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European Standing Committee C Debates

Community Postal Services

European Standing Committee C

Wednesday 4 April 2001

[Mr. David Amess in the Chair]

Community Postal Services

10.30 am

The Minister for Competitiveness (Mr. Alan Johnson): Thank you, Mr. Amess. It is a pleasure to serve under your chairmanship for the first time.

In 1997, the European Parliament and the Council agreed on a harmonised regulatory framework for postal services in Europe. Most significantly, the framework set a minimum requirement for a universal postal service and set limits to the services that could be reserved to universal service providers. The directive also set a timetable for the European Parliament and the Council to decide on further gradual and controlled liberalisation. The proposals issued by the European Commission last May give effect to that timetable.

In essence, the Commission has proposed that, from 2003, the limit to the services that may be reserved should be reduced from 350 g and five times the fastest standard tariff to 50 g and two and a half times that tariff. It has also recommended that outgoing cross-border mail and some specific services, including express services, should no longer be reserved and that there should be a review in 2004, leading to decisions in 2005 about the further liberalising steps to be taken in 2007. The Commission has also proposed that provisions for non-discrimination and transparency in tariff setting, avoiding cross-subsidy between reserved and other services, should be tightened up and that provisions for complaints procedures should be extended.

In December, the European Parliament proposed a number of amendments, including limiting the first step to 150 g and being less specific about the forward timetable after any review. The Telecommunications Council debated the draft directive in December, but failed to reach agreement. Several member states, in particular Germany, the Netherlands, Austria, Sweden and Finland, were willing to go further than the Commission proposals both in terms of the first step to be taken in 2003 and in wanting to achieve an end date for full liberalisation. Those who opposed the 50 g proposal included France, Greece, Italy, Luxembourg, Portugal and Spain. Several of those countries also have problems with the proposal on international mail. Belgium and Ireland, while favouring a lower first-step reduction, also wanted a final end date.

The UK supported the Commission framework and timetable to make a first significant reduction in 2003 and then to conduct a review before deciding the next steps to be taken in 2007. We said that although we believed that a reduction to 150 g could be achieved in 2003 without adversely affecting the universal service and the uniform tariff, we could not go further without the advice of our new postal regulator, the Postal Services Commission, known as PostComm.

The Committee will be aware of the Government's postal reforms. We have consistently supported the introduction of competition consistent with maintaining the universal service at a uniform tariff. An effective competitive environment can bring benefits of greater choice, higher quality and keener pricing for consumers, and can drive efficiencies and improve performance in competing companies. That is why we have set up an independent postal regulator, whose role is to protect and promote consumer interests and whose primary duty is to ensure the maintenance of a universal service at a uniform tariff.

The Post Office—now Consignia plc—no longer has a statutory monopoly, but since 26 March it has operated in an area of broadly equivalent scope under the terms of a licence issued by the Postal Services Commission. PostComm is also able to consider applications from other operators. In so doing, it must ensure that the universal service at a uniform tariff will not be undermined.

One of PostComm's key tasks is to make recommendations on how to introduce more competition, but because work is in progress, the Government have told the European Commission and other member states that, although we support the overall framework proposed by the Commission, we do not want to take a definitive view of the detail until we have the advice that we have commissioned from PostComm. We expect PostComm to address the important questions on the cost of the universal service and on how to ensure that it can continue to be financed in an increasingly competitive market.

The United Kingdom has a dynamic and increasingly competitive postal market, so it is in our interests to ensure that there is a level playing field in Europe. That is why we said that we want a significant increase in competition in 2003, consistent with maintaining the universal service at a uniform tariff, and a timetable for next steps, including a review before they are taken in 2007. To ensure that the steps that we take really represent a level playing field, we believe that the European Commission should examine the different regulatory frameworks in operation and the commercial provision to the public of non-reserved postal services.

