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

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SCHEDULE 2

The Consumer Council for Postal Services

188. Schedule 2 sets out a series of detailed provisions regarding the membership and constitution of the Council.

189. Paragraph 1 provides for the membership of the Council. There must be a Chairman appointed by the Secretary of State. The Chairmen of the regional committees for Wales, Scotland and Northern Ireland are members by virtue of their office. The Secretary of State may appoint such other members as he may from time to time determine subject to consulting the Chairman before making any such appointments.

190. Paragraph 2 provides that the regional committees for Wales, Scotland and Northern Ireland shall consist of a Chairman appointed by the Secretary of State after consultation with the Chairman of the Council and other members appointed by the Council. It also makes provisions about the formation of regional committees and the appointment of the Chairmen.

191. Paragraph 3 provides that the Council in consultation with the Secretary of State shall decide the nature of any regional committee and makes provisions about the procedure for making changes to such a committee.

192. Paragraph 4 allows both the Council and any of its committees to establish other committees and that the members may include persons who are not members of the Council or of its committees and makes provisions about members vacating office.

193. Paragraph 5 provides that subject to this schedule the Chairmen and all members of the Council shall hold and vacate office in accordance with the terms of their appointments.

194. Paragraph 6 provides that the Chairmen and all members of the Council may resign by giving notice to the Secretary of State and provides that the Secretary of State may remove any Council member on grounds of incapacity or misbehaviour. It also provides that where a person ceases to be the Chairman of the Wales, Scotland or Northern Ireland regional committees then he shall cease to be a member of the Council. Previous service in any capacity on the Council does not disqualify someone from being appointed again.

195. Paragraph 7 makes provision for the Council to pay and remunerate its members. It also makes provision for the Secretary of State to authorise the Council to pay compensation where a person ceases to be a member where in his view there are special circumstances.

196. Paragraph 8 provides the Council with a duty to appoint a principal officer, and a power to appoint other staff, on such terms and conditions of service as the Minister for the Civil Service may approve.

197. Paragraph 9 provides for the Council's staff to be eligible for schemes under the Superannuation Act 1972. This allows staff to have pensions analogous to those of civil servants.

198. Paragraph 10 provides that the Council may regulate its own proceedings including its quorum.

199. Paragraph 11 provides for the authentication of the Council's common seal.

200. Paragraph 12 provides for a document executed under the seal of the Council, or signed on its behalf, to be received in evidence.

201. Paragraph 13 sets out the power of the Council to delegate to any member, or member of staff, of the Council or a Committee who is authorised for that purpose.

202. Paragraph 14 provides supplementary powers for the Council. It provides that the Council has power to do anything (except borrow money) which is calculated to facilitate, or which is incidental or conducive to, the performance of any of its functions.

203. Paragraph 15 provides that the Council must perform duties of a financial nature specified in notices from the Secretary of State which have been approved by Treasury.

204. Paragraph 16 requires the Council to prepare annual accounts that give a true and fair view of its financial affairs and for such accounts to be sent to the Secretary of State and laid before each House of Parliament.

205. Paragraph 17 provides that the Secretary of State may pay such amounts in respect of the expenses of the Council as he may determine.

SCHEDULE 3

Transfer to the Post Office company: supplementary provisions

206. Schedule 3 sets out a series of provisions regarding the vesting of property, rights and liabilities of the Post Office in the Post Office company.

207. Paragraph 1 provides that anything (including any legal proceedings) which is being done by or in relation to the Post Office immediately before the appointed day may be continued to be done by or in relation to the Post Office company after the appointed day. Anything done by or in relation to the Post Office for the purpose of the transfer to the Post Office company will, if it is in force immediately before the appointed day, have effect as if it were done by or in relation to the Post Office company in so far as that is required for it to have continuing effect after the transfer. The transfer to the Post Office company does not affect the validity of anything done by or in relation to the Post Office before the transfer.

208. Any agreement or any document which was made before the appointed day will have effect for the purposes or consequences of the transfer to the Post Office company as if any reference to the Post Office were references to the Post Office company and any references to an employee or other person serving the Post Office in a specified capacity were references to such a person as the Post Office company may appoint or, in default, to the officer who most closely corresponds with the original member or officer of the Post Office. Paragraph 1 is subject to any provisions made by or under this Bill.

209. Paragraph 2 provides for the Post Office company to be liable, as from the appointed day, for the pension arrangements of the Post Office. In particular, paragraph 2(1) imposes the Post Office's previous liabilities under the 1969 Act on the new Post Office company. Paragraph 3 confers similar powers in relation to the new Post Office company to those which currently exist in relation to the Post Office in respect of certain previous employees of the Cable and Wireless company. Paragraph 4 provides that certain moneys in the pension schemes which were provided under the Post Office Act 1969 are to be held by trustees - just as they are currently held by trustees. The Post Office's pension funds are currently held by a corporate trustee company (Post Office Pensions Trustees Ltd), and the Trustee Board operates independently of the Post Office. The effect of paragraph 4(1) is to permit such arrangements to continue. Paragraph 4(2) provides that the Trustees in office immediately before the "appointed day" will remain the Trustees after the transformation, and the trusts themselves will be equally unaffected in substance by the transformation. Paragraph 4(3) defines the boundaries of the trusts which are held within the ambit of these transfer provisions - it is drawn in such a way as to embrace all the current pension schemes.

210. Paragraph 5 provides that no relevant land right of third parties will operate or become exercisable by virtue of the vesting of the rights and liabilities of the Post Office in the Post Office company. "Relevant land right" is defined in paragraph (2). A relevant land right will have effect in the case of vesting of the rights and liabilities of the Post Office in the Post Office company as if the Post Office company were the same person in law as the Post Office and no transfer of land had taken place. Fair compensation will be paid by the Post Office company to any person having a relevant land right but who cannot exercise it because of the provisions in this paragraph. The paragraph makes provision for the appointment of an arbitrator to deal with any dispute over such compensation.

211. Paragraph 6 deals with any other rights or liabilities of a third party which were enforceable against or by the Post Office and which by virtue of the Bill have become enforceable against or by the Post Office company, and the value of any property or interest of the third party which is consequently reduced. "Third party" in this paragraph means any other person other than the Post Office and the Post Office company. Fair compensation will be paid by the Post Office company in such circumstances and any dispute as to whether and how much compensation should be payable, and provision is made for the appointment of an arbitrator.

212. Paragraph 7 provides that a person dealing with the Post Office company in respect of land transferred under clause 62 of the Bill shall not be bound or entitled to enquire whether Treasury consent to any previous dealing with the land was needed or, if it was needed, whether or not it was given. It re-enacts section 62 of the Post Office Act 1969 but modifies it to apply to the Post Office company.

213. The Post Office still owns much of the land purchased with Treasury consent. The proposed clause has the effect of allowing third parties to deal solely with the Post Office company in respect of dealings in land. It removes the burden on third parties to enquire whether Treasury consent was given in respect of past dealings in land and also provides protection in the unlikely event that Treasury consent was not given. The provision will remove the risk that dealings in respect of land between the Post Office company and third parties could be prejudiced.

214. Paragraph 8 provides for the transfer of any foreign property, right or liability.

215. Paragraph 9 defines "the transitional period" referred to in this schedule as the period of continued existence of the Post Office after the appointed day.

SCHEDULE 4

Transfer to the Post Office company: Tax

216. This Schedule sets out the tax provisions in relation to the transfer of property, rights and liabilities from the Post Office to the Post Office company. The effect of these provisions is to make the transfer tax neutral. They ensure that the Post Office company will not receive any tax advantage as a result of the transfer and equally ensure that the Post Office company does not suffer any disadvantage.

217. The Post Office is currently chargeable to corporation tax, as will the Post Office company. Paragraph 1 enables that, for the purposes of corporation tax, the Post Office company shall be treated as if it were the same person as the Post Office. It will ensure tax neutrality. The Post Office company will avoid charges to corporation tax resulting from the transfer of property, rights and liabilities from the Post Office. It will also allow the Post Office company the same tax reliefs as would have been available to the Post Office.

218. Paragraph 2 covers the treatment of any shares issued under clause 63 of the Bill. It enables such shares to be treated for the purposes of the Corporation Tax Acts as if they had been issued wholly for consideration of a subscription paid to the Post Office company of an amount equal to the nominal value of the share. Without this provision, shares would be deemed to be issued for no consideration with the consequence the issuing of the shares would be deemed to be a distribution which would attract a tax charge.

219. Paragraph 3 covers the treatment of any securities issued under clauses 63 or 74 of the Bill. It enables such securities to be treated for the purposes of the Corporation Tax Acts as if they had been issued for consideration of a loan made to the Post Office company of an amount equal to the principal sum payable under the security. If securities were issued for no consideration, interest payments by the company could be considered a distribution and attract a tax charge.

220. Paragraph 4 ensures that the existence or exercise of the powers of the Secretary of State under clause 62 of the Bill does not constitute or create arrangements within the meaning of section 410 of the Income and Corporation Taxes Act 1988. Without this amendment, there is the possibility that the Post Office company and its subsidiaries may not be able to obtain group relief from the time that arrangements are in place to transfer the Post Office subsidiaries to the company.

221. Paragraph 5 makes it clear that nothing in Part IV of the Bill and nothing done under it shall be regarded as a scheme or an arrangement for the purposes of section 30 of the Taxation of Chargeable Gains Act 1992. Without this provision, section 30 would confer on the Post Office company a tax free benefit as a result of the transfer of property, rights and liabilities from the Post Office which could give rise to an additional tax liability.

222. Paragraph 6 ensures that the Taxation of Chargeable Gains Act 1992 applies to a disposal by the Post Office company of any assets acquired by the Post Office under Part III of the Post Office Act 1969. In such instances, the acquisition or provision of an asset by the Crown will be deemed to be an acquisition or provision by the Post Office company. This provision gives the Post Office company the capital gains base cost for things such as buildings that will be owned by the Post Office at the time of transfer. Without this provision the Post Office company would not be entitled to the base cost.

223. Paragraph 7 makes it clear that the transfer of property, rights and liabilities under clause 62 of the Bill will not give rise to any liability to stamp duty.

224. Amendments to the Value Added Tax Act 1994 as set out in Schedule 8 of the Bill are also intended to ensure that the transfer of the property, rights and liabilities of the Post Office to the Post Office company is tax neutral.

SCHEDULE 5

Acquisition of Land

225. Schedule 5 sets out the detailed provisions on the compulsory acquisition of land by a universal service provider. Under Part I, any universal service provider who requires to make a compulsory acquisition of land for the purpose of the provision of a universal postal service will require authorisation from the Secretary of State. As planning law differs within the UK, the Schedule provides separate powers for England and Wales, Scotland and Northern Ireland.

226. Paragraph 1(2) expands the power to make a compulsory purchase of land and rights over land so that it includes the power to acquire a right over land by creating a new right. Unlike the Acquisition of Land Act 1981, the Compulsory Purchase Act 1965 does not contain provision for such new rights and so paragraphs 5 to 13 make the necessary modifications to that Act.

227. Paragraph 2(2), like paragraph 1(2), provides for the acquisition of land by means of the creation of a new right over land. Paragraphs 15 to 28 make provision similar to that in paragraphs 5 to 13 and for the same reason.

228. Part IV of the Schedule contains procedures for the compulsory purchase of land by universal service providers in Northern Ireland. It applies, with modifications, Schedule 6 to the Local Government Act (Northern Ireland) 1972 and Schedule 8 to the Health and Personal Social Services (Northern Ireland) Order 1972. It provides that any compensation due as a consequence of a compulsory purchase is to be assessed in the same way as when land is vested in a district council by virtue of Schedule 6 to the 1972 Act.

SCHEDULE 6

Further provisions relating to land

229. Schedule 6 contains further provisions relating to land.

230. Paragraph 1 (1) permits a person authorised by a universal service provider to enter and survey land to ascertain whether it is suitable for any purpose in connection with the provision of a universal postal service.

231. Paragraph 1(2) allows the authorised person to search and bore to ascertain the nature of the subsoil of the land.

232. Paragraph 1(3) limits the power in paragraph 1(2) to circumstances where the land is not covered by a building (or does not have planning permission to be covered). Paragraph 1(4) extends the meaning of "building" to include a garden etc. belonging to the building.

233. Paragraph 2(1) and (2) contains the conditions with which the universal service provider must conform to obtain entry to any land.

234. Paragraph 2(3) provides that, if the land is owned by a statutory undertaking, the authority of the appropriate Minister (as defined in paragraph 2(4) to 2(6)) will need to be obtained if the survey of the land would be detrimental to the undertakings' activities.

235. Paragraph 3 makes it an offence to obstruct an authorised person carrying out their work.

236. Paragraph 4 (1) provides that the owner of the land may seek compensation from the universal service provider if the authorised person causes damage to the land.

237. Paragraph 4(2) to (4) sets out the procedures for the determination of compensation in England and Wales, Scotland and Northern Ireland.

238. Paragraph 5 applies, for England and Wales, the relevant provisions of Part I of the Compulsory Purchase Act to the acquisition of land by a universal service provider by agreement.

239. Paragraph 6 applies, for Scotland, the relevant provisions of the Town and Country Planning (Scotland) Act 1997 (incorporation of Land Clauses Acts) to the acquisition of land by a universal service provider by agreement.

240. Paragraph 7 applies, for Northern Ireland, the relevant provisions of the Land Clauses Acts to the acquisition of land by a universal service provider by agreement.

241. Paragraph 8 permits the Duchy of Lancaster to sell land owned by the Crown to a universal service provider for use in the provision of a universal postal service.

SCHEDULE 7

Disclosure of information

242. Schedule 7 sets out the basis upon which information obtained under the Bill can be disclosed. Information may only be disclosed if it falls within one of the criteria in this schedule. Paragraph 3(1) allows disclosures to be made for certain purposes which are listed there. One of these purposes (see paragraph 3(1)(b)) is to facilitate the carrying out by a person or body listed in paragraph 3(2) of any function conferred by the Acts and other legislation listed in paragraph 3(3). The Secretary of State may modify these lists by Order. There are comparable provisions in the Telecommunications Act 1984. The Bill makes it an offence to disclose information in contravention of Schedule 7.

SCHEDULE 8

Amendments of enactments

243. Schedule 8 amends a number of enactments in consequence of the Bill.

SCHEDULE 9

Repeals and revocations

244. Schedule 9, repeals and revokes a number of enactments in consequence of the Bill or which are obsolete or unnecessary.

FINANCIAL EFFECTS OF THE BILL

245. The main effects of the Bill on public expenditure will be as a result of the wider functions of the new Postal Services Commission, which is replacing the advisory body also known as the Postal Service Commission set up under the Postal Services Regulations 1999. The costs of the advisory Commission under the regulations have been estimated at £3 million per annum when it is fully up and running. The wider functions of the Bill, particularly the running of a licensing regime and investigation powers for enforcing the monopoly, are estimated to cost a further £2m.

246. It is also intended to provide greater resources for the Consumer Council for Postal Services than has been devoted in the past to the Post Office Users' National Council (and the other councils for Scotland, Wales and Northern Ireland) when the licensing regime is available. The uncertainties mean that a meaningful estimate is difficult to provide.

247. The cost of these new bodies (the Commission and Consumer Council established by the Bill) will be met through the licence fees of licensed postal service companies. These costs are likely to fall to the Post Office company as the main licensed operator. Over time it is anticipated that some costs will be met by other licence holders.

248. The start-up and running costs of the advisory Commission are currently being met by the Government. For the financial year 2000/2001 it is intended to negotiate a deed of promise with the Post Office for them to pay for the cost of the Commission until the new licence system comes in to force. The Post Office understand this. The Post Office Users' Council is publicly funded.

249. The Bill also provides for the Commission to impose a monetary penalty on licence holders in certain circumstances for breach of licence conditions. These monies will be paid into the Consolidated Fund.

250. The Bill provides that the transfer of property, rights and liabilities of the Post Office to the Post Office company will be tax neutral.

EFFECTS OF THE BILL ON PUBLIC SERVICE MANPOWER

251. The Bill will not have any immediate effect on the level of public service manpower. The existing Commission will have five members, including a Chairman and a Chief Executive. They will also have supporting staff. Commissioners and staff are currently being recruited for the advisory Commission following the Postal Services Regulations 1999 (SI 1999/2107) which gave functions to the Commission. After the advisory Commission is replaced by the new Commission established in this Bill, those Commissioners and staff will migrate to the new organisation.

252. Like the Commission, the Consumer Council also already exists in a different form, in its case as the Post Office Users' National Council (and other country councils). The new Chairman of the Post Office Users' Council is developing plans for some increases in staff to increase effectiveness and these would carry through to the Consumer Council for Postal Services. In the longer term, the Consumer Council for Postal Services and the new Commission will wish to consider whether their powers and duties will require any increase in manpower.

SUMMARY OF THE REGULATORY APPRAISAL

253. The provisions in the Postal Services Bill will have an impact on three main groups: the Post Office; its competitors; and consumers of postal services.

254. The measures contained in the Bill, and the reform package as a whole, will benefit the Post Office by providing for greater commercial freedom, aiding its competitiveness and its ability to respond to changing consumer demands and wider market developments such as technological change.

255. Potential competitors to the Post Office may benefit from the opening up of new markets and new opportunities for them in the area currently reserved for the Post Office. The Commission will have responