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Noble Lords: Hear, hear!

Lord Geddes: My Lords, there are two other matters with which I should deal before turning to the principal subject of the debate. First, in concluding the inquiry on which the report is based, the sub-committee received oral evidence from an unusually large number of overseas witnesses, including representatives from three other Community post offices and two different branches of the Commission. The assistance of those witnesses deserves full acknowledgement. The report is, I think, broader in its outlook as a result of their assistance.

Secondly, our thanks are very much due to our specialist adviser, Mr. Chris Nicholson of KPMG; and to our clerk, Dr. Andrew Mylne, and his secretary, Miss Valerie Bath. Without their joint and several efforts and expertise neither our deliberations nor the report would have achieved the very high standards that we believe they attained.

As I said, we heard evidence from two directorates general on the Commission's plans to harmonise and introduce common standards for Community postal services. The reason we felt that to be necessary was that we started our inquiry with two separate documents: a draft directive, which aims to lay down some new

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rules for the postal sector, and a draft notice, which is meant to provide guidance on how existing Community competition rules apply to the sector.

The sub-committee felt from the beginning of the inquiry that the combination of those two documents was not a happy one. That view was shared by many of our witnesses. The notice seemed to go much further than its stated purpose, laying down policy rather than merely interpreting the existing law. Many witnesses also found inconsistencies between the draft and the directive. Because of those problems we welcome the fact that the notice has now been suspended until the directive is issued.

The directive starts with two basic principles: that everyone in the European Community should have access to the same level of service and that such a universal service can be guaranteed only if national post offices are given some monopoly protection. Virtually everyone accepts those principles. The difficulty is that the countries of the Community vary widely in the services currently available and in the efficiency of their post offices. The different interest groups in the postal sector--post offices, unions, customers, governments and private operators--have different views on the crucial question of how much competition can safely be introduced into the sector.

The basic problem is simple. Some parts of a universal service are expensive to provide and this loss-making; others are cheap and therefore profitable. A single operator can only afford to provide a universal service if it can be sure of getting enough of the profitable business to offset the cost of providing a loss-making service elsewhere. There are also significant economies of scale. The sheer volume of mail that post offices' monopolies handle is an important factor in keeping costs down. Too much liberalisation carries the risk of letting private operators cream off all the profitable business, leaving post offices unable to provide a universal service at a price that everyone can afford. Too much monopoly protection risks denying other operators any commercial opportunity and denying customers the benefits of cheaper prices and improved service that a competitive market can bring. The liberalisers also point to the growing competition that postal services face from faxes and electronic mail, saying that a vigorous entrepreneurial approach is necessary if post is to keep its share of the communications market.

That, then, is the challenge the Commission faces with its draft directive. It was never going to be possible to please everyone. Nevertheless, much of what the Commission has proposed the committee welcomed and found sensible. First, there are rules governing the extent of the universal service and the quality of that service. Those are quite modest compared with the standards which the better post offices, our own included, already achieve. For example, the Commission proposal only requires post offices to collect and deliver once a day, five days a week and only demands that 80 per cent. of mail reaches its destination the following day. When not disrupted by strike action, the UK Post Office delivers six days a week, twice a day in most places and achieves well over 90 per cent. next-day delivery of first-class

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mail. Incidentally, only the UK Post Office within the Community offers two classes of mail. Other Community post offices are less efficient. For them the Commission standards are a tough challenge.

We conclude in the report that the Commission has, on the whole, struck a sensible balance so long as those universal standards are seen as a minimum by those post offices which already exceed them. There are other aspects of the directive which we regard as moderate and sensible; for example, rules requiring transparency of accounts and the establishment of independent national regulators.

