. One of the reasons why Clause 101 contains a power and not a duty to make an order is that the power can either be used in conjunction with the licensing scheme or when it has been suspended. If the licensing regime has been suspended there are then two options available to the Secretary of State to try to ensure that the community obligation is fulfilled. The first would be to use the Clause 101 power; the second would be to remove the suspension of the licensing regime. The effect of this amendment would be that as soon as the conditions in Clause 101 were met the Secretary of State would be forced to use the Clause l01 power, without having the alternative option of seeing whether the removal of the suspension of the licensing regime would have the desired effect.

The effect of Amendment No. 92 would be to provide that an order requiring a postal operator to provide a specified postal service to ensure compliance with the postal services directive is limited in scope only to those operators who are already designated as universal service providers or, if not, are licensed postal operators. This would have the effect of fettering the discretion of the Secretary of State in respect of which postal operators might be required to provide such postal service as might be required by an order under Clause 101. It would not allow the Secretary of State to decide on the basis of the facts at the time which postal operator or operators should be required to provide the necessary postal services to ensure that the United Kingdom continues to meet its EU obligations and the public continue to benefit from a universal postal service.

Instead, the Secretary of State's discretion would be fettered by a decision taken now against a background and a market which are unlikely to be relevant in years to come.

Ideally, of course, the Government will never need to use these powers. If they were to be used, the expectation must be that a requirement under subsection (3)(b) for a postal operator to provide specified services will, if at all possible, be placed upon an existing universal service provider. But we cannot rule out entirely the possibility that there might be circumstances where the universal service provider cannot, for whatever reason, be relied upon to continue to provide the universal postal service—for example, through insolvency—and where the Government would have to look elsewhere to ensure the provision of such services.

The proposed amendment would provide as an alternative a licensed special operator who is not also a universal service provider. But this alternative is flawed. It is possible that the order-making power under Clause 101 would be used after a licensed area has been suspended. With no licensed area, there would be no licensed operators on whom to place any requirement to provide postal services. Even if the powers were to be used while there was still a licensing regime in place, we cannot be certain either that there would be any licensees at the time, or that those who held licences—which might be for very small niches within the reserved area—were capable of delivering a universal postal service.

The amendment might work in the near future, where we have at least some idea of what this fast-changing market might look like. We cannot know whether it would work in 10 or more years' time, when the market and the players within it may have changed beyond recognition.

This amendment would unnecessarily restrict the scope of the order-making power, with the effect that, in some circumstances, the Government could no longer guarantee the universal postal service or that other obligations under the directive are met. This would be extremely unfortunate, given the huge value that everyone places on the universal postal service. We cannot afford to put that in jeopardy. In the light of that explanation, I hope that the noble Baroness will withdraw the amendments.

Baroness Miller of Hendon

Perhaps I may begin by apologising to the Minister. My Deputy Chief Whip was whispering something in my ear when the Minister came to a critical part of his reply. He repeated that part of his reply, and I am glad that he did.

I have listened very carefully to what the noble Lord said. There is no way that I would wish to put in jeopardy the universal service provision. I shall take the matter away and consider it carefully. I think that at this stage I probably accept what the Minister said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 92 not moved.]

Baroness Miller of Hendon

moved Amendment No. 93: Page 60, line 45, at end insert— ("(f) require a universal service provider to keep separate accounts of each of the postal services which may not be provided unless he is a licence holder under Part II and any other postal services, and that the accounts for any other postal services clearly distinguish between services which are part of a universal postal service and which are not, (g) prohibit cross-subsidies by a universal service provider between the postal services which may not be provided unless he is a licence holder under Part II and any other postal services which are not part of a universal postal service"). The noble Baroness said: I consider Amendment No. 93 to be very important. The purpose of the amendment is to give the opportunity for the Secretary of State to impose an obligation for all licensees who require a universal service provider to provide transparent accounts and to prohibit cross-subsidies. I beg the Committee's pardon. It is for the Post Office; not for the licensees. I read my notes wrongly.

The White Paper emphasised the importance of transparent accounting and limiting cross-subsidies to a level necessary for the preservation of essential services. It states: the Regulator will need to ensure that the necessary accounting transparency is in place to give credible assurance that there is no cross-subsidy from the business units operating in the monopoly area to those competing in other market sectors". The point was expanded later—I abbreviate slightly—where it states: The Regulator will ensure that … any … body licensed … to operate a full public postal service … does not act in any way anti-competitively". In particular the regulator will ensure that any cross-subsidy from the monopoly area to competitive activities is the minimum required…to ensure the continued provision of services required by the universal service obligation [USO] and the uniform public tariff". The White Paper made clear that until the regulator was established the responsibility for ensuring transparent accounting and monitoring cross-subsidies rested with the Government. The 12th report of the Select Committee on Trade and Industry reached a similar conclusion. It states: There has for some years been understandable resentment among the Post Office's commercial competitors in the parcels business at the way in which Parcelforce has been kept afloat by loans from the Post Office". A no less important matter for consideration is the fact that transparency and limitation of cross-subsidies is also a central theme of the European postal services directive. Recital 28 states: separate accounts for the different reserved and non-reserved services are necessary…to ensure that cross-subsidies…do not adversely affect the competitive conditions in [the non-reserved area]". Article 14 of the directive contains an express requirement to keep separate accounts and to allocate costs to each of the reserved and non-reserved services.

The amendment will ensure that the Bill gives appropriate weight to the directive, to the select committee report, and, in particular, to the Government's stated policy as set out in the White Paper—all of which require that competition should be fair and that cross-subsidies should only be permitted where they are necessary to maintain the universal postal service obligation.

The Minister for Competitiveness told the committee in the other place that the Government had "considerable sympathy" with the aims of a similar amendment tabled by my honourable friends. He said that he believed that the Bill already made provision to achieve these aims and suggested that the Companies Act 1989 and various pieces of legislation prohibiting anti-competitive practices achieved the desired effect.

The short answer is that the amendment seeks to enhance the provisions in the Bill and in the other legislation. One could describe it as "belt and braces". The amendment makes clear in a single place—without anyone having to hunt through the statute book—what is required to comply with this important topic.

To anticipate another possible objection, I hope that the Minister will not suggest that the objective of the amendment will be met by conditions in the licence. Subject to what already appears in the Bill, and what may later be included by amendments that we intend to bring forward, the regulator has a discretion as to the contents of the licence. Indeed, there is no requirement that every licence should be identical.

It is true that under Clause 101(2) the Secretary of State can intervene if he is dissatisfied with the arrangements, but the Government are seeking only permissive powers. It cannot be right that the Government's obligations to comply with the directive—and, indeed, with their own stated policy in the White Paper—as well as with the will of Parliament, as expressed in the select committee report, should be put into effect at the discretion of the regulator. It should be in the Bill. It has been said several times that they want transparency and no cross-subsidy, and that should be in the Bill. It is fundamental. Creating competition for the Post Office, but ensuring that that competition is fair and complies with our Community obligations, is fundamental. That is why I began by saying that this is a very important amendment.

The amendment ensures transparency; I hope that the Minister will be able to meet me on it. I beg to move.

Viscount Goschen

I support my noble friend's amendments. These amendments cut to the heart of the Bill. Throughout the discussions at Second Reading and during two days in Committee, a great deal has centred on the ability to generate fair competition for the Post Office, for the universal service provider, but to ensure that no competitive edge is gained by the provision of the universal service than would otherwise be the case.

In order to give the regulatory authorities the information they require to ensure that this happens, my noble friend has hit upon extraordinarily powerful arguments for insisting that these basic provisions should be put on the face of the Bill. They would be in line with our European obligations. It is extraordinarily important to include such a provision on the face of the Bill in order to achieve the comfort required by bodies that might he competitors of the universal service provider in the non-reserved areas. I support the position adopted by my noble friend.

5.30 p.m.

Lord Sainsbury of Turville

I must say again that there is no substantial difference between the noble Baroness and myself on this matter. We too believe that there should be transparency and that any movement in the accounts should be clear to anyone involved. The amendment seeks to ensure two things: first, that the universal service provider keeps transparent regulatory accounts; secondly, that anticompetitive cross-subsidies from the reserve to the non-reserved areas are prohibited. They are exactly the aims with which the Government have sympathy. The regulatory framework established by provisions within the Bill already provides for both.

The amendment would have no practical effect unless and until the order-making powers in Clause 101 were used. Given that these powers are intended to be used only in very limited circumstances—in effect they are emergency powers and not ones on which the provision of universal postal services are intended to rely—it is unlikely that they will be triggered in the near future, if ever. Unless the noble Baroness wishes only to ensure regulatory accounts and prevent undue cross-subsidy at some as yet unknown point in future, this amendment will achieve nothing. (I seek to avoid using words which are regarded as provocative.)

This amendment is not appropriate in respect of the order-making power itself. The two issues highlighted in the amendment are already subsumed within the general powers of Clause 86(2). That clause provides that the Secretary of State may by order make such provision as he considers appropriate to ensure that the obligation is complied with. We have already made provision for the concerns that lie behind the amendment. To ensure that there is a level playing field and the Post Office company does not abuse its dominant position, or otherwise act in an anticompetitive manner, including illegal cross-subsidy from reserved to competitive services, under the Bill we are establishing—

Baroness Miller of Hendon

I apologise for interrupting the Minister. I believe that the noble Lord said that under Clause 86(2) the Secretary of State could make absolutely certain that there was transparency. I do not find that provision in the clause. It may be that the noble Lord has referred to the wrong provision.

Lord Sainsbury of Turville

I believe that under Clause 86 the Secretary of State has general power to make such provision as he thinks is appropriate. I shall check it in case I have given the wrong reference.

It is anticipated that the Post Office will be granted a licence that will take effect from, in this case, the first day of the new licensing regime. Such a licence would be agreed between the Post Office company and the postal services commission. I stress that it would have to include provisions that satisfied the detailed requirements of the EU postal services directive. It may be that this is where a difference of opinion arises. There is a statutory duty to follow the EU directive which requires that that information is produced.

I am informed that the correct reference is Clause 101(2).