We want more information from our regulator before we reach final agreement about the precise steps to be taken. Some details—the issue of special services and the size of the first step, for example—need to be resolved, but in principle we welcome the European Commission's initiative and proposals for a more competitive postal market in Europe. It will be a useful basis for determining a framework for future liberalisation of the postal services sector in the European Union, provided that appropriate safeguards are in place to maintain the universal service at a uniform tariff.

The Chairman: We now have until 11.30 at the latest for questions to be put to the Minister. They should be brief and asked one at a time, which should allow ample opportunity for hon. Members to ask several.

Miss Anne McIntosh (Vale of York): It is a great pleasure to serve for a second time under your chairmanship, Mr. Amess. I welcome the Minister's introductory statement. Will he shed light on when he expects to hear from the regulator?

Mr. Johnson: The timetable from the regulator suggests that it should provide us with its advice and the new level of the domestic reserved area in late summer.

Miss Geraldine Smith (Morecambe and Lunesdale): If full liberalisation of postal services takes place too quickly, what will be the implications for universal service providers and for my constituents who live in rural areas and depend on postal services? Will costs on them increase?

Mr. Johnson: Those are the major concerns. We must consider not only universal service, but universal service at a uniform tariff. The uniform tariff is not common throughout Europe. Spain has never had it and Sweden has abandoned it, to all intents and purposes. We intend to protect it, as it is important for consumers everywhere, especially in rural areas. For that reason, we agree that we should move to liberalisation carefully and ensure that, at every step, we review the situation so that the provision is not damaged. There are huge implications for people in rural areas. In some countries that have moved on liberalisation too quickly, evidence shows that doing so has adversely affected services offered to rural communities.

Mr. David Heath (Somerton and Frome): It is a pleasure to serve under your chairmanship, Mr. Amess, for, I think, the first time.

The Minister said that Sweden had abandoned a uniform tariff, to all intents and purposes. Given that the demographic distribution of population is even more extremely polarised in Sweden than in Britain, what have been the consequences in terms of increased tariff in its more rural areas? Might lessons from Sweden be applied to Great Britain?

Mr. Johnson: In Sweden, a uniform tariff applies to domestic users, but bulk mail is zonally priced. That has affected the uniform tariff. Costs have increased, some of which the Swedish Government attribute to the imposition of 25 per cent. VAT on postal tariffs, and the Swedish consumers' body has said that service has worsened. The country provides an important lesson as to how we deal with the issue domestically.

Mr. Keith Darvill (Upminster): This is the third time that I have served under your chairmanship in about as many days, Mr. Amess.

Will my hon. Friend the Minister tell the Committee about arrangements to study the impact of information and communications technology? The possible effect on universal postal services could be quite severe. We are in an important decision-making period and the Government and PostComm should take into account changes in information and communication technology; they may have more impact than in the past.

Mr. Johnson: That is one of the major tasks of PostComm. New information technology is one of the three challenges for postal services across the world, the other two being liberalisation and globalisation. Mail is still forecast to grow Europe-wide by between 2 and 3 per cent. a year. The most common message in e-mails is still, I think, a request to send something by post. The new developments are not entirely to be considered as a threat; they present opportunities too. However, the issue that my hon. Friend identifies is important, and provides one reason for the view taken by PostComm when it responded to an inquiry from us, before the Council of Ministers meeting on 22 December. PostComm stated that although it was relaxed about the prospect of a reduction of the limit to 150 g and confident that it would not damage the universal service at a uniform tariff, it wanted to do more work before it could be confident that a further reduction would not diminish and threaten the universal service.

Mr. Tim Loughton (East Worthing and Shoreham): I am a virgin as far as your chairmanship goes, Mr. Amess, but I welcome the opportunity to serve under it and look forward to doing so in future.

I welcome the Minister's statement, but will he provide further details about the comparable costs of universal rates on the continent and how the UK charges rate in that context? Also, I gather that in countries such as Belgium, differential rates apply depending, for example, on the shape of letters. How much are matters on the continent confused by considerations other than weight and price?


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