The key aspect of the draft directive concerns the rules about which services can be reserved to those operators prepared to offer a universal service; in practice, national post offices. In other words, how much monopoly protection are they to be allowed? As I said, the aim is to introduce some liberalisation without jeopardising the financial viability of national post offices. The Commission wants to introduce liberalisation in two stages. The first opens to competition items of domestic mail weighing more than 350 grammes or costing more than five times the basic tariff. In practice, that leaves around 98 per cent. of domestic mail within the reserved sector. In the UK it will have virtually no impact since the Commission's price-and-weight threshold is roughly equivalent to the Post Office's existing monopoly limit of £1.

Also proposed for liberalisation at the first stage, which means six months after the directive is approved, is outgoing international mail. That will have no real effect as such mail is in practice already open to competition. The first stage of liberalisation, then, poses no great threat to the universal services. In fact the only witnesses who did not like it were those most enthusiastic for liberalisation and for whom the proposal did not go nearly far enough.

The real controversy arises over the Commission's second stage of liberalisation due to begin in 2001. That will open to competition incoming international mail and what is called "direct mail"--junk mail to most of us. Although we may curse the ever larger quantities of such post that lands on our doormats, it is a highly profitable part of post office business. Incoming international mail, though a small segment of the market, is also important. We heard many views on that crucial aspect of the Commission's proposal. In the end we concluded that those types of mail should not be liberalised. We felt that there was too big a risk that to do so would undermine the post offices' need to survive. We were also concerned that distinguishing the mail that is open to competition and the mail that is not by reference to its contents raises difficult problems of enforcement. How could we prevent mail that is supposed to be carried only by post offices from being diverted into liberalised mail streams?

Another issue that concerned us was that no one seemed very sure of the effects of the second-stage liberalisation. Yet the Commission--this is the crucial point--expects the member states of the Community to agree now that the second stage should go ahead just a few years after the first stage. The directive requires the

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Commission to conduct a review in 1998, but it will be for it alone to decide whether, as a result of that review, the second stage of liberalisation goes ahead as planned. We prefer a more open approach which would allow the whole Community to see the evidence before a decision is taken. In our view that is particularly important given that liberalisation measures are in practice irreversible.

The Government's response to our report was, unfortunately, received only three days ago and has not been discussed by the committee. My reaction to that response is therefore a personal one. It is pleasing that the Government agree with nearly all our recommendations but I am concerned by a paragraph which reads,

    "A start must be made on the liberalisation of European postal services and a clear timetable set for the second stage in order to ensure that the necessary re-structuring of some of the public postal operators takes place and that growth in the sector is stimulated. To achieve this there must be a compromise. We [the Government] believe that an efficient and competitive Post Office such as our own can accommodate liberalisation of direct mail in 2001 without a threat to the universal service. For these reasons the Government now believes that the right course is to strongly support"--

I hasten to add that I am in direct quotes and find myself unable to avoid splitting an infinitive--

    "the Italian Presidency's proposal".

That proposal is,

    "A review of the reserved area in 1998 with a view to further liberalisation but provision for direct mail to be liberalised in any event from 2001".

To elaborate, the Government believe that the right course is to support that proposal as a means of trying to reach political agreement in the Council. I understand that a Council of Ministers meeting was scheduled for yesterday. In her reply I ask my noble friend to advise the House of the outcome of that meeting in the context of our report and of this debate.

There is one other aspect of the directive that I should mention because I know it concerned many of us on the committee. I refer to uniform tariffs or, rather, the lack of any mention of them. As I said, the directive lays down very precise rules about what level of universal service must be available within each member state. But there is no requirement that everyone within that state should pay the same price for that service. Instead, the Commission merely says that postal services must be "affordable". Affordability of course is not defined, and is probably undefinable. We felt fairly strongly that that was not good enough. To most of us, I think, a universal service without a uniform tariff requirement is pretty meaningless.

In the course of our inquiry we heard much interesting evidence. In particular, I mention the witnesses from the Swedish and Dutch post offices. Those countries have gone further than most--the Swedes in particular--towards liberalisation. They are convinced that it can bring nothing but profit. I have to say, however, that we were not entirely persuaded. Sweden Post has no legal monopoly at all, so that in theory any rival can set itself up to cream off all the profitable mail. One such rival did appear in Stockholm for a while but never succeeded in making much profit.