A draft outline licence for the Post Office was placed in the Library of the House on Friday 11 th February 2000. This document illustrates the kind of terms and conditions that the Government expect to see in the Post Office company's licence. One such condition (at paragraph 9 on page 4 of the outline licence), as required by the EU directive, is that the Post Office company keeps separate accounts within its internal accounting system for each of the activities carried out within the reserved area on the one hand and its activities outside the reserved area on the other. Furthermore, accounts for the non-reserved area must distinguish between activities that are part of the universal service and those which are not. That will enable the commission to ensure that there is no undue cross-subsidy from monopoly to competitive markets.

It is also intended that it shall be a condition of the Post Office company's licence that it competes within the law and does not abuse its dominant position, enter into anti-competitive agreements or use anti-competitive means either to enter new markets or to consolidate its position within existing markets. The Post Office company will also, like any other postal operator, licensed or not, be subject to general competition rules. The proposed licence covers this area. If there is any concern about this matter among other postal operators, there is in any event a requirement for this to be done under the EU directive.

Finally, if one is to make a further provision of this kind—which I believe the Committee agrees is unnecessary in the circumstances—this is not the way to do it, because the provision will come into effect only by way of an emergency power. Therefore, the amendment is not appropriate and I ask the noble Baroness to withdraw it.

Baroness Miller of Hendon

I have great difficulty in accepting the response of the Minister. I made the point very strongly that this fell within the EU directive and that the Bill should comply with it. I also said that it was in the White Paper and that the 12th report of the Select Committee on Trade and Industry had come to the same conclusion. All I say is that it should also be in the Bill. I very much hoped that the Minister would not say that it was for the regulator to put it into the licence. Perhaps at Report stage we may make suggestions as to what should go into the licence. However, at this stage what goes into the licence is within the discretion of the regulator.

I would have been satisfied had the Minister been able to show me a reference in the Bill to the transparency of accounts. The Minister corrected an earlier mistake, which I understand; it is always difficult to find the right references. The Minister quoted Clause 101(2) which provides that, The Secretary of State may by order make such provision as he considers appropriate", and so on. In Amendments Nos. 91 and 92 I sought to change "may" to "shall". I did not succeed because the Minister regarded it as unnecessary.

Therefore, the Secretary of State may not in the event need to do anything, and the regulator may not put it in the licence. The White Paper and European directive say that it should be, and the Minister relies on that. The fact remains that it is still not in the Bill.

Lord Sainsbury of Turville

I hope I have made it clear that all of this is covered by the EU directive, which also requires the national regulator to make certain that the universal service provider meets the requirements of the directive. This is not a matter that is within the discretion of the Secretary of State. The Secretary of State has power to require it, and the EU directive means that he has no choice. In any event, we have already shown it in the licence. This is not a matter of choice; it is a requirement.

Baroness Miller of Hendon

I would be very grateful if the Minister could give me the relevant reference in the EU directive. If the Minister is correct I am amazed that I am being lobbied so much by competitors who come into the market and tell me that there has never been any transparency in this matter and there is no provision that there should be. They do not believe that the directive covers it. If the directive dealt with it there would be no need for the amendment, in which case I would be in agreement with the Minister. The Minister began by saying that there was very little difference between us. If that is correct—I doubt whether this matter is covered because I am being pressurised by people who want to ensure that there is transparency—what is the difficulty in accepting this amendment?

Lord Sainsbury of Turville

I do not have to hand the exact reference in the European directive, and perhaps I may write to the noble Baroness and provide it. Clearly, this is a fundamental point. I do not want any misunderstanding among other postal operators: this is how we shall proceed, because there is no choice in the matter.

Baroness Miller of Hendon

I believe that a note has just come from the Box.

Lord Sainsbury of Turville

I am now able to give the reference with even greater speed. Articles 14 and 22 make provision exactly for this point. Therefore, I hope that that answers the noble Baroness.

Baroness Miller of Hendon

I must say to the Minister that he was saved by the bell. I had intended to divide on this point and had mentioned the fact to my Chief Whip. I had hoped that the noble Lord, Lord Razzall, would ask the Liberal Democrats to support me on this matter because, as he claimed earlier, it was he who pointed out during discussion on Amendment No. 69 that there should be clear transparency vis à vis acquisitions by the Post Office. He claimed the credit for that today, and I was intending to claim the credit on this point. As I took on board what he said and moved the amendment, I hoped that he would also support me and ask the Liberal Democrats to do so.

A few hours ago we lost a Division because the Liberal Democrats did not vote with us. That made the difference between winning and losing. It would have been nice if they had supported me on the matter of transparency, which I believed was very dear to their hearts. Therefore, I believe that not only the Minister but the noble Lord, Lord Razzall, was saved by the bell as now he does not have to advise his colleagues one way or the other whether to support or go against transparency.

I make it absolutely clear to the Minister that I shall ensure that those who urged me down this course take note of the particular conditions in the European directive to which he referred. If they are not satisfied, I shall certainly bring the matter back. However, at this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 101 agreed to.

Clause 102 [Subsidy for public post offices]:

5.45 pm

Baroness Miller of Hendon

moved Amendment No. 94: Page 61, line 8, leave out ("may") and insert ("shall"). The noble Baroness said: In moving Amendment No. 94, I shall speak also to Amendments Nos. 95, 96, 98, 99, 100 and 102. My noble friend Lady Byford will speak to Amendment No. 97, to which my name and that of my noble friend Lord Northbrook have been added.

My amendments are probing amendments because the Government were not able to give an explanation to the other place of some of the provisions of this clause. Perhaps that is understandable to the extent that this clause, which covers the important—indeed, fundamental—subject of subsidies to the Post Office to enable it to continue to provide vital social services to many small communities, was introduced in the other place only at the last minute at 'Third Reading.

That was despite the fact that throughout the entire passage of the Bill and, indeed, during the debate on the White Paper which preceded it, honourable Members on all sides in the other place expressed serious concern about the effects that the Bill would have both on the universal postal service and on communities which experienced transport problems, lack of banking facilities or where the only shop (the village store), also serving as the post office, depended on that custom for its viability. It is not only village stores that will be affected but also small local shops in suburban parades which must compete with nearby giant supermarkets and often can do so only because customers come in to collect their pensions, and so on.

The so-called new Clause 1, which is now Clause 102, shows every sign of having been cobbled together hastily, partially to placate the other place where objections were raised to the absence of subsidy provisions. Certainly the aim also is to try to head off objections from your Lordships, who undoubtedly will not be willing to be fobbed off with provisions which may truly be described as an "Emmental cheese" because it is so full of holes.

At Second Reading, I expressed concerns about a number of mysterious provisions in the clause. No answer came from the Minister then and no answer has come since. Since Second Reading, no amendments have been tabled by the Government to clarify matters. Therefore, we must assume that the Government are content with the meaningless provisions that the clause contains, as drafted at present. I believe that that simply will not do for this very important provision. Absolute clarity is required. The public and sub-postmasters, whose businesses otherwise may be wantonly destroyed by the Government's action in taking away their earnings from paying pensions and social security allowances, must clearly know at least the basis of the help that the Government will give, or suggest that they may give, by way of compensating subsidies.

The clause as drawn at present is simply full of holes. Even at this advanced stage, we do not know whether the subsidy will be permanent or temporary, what will trigger the payments, how much they will be, or whether they will be more or less than the Treasury is trying to save by taking away, on their own figures, £400 million a year from the income of all the post offices by phasing out payments of benefits from across their counters. We do not even know whether all post offices will qualify and, if not, which will do so. We do not know who will be the arbiter of who will receive what, how much they will receive and how they will receive it.

We would prefer the whole clause and the need for subsidies to be unnecessary. However, they are necessary because the Government have decided to press ahead with the scheme for automatic credit transfer, whether or not the public want it and whether or not they have access to cash facilities. If the Government are to put at risk people's investments and businesses, valued in total at £2 billion, or at the least deprive local communities of a vital facility, then compensation is required and, in this case, it is in the form of a subsidy. We do not want to see people's businesses in effect confiscated by the state, which wants to grab £400 million a year. That is not the way that things are done; certainly that is not the way that things should be done.

With that explanatory preamble, perhaps I may now go through the amendments in sequence in order to indicate to the Minister where we require both clarification and, indeed, some sort of commitment from the Government. We want to know what it means and what is to happen.

Amendment No. 94 alters the word "may" to "shall". If the subsidy provisions are purely permissive, the entire clause is a meaningless piece of window-dressing. After the Bill is passed, that may be the last that anyone hears or sees of those subsidies. I say that particularly in the light of proposed subsection (6), which gives the Treasury an absolute veto over the whole scheme. The reason for my later amendment, Amendment No. 101, to this clause is to delete that veto.

Amendment No. 95 provides that one of the purposes of the subsidy is to have regard to the social needs of the local post offices and to ensure that those needs are given priority over commercial considerations. We do not want to hear that a village post office is not to be provided with a subsidy because it is not profitable. I remind the Committee that there is ample precedent in the form of subsidies paid to train and, more especially, bus services on otherwise unprofitable routes. If a sub-post office should t urn out to be unprofitable and is to be ruined completely, then the subsidy is called for.

Amendments Nos. 96 and 98 are simply paving amendments for Amendment No. 99. That amendment adds a new paragraph, (5)(a), and prohibits the payment of the subsidy to a bank or building society. If we are to have subsidies to save sub-post offices, they should be the only organisations that receive those subsidies. Part of the problem is caused by the withdrawal of banking and cash facilities from small localities by banks and building societies.

A potential problem is also caused by the same commercial concerns demanding the payment of fees or charges from pensioners or receivers of benefits who collect their own money. It would be iniquitous if money which was needed to facilitate the continued existence of a sub-post office were diverted to the giant banks. It cannot be right for the Government to take £400 million a year from small businesses in the form of sub-post offices and hand that over to the banks. The subsidies are intended for the benefit of sub-post offices and this amendment is to ensure that that is where the subsidy goes.

Amendment No. 100 adds another new subsection. Subsection (2) refers to: the person deciding whether to make the payments"— that is the subsidy. Subsection (3) refers to payments: made by the Secretary of State or by another person". It is not clear whether that other person is the same one as referred to in subsection (2) or yet another person.

In subsection (5)(b) there is reference to, the person concerned". Who is that? What is this vague clause taking about? Who are these people? More important, despite the fact that several noble Lords asked the Minister who was this person—whether it is one person or two people—during Second Reading, there was no answer from him. I wonder why the Government are being so coy about specifying who is this mysterious person. Is it one person, two people, three people or even four people? I asked that at Second Reading and we still do not know.

Until the Government clarify the position to your Lordships' satisfaction, we believe that there should be certain essential constraints. We believe that the payment of subsidies must remain in the hands of the Government. However, if they want power to delegate such decisions so that they can divert any criticism of the application of subsidies from their good selves, that should go to the commission. At least the commission can be regarded as non-political and impartial.

Paragraphs (a), (b) and (c) of this new subsection expressly exclude from the power to distribute the subsidy to local authorities members of local authorities or candidates for local government and trade associations and trade unions. So long as the Government have failed to describe the circumstances under which a subsidy will be paid and by whom, it is essential that there should be payment only when it is impossible for it to be of local political advantage or for the benefit of a pressure group.

At Second Reading I mentioned that, and I said that no one should think that I am unduly suspicious or see politics lurking behind every single amendment that is tabled. The fact remains that if the subsidy is to be handed to a local council to pay to any sub-post office in their area where they believe that a subsidy is required, I would bet that it would be given to a Labour council just before a local election. I am sure that noble Lords opposite will understand why I feel that that should never be allowed to happen. In any case, that should not happen. It is not a matter for local councils. If there is a need for this subsidy, the Government must have responsibility for it and take the flak in relation to handing it out and when deciding the rules.

The Government have had ample time to clarify all the mysteries surrounding this clause and to ensure that when they promise a subsidy it is one that they or the Treasury cannot weasel out of as soon as the ink is dry on the Bill, the Bill is passed and there are no longer hundreds of thousands of sub-post offices collecting names and handing them in at Downing Street or somewhere else. The subsidy clause came in rather quickly. Now it is all over and matters have gone quiet. We do not want to hear that the Bill is simply passed. I await the Government's response to our anxieties over this clause, which we believe is essential to preserve the entire system of local sub-post offices. I beg to move.

Baroness Byford

I rise to support the case put forward by my noble friend Lady Miller. I am not sure how the Minister will respond—whether he will be coy or whether the Government still do not know. I apologise to your Lordships that I shall take some time over this item because the crux of the matter is how people claim and receive benefits. I have been through this exercise on the Child Support, Pensions and Social Security Bill and I still have no answers. I believe that the Government do not know the answer. I hope noble Lords will understand why I shall take my time to go through this yet again.

The purpose of my amendment is to establish a method of payment and the practicalities for people who live either in rural areas or in urban areas. I want to try to flush out how people will receive payment, what the cost will be and when and how this will happen.

Perhaps I can begin at the beginning. In this country some 2 million people are still "unbanked". When I raised this matter on 16th May during the debate on the Child Support, Pensions and Social Security Bill, the noble Baroness, Lady Hollis of Heigham, commented that she was not happy that I used the term "switch card" and that they may well come forward with a bank card. In a letter she stated that the precise means of doing so will be a matter for the Post Office and banks and that they expect available options to include withdrawing money through a bank card. That is a start.

My question to the Minister—there will be several—is, if that is so and we move to a bank card system, how will that differ from what the previous Government had started and which this Government abandoned? How will it save money, if it is being reinstalled? Who will pay for the new bank card? Will it be cheaper than the previous system? Will the Department of Social Security be expected to pick up the bill, or will the Post Office pick it up?

We know that there are some 2 million people who are "unbanked". The Government have indicated that they will finance a scheme to give them banking facilities. If that is so, how will the Government do that? What do the Government believe will be the cost and who will bear it? Will it be the Department of Social Security or the Post Office? If the banks have to bear it, the potential cost to them of opening and operating such social bank accounts is an interesting point. Whether or not we expect them to make a profit from such accounts, there would be a loss.

I have received letters from banks and it has been agreed by them that an average balance of around £1,000 a year will be needed to make any bank account profitable. Many of these accounts will not contain that sort of amount. We certainly need to have some indication from the Government as to how and who will cost the scheme.

I believe that the Minister will say that the Government still do not know. We have been waiting for the PIU report that was supposed to be with us at Easter. Easter has come and gone, May has come and gone and we are half way through June and the report is still not with us. I am told that there are great matters in the report, but I and many other noble Lords are anxious that if we are not careful, not only this Bill, but also the Child Support, Pensions and Social Security Bill will pass through the House without us having answers to these basic questions. It is extremely important that we have answers.

On top of that, today I received the CAB social policy bulletin for June 2000. The Skipton CAB has carried out research which showed that its clients were experiencing real difficulty in gaining access to bank accounts, and were anxious about ATM usage, particularly in rural areas. The bulletin said: A survey of all banks and building societies in the Craven District area aimed to find out what facilities were on offer and what checks were made before a bank account could be opened. Few of the 21 banks and building society branches surveyed seemed to be able or willing to offer any facility to clients experiencing financial problems or who had a default recorded". If that is true, and if the banks are not keen to give people banking "streams" without back-up, who will?

The Alliance & Leicester Bank has also written to me as, I believe, I mentioned at Second Reading. That bank is concerned about the impact of withdrawing the current system of the Giro. The Select Committee report on the Rural White Paper, dated 3rd May 2000, stated on page 18 that the committee feared that the loss implications of withdrawing the current benefit payment system would result in some more losses of post offices, particularly rural post offices.

I believe that banks are entitled to refuse banking services to certain clients; a point I made when I referred to the letter from the CAB. However, the Government wish to see universal coverage. If the Government forbid banks to charge "unbanked" people for using banking facilities, who will pay for it?

Having referred to the PIU, I shall now move on to the speech made recently by the Prime Minister at the Women's Institute meeting. I am sure that it is a fact now well known to noble Lords that that speech was received with a certain coolness. However, it contained a very important section. The Prime Minister stated: You have a strong campaign on rural post offices". That is indeed the case. I want you to preserve them too. This month we publish plans that will allow people to carry on taking out pensions and benefits in cash; and that will protect rural Post Offices and offer them a new lease of life. Be under no illusion: over the years more people will choose to have their money paid into their hank accounts all around the world, postal services are going to be revolutionised by new technology and the growth of the internet. So we can give rural post offices a future. He went on to say: I would fail in my duty to you, if I don't also say it has to be a future allied to future reality". I do not think that anyone would deny that. I should hate it if Members of this House thought that I was someone with a negative view, one who felt that things should remain as they are. However, changing from one system to another without knowing what the new system will be and what it will cost is important and needs to be thought through.

We spoke of this problem during our deliberations on another Bill. We were told then that the ACT transactions to be introduced will cost only 1p per transaction, as compared with order books, which cost 48p. It has also been stated that benefit payments made using ACT will reduce fraud. I shall probably not argue about that because I have no reason to suspect that that would not be so. However, I suggest that the Government's comparative exercise as regards ACT has not given a true result, or at least not a full one. The figure of 1 p per transaction quoted by the Department of Social Security is what it will need to pay rather than a calculation of the full cost, whereas the cost of the order book reflects the full costs involved.

Research carried out by the banks estimates that it will cost £350 million a year to establish and run a social banking system that will pay all benefits into bank accounts. That is a very different figure from that of 1p which is being bandied about so freely and is the reason why I keep posing such questions. For a successful introduction of ACT, the Government need to be realistic about the actual costs involved.

I should like to raise one or two other points. Each week 20 million benefit claims are made at post offices. Over the course of a year, those claims attract some £50 billion in cash payments, distributed via 712 million transactions. As I have said, research carried out by the banks has shown that the establishment of ACT will cost £350 million, while the Government continue to quote 1p per transaction. If an additional £50 billion in cash is to be paid out via the banking system to benefit claimants, then in addition to the 1p cost per electronic transfer from the Benefits agency to a claimant's bank account, surely other costs will arise; namely, the cost of physically moving £50 billion in cash to millions of bank accounts and to post offices. Furthermore, the cost of setting up new bank accounts for claimants must be taken into account, as well as the cost of running bank accounts to be used for paying benefits. For example, a cost is incurred every time a plastic card is used at an ATM.

I apologise that I have had to speak at length. However, noble Lords will understand my concerns in this area. If rural post offices and some of our more remote urban and suburban post offices do not survive, the reason for their demise will be because of the withdrawal of the payment of benefits via sub-post offices. Given that, the Government's wish to ensure that each recipient will still be able to visit a post office will need to be looked at in a different light.

I have posed several questions in my contribution. First, I do not believe that we have received a full answer as regards the full cost of implementation. It may be that the Minister will tell me that it is still too early to tell. Secondly—this point was also raised by my noble friend Lady Miller—we must address the question of the subsidy. The amendment was introduced only during the later stages of the Bill's progress through another place. It has been suggested that some of the proposed subsidies could be paid through local authorities. However, I understand that sub postmasters are concerned about that for the simple reason that one local authority may take a quite different view from another. From a practical point of view, I should like the Minister to comment on this. It is not a good idea to implement all kinds of different systems when the aim is to achieve universal coverage.

On the last occasion that we discussed the matter of ensuring that payments reach claimants, the noble Earl, Lord Russell, said that he was happy with the assurances given by the Minister. However, those assurances will be valid only if claimants retain access to a post office. If I have over-egged the pudding here, I apologise. This matter is posing a dilemma for those who need to examine the hard reality of how claimants are to receive their payments. I raised these matters during our debates on the Child Support, Pensions and Social Security Bill and I have raised them again today. That is because it appears that the buck is passing between two departments. It is now time for the Minister to clarify one or two of these very important points.

6 p.m.

Lord Clarke of Hampstead

I shall again declare my interest as a former Post Office worker and as a former official of the Union of Post Officer Workers. I am grateful to those sitting opposite for having put down these amendments. They have given the Committee an opportunity to examine the whole question of subsidies.

It is common knowledge that the idea of providing subsidies came only as a late add-on during the deliberations in another place because the plans for the transfer of benefit payments to ACTs were ill judged. Those plans had not been thought through and the subsidies were introduced as a reaction to that.

Perhaps I may say at the beginning of my remarks that I do not believe that subsidies will provide the answer to the long-term future of sub-post offices and post office counters in either urban or rural areas. The salvation of the counter network will come through the provision of more business, better competitiveness that will attract new business and a climate that will enable those small businesses to stand on their own feet. We must recognise that the proposals for subsidies have been introduced to compensate for the loss of payments that would accrue from the transfer of cash payments to automatic credit transfers.

The Government's intention to enable the possible use of subsidies was first indicated only as late as February of this year. The Secretary of State for Industry stated that: the Government will consider very closely the need to include a provision that would enable a subsidy to be provided where it is appropriate to do so".— [Official Report, Commons, 15/2/00; col. 805.] That statement in itself begs a number of questions.

Like many others, I had expected that an amendment would be introduced during the Committee stage in another place, but no amendment was forthcoming. Instead, on 12th April the Secretary of State announced that, we will table a new clause to the Postal Services Bill when it is debated on Report. It will enable me to set up a financial scheme to ensure that essential services can still be delivered through a nationwide network of local post offices".—[0fficia/ Report, Commons, 12/4'00: col. 385.] Clause 102 has now been introduced. The clause does not make it clear how subsidies are to operate and when they will be considered necessary. If we must have subsidies, then the most straightforward method of providing them would be through direct payments from the central government, authorised by the Secretary of State in consultation with the Treasury.

Clause 102 enables the Secretary of State to make such payments to assist in the provision of post offices and the services provided as he sees fit. These payments can also be restricted to post offices of a "particular description". I am most anxious to know what the criteria of a "particular description" would be. It seems likely that the Government will have to consider any criterion for access to postal services that is recommended by the PIU.

However, both previous speakers mentioned that we have been waiting with bated breath for the report of the PIU which was promised when this matter first came before this Chamber. The noble Baroness, Lady Byford, drew attention to the fact that we are still waiting. Perhaps we shall get another rabbit out of the hat, as happened in the other place when the whole question of subsidies was revealed. But if we have had to wait all this time just to see what the future of the counter network will be, it is a poor performance by the Performance and Innovation Unit. We expect the report to talk about the social and environmental guidance emanating from this Bill relating to the number, or percentage, of people living within an area to be served by a post office, otherwise, I see no clear indication regarding what will happen.

We talk about local authorities, but there is already a precedent for local authorities to become involved. Section 97 of the Telecommunications Act 1984 quite clearly states: Where a local authority consider that it would be for the benefit of the whole of any part of there area …the authority may undertake to pay … [an] operator any loss he may sustain by reason of the provision or continued provision of those facilities". It is unlikely that most local councils will be able to find the funds to do so. In fact, as a former local councillor I find it offensive for central government to pass over the responsibility to put something right that it created in the first place—namely, taking away the cash payment, thereby making it necessary to find the money to subsidise the post offices—and then say to local government, "You have to do it". That seems to me to be incomprehensible, if not less than straightforward.

I should like to say much more but both previous speakers covered a whole range of issues about sub-post offices. I completely agree that we should not be paying subsidies to banks or building societies, which are actually putting extra pressure on the whole system. I hope that my noble friend the Minister will be able to give us some answers, as well as an indication of where we are going on this question of subsidies. As I said at the beginning of my remarks, subsidies are not the answer: more business in our post offices is. The future of the network would be much more secure if the Post Office were allowed to get on and promote its business.

Lord Skelmersdale

I do not envy the Minister because, of course, the cat is out of the bag as far as concerns the delay in the publication of the PIU report. As my noble friend Lady Byford made clear, at the annual conference of the Women's Institute last week the Prime Minister certainly gave the impression not only that the report and an accompanying announcement would be made later this month but also that he would make the announcement himself. That rather queers the pitch, if I may so describe it, of the Minister at this moment.

None the less, the questions asked by the noble Lord., Lord Clarke, and by my noble friends Lady Byford and Lady Miller are absolutely right. Before the end of the proceedings on this Bill, we all need to be satisfied, wherever we sit in the House, that the Government have come forward with the right answer in Clause 102. We also need to know how the wretched system will work.

6.15 p.m.

Lord Sainsbury of Turville

Not for the first time in this House, or in the other place, the important issue of whether financial systems can be provided for the support of public post offices is under discussion. Clause 102 is an extremely important clause. It will enable the Secretary of State to set up a financial scheme for the purpose of supporting public post offices. As the Secretary of State said in another place on 12th April, this power is a safeguard which is intended to keep open the option of financial assistance.

Perhaps I may stress again that this is an enabling clause; it is not a scheme. Therefore, to ask that all the details should be laid out now is to miss the point. In such a piece of legislation it is sensible to include the power. But that is not the same as saying that a scheme will be brought in tomorrow to cover the provisions in the clause.

I should like to deal, first, with the whole question of the loss of income from post offices by the switch to ACT, which will take place between 2003 and 2005. It will not happen tomorrow. Therefore, it may prove to be necessary to take such action in the future; it may not be right to take it now. That is why we have introduced this enabling clause and not a scheme.

I agree with the noble Lord, Lord Clarke of Hampstead, that long-term subsidies are not the answer. However, we must try to ensure that the Post Office company will be able to develop alternative revenue streams. That is why we are equipping 40,000 counter positions in 18,500 post offices with computer equipment to modernise the network at a cost of almost £500 million. This will give the Post Office the ability to offer an improved service and a wider range of services. For example, we have already seen more banks seeking to offer services through post offices.

Perhaps I may also deal with an issue that has frequently arisen in this Chamber; namely, how benefits will be paid in the future. Again, this will take place in the year 2003, not tomorrow. I believe that we have made it absolutely clear that people on benefits will be able to receive them in cash from post offices without any additional payments. That situation is clear. With the systems that we are putting in place, it is not difficult to imagine many ways of how that could be done.

If you believe in the future of the Post Office, as I do, you cannot continue to argue the case that the current system of payment, which is totally antiquated, should be the way forward. It is not surprising—

Baroness Byford

I apologise for interrupling the Minister, but I do not believe that any of us has made that suggestion today. To be honest, I do not think that anyone said that we wished the current system to continue. I just wanted to put the record straight. I am sure that the Minister was about to deal with it, but what we want to know is the actual cost involved. We have received no real answer in that respect. We are told that it will cost one penny, but I do not believe that that is the full truth.

Lord Sainsbury of Turville

Some noble Lords have implied throughout this debate that there is a choice as regards not going ahead with the new system and that we could somehow retain the current one. Some people seem to believe that that is a sensible way forward. However, if we believe in the future of a Post Office as a modern system providing a service to customers, we should ensure that such systems are properly automated in line with other computer-based systems that exist today. It should not surprise anyone that such systems are likely to be cheaper than the current systems, which are essentially paper based. The calculations available show £500 million in savings in reduced administrative costs, compared to paper-based systems, before taking into account the £140 million savings through reduced instances of fraud and theft of order books and giros.

Without having checked all those figures myself, I have to say that I do not find that at all surprising. In this modern age when every other kind of business is going over to this kind of system and saving large sums of money, I do not think that it is right to go on arguing for the retention of an old system. Similarly, I do not think it right to continue to raise concerns by implying that we cannot issue cash through this method just as we do through any other system.

I hope that I have not misunderstood the noble Baroness, but she asked how we would get cash to post offices for this purpose. But that is exactly what we have to do today. I cannot see that there is a difference in having to get cash to the post office, compared with the other systems. Post offices have always had to use large amounts of cash to make benefit payments, and this is not generated by their own system.

However, the Government recognise the real concerns of many people throughout the country about continued local access to postal services, particularly in rural areas, but also, and importantly, in some of our inner cities. The clause provides an additional safeguard allowing the Secretary of State to provide financial assistance if it proves necessary to do so. That clearly underlines the Government's commitment to a nationwide network of post offices.

I turn to Amendment No. 94. We have made it quite clear that the clause as it stands will enable the Secretary of State to make a scheme to support public post offices. Again, as we have repeatedly made clear, this will enable financial assistance to be given if necessary. The noble Baroness's amendment assumes that a subsidy is needed. I do not share her pessimism about the current situation, although we should be prepared for the future. We are giving the Post Office the commercial freedom that it needs. We are modernising and creating opportunities. The Government are committed to ensuring that post offices are equipped and redesigned to face the future and are thereby able to continue to play their role as an essential part of the country's fabric.

As I have said, the Government's aim was to provide an enabling power for the Secretary of State to make a scheme. If financial assistance proves necessary, then as a matter of fact, commercial considerations are likely to take second place, particularly if it is a particular service which is to be subsidised. A service can be subsidised under the clause only if the person making the payments considers that the provision of the service through post offices assists in the provision of the post offices themselves. It may well be the case that without the subsidy the service concerned would not otherwise be provided on a commercial basis through post offices or indeed other outlets within the vicinity.

However, commercial considerations will be important, since one of the ways in which we shall determine the level of assistance needed is to look at the cost at which the service could be provided on a commercial basis. I fear that the noble Baroness's amendment amounts to an invitation to write a blank cheque now for a scheme.

As I have said, we value post offices greatly and have taken steps to support the network. If a scheme is necessary, it will be because certain wider public policies cannot be delivered by commercial means alone.

I hope that the noble Baroness will consider withdrawing the amendment.

I appreciate the strength of feeling in the Committee and more widely about the recent wave of withdrawals of bank branches from small communities. However, I do not believe that the noble Baroness's amendment on this point is the correct reaction.

Clause 102 provides for payment for services that support public post offices. This may involve asking commercial bodies to do something that is inherently uncommercial for them, and the Government may wish to provide assistance for that purpose. More specifically, an amendment such as we have before us might prevent payments to the Post Office company itself, since it is planning a universal bank which will play a potentially important role in combating social exclusion. There are many other businesses that may have banking connections, and we would not want to rule them out either.

