House of Lords - Explanatory Note
Postal Services Bill - continued          House of Lords

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Clause 44: Review and information

62. Clause 44 requires the Commission to keep under review and collect information about the provision of postal services in the United Kingdom, other member States of the European Community and elsewhere in order to facilitate the exercise of its functions.

63. It also provides for the provision of information, advice and help to the Secretary of State regarding any matter in relation to which the Commission has a function; and for the collection of such information as is necessary for it to comply with a requirement of the Council under clause 58(1).

Clause 45: Annual and other reports: the Commission

64. The Commission is required to make an annual report to be sent to the Secretary of State and published. Clause 45(2) specifies what the report should include. The Commission also has the power to make other reports in respect of its functions.

Clause 46: Publication of information and advice: the Commission

65. Clause 46 allows the Commission to publish information and advice to universal service providers, licence holders who are not universal service providers and users of postal services. The Commission is required, so far as practicable, to ensure that any such publication does not seriously and prejudicially affect a person's interests or, if it does, that publication is in the public interest.

Clause 47: Power of the Commission to require information

66. Clause 47 provides powers for the Commission to require information and documents for any relevant purpose, as defined in subsection (6). But no person may be required to provide information or documents which he could not be compelled to produce or supply in evidence in civil proceedings before the court.

Clause 48: Information powers: enforcement

67. Clause 48 makes it an offence for a person, without reasonable excuse, to fail to provide information and documents required by a notice under clause 47. An offender is liable on summary conviction to a fine not exceeding level 5 on the standard scale. Under subsection (4) it is an offence for a person to alter, suppress or destroy documents which he has been required to produce, or knowingly or recklessly to make a false statement.

Clause 49: Powers of entry and seizure

68. Clause 49 provides a power of entry and seizure where, on an application by a constable or the Commission, a justice of the peace or sheriff is satisfied that there are reasonable grounds for suspecting that a person has committed an offence by providing a postal service when they are neither licensed nor permitted to do so. A warrant may be issued for an appointed person to enter premises, search for articles or documents, and seize and remove items. In order to respect the principle of the inviolability of the mail, the power to seize documents does not extend to items of mail. The clause also sets out procedures and powers in relation to the use of a warrant.

Clause 50: Codes of practice

69. Clause 50 provides that the Commission shall prepare, and may revise, a code of practice governing the discharge of its functions. In preparing or revising the code the Commission shall consult the Secretary of State, the Council, universal service providers, licence holders who are not universal service providers, and such other persons as the Commission considers appropriate. The code and any revisions must also be published.

Clause 51: Relevant postal issues

70. Clause 51 lays the foundations for setting out the functions of the Consumer Council for Postal Services by defining the postal issues and services that are to be covered. Relevant postal issues are defined by reference to relevant postal services. Relevant postal services are confined to those provided by universal service providers in connection with the provision of a universal postal service or services provided by licence holders in accordance with a licence under Part II.

Clause 52: Provision of advice and information to public authorities and licence holders

71. Clause 52 gives the Council the duty of providing advice and information, representing the views of users in relation to relevant postal issues and making proposals on relevant postal issues to the Secretary of State, the Commission, the Competition Commission, other public authorities, universal service providers, licence holders who are not universal service providers and any person whose activities may affect the interests of users. Subsection (3) requires the Council to secure as far as practicable that no information is disclosed to a licence holder or person whose activities may affect the interests of users under this clause which might seriously or prejudicially affect the interests of the person to whom it relates (unless that person consents).

Clause 53: Publication of information to users

72. Clause 53 requires the Council to make available and gives it power to publish information for users of postal services about relevant postal issues and services, and the Council itself and its functions. It includes a similar provision about disclosure of information to that in clause 52.

Clause 54: Exercise of functions: general

73. Clause 54(1) requires the Council to have regard to the interests of different users of relevant postal services including the interests of users in different areas.

74. Subsection (2) requires the Council to have regard to the interests of certain specified groups. The specified groups are qualified to make clear however, that this is not intended to be an exhaustive list and it should not be taken as implying that regard should not be had to the interests of other descriptions of persons.

75. Subsection (3) requires the Council, as far as practicable, to collect and review information about the provision of postal services and the interests and views of users and matters affecting them.

