HL Deb 16 December 2003 vol 655 cc1056-8

3.1 p.m.

Lord Roberts of Conwy

asked Her Majesty's Government:

What is their current policy on the liberalisation of postal services.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, under our reforms of the postal services market, we created Postcomm, and gave it a primary duty to maintain the provision of a universal postal service, subject to which it is also responsible for introducing more competition into the postal services market in the interests of consumers. Postcomm has developed a framework for the introduction of competition in three stages that started on 1st January 2003 and will lead to full market opening in 2007. Postcomm's key policy documents on market opening and licensing of operators can be found on its website.

Lord Roberts of Conwy

My Lords, I am grateful to the noble Lord for that enlightening reply, which is summed up in the phrase that he used, and which the Chancellor also used in a recent speech, when he referred to, "full market opening of postal services by 2009". How do the Government reconcile that policy with their manifesto commitment to high quality universal postal services in the UK? Are they taking steps to strengthen the delivery network that is so important to us all at this time of year?

Lord Sainsbury of Turville

My Lords, as part of our Postal Services Act 2000, we created Postcomm and gave it a primary duty to maintain the provision of a universal postal service, with all that that entailed. It is subject to that primary task that Postcomm is responsible for introducing more competition into the postal services market where it benefits consumers.

Lord Clarke of Hampstead

My Lords, is my noble friend aware of the regulatory results report, published in the summer by the Royal Mail? Those results show that, for letters weighing up to 100 grams, which is 75 per cent of the 82 million letters handled each day by Royal Mail, the Royal Mail lost £480 million. Does my noble friend agree that it would be totally unfair if under the Postal Services Act 2000, which requires the Post Office to take in the work of Royal Mail's competitors, the cost passed to the competitors was less than the cost to deliver? That would be terribly unfair and not competitive at all, but a burden on Royal Mail.

Will the Minister ensure that Postcomm, the regulator, is transparent in making its report on the amount that is being charged to competitors, and ensure that Royal Mail is allowed to charge a commercial rate to the competitors that it is likely to be subsidising?

Lord Sainsbury of Turville

My Lords, a final decision has not yet been taken on the question of access pricing, but Postcomm hopes to make an announcement on developments later this week. It published a draft determination on 19th May; unsurprisingly, there are differing views on prices of access. Postcomm proposes a price of 11.46 pence for the cheapest type of access to Royal Mail's network, but Royal Mail wants 20 pence. The aim of Postcomm in those circumstances is to arrive at a price that covers the company's costs and allows Royal Mail to make a modest profit.

Lord Razzall

My Lords, does the Minister not accept that this mini-debate demonstrates the problem—that there is a significant lack of clarity in who is responsible for postal services in the Post Office? Would he not agree that currently the Post Office has all the disadvantages and none of the advantages of the old nationalised industries, in that the Government claim the credit when things are going well but say that it is nothing to do with them when things go badly? Is this not a moment at which there should be greater transparency and clarity?

Lord Sainsbury of Turville

My Lords, one advantage of the system is that there is much greater independence and clarity. Postcomm must determine on the issue of access, which is how it should be; it is transparent and very open to the public.

Baroness Miller of Hendon

My Lords, would the Minister agree that the £161 million profit that the Royal Mail made in the last half of the year was mostly due to a penny increase in first and second class mail and an increase in the volume of letter post by 3 per cent over the corresponding period in the previous year? It was not exactly due to productivity. In those circumstances, would the Minister agree that, when the markets are liberalised, the Royal Mail will have to become much more productive to become a truly competitive and profitable company, as everyone in the House wishes?

Lord Sainsbury of Turville

My Lords, I agree, and I suggest that Allan Leighton, the chairman of the Post Office, made that very point in his interim statement, when he said that, the increase in profit from our letters operations did not come from cost savings but was largely due to the Royal Mail tariff increase in May, when First and Second Class basic postage prices rose by 1 penny, and increased revenue from economic growth. The Letters business therefore remains the segment where the biggest operational changes have to be made, yet it's the area where we have made the least progress in the Company's overall Renewal Plan". Clearly, there is still a great deal of work to be done in that area.

Lord Roberts of Conwy

My Lords, will the Government continue to resist the European Commission proposal that there should be VAT on state monopoly postal services?

Lord Sainsbury of Turville

My Lords, I believe that continues to be the Government's position, and that we continue to oppose any move on that front. If that is not the case, I shall write to the noble Lord with the exact situation.