Similarly, it might be sensible to ask a financial institution to have a hand in running a scheme, although it would be the Government's general intent to appoint a government agency or similar body to act as the "person" deciding to make payments. In such circumstances, it might be reasonable to pay fees in respect of work done by a bank or building society.

Therefore, while I accept the intentions behind the amendment, I must ask the noble Baroness to withdraw it.

Similarly, I would hope that Amendment No. 97, in the name of the noble Baroness, Lady Byford, will be withdrawn. My principal difficulty with it is that it is based on the supposition that there will be a single scheme for the provision of financial assistance to public post offices. In fact, there may be a number of schemes targeted at certain types of post office. For example, the Post Office presently has around six types of contract with different classes of sub-postmaster, and we might want schemes that were tailored to those arrangements. We might want to offer different support in rural areas from that in inner cities, or have special schemes aimed at delivering certain other services through post offices.

That is not to underestimate the importance of benefit payment to post offices or the wider concerns about the network. As I have said repeatedly, the Government are committed to the national network of post offices.

The amendment would unnecessarily fetter the discretion within the Bill. Any scheme will have to come before Parliament for approval by affirmative resolution, and there will therefore be plenty of opportunity to comment on the merits or demerits of a specific scheme. I would therefore ask the noble Baroness to withdraw the amendment.

I turn to Amendment No. 100, which would appear to constrain the scheme before the Secretary of State even has a chance to present one for the approval of the House of Lords. The Opposition have tried to suggest that without these controls the scheme could be used for political purposes, with greater assistance being given to areas with strong Labour representation. As my right honourable friend the Secretary of State assured another place, there is no suggestion whatever that this would happen or should happen. The Government's only interest is to enable a scheme to be put forward for the support of public post offices.

As I have said, any scheme will require the approval of both Houses. There is no question of the Secretary of State being able to sneak through an unsuitable scheme.

We want to ensure that a suitable body would provide the assistance. I turn now to that issue. It could be the commission, as the noble Baroness, Lady Miller of Hendon, suggested, but it might be more economical and make more sense for a body with experience of administering this type of scheme, such as the Countryside Agency, to do so. Clearly, it will depend on the type of scheme that is needed.

Against that background, I find it rather extraordinary that delivery through local authorities would be ruled out, even if that were the most suitable means. Furthermore, local authorities are already involved in giving financial assistance to post offices through a scheme which, although enhanced and made more generous by the present government, was instituted by the previous administration. I am, of course, referring to the village shop rate relief scheme, which provides a sole general trade store and/or post office in a settlement of fewer than 3,000 inhabitants with 50 per cent mandatory rate relief. Local authorities also have discretionary powers to top up that relief to 100 per cent. They also have the discretionary power to grant up to 100 per cent relief to any other rural business in the settlement which is important to the community.

If the amendment was designed to probe the Government's intentions, I can assure the Committee that we would want to deliver any scheme in the most targeted way possible. That might involve a national body, since, after all, we are talking about a national network. However, I would not rule out regional or local bodies assisting in the administration of a particular scheme or schemes.

With regard to this amendment, I end on a technical point. The amendment suggests that any person who administers a scheme should be appointed by the commission. It is our intention that the person to administer the scheme should be named in an order placed before Parliament, and therefore approved by the House of Lords and another place. If we were to follow the amendment, that oversight would appear to be removed from Parliament and delegated to the commission.

I should like briefly to touch on some of the other points raised by the noble Baroness, Lady Byford, although I have tried to deal with them generally in terms of the question of cost. We inherited a scheme, the benefit payment card, from the previous government's plans. That was a magnetic strip card, an integral part of the Horizon project, which was running three years behind schedule and hugely over budget. We have put the project back on track by removing the outdated technology and complexity of the benefit payment card. ACT is an established, convenient and fraud-resistant method of payment, and all post offices will be equipped with the Horizon platform by this time next year. In that way we can significantly improve the cost structure of what the post offices are doing.

I hope that that broadly deals with the issue of concern to the noble Baroness, Lady Miller, as to how the system will work and whether the costs can be reduced in the way suggested. The main point on which this Committee must deliberate is that this is an enabling power and that the parameters laid down constrain it in an appropriate way. Any scheme will have to come back to the House for affirmative resolution. At this point we are not putting forward any specific scheme; this is simply an enabling clause. On that basis the amendments are not appropriate and I hope that the noble Baroness will feel able to withdraw her amendment.

Noble Lords

Hear, hear!

6.30 p.m.

Baroness Miller of Hendon

I know that the Minister is too experienced to take it personally when I say to him that his response was totally unsatisfactory. He said that he did not want subsidies; that we should have more confidence in the Post Office; that it will prosper and will not need subsidies. But there should be no suggestion that his noble friend Lord Clarke, my noble friend Lady Byford or myself welcome the idea of subsidies; we do not. If the Government were not introducing ACT at this time, there would be no need whatever for these amendments. So none of us welcomes the idea of subsidies.

However, we said that if there was a power to introduce a subsidy, then that power should not be so full of holes that it has no value whatever. Why did the Government feel it necessary to introduce the new clause at Third Reading in the other place, which subsequently became Clause 102? Why was it not in the original Bill?

Lord Sainsbury of Turville

I rise simply to make the point that the noble Baroness, Lady Byford, said that no one on the other side of the Chamber was suggesting that ACT should not be brought in. The noble Baroness, Lady Miller, is saying that the Government should not have brought in ACT; that that is the cause of these difficulties. That is a fundamental mistake and there is no alternative.

Baroness Miller of Hendon

I believe that the introduction of ACT at the critical time of the changeover of the Post Office to a plc with one shareholder and so forth, causes great difficulties for the sub-post offices. The sub-postmasters have made that known in their petitions, in their meetings, and in their lobbying briefs which Members of the Committee on all sides of the Chamber have received.

My question is: why did the Government feel it necessary to introduce this permissive clause at such a late stage? Why was it not part of the original Bill? I suggest that the reason the Government came up with this clause is that the sub-postmasters decided that ACT was extraordinarily dangerous for their businesses and that there needed to be a subsidy of some kind. The clause is a response to the petition in Westminster Hall and to all the lobbying that took place.

But does that response mean anything? Clearly not. The Minister began by saying that it was an enabling power. In fact, once the Bill is passed, I suggest that we shall hear no more about this clause. The Minister said that the Government had had no thoughts about a subsidy; that they did not intend to introduce one; and that the enabling power exists in case the need for a subsidy should ever arise. But once the Bill is passed, it is passed. The clause can sit there and never ever be used.

We feel that that situation is totally unacceptable. My noble friend Lady Byford spoke extremely well to her amendment. The general feeling is that we need some sort of clarification. The Minister was unable to identify "the person" in the clause. Is it one person, two persons, any person, that person or this person? I know not. The fact that the provision is so vague that the Government know not either, nor agree with us that the "person" should in fact be the Crown, leads me to the conclusion that this power will never be used.

Let us hope that the power is not necessary. However, if such a clause has to be included in the Bill, it should mean something. This clause means nothing. While the Minister spoke so well and we heard Members of the Committee on his side call out "Hear,!head", I hope that he will not be upset when I say that his response was totally unsatisfactory. I could use other words to describe what I think. I felt that what he said was not worth saying. It meant nothing.

It may be that our amendments are not as perfect as they should be. That is possible. I cannot pretend that my amendments are always right. I hope they are, but it may be that they are not. However, it would have been helpful if the Minister had said that something could be done. We could then take his words away and think about them. But there is nothing to be done. This clause has been inserted into this Bill purely to placate the sub-postmasters and mistresses who fear that they will lose their businesses, otherwise it would have formed part of the original Bill.

Our amendments sought to strengthen the provision in some way or other by saying that, if necessary, The Secretary of State shall". The Minister's response is that, if necessary, The Secretary of State may". We suggested that "the person" should not be a Chancellor of the Exchequer; we all know what they can do when they have the power.

My noble friend tried to find out how much the scheme will cost. All we know is the amount that sub-postmasters say they will lose. And we have no idea what sort of money will be available for the subsidies if they prove to be necessary.

We have sat for a long time and, with regret, I shall not divide the Committee on this amendment.

Noble Lords

Oh!

Baroness Miller of Hendon

Not because I do not want to, but I fear that at this stage I may lose and there is too much money at stake for sub-postmasters for me to jocularly say, "I shall test the opinion of the Committee". I feel that we may be doing enormous damage to those who have invested their lives in sub-post offices throughout the country. Rural areas have enough problems with lack of transport and all those other difficulties mentioned by my noble friend.

My concluding speech has been rather long. That may be why Members of the Committee opposite felt it necessary to laugh when I said that I did not intend to divide the Committee. But I want the message to go out loud and clear to sub-postmasters throughout the country that we tried and fought for them, as did some Members opposite. Unfortunately the Government turned us down. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 95 and 96 not moved.]

Baroness Byford

moved Amendment No. 97: Page 61, line 31, at end insert— ("( ) A scheme under this section must provide for payments under the scheme to be made subject to conditions specified in or determined under the scheme enabling payments of any benefit to which section 5 of the Social Security Administration Act 1992 applies to be made at a public post office to which the scheme applies—

1. (a) in cash:
2. (b) in a manner which ensures the identification of the recipient: and
3. (c) to a designated proxy of the recipient.").

The noble Baroness said: I thank the Minister for his comments. Like my noble friend Lady Miller, I find much of what he had to say merely a repetition of the arguments and not an answer to some of my specific points. I shall go away and read Hansard carefully. I hope that between now and the next stage we will obtain more information.

There is no difference between my noble friend and myself. At no stage did I indicate that we felt that the method of payment of benefit should continue as it was. What the Minister picked up on was the fact that I was trying clearly to identify the cost of the scheme. There has been no answer at all to that.

Perhaps I may make one or two further points. Like my noble friend, I was somewhat concerned— I am happy it is recorded —that Members of the Committee opposite found it funny that we pursued this matter to the depths that we have. I suggest that some of them, especially the noble Lord, Lord Clarke of Hampstead, have been valiant in trying to put forward the practical reasons for chasing this matter. There is no point in having a wonderful Post Office, which can do so many things, if the one thing it needs to do, but cannot, is enable people to draw their money from its many branches. I shall not repeat my arguments.

I hate to say it, but I accept that some post offices closed during our time in government. However, the increase in closures has been frightening this past year. Those noble Lords who jest about it need to look at the figures; I gather that there were about 500 this past year.

Those people who run sub-post offices do not do so for the good of their health; they are small individual businesspeople. The Government are supposed to be joined-up thinkers and are supposed to be for individual and small businesses. They are not helping small businesses. Indecision is really the reason for the amendment. My noble friend touched on that.

I went to the rally at the Central Methodist Hall, which was packed. Earlier that morning some of those attending had delivered what was considered to be the biggest petition (3,125,000 plus signatures) relating to the concern being expressed by people with regard to sub-post offices, those who run them and those who actually use them. That is no jesting matter. That is actually very serious.

I shall not press the noble Lord further. I had hoped that he would have given better answers to my questions. As I said earlier, I am not against moving forward and neither are the people who run the sub-post offices. However, they run small businesses; they need to plan for the future. They do not look to subsidy, but perhaps because of what the Government are doing they will need some form of subsidy. We return to where we started; that is, waiting for a report which has been in gestation for longer than I think noble Lords would wish. I should be glad of a response to my remarks before deciding what to do with my amendment, Amendment No. 97.

I believe that the Minister mentioned that the way in which payments might be organised, not necessarily be through the sub-post-offices, but might—

Lord Carter

I know that the noble Baroness feels very strongly about the issue and I understand that. However, I believe that she is not actually moving her amendment. Is that correct?

Baroness Byford

I have not decided yet.

Lord Carter

Have we reached this amendment on the Marshalled List? Is the noble Baroness moving her amendment?

Lord Skelmersdale

Perhaps I can help the Chief Whip and my noble friend Lady Byford. I agree with the Chief Whip that my noble friend has now spoken for so long that she really has to move her amendment in order to withdraw it at the conclusion of her remarks. Clearly, she has not come to the end of them, and I suggest that the Committee let her get on with it.

Baroness Byford

I am sorry; I thought I had moved it at the beginning.

Lord Carter

In asking the noble Baroness to move her amendment that does not mean that she has to vote on it.

Baroness Byford

I apologise to the Committee and particularly to the Chief Whip. I am speaking to the amendment, which I have moved. With hindsight, I apologise. I am 10 minutes too late in what l should have done.

I should be grateful if the Minister could answer my question. In response to the earlier debate, he indicated that it might not be the Post Office which organises welfare benefit payments, but that it might be the commission or the Countryside Agency. Could the Minister tell me whether there have been any contact or negotiations with that agency? I beg to move.

Lord Sainsbury of Turville

There are two issues involved. One is the subsidy issue. I hope I have made clear that, if we have a subsidy scheme, it has not been decided who it would be. Therefore, there have been no discussions with the various bodies. As there are alternative bodies, it might not be sensible at this point to say that it would be done through the commission.

Baroness Byford

I thank the Minister for that response. Could I ask him why he particularly mentioned the Countryside Agency?

Lord Sainsbury of Turville

I was simply trying to illustrate the kind of body which might be considered in these circumstances, given their experience. That is not the same as saying, "We have had discussions". It simply illustrates that at this stage there are a range of bodies, and the Countryside Agency is one of them.

Baroness Byford

I thank the Minister for his response. I clearly do not want to take up any rnore of the Committee's time. I thank the noble Lord, Lord Clarke, for his contribution to our discussions. It does not remove my commitment to what I believe is causing many people great concern. I shall look at Hansard very carefully. I hope that, in the meantime, the Government—if not the Minister, perhaps the noble Baroness, Lady Hollis—will provide more answers to our questions before the next stage. With those comments, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 98 to 101 not moved.]

Clause 102 agreed to.

6.45 p.m.

Lord Sainsbury of Turville

moved Amendment No. 102: After Clause 102, insert the following new clause— INVIOLABILITY OF MAILS (" . — (1) Subsection (2) applies to—

1. (a) a postal packet,
2. (b) anything contained in a postal packet, and
3. (c) a mail-bag containing a postal packet,

which is not the property of the Crown but which is in the course of transmission by post. (2) Anything to which this subsection applies shall have the same immunity from—

1. (a) examination, or seizure or detention, under a relevant power conferred by virtue of this Act or any other enactment,
2. (b) seizure under distress or in execution,
3. (c) in Scotland, any diligence, and
4. (d) retention by virtue of a lien,

as it would have if it were the property of the Crown. (3) In subsection (2) "relevant power" means any power other than—

1. (a) a power conferred by section 47 so far as it is exercised for any purpose connected with the investigation of an offence under section 6 or any proceedings for such an offence,
2. (b) a power conferred under section 49,
3. (c) a power conferred by an enactment relating to customs or excise in its application, by virtue of section 103 or any regulations made under that section, to goods contained in postal packets, or
4. (d) a power conferred by section 104 or 105.

(4) The Secretary of State may by order modify subsection (3)."). On Question, amendment agreed to.

Clause 103 [Application of customs and excise enactments to certain postal packets]:

Lord Sainsbury of Turville

moved Amendment No. 103: Page 62, line 20, leave out ("other country") and insert ("country or territory outside the United Kingdom"). The noble Lord said: This group of amendments includes a number of minor drafting amendments to the Bill; the extension of certain provisions in the Bill to the Isle of Man and the Channel Islands; and an amendment to enactments and repeals of existing legislation. I beg to move.

On Question, amendment agreed to.

Baroness Miller of Hendon

moved Amendment No. 104: Page 62, line 25, at end insert— ("( ) Nothing in this section or any of the enactments referred to in subsection (1) shall be taken to authorise the imposition of any obligation upon a particular postal operator or class of postal operators in a manner which—

1. (a) imposes an undue financial or administrative burden on that postal operator or class of postal operators; or
2. (b) otherwise distorts competition in the provision of postal services.").

The noble Baroness said: This is a short probing amendment. I hope that the Minister is able to give me some information because it is a very important matter. Its purpose is to elicit from the Government a clear commitment that when applying any Customs legislation the Customs and Excise will provide a level playing field among postal operators, either providers of a universal postal service or licensees. There has to be a guarantee that competition will not be distorted, either accidentally, or deliberately by selectively imposing controls and regulations on certain operators or certain classes of operators.

No VAT is paid on postage by the sender of mail. VAT is paid by the courier services on their charges for domestic and EU movements, although international movements are free of VAT. I am not advocating the charging of VAT on postage, or the reduction of VAT levied on the courier companies, even if any of them become licensees or universal postal service providers. That is something that they have hitherto had to contend with and have none the less been able to compete with the Post Office. However, there is what the industry itself describes without exaggeration as a potential disaster looming in the United Kingdom parcel industry.

With effect from July— just over a year away from now—Customs and Excise intend to introduce a new electronic export system, which will completely change how parcel operators will be required to work. At present, they are using a paper-based system. Shipments are keyed into a computer and shipping manifests are then printed out. These printed manifests are presented to Customs at the export airport. Customs scan the manifests, select anything that they want to examine, and allow the rest to go on their way. Then within 14 days the shipping company has to provide a detailed schedule for schedulef for all shipments valued valued at more than £600.

The drastic change that Customs are proposing is that all shipments will have to be declared pre-shipment to the Government's computer. There is also a proposal for the declaration to include an eight-digit tariff code. That is not to be mandatory— at least, not for the moment— but Customs and Excise have said that without it the clearance of shipments may be delayed to allow for manual scrutiny of the data. Therefore, in order to obtain quick clearance— or, putting it another way, to avoid the delay of shipments— highly skilled staff will be required to select the correct code for each item out of thousands of possible codes and to import them on to the forms. I should tell the Minister that I was faxed such a form and believe that it would be a nightmare to deal with it all properly.

It involves every item that is being exported. The encoding will in any case delay dispatch and mean that very late pick-up from customers will become impractical, resulting in a much poorer service. In addition, a message will have to be sent for every shipment when the goods arrive at the airport, followed by a later one when the goods have gone on. And, as though that is not enough, a full declaration has to follow, with details of high-value shipments.

The industry claims that this massive increase in red tape will be catastrophic, first, on the ground of cost. Each declaration will cost approximately 20p per item. That is because, in order to comply with the demands of Customs and Excise, carriers will need to create an export brokerage department to make the entries and to include the tariff codes. Secondly, no shipments will be able to move from warehouse to airport, or from airport onwards, until positive clearance has been received from the Customs computer. Keying in that information will take a considerable amount of time, thus delaying all the traffic and necessitating an earlier pick-up.

The four major operators in this field estimate that to implement and operate the new system will cost them no less than £5 million a year. And that is without counting the cost of lost business if the carriers have to pick up earlier in the day and the delay while all the data is entered on to the computers.

The industry provides a vital service in the form of guaranteed deliveries of time-sensitive material—for example, material dispatched from the United Kingdom to reach destinations in the USA the next morning by the start of their working day. The point is that this procedure, with all the risks of delay, does not now and will not in the future apply to the Post Office or to Parcelforce. In other words, the Bill, which is to create competition, will be anti-competitive in this area.

The dice are being deliberately loaded against the independent operators. The excess cost and delay will inevitably fall on our exporters to the detriment of the economy. Furthermore, some of the smaller operators will have to go out of business because of the cost, the problem of recruiting skilled staff and the disproportionate management burden that the new system will impose upon them.

It is difficult to see to what end the requirement is directed, except to enable Customs and Excise to claim that they have modernised—and that seems to be an in-word. During our debates on the Bill we have spoken of competition and I know that Members of the Committee will accept that we have done our best to protect the Post Office in those areas in which it should be protected. The previous amendment showed that most clearly. However, the other side of the coin is to make it competitive for other operators to come in, and to benefit the Post Office, too, so that they can compete with postal companies across the world. But with obligations on one side and not on the other, that is difficult.

I cannot see that the provision would produce an extra penny in revenue or detect one extra restricted export. Customs and Excise have recently stated that under the new system there will be no more examinations than under the current system of spot checks. Customs and Excise will continue to depend on what the dispatching company tells them its customers have told it. The fact is that at the moment the Post Office enjoys exemption from these declarations, or a more favourable regime in relation to them. And it will continue to do so. It is being given an unfair advantage; that is, a reduction in costs and the possibility of avoiding delay which the present independent operators will have to put up with.

The amendment, which I have described as probing, requires a specific answer to the specific problems that I have outlined. I and the industry, which is vital to our export trade, await to hear what the Government will do to prevent it being severely harmed for no other purpose, it would seem, than to facilitate the administrative procedures of the Customs and Excise. Perhaps the Minister will explain that and why the requirement should not apply to everyone or to no one. I beg to move.

Lord Borrie

The noble Baroness, Lady Miller of Hendon, has made a powerful case which needs an answer. I naturally prick up my ears when I hear the phrase "distortion of competition" and there appears to be a legitimate concern. However, because both the noble Baroness and I are so keen to hear the answer, I shall not stand further in the way of the Committee hearing the Minister's response.

Lord Sainsbury of Turville

Customs have no wish to impose undue financial or administrative burdens on anyone or distort competition. However, it must be recognised that the nature of the business and the type of traffic of a particular postal operator in the future may be very different from traditional postal traffic as currently handled by the Royal Mail and Parcelforce. For example, a good proportion of international postal packages are gifts between family members where delivery is not usually time critical. There is a big difference between this and regular commercial traffic paying a premium rate for speedy delivery.

Operators might well be upset if Customs decided to treat the two types of traffic in exactly the same way. Customs must have the freedom to vary the arrangements to meet the needs of the traffic and to deal with the different risks posed.

This is an international issue. A study by the World Customs Organisation, the Universal Postal Union and the International Express Carriers Conference is currently being undertaken to compare the procedures for postal and express carrier traffic. We need to await the outcome of that study.

Furthermore, it is not at all clear that there is unfair treatment and that a competitive advantage is being given to the Post Office. Express parcel operators have a major advantage in terms of speed of clearance. Their packages are cleared automatically unless Customs decide to examine particular items. Customs clearance is nearly always achieved within one hour. At postal depots dealing with Post Office mail, clearance of chargeable packages normally takes several hours and can take up to two or three days.

However, the subject is one of importance and we would not want to be unfair. Perhaps, therefore, I may take these detailed points away, discuss them with the Customs and Excise and write to the noble Baroness as soon as possible.

The Earl of Caithness

Before my noble friend withdraws her amendment, will the Minister take his answer a little further? He said that a report is being prepared and that we should await the outcome. When is the outcome due? If it is after the passing of the Bill, perhaps we should get on with the report now.

Lord Sainsbury of Turville

I cannot give a time. The work is being undertaken, but I was not suggesting that it would provide the answer. I was saying merely that it is an international problem and that there are differences between the two classes of business. For that reason, I believe that we should treat them differently. Whether the treatment given was fair was the issue I took away from the comments of the noble Baroness, Lady Miller, and it is that about which I shall speak to Customs and Excise: as to whether the current system appears to be fair.

Baroness Miller of Hendon

I thank the noble Lord, Lord Borrie, for his support of my amendment, and the support of my noble friend, requiring an answer from the review which is taking place. I am grateful for the answer and am satisfied that the noble Lord will take it up with Customs and Excise to find out why this is happening. It is to be hoped that that will resolve the problem. If not, of course, I can bring the matter back. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Sainsbury of Turville

moved Amendment No. 105: Page 62, line 29, after ("concerned") insert ("and in England and Wales and Northern Ireland may be so recovered"). On Question, amendment agreed to.

Clause 103, as amended, agreed to.

Clause 104 agreed to.

Clause 105 [Conditions of transit of postal packets]:

Lord Bach

moved Amendments Nos. 106 to 109: Page 63, line 27, leave out ("if necessary,"). Page 63, line 27, leave out ("in the post office"). Page 63, line 29, at end insert— ("( ) destroy or otherwise dispose of the packet."). Page 63, line 29, at end insert— ("( ) Subsection (1) is without prejudice to any other powers which the postal operator may have in relation to the packet (whether under the terms and conditions applicable to its transmission by post or otherwise)."). On Question, amendments agreed to.

Clause 105, as amended, agreed to.

Clauses 106 to 108 agreed to.

Lord Bach

moved Amendments Nos. 110 to 112.

After Clause 108, insert the following new clause— ("Postal and money orders EXCLUSION OF LIABILITY IN RELATION TO POSTAL AND MONEY ORDERS — (1) No proceedings shall lie or, in Scotland, be competent against the Post Office company for any loss or damage as a result of—

1. (a) a refusal by the Post Office company to pay a postal or money order which has been issued by it or a foreign postal administration, or
2. (b) a delay by the Post Office company in paying any such order.

(2) Where a postal or money order issued by the Post Office company is presented for payment in the United Kingdom by a banker to whom it has been delivered for collection, payment of the order to the banker discharges it. (3) Where a relevant uncrossed order issued by the Post Office company is presented for payment in the United Kingdom otherwise than by a banker to whom it has been delivered for collection, payment of the order to the person by whom it is presented discharges it. (4) A postal or money order issued by the Post Office company is discharged by the payment of the order outside the United Kingdom in accordance with arrangements made by the Post Office company in that regard. (5) Where a postal or money order issued by a foreign postal administration is paid by the Post Office company to a banker to whom it has been delivered for collection on behalf of a person other than the true owner of the order, the Post Office company shall not be liable to the true owner of the order by reason of having paid it to the banker. (6) Where a relevant uncrossed order issued by a foreign postal administration is presented to the Post Office company for payment otherwise than by a banker to whom it has been delivered for collection or the true owner of the order, payment of the order by the Post Office company to the person presenting it shall not make the Post Office company liable to the true owner of the order. (7) Any person acting as a banker in the United Kingdom who, in collecting in that capacity for any principal, has received payment from the Post Office company in respect of any postal order, or any document purporting to be a postal order, shall not incur liability to anyone except the principal by reason of having received the payment or having held or presented the order or document for payment. (8) Subsection (7) does not relieve any principal for whom any such order or document has been so held or presented of any liability in respect of his possession of the order or document or of the proceeds of the order or document. (9) In this section "relevant uncrossed order" means—

1. (a) an uncrossed postal or money order which—
1. (i) is expressed to be payable to a person specified or described in the order, and
2. (ii) is signed by or on behalf' of that person or purports to be so signed, or
2. (b) an uncrossed postal order which is not expressed to be payable to a person specified or described in the order.

(10) In this section and section (Recoupment of losses on wrongly paid money orders) "banker" includes a body which carries on the business of banking."). After Clause 108, insert the following new clause— SCHEMES IN RELATION TO POSTAL AND MONEY ORDERS ("— (1) The Post Office company shall not issue postal or money orders otherwise than in accordance with a scheme under this section. (2) The Post Office company may make a scheme under this section in relation to—

1. (a) the issue by it of postal or money orders,
2. (b) other services provided by it in connection with postal or money orders (whether orders issued by it or otherwise).

(3) A scheme under this section is a scheme for determining any or all of the following (so far as not otherwise agreed) —

1. (a) the charges which are to be imposed in respect of the services concerned,
2. (b) the other terms and conditions which are to be applicable to the services concerned, and
3. (c) procedures for dealing with the complaints of persons who use the services concerned.

(4) A scheme under this section may, in particular—

1. (a) adopt such system for the determination of the charges and other terms and conditions as the Post Office company considers appropriate (including determining them itself subject to any conditions and limitations provided for in the scheme),
2. (b) provide for the non-payment by the Post Office company after t he end of a specified period, except on satisfaction of specified conditions, of a postal or money order issued by that company or a foreign postal administration,
3. (c) specify the manner in which, time and place at which and person by whom the charges are to be paid.

(5) No provision may be made in any scheme under this section—

1. (a) for limiting the liability of the Post Office company for loss or damage, or
2. (b) for amending the rules of law relating to evidence.

(6) A scheme under this section shall come into force on such day as is specified in the scheme; but no day earlier than the day after that on which the scheme has been published in the London, Edinburgh and Belfast Gazettes shall be so specified. (7) A scheme under this section may—

1. (a) make different provision for different cases or classes of case determined by, or in accordance with, the provisions of the scheme,
2. (b) modify any previous scheme made under this section.

(8) Any charge payable by virtue of this section may be recovered by the Post Office company and in England and Wales and Northern Ireland may be so recovered as a civil debt due to it. (9) The production of a copy of any of the Gazettes mentioned in subsection (6) which purports to contain a scheme under this section shall be conclusive evidence in all legal proceedings of that scheme. (10) The Secretary of State may by order modify this section.") After Clause 108, insert the following new clause— RECOUPM ENT OF LOSSES ON WRONGLY PAID MONEY ORDERS ("— (1) Subsection (2) applies where—

1. (a) a money order issued by the Post Office company or a foreign postal administration has been delivered for collection to a banker, and
2. (b) the Post Office company has paid the order to the banker when it should not have done so.

(2) The sum paid may be deducted from sums subsequently falling to be paid by the Post Office company to the banker by way of payment of money orders so issued which have been delivered to the banker for collection."). On Question, amendments agreed to.

[Amendment No. 113 had been withdrawn from the Marshalled List.]

Lord Bach

moved Amendment 113A: After Clause 108, insert the following new clause— SPECIAL ARRANGEMENTS WITH OTHER COUNTRIES OR TERRITORIES ("— (1) References in sections (Exclusion of liability in relation to postal and money orders) (other than subsection (4)). (Schemes in relation to postal and money orders) and (Recoupment of losses on wrongly paid money orders) to money orders issued by the Post Office company shall be construed as including references to special money orders issued by that company. (2) For the purposes of subsection (1) special money orders are orders for the payment of money in the United Kingdom which are issued by the Post Office company in pursuance of an arrangement made with a government or postal administration of any other country or territory for the transmission, by means of orders for the payment of money, of sums of money through post offices under the charge of the Post Office company and the postal administration of the other country or territory. (3) The reference in section (Schemes in relation to postal and money orders)(2)(b) to money orders shall be construed as including a reference to orders for the payment of money issued in pursuance of an arrangement of the kind mentioned in subsection (2) above by the postal administration of the other country or territory."). On Question, amendment agreed to.

Clauses 109 and 110 agreed to.

Lord Sainsbury of Turville

moved Amendment No. 114: After Clause 110, insert the following new clause— RECORDS OF THE FORMER POSTMASTER GENERAL'S DEPARTMENT ("— (l) The Secretary of State may by order vest in the Post Office company such records of the department of the Postmaster General as—

1. (a) belong to Her Majesty in right of Her Majesty's Government in the United Kingdom, and
2. (b) are specified in or described by- the order.

(2) The Secretary of State may give such directions to the Post Office company as he considers appropriate for ensuring that any records so transferred to the Post Office company are available to the Crown for inspection and copying."). The noble Lord said: In moving Amendment No. 114, I speak also to Amendment No. 129. The new clause will recreate a power similar to that in Section 75(2) of the Post Office Act 1969 to enable the Secretary of State by order to vest in the Post Office company the property in the pre-1969 records of the Postmaster General and to give directions to the Post Office company in respect of making those records available to the Crown for inspection and copying. The order-making power in Section 75(2) of the 1969 Act has never been exercised, and so the vesting of the pre-1969 records remains an outstanding matter from the 1969 Act. As the Secretary of State would wish to consult before exercising such power, its provision is being carried forward in the Bill in order to preserve the Government's current position under the existing legislation.

The second amendment will bring both the new Consumer Council for Postal Services and the Post Office company within the scope of the Public Records Act 1958 when those bodies come into existence. It carries forward existing policy whereby the Post Office corporation and the Post Officer Users' National Council are subject to the provisions of the Public Records Act. I beg to move.

On Question, amendment agreed to.

Clause 111 agreed to.

Schedule 7 [Disclosure of information]:

Lord Bach

moved Amendments Nos. 115 to 117: Page 91, line 6, after ("State") insert (", the Treasury") Page 93. leave out line 8. Page 93, line 12, at end insert— ("( ) Sub-paragraph (1) is without prejudice to any other exception to paragraph 1(2)."). On Question, amendments agreed to.

Schedule 7, as amended, agreed to.

Clauses 112 and 113 agreed to.

Clause 114 [Orders and regulations]:

Lord Bach

moved Amendments Nos. 118 to 124: Page 67, line 16, leave out ("or 101") and insert (", 101 or 121"). Page 67, line 20, leave out ("or"). Page 67, line 20, after (" 93") insert ("or (Inviolability of mails)(4)"). Page 67, line 20, after (" 93") insert ("or (Schemes in relation to postal and money orders)(10)"). Page 67, line 23, leave out subsection (5). Page 67, line 32, after (" 101") insert (", (Inviolability of mails)(4)"). Page 67, line 34, after (" 102") insert (", (Schemes in relation to postal and money orders)(10)"). On Question, amendments agreed to.

Clause 114, as amended, agreed to.

Clauses 115 and 116 agreed.

Clause 117 [Interpretation]:

Lord Bach

moved Amendments Nos. 125 and 126. Page 68, line 13, at end insert— (""body" includes an unincorporated association,") Page 69, line 13, after ("collecting") insert (", sorting"). On Question, amendments agreed to.

Clause 117, as amended, agreed to.

Clause 118 [Index of defined expressions]:

Lord Bach

moved Amendment No. 127: Page 70, line 19, at end insert— ("Body Section 117(1)") On Question, amendment agreed to.

Clause 118, as amended, agreed to.

Clause 119 [General amendments and repeals]:

Lord Bach

moved Amendment No. 128: Page 71, line 24, at end insert— ("( ) Any amendment by that Schedule of an enactment comprised in subordinate legislation is without prejudice to any power to make further subordinate legislation modifying the amended enactment."). On Question, amendment agreed to.

Clause 119, as amended, agreed to.

Schedule 8 [Amendments of enactments]:

Lord Bach

I now wish to move Amendments Nos. 129 to 135.

Lord Skelmersdale

The noble Lord is a little previous and over-eager because one of those amendments stands in my name. Although we debated it earlier, the Government certainly do not want to accept it. Perhaps the Minister would like to rephrase his words.

Lord Bach

I thought it was worth a try!

Lord Bach moved Amendments Nos. 129 and 130

Page 93, line 24, at end insert— ("Public Records Act 1958 (c.51) .In Schedule 1 to the Public Records Act 1958 (definition of public records), in Part II of the Table which is at the end of paragraph 3, there shall be inserted at the appropriate places— Consumer Council for Postal Services Post Office company (within the meaning of Part IV of the Postal Services Act 2000).""). Page 93, line 29, at end insert— (". In that Schedule to that Act the reference to the Postal Services Commission shall be construed as a reference to the Commission established by section 1 of this Act."). On Question, amendments agreed to.

[Amendment No. 131 not moved.]

Lord Bach

moved Amendments Nos. 132 to 135: Page 94, line 12, at end insert— (". In Part II of Schedule 1 to the Act of 1975 the reference to the Postal Services Commission shall be construed as a reference to the Commission established by section 1 of this Act."). Page 95, line 25, at end insert— ("Value Added Tax Regulations 1995 (S.1.1995/2518) . In regulation 2 of the Value Added Tax Regulations 1995 (interpretation) in the definition of "datapost packet" —`

1. (a) for the words "the Post Office" there shall be substituted "the Post Office company",
2. (b) after "a post office" there shall be inserted "of the Post Office company", and
3. (c) after "United Kingdom", where it appears for the fifth time, there shall be inserted "by that company".").

Page 95, line 41, at end insert— ("Local Government and Rating Act 1997 (c.29) . In Schedule 2 to the Local Government and Rating Act 1997, in paragraph 3(4)(a) (relief from non-domestic rates for rural post offices) for the words from "the Post Office" to "1953)" there shall be substituted "a universal service provider (within the meaning of the Postal Services Act 2000) and in connection with the provision of a universal postal service (within the meaning of that Act)"."). Page 95, line 41, at end insert— ("Postal Services Regulations 1999 (S.I. 1999/2107) . In Regulation 2(1) of the Postal Services Regulations 1999 (designation of Secretary of State and Postal Services Commission as national regulatory authorities for the postal sector in the United Kingdom) the reference to the Postal Services Commission shall be construed as a reference to the Commission established by section 1 of this Act."). On Question, amendments agreed to.

Schedule 8, as amended, agreed to.

Schedule 9 [Repeals and revocations]:

Lord Bach

moved Amendments Nos. 135A to 138: Page 96, line 3, at end insert—

("10 & 11 Geo.5 c. 75.

Official Secrets Act 1920.

Section 5.")

Page 96, column 3, leave out lines 4 to 13 and insert ("The whole Act."). Page 96, leave out lines 14 to 18. Page 96, line 18, at end insert—

("1967 c.13.

Parliamentary the Commissioner Act 1967

In schedule 2, the entries relating to the Post Office Users' Council for Northern Ireland, the Post Office Users' Council for Scotland, the Post Office Users' Council for Wales and the Post Office Users' National Council.")

On Question, amendments agreed to.

7.15 p.m.

Lord Skelmersdale

moved Amendment No. 139: Page 96, line 22, column 3, leave out ("Sections 6 to") and insert—. (" Section 6. Section ") The noble Lord said: I had hoped that I would not have to move the amendment, having been persuaded by the Government Chief Whip. However, in discussion on the matter earlier, I failed to pick up a point to which I should have known the answer. Since the Minister is going to write to me, rather than waste time today, perhaps he will reply to this point in the same letter.

The point in question is that Section 6(4) of the Post Office Act 1969, which is repealed by Schedule 9, authorises Schedule 1 to the 1969 Act. It is all very well to repeal the authorising section but the schedule will be a rogue animal on the statute book. Should not it be removed too? I beg to move.

Lord Sainsbury of Turville

I shall be happy to write to the noble Lord on this technical point.

Lord Skelmersdale

I thank the Minister. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Bach

moved Amendments Nos. 140 to 143: Page 96, line 32, column 3, leave out ("Section 74(2).") and insert— ("Sections 69 to 75. Sections 80 and 81.") Page 96, line 33, column 3, at end insert — ("Section 87.") Page 96, line 35, column 3, at end insert— ("Schedules 1 to 3.") Page 96, line 47, column 3, leave out ("Postal Services") and insert ("Post Office"). On Question, amendments agreed to.

[Amendment No. 144 not moved.]

Lord Bach

moved Amendments Nos. 145 and 146: Page 97, column 3, leave out lines 46 to 50 and insert— ("In Regulation 1(3), the definitions of "the 1969 Act" and "the 1981 Act". Regulation 2(2) and (3).") Page 97, line 52, column 3, leave out ("Regulation 4.") and insert ("Regulations 4 to 6."). On Question, amendments agreed to.

Schedule 9, as amended, agreed to.

Clauses 120 and 121 agreed to.

Clause 122 [Commencement]:

Lord Bach

moved Amendment No. 147: Page 71, line 43, leave out (" 108") and insert ("(Special arrangements with other countries or territories)"). On Question, amendment agreed to.

Clause 122, as amended, agreed to.

Clause 123 [Short title and extent]:

Lord Sainsbury of Turville

moved Amendment No. 148: Page 72, line 6, at end insert— ("(4) Sections 119(l) and 121 and this section, together with sections 114 and 117 so far as they relate to those provisions, extend to the Isle of Man and the Channel Islands (in addition to any provisions of this Act which so extend by virtue of subsection (2) above)."). On Question, amendment agreed to.

Clause 123, as amended, agreed to.

House resumed: Bill reported with amendments.

Lord Carter

My Lords, I am sure noble Lords are aware that my noble friend Lord McIntosh of Haringey is to move the Second Reading of the Television Licences (Disclosure of Information) Bill. As I speak my noble friend is in the Moses Room. He is capable of many things, as we know, but being in two places at once is not one of them. I think that it has been understood that we shall adjourn for pleasure for 10 minutes, until 7.25, so that the business in the Moses Room can be completed. We shall then continue with business in the Chamber. I beg to move that the House do adjourn during pleasure.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 7.15 to 7.25 p.m.]