76. Subsection (4) requires or allows the Council to set up certain committees. It requires committees to be set up for each of Wales, Scotland, and Northern Ireland and allows for committees to be set up for England and areas within England, Wales, Scotland, and Northern Ireland.

77. Subsection (5) sets out the purposes of a committee established under subsection (4), which are to provide advice and information to the Council about relevant postal issues affecting the area for which it is established and such other purposes as the Council may determine.

78. Subsection (6) requires the Council to maintain in each of England, Wales, Scotland, and Northern Ireland at least one office where users can apply for information.

Clause 55: Annual and other reports: the Council

79. Clause 55 requires the Council to make an annual report to be sent to the Secretary of State and published. The Commission also has the power to make other reports in respect of its functions. So far as practicable, the Council should exclude from the report information about a person which might seriously and prejudicially affect that person's interest (unless that person consents).

Clause 56: Complaints referred to the Council

80. Clause 56(1) provides that the Council shall investigate complaints by or on behalf of users of relevant postal services as it thinks appropriate if:

  • the matter has previously been the subject of a complaint to a person providing the services concerned and has not been satisfactorily resolved, and

  • it does not appear to the Council to be of a frivolous or vexatious nature.

81. Subsection (2) requires the Council to refer any complaint to the Commission if, as a result of an investigation under clause 56(1) it considers that:

  • a licence condition may have been contravened

  • the matter is a referable matter (as defined in subsection (3) of clause 56)

  • it is appropriate to do so.

82. Subsection (3) requires the Council to agree with the Commission what are referable matters for the purposes of subsection (2)(b) above.

Clause 57: Power of the Council to investigate other matters

83. Clause 57(1) allows the Council to investigate any matter, not being a matter it has a duty to investigate under the terms of clause 56 which appears to it to relate to the interests of users of relevant postal services (defined in clause 51) or which relates to the provision of advice to the Commission about the number and location of public post offices.

84. Subsection (3) allows the Council to send reports on any matter investigated under subsection (1) to specified public bodies.

85. Subsection (4) allows the Council, subject to the requirements of subsection (5), to send reports on matters investigated to persons who the Council thinks might have an interest in these matters, or to publish a report in any manner the Council considers appropriate.

86. Subsections (5) and (6) require the Council, so far as practicable, to exclude from any report sent to any person or published under subsection (4), any matter which might seriously or prejudicially affect the interests of the person to whom it relates (unless that person consents).

Clause 58: Power of the Council to require information

87. Clause 58 gives the Council the power to require information which it may reasonably require in the exercise of its functions from the Commission, universal service providers, or other licence holders. The Commission or other persons specified in this section, may refuse to supply information to the Council under certain circumstances.

Clause 59: Provision of information by the Council to the Commission

88. Clause 59 gives the Council the duty to provide to the Commission information which the Commission may need in order to carry out its functions. But this duty is limited by the Secretary of State having the power to make an order specifying the conditions in which the Council may refuse to provide information to the Commission. If the Council refuses to supply information to the Commission, it must give notice to the Commission explaining why it has reached this decision. The Commission has the power to publish this notice.

Clause 60: Memorandum of Understanding

89. Clause 60 gives the Council and the Commission the duty to make arrangements on co-operation and exchange of information between them and on consistent treatment of matters which affect both of them, and also the duty to prepare a document setting out these arrangements (a Memorandum of Understanding; MoU). The Council and the Commission have the duty to send this MoU to the Secretary of State who has the duty to lay it before each House. The content of this MoU is entirely at the discretion of the Council and the Commission.

Clause 61: Forward work programmes

90. Clause 61 provides that the Commission and the Council shall publish forward work programmes before the beginning of each financial year with a description of the projects each intends to undertake during that year. Such descriptions need not include routine activities in exercise of their functions. The description of the projects shall cover the objectives and the estimated costs to be incurred during the year in question.

Part IV Reorganisation of the Post Office

Clause 62: Transfer of property etc. to nominated company

91. Clause 62 permits the Secretary of State, after consulting the Post Office, to transfer by order all the property, rights and liabilities of the Post Office to a company wholly owned by the Crown which has been formed under the Companies Act 1985. He may vary or revoke the order with a subsequent order before any transfer has taken place. Further provisions about the transfer are made in Schedule 3.