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It does, to the best of our knowledge, still exist but has gone bust more than once and was, at least for a while, partly owned by the Swedish post office. So this is not a success story for competition.

Nor were we convinced that the Swedish case showed that monolopy protection was unnecessary. Sweden is smaller than the UK. It has a different population distribution; postal prices are significantly higher; and the level of service poorer. The Swedish post office also used fairly vigorous methods to see off its rival, including lowering its prices to Stockholm customers while keeping the same high prices for everyone else. In the process it got into trouble more than once with the competition authorities. So we did not feel, on reflection, that that was a route that either the UK or the Community should follow.

Our own Post Office, by contrast, comes out rather well from our report. We felt it combined efficiency and profitability with a higher level of service than in any other country. Significantly, perhaps, in view of recent events, that was a view that was persuasively argued not just by the Post Office itself, but also by the Union of Communication Workers. It, among other witnesses, impressed upon us the great dangers faced by competition from other means of communication. Its recent actions, sadly, seem almost calculated to persuade the Post Office's customers to use faxes and e-mail. In response, the Government seem ready to threaten to remove, temporarily or permanently, the Post Office's monopoly protection and let in the competition. We can only hope that common sense prevails on both sides. Postal services are vital to us all, for their social role as well as their economic importance. That is why we must take great care to ensure that changes to the rules under which they operate--whether those changes are proposed in Whitehall or in Brussels--are considered soberly and carefully and implemented gradually so that we can be sure they will not undermine the service that serves us well and which so many of us so often take for granted. I beg to move.

Moved, That this House take note of the Report of the European Communities Committee on Community Postal Services (10th Report, HL Paper 81).--(Lord Geddes.).

11.33 a.m.

Baroness Dean of Thornton-le-Fylde: My Lords, as a member of the committee, I am pleased to take part in the debate and also to commend the report to the House. It is regrettable that our chairman, the noble Lord, Lord Elibank, is unable to be with us because of ill health. I should like to join the noble Lord, Lord Geddes, in wishing him a quick recovery and return to the House. I should like also to support the noble Lord in his thanks, which he has put on the record, to our staff and special adviser. I should like equally to thank the noble Lord, Lord Geddes, who stood in for the noble Lord, Lord Elibank, at one of our meetings during the course of the review.

I am sure that when the noble Lord, Lord Elibank, reads in Hansard the noble Lord's presentation of the report to the House on his behalf he will be fully

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satisfied with the wide ranging comments made by the noble Lord, Lord Geddes. I, too, am satisfied. I would have said fully satisfied until he referred to the dispute--a point to which I shall come later. The noble Lord, Lord Geddes, has done the committee a good service in the way in which he presented the report this morning.

Of course our postal services in the UK and debate about them are not new. It is something which has been ongoing over the past few years. They have been extremely emotional debates on occasions and ones in which parties--the Government, in particular--have not always had their own way. It is a debate which is very much at the heart of our community. The very first paragraph of the report refers to the fact that changing the rules governing postal services is controversial. That may be an understatement.

The Post Office is a large industry. It is a large employer and a major public service. However, in major parts of our country it is also a social service, with the free delivery of prescriptions, rural buses provided by the Post Office, free services to the blind, and a whole range of services which a business person might say are not related directly to the delivery of mail.

The report shows that the committee took evidence from a wide range of providers of services, and those involved in the distribution and delivery of them, both from the Post Office and the private sector. It was that wide-ranging evidence and that contained in a number of presentations from users of the service that led the committee to conclude in paragraph 185:

    "The United Kingdom Post Office combines efficiency with a high level of service".

It is against that background that we need to judge the draft directive and the, fortunately now suspended, draft notice which have come from the Commission. I suggest that the key issues for the public in this country with regard to postal services are the same as they have always been: a universal service in these islands at a universal cost, irrespective of where one lives; to have deliveries as near as possible to the next day; for them to be as frequent as possible; and of course, at the cheapest possible price.