Clause 63: Government holding in the Post Office company and certain subsidiaries

92. Clause 63 requires the Post Office company or any of its wholly owned subsidiaries to issue securities (securities are defined in clause 82) upon the direction of the Secretary of State. Those securities shall, as directed by the Secretary of State, be issued to the Treasury or the Secretary of State, or to a person approved for the purpose of a disposal under clause 67, or to the Post Office company or a relevant subsidiary (as defined in subsection 8). Clause 79 has the effect that nominees may be appointed by the Treasury or the Secretary of State for the purpose of this clause. The Secretary of State's power to direct for the purpose of clause 67 ceases in the event that the Crown no longer wholly owns the Post Office company. Securities issued under this clause can be issued at such times and on such terms as the Secretary of State directs, but any shares issued will bear a nominal value, as directed by the Secretary of State and be treated as if fully paid for the purposes of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986. A relevant subsidiary is defined in subsection (8) as one which delivers or collects or sorts or transports relevant postal packets (of the type defined in clause 4) in the United Kingdom or which provides a registered postal service in the United Kingdom or any other subsidiary of the Post Office company which holds shares or share rights in, or is connected to, any such subsidiary. A subsidiary is connected to another for the purpose of the clause if it forms part of a chain of subsidiaries of the Post Office company, each holding shares or share rights in the other, which includes the relevant subsidiary.

Clause 64: Government investment in securities of the Post Office company

93. Clause 64 empowers the Treasury or the Secretary of State (with Treasury consent) to acquire any securities issued by the Post Office company (or its subsidiaries). The Secretary of State can only dispose of such securities with the consent of the Treasury. The Secretary of State does not require the consent of the Treasury for disposals permitted under clause 67. Clause 79 has the effect that nominees may be appointed by the Treasury or the Secretary of State for the purpose of this clause.

Clause 65: Restriction on issue of shares to third parties

94. Clause 65 prevents shares or share rights in the Post Office company or any relevant subsidiary being issued to anyone other than the Treasury and the Secretary of State (or any nominee of either of them), unless approval has been given by Parliament under the procedure set out in clause 67 to dispose of shares to a named third party. Subsection (2)(b) also permits shares or share rights in relevant subsidiaries being issued to the Post Office company or another relevant subsidiary of which the subsidiary concerned is itself a subsidiary.

Clause 66: General restriction on disposals of shares

95. Clause 66 prohibits the Treasury and the Secretary of State (or any nominee) disposing of shares or share rights in the Post Office company (or any relevant subsidiary) other than to each other, as permitted by subsection (3). However, the prohibition does not apply if the prior approval of Parliament has been obtained in accordance with clause 67. This follows the policy, set out in the Government's White Paper (Post Office Reform, cmnd 4340), that after transformation to a Companies Act company, the Post Office would remain Government-owned and shares would only be exchanged or sold in order to cement commercial strategic alliances.

96. Subsection (2) prohibits the Post Office company or any of its subsidiaries (or their nominees) disposing of shares or share rights in any relevant subsidiary (as defined in clause 65), though subsection (5) permits their disposal to the company or another subsidiary (or their nominees). Again in accordance with subsection (4), the prohibition does not apply if Parliamentary approval has been obtained under the procedure in clause 67.

Clause 67: Approved disposals

97. Clause 67 sets out the procedure to be followed in order to obtain the approval of Parliament to make share issues or disposals which would otherwise be prohibited by clause 66.

98. Subsection (2) specifies the minimum information to be contained in a motion to be presented for the approval of both Houses.

99. Subsection (3) sets out the conditions that must be met before a motion relating to the disposal of shares in the Post Office company may be moved, notably that the company has agreed to take part in a joint venture or other partnership which it considers to be in its commercial interests, which involves the issue or disposal of shares in the Post Office company. In addition the motion may not be moved unless the Post Office company has recommended to the Secretary of State that the disposal takes place, the Secretary of State is satisfied that the issue or disposal secures the proposed arrangement and that it is in the commercial interests of the company; and the Treasury has given consent to the proposed issue or disposal.

100. Subsection (4) sets out the pre-conditions to be met before moving a motion relating to issue or disposal of shares in a relevant subsidiary (as defined in clause 63) in order to enable the Post Office company or a relevant subsidiary to take part in a joint venture or other partnership. The pre-conditions are generally similar to those set out in subsection (3).

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

101. Clause 68 empowers the Secretary of State, with the approval of the Treasury, to lend to the Post Office in any currency once it becomes a company and authorises the necessary funds to be provided from the National Loans Fund. The clause provides for lending either to the Post Office company or direct to any of its subsidiaries on terms to be agreed (with the Treasury's consent) between the Secretary of State and the Post Office company/subsidiary, except that interest rates are to be as directed by the Secretary of State with the approval of the Treasury. The lending and issues from the National Loans Fund may be in any foreign currency if the loan is to be in that currency, as well as sterling. Any monies repaid to the Secretary of State in respect of interest or capital on the loan will be repaid into the National Loans Fund. The provisions of this clause make section 5 of the National Loans Act 1968 applicable to the rate of interest payable on loans and the rate will be subject to the requirements of that section.

Clause 69: Guarantees by the Secretary of State to the Post Office company and its subsidiaries

102. Clause 69 empowers the Secretary of State to give guarantees in respect of any financial obligation of the Post Office company or its subsidiaries. This power is taken because under Treasury guidance, it is usual practice for nationalised industries which are borrowing from non-Government sources (e.g. to provide an overdraft facility) to obtain a Government guarantee to secure the cheapest available funds for the public sector. However, this may not be appropriate in all circumstances, and it is not envisaged that this power would be used often in the Post Office's case. The Secretary of State must make a statement to Parliament about the giving of any such guarantees as soon as practicable after they have been given. If any payments are made by the Secretary of State under a guarantee, the Secretary of State will direct the terms (as to interest and capital) on which the monies are repayable by the Post Office company or, as relevant, by the subsidiary. At the end of any financial year in which any monies were paid by the Secretary of State in respect of a guarantee, a statement will be laid before each House of Parliament stating the sums paid. A statement will also be laid before each House after the end of each financial year regarding the amount of any outstanding debt or obligation which is the subject of the guarantee given by the Secretary of State. This will allow Parliament to be informed about the remaining risk under any outstanding guarantees. In addition, the statement laid must include any amounts received by the Secretary of State during the financial year concerned in repayment of sums, or interest on sums, paid by the Secretary of State in fulfilment of any guarantee given under this clause. The statement must also include any amount outstanding and unpaid at the end of the financial year in respect of the sums paid by the Secretary of State. This will allow Parliament to be informed of what has been paid back to the Government by the Post Office company or its subsidiaries in respect of any guarantees fulfilled by the Secretary of State and what amounts remain to be repaid. These statements will cover both the principal and the interest and are intended as an aid to public accountability.

Clauses 70, 72 and 74: Provisions about financial restructuring

103. Clauses 70 and 72 are intended to facilitate the restructuring of the balance sheet on 1 April 2002, as announced in the White Paper. The balance sheet will be restructured in order to place the Post Office company on a more commercial footing and allow benchmarking against its competitors. At present the Post Office holds on its balance sheet the government securities and deposits with the National Loans Fund (NLF) which represent accumulated reserves, in effect accumulated dividends, which were not payable to the Consolidated Fund.

104. Clause 70 empowers the Secretary of State with the consent of the Treasury by order subject to negative resolution procedure to cancel any liability of the Post Office company or any of its subsidiaries, including any in respect of sums paid in fulfilment of guarantees, but not principal of or interest on loans owed to the Secretary of State and payable into the National Loans Fund or any form of taxation duty or fine. The Secretary of State must consult the Post Office company before extinguishing any of its liabilities and must consult that company and the subsidiary concerned before extinguishing any liabilities of a subsidiary. However, the Secretary of State may by order repeal the section and it would be the intention to do so once the purpose of the clause is spent, i.e. the restructuring of the balance sheet of the Post Office company is complete.

105. Clause 72 empowers the Secretary of State, after consultation with the Post Office company and with the consent of the Treasury, to give directions to the Post Office company requiring it to allocate amounts to general reserves or to reserves for a particular purpose; and to reallocate those reserves to other specified purposes. The Secretary of State may also direct the Post Office company to cause any of its subsidiaries to create such reserves or to reallocate them for other purposes.

106. The Secretary of State may also direct how amounts allocated to a reserve are to be applied and may require such amounts to be paid out as if they were profits available for distribution within the meaning of section 263(1) of the Companies Act 1985 or Article 271(1) of the Companies (Northern Ireland) Order 1986 (distributions to be made out of profits). This provision therefore enables the Secretary of State to require the payment of dividends out of these reserves.

107. Subsection (4) provides that no reserve created under this clause shall count as an undistributable reserve for the purposes of section 264(3)(d) of the Companies Act 1985 or Article 272(3)(d) of the Companies (Northern Ireland) Order 1986 (restriction on distribution of assets). However, under subsection (5), amounts allocated to reserves, apart from any amounts which the Secretary of State has authorised to be applied as if they were profits available for distribution, shall be treated as if they were unrealised profits of the company (for the purpose of section 264(3)(c) of the Companies Act 1985 or Articles 272(3)(c) of the Companies (Northern Ireland) Order 1986). This means that the reserves created under this clause would only be distributable once the Secretary of State has given a direction requiring their application as distributable profit.

108. This clause enables the Government to extract as a dividend, payable to it and then into the Consolidated Fund, the Post Office company's holdings of government securities and deposits with the National Loans Fund which represent accumulated reserves.

109. Clause 74 gives the Secretary of State further powers for the purposes of restructuring the balance sheet of the Post Office company by April 2002 by injecting debt to create a commercial level of gearing and removing from it value representing reserves accumulated because the company could not as a statutory corporation pay government a dividend. It enables the Secretary of State to create debt owed by the Post Office company including debt in the form of debentures or bonds. These powers are only to be exercised after consultation with the Post Office company and with the consent of the Treasury. They are not limited to the time when the company is wholly owned by the Crown as the timing of restructuring in relation to any commercial partnering of the Post Office cannot be predicted and flexibility is required. However the Secretary of State may by order repeal the section and it would be the intention to do so once the purpose of the clause is spent, i.e. the balance sheet of the Post Office company has been restructured. The clause contains a definition of "debt securities" for the purpose of Part IV of the Bill and this includes debentures, bonds and loan stock.

Clause 71: Limit on lending and other arrangements

110. Clause 71 sets a limit of £5,000 million on the total of the Crown's financial arrangements with the Post Office company and any of its subsidiaries and defines what is to be included in the calculation of the figure. The Secretary of State may increase the limit set out in the Bill by an order approved by a resolution of the House of Commons. The limit is in part required in order to provide assurance to Parliament that the Post Office company and its subsidiaries are not being afforded unlimited access to the National Loans Fund. The limit also provides assurance that unlimited calls may not be made on monies to be provided by Parliament.

Clause 73: Statutory accounts of the Post Office company

111. Clause 73 provides for continuity in the business across the transfer from statutory corporation to public limited company by providing that the Post Office's closing accounts are in effect also the Post Office company's opening statutory accounts. The clause will mean that assets and liabilities of the Post Office are to be taken as transferred at the value given by the accounts of the Post Office for its last accounting year. It also means that anything done by the Post Office is treated for accounting purposes as if it had been done by the Post Office company. For example, the profits of the Post Office are carried forward and treated as profits of the Post Office company and the same would be true of losses, if there were any.

Clause 75: Dissolution of the Post Office

112. Clause 75 provides for the Post Office to continue in existence after the day of transfer of the business of the Post Office to the Post Office company, for a transitional period. It gives the Secretary of State the power to dissolve the Post Office by order, following consultation with the Post Office and Post Office company, once he is satisfied that nothing further remains to be done under paragraph 8 of Schedule 3.

Clause 76: Accounts of the Secretary of State in relation to loans

113. Clause 76 requires the Secretary of State, at the Treasury's direction, to prepare an account in the form required by the Treasury showing:

  • sums issued to him from the National Loans Fund for lending to the Post Office company and its subsidiaries;

  • repayments to him in respect of those loans and payments of interest on them; and

  • how he disposed of the sums issued to him for lending and of the repayments of and interest on loans made by him, the repayments and interest being payable by him into the National Loans Fund.

114. The account must be sent to the Comptroller and Auditor General by 30 November following the end of the financial year in question and he will examine, certify and report on the account and lay copies of it and his report before each House.

 
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Prepared: 20 April 2000