The efficiency of the postal services is central to the achievement of the public's wishes for good deliveries and a universal service at a uniform tariff. As the noble Lord, Lord Geddes, said, there are major differences between the UK and our partners in the Community in the whole area of efficiency, cost and universality.

The committee welcomes the Commission's decision to bring forward the proposals for postal services and the five declared aims of the draft directive. But in my view, and if noble Lords read the report, in the view of the report, the Commission has some of the framework and detail of the draft directive badly wrong. The first area is to use the telecom model of liberalisation, superimpose it onto postal services, and believe that it will work. I shall return to that point later.

The key issue addressed by the Commission is the universal service, which it accepts as necessary and which plays a central role in postal services in all nation states. However, the Commission does not deal with a

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uniform tariff, which is central. It is the other arm of having a universal service. In the draft directive the Commission proposes that the universal service be linked to one of two measures, and it puts forward both--five times the basic rate within a country which, in the UK would mean that the reserved universal area would be limited to a cost of £1.25--£1.30 from next month because of the Treasury's demand that the Post Office return more of its profits to it--or five times the basic rate, or 350 grammes. It is messy. One takes one or the other.

In Britain we have a limit of £1. The reserved services figure was set in 1981, and I gather today is worth about 88p. It has not been increased since 1981 and so its value has gradually reduced. I suggest, therefore, that the reserved services themselves de facto have reduced.

In that time there has been a 60 per cent. increase in mail and an increased delivery. Today in Britain more than 90 per cent. of first-class mail is delivered the next day. That is very different from the situation in Italy where it is approximately 14 per cent. How many of us still go abroad and find that we are back home before our families have received the postcards which we sent to them?

It is against that background that we must judge the draft directive and the suspended notice. In Germany, for instance, the reserved mail area equates to approximately £4.50 for the monopoly to be maintained against our £1. Indeed, fewer than 50 per cent. of the member states in the Community have a six-day delivery. In the rest there is a five-day delivery. We want to maintain our six-day delivery and many of us would like to see a return to a seven-day delivery.

Perhaps I may say as an aside that we have a home in Cornwall. Some years ago we received a card which was posted at 12 noon in Truro, some 20 miles away, and delivered at 3.15 that afternoon. My goodness, that was a good quality of delivery!

The omission in the directive to deal with a uniform tariff for the reserved area greatly flaws the proposal. The noble Lord, Lord Geddes, referred to that. That omission means that one could have a legal universal service requirement but could charge different tariffs in different parts of the country for that service to be provided. That is a great flaw in the draft directive and it must be addressed.

The Committee addressed that point by asking the Post Office for figures. We were told, "If we take the first-class letter here in the City of London, for instance, you could probably deliver it for 8 pence less than the 25 pence that is charged. But, of course, if you live in Scotland that same letter could cost between £2.50 and £3 to deliver". One of our committee members lives in Scotland and was horrified to hear that. I suggest that it is essential to maintain the universal delivery with the uniform tariff.

Most postal services in the Community are still within public ownership, albeit that some are at arm's length trading as agencies--in some instances agencies independent from the government. But we wanted to look at alternative models, which was why we looked, among others, at Sweden. Sweden stated that it did not

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have a monopoly in any area and had been deregulated in that sense. The report touches on the issue but perhaps does not go as far as I would. On closer looking we found that in Sweden it is a monopoly in name only. We found it impossible to find any functioning competitor to the Swedish postal services and therefore it is not an appropriate model with which to compare.

In New Zealand, the land of total deregulation, there is a charge of 40 New Zealand dollars for the delivery of mail in rural areas. I do not believe that we want that here. Indeed, in New Zealand it was proposed that, on the post office being privatised, the delivery payment in rural areas should rise to 80 New Zealand dollars a year. Unfortunately, that was at a time of a general election campaign and the government soon found that they had to run away from that proposal. However, it lifts the curtain on what can happen if one moves away from guaranteeing a universal service with a uniform tariff.

Of course, to believe that competition does not exist in the UK is wrong. It does exist in a whole range of postal delivery areas. One of the key new areas of competition is the new communications field on which the report touches. Fax transmission and e-mail are two such areas. I understand that 70 per cent. of all letters are processed by computer. How easy it is merely to press a key or to touch a switch to send that letter by e-mail rather than through the post. I suggest that that is a major area of competition.

The noble Lord, Lord Geddes, rightly touched on other areas of the second stage of development which cause us serious concerns and are referred to in the report. I mentioned the telecom liberalisation model as being one which we state in the report is inappropriate. However, the draft directive goes further in that. Taking that model, it suggests that the postal services should be four businesses: collection, sorting, transport and distribution. It states that a competitor should be able to latch into any of those four areas at a payment which is agreed--it does not say by whom--in order to use the postal service. In telecoms it is called interconnection and has caused a great deal of trouble in the privatisation. There have been major arguments about what the real costs should be and what should be paid to British Telecom. I gather that in the postal services it is called "downstreaming" and it is an area of major concern.

Finally, when we had completed our work, and were in the drafting stage of our report having agreed our conclusions, we learnt of the opinion of the Economic and Social Committee of the Community which had been consulted on the draft proposals. Its views are printed at the back of the report and are useful reading. Its views very much coincide with ours, approaching the issue from a different angle. I agree--it is a personal view--with that committee's opinion in paragraph 5.2.1 that as regards people employed in this whole sector:

    "Before any further moves towards liberalisation there should be a thorough investigation into the effects on wages and working conditions".

The noble Lord, Lord Geddes, at the end of his presentation referred briefly to the current postal dispute: the strike that took place during the past

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24 hours. I am pleased to hear that the Union of Communication Workers has stated that it does not intend to call any more strikes. It is not a matter that is before us today in the sense that we are discussing the report. Furthermore, I suggest that industrial disputes of that nature are never settled by a third party in the form of government intervening. I do not suggest that the Government have directly intervened, but it is down to the union and the Post Office to resolve the problem.

I too ask the Minister to comment on this week's reports about the proposed liberalisation, privatisation, of direct mail. It is an issue that we looked at and we do not support the privatisation of direct mail. We hope that, despite what we have read in the press, the Government will support that view. I shall listen with a great deal of interest to the Minister's reply. I commend the report to the House.

11.47 a.m.

Lord Bridges: My Lords, I thank the noble Lord, Lord Geddes, for the careful, admirable and impartial way in which he introduced the committee's report. We greatly regret that our chairman is not here to take part in the debate but I entirely agree that the noble Lord did admirably in his stead.

The Commission's proposals are in many respects unusual. First, they do not follow the customary trend which is common to so many Commission proposals by suggesting more measures of centralised control and ever more tightly regulated markets. Rather, the move suggested is in the opposite direction by seeking to promote deregulation and greater commercial freedom in postal services, a sector which is still owned by governments in every member state. Thus, the Commission's initiative may be said to be inspired at least in part by the privatisation initiatives of the Conservative Government of the past two decades.

The proposal is also unusual because the Commission does not, as is normal, present a united front. There is an evident difference of opinion between Directorate-General 13, which is responsible for telecommunications and postal matters and produced the draft directive, and Directorate-General 4, which is responsible for competition policy and which produced the draft notice. That difference of opinion was confusing not only to our sub-committee but to all member states which considered the document. I believe that some confusion remains despite the withdrawal of the draft notice.

A third unusual aspect of this subject is the current labour dispute in this country between the Post Office and its labour force. According to newspapers, the Government believe that they may have to introduce some of the measures which are discussed in our report. That factor makes this debate of greater topical interest than would otherwise have been the case.

The broad approach taken by the Commission is to introduce more competition into postal services in member states, particularly in some sectors such as direct mail which have hitherto been reserved to postal administration. The general attitude of the sub-committee, which I share, was to find that approach

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unsatisfactory because it proceeded on the basis of economic theory and tended to disregard the social consequences and benefits which flow from the kind of efficient universal service which we normally enjoy in this country.

I agree with that reaction. Having spent much of my life away from the home base and having depended greatly on the speed and regularity of postal communications within my family, it has meant a great deal to me, when living perhaps several hundreds of miles away from home in different parts of the country, to know that a letter posted at three o'clock on Sunday afternoon would normally reach me early the next day. There are few if any other countries in Europe where that can be depended upon. Yet surely that is part of life in a civilised country and society.

In our view, it would have been better for the Commission to have concentrated on improving postal services throughout Europe to the level which we enjoy here. Indeed, as has been remarked, some member states have inadequate postal services. When I lived in Rome some 10 years ago, it could take up to a week for a letter to go from one part of the city to another. I do not believe that the situation has improved much since.

In southern Europe, the main political importance of the post office is as a large employer of unskilled labour rather than as the provider of an efficient service for all citizens. I suggest that that would have been the right target for the Commission to aim at.

But even if some European postal services are slow and inefficient, they are still very important from a social viewpoint. That importance takes different forms in different countries. We all know what it means here and we are all aware of the contribution which a friendly postman may make to the life of a small community.

I give a different example. Some 30 years ago, when living in Greece, we spent a happy summer holiday on a remote island in the Cyclades. The postal service there was an eye-opener. Communication with the rest of Greece depended on the arrival of a steamer from Piraeus, a journey which took some 14 hours and reached its destination in the small hours. Nevertheless, the island postman was on hand and rowed out to the ship with a bag containing the outgoing mail, exchanging it for the incoming mailbag.

I should explain that the Greek word for postman taxidromos means the fast runner and the Greek word for post office, taxidromeion, means the fast-running department. But on an island like the one we were on which was rocky and hilly, the best way in which to proceed was on a donkey. Therefore, for the next six days the postman travelled around the island on his donkey visiting each settlement in turn. On arrival at a small hamlet, he would tie a donkey to a pine tree--once I actually saw a notice saying, "Do not park your donkey here"--take off his satchel and extract a post horn from it which he blew. All the inhabitants would then arrive and he handed out the mail to them. In general, the envelopes were perused with interest but also in general were handed back to the postman so that he could read the letter to the recipient. After a pause and much discussion, the recipients of the letters might

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then invite the postman to inscribe their replies in return for a bottle of fizzy lemonade. That was the procedure. At the end of the week, the postman travelled back on his donkey and handed in the outgoing mailbag to the steamer.

The point of the anecdote is to illustrate that the social service provided by the post in isolated communities is important and, for them, the liberalisation of direct mail would mean nothing at all.

In our society, direct mail is of course of great importance, particularly for those offering services and products and other means of introducing them to the public and to the market. There are other means of doing that by advertising in all its various and competitive forms. It happens that since our report was completed, I received a letter from an organisation representing such firms which regrets that the committee's report favours leaving the postal system in this country much as it is. The letter says that customers will not benefit from that and regrets that we did not address further the needs of the private sector.

I disagree with that view. Individuals are well served by the present system and most of us do not wish to be deluged with unsolicited mail, much of which is thrown away after the most cursory examination. That seems to me to be a colossal waste of resources and I have even sometimes wondered whether we should not reintroduce the 18th century system of a tax upon paper. That would at least spare some of our forests, save money on unnecessary imports of paper; economise on newsprint, reduce the size of newspapers, and help to restore the essential link between communication and thought which seems to me is too often lacking in our society.

There is also the point made by the Government--and it is important--referred to in paragraph 66 of the report that:

    "a degree of monopoly is needed to support the maintenance of the universal service and a uniform tariff structure".
The only exception which I should be willing to contemplate would be the provision of an express letter service which, exceptionally, our own Post Office has not provided in my lifetime to a high standard.

In contrast I could receive from my home in suburban Washington DC an express letter delivered by US mail even on a Sunday morning. That service was of a very high standard and was extremely useful. That would be an additional useful service for us to have here, particularly since the withdrawal of the old telegram service.

I hope that the investigations which we have made into this complex subject in a rather long report will help policy makers in this country and elsewhere in Europe. I do not believe that the Commission's proposals measure up to the needs of coming generations, partly because, as I said, it is too reliant on economic theory but also because it does not pay sufficient heed to the growing trend towards electronic communication. Just as the telephone has reduced dependence on mail in our lifetime, so surely will the fax and e-mail reduce it further in the next generation. All the witnesses from whom we heard concurred with that view. Therefore, a sounder approach might be to

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emphasise the role of governments and PTTs in providing and regulating a national and, perhaps eventually, Europe-wide network of high quality trunk cables with access for service providers at reasonable prices. That would be a more worthwhile contribution to our future communications needs rather than tinkering with the existing postal service on largely theoretical grounds.

11.58 a.m.

Lord Brabazon of Tara: My Lords, I join with other noble Lords in sending my best wishes to my noble friend Lord Elibank, the chairman of our committee, and I wish him a speedy recovery. I should also like to congratulate my noble friend Lord Geddes on stepping into the breach at short notice and on giving such a lucid description of our report. Following the speeches of the noble Baroness and the noble Lord, Lord Bridges, I shall be able to be brief.

It is timely that we discuss this report today because I understand that the Council of Ministers--and my noble friend Lord Geddes referred to this--discussed this issue only yesterday. I shall be extremely interested to hear from the Minister about what conclusions, if any, were reached on that issue.

I enjoyed sitting on the committee for this report. I found it extremely interesting. I found out many things which I did not know about the postal service and I was extremely impressed by a number of matters which I discovered.

As other noble Lords have said, it is important to remember that the postal service is an essential business tool for business customers in this country, but it is also an important social force for good, particularly for those people living in rural areas.

As a member of the committee, I was pleased when it became clear early on in our proceedings quite how good the British Post Office is compared with many others within the Community. That was a source of pride to me, and, I believe, to others as well.

The notice, which I now understand has been withdrawn--and I quote from paragraph 14 of our report--says that the task of public postal operators,

    "consists in the provision and the maintenance of a basic public postal service guaranteeing, at affordable, cost-effective and transparent tariffs, nation-wide access to the public postal network ... including ... accessible postal boxes [and] regular scheduled delivery rounds".
Those are facilities which we in this country already take for granted. It is unfortunate that we should happen to be debating such a report on the day of a strike; indeed, reference has already been made to that fact. I only have one point to make in that respect. The noble Baroness, Lady Dean, told us that the unions have said that there is no need for further strike action and that talks will be resumed for the time being. However, I believe that that was said on Wednesday, so I find it somewhat strange that we are having another strike today. I hope that it will be the last one and that agreement will soon be reached.

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There are two issues which arise from that industrial action. The first is something to which we make reference in our report; namely, the competition that is undoubtedly coming--and, indeed, has already come--from fax and electronic mail. I saw an advertisement in a newspaper only the other day which said, "If the post can't deliver, BT fax can". There is no doubt in my mind that such disputes are bound to encourage people to use alternative forms of mail transmission. Unfortunately for the Post Office, some of that business will not return and those people may continue to use fax machines, and so on. I do not know how much it costs, but I believe that it is a good deal cheaper than sending a first class letter.

The second aspect is the possible suspension of the £1 monopoly threshold. I hope that that does not happen. It would be unfortunate if it did. If it is to be suspended, I trust that that will be only a temporary measure. As I said, I hope that the dispute can be brought to a rapid conclusion. However, at the same time, I hope that nothing that is finally decided so far as concerns the directives or notice will remove the Government's right to suspend the monopoly if in fact there was a really serious long-term disruption to services some time in the future.

As well as being one of the most efficient in the Community, our Post Office is also one of those that offers the best value for money. If one looks at the table on page 48 of the second part of the evidence to our report, one will see that the cost of posting a letter within the EC to another Community country is 25 pence in this country and that that is the second cheapest rate after Greece. The noble Lord, Lord Bridges, has already referred to the Greek Post Office and perhaps, therefore, enough has been said on the subject. It compares very favourably with the price of 38.3 pence charged in Sweden which, allegedly, has a more liberalised system than we have.

I should like to make one further point in that respect. The table to which I referred does not use straightforward exchange rates; it uses purchasing power parities to give a more accurate comparison of the prices. I should point out to the House that that seems to me at any rate to put the prospect of a common currency and economic and monetary union somewhat further away than some people may think.

On the question of the reserved area, the Commission proposes price and weight thresholds. I believe that a single price threshold would be much easier to operate. As has been said, we have had a £1 limit in this country since 1981. That has worked well. Despite having reduced in real terms, it does not appear to have damaged the business of the Post Office. Moreover, it is probably one of the lowest within the European Union. Indeed, I saw from the table that many countries operate a weight threshold as high as 2 kilogrammes. I do not know how much a parcel of 2 kilogrammes costs to post, but I believe that it would be considerably more than £1.

There is another area where I seriously disagree with the Commission's proposals. It is a matter that has already been well addressed, so I can only endorse my agreement with what has been said. I refer to the absence of a uniform tariff. I cannot conceive of a universal service without a uniform tariff being anything other than almost meaningless. Indeed, the noble

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Baroness, Lady Dean, made that point extremely well. If we were not to have a uniform tariff, it might well cost £2 or £3 to send a letter from London to Scotland, whereas it would only cost 25 pence to send one from here to the City. The Commission tries to get round that with the word "affordability". But what is affordability? Is a £2 postal charge to Scotland affordable, or is it not? I fully endorse what has already been said on the subject.

The main question is whether such a universal service at a uniform tariff can be guaranteed unless the operator is allowed a monopoly. I do not believe that it can. Again, by way of a sort of compromise, the Commission proposes to impose a levy on other competitive operators to compensate the provider of the universal service. I believe that that would be very bureaucratic and not at all satisfactory, especially as far as we are concerned in this country.

If someone were to leave the Chamber at the moment and go out into the street, I would have a small bet with that person that, within five minutes, he would see at least half a dozen motor cycle couriers riding past, going about their business. Is the Commission really suggesting that all those motor cycle couriers should have to be registered, should have to produce returns of their business and, indeed, be obliged to pay some kind of levy if, of course, they are allowed to enter the reserved area of the market? I do not believe that that is a practical suggestion.

There is one further point that I should like to make on the question of private companies in this country operating outside the reserved area; like, for example, couriers. I received a letter from one of the companies concerned. It seemed to me to make a good point which I hope my noble friend the Minister will be able to address. At present, the Post Office is exempt from VAT on services which are outside the reserved area, but its direct competitors in the express distribution industry are subject to VAT. That does not seem to be fair.

In summary, I do not believe that we in the UK have much to fear from the first stage of liberalisation proposed which, after all, will only bring the rest of Europe into line with the good service that we already enjoy in this country. However, as regards the second stage--that is, direct mail and incoming cross-border mail--I believe, for the reasons that have already been given, that we should move forward with extreme caution; otherwise damage could be done to the universal service, and that is something that none of us on the committee would wish to see happen.

However, I would enter one caveat in that respect. If a post office is not offering the minimum acceptable service in terms of delivery and collection as laid down in the directive, I believe that it should be open to competition. I do not think that we would have much to fear in this country from that prospect, but there are other post offices which, after all, have an effect on the business that we do here which might. Having said that, I can only join other noble Lords in commending the report to the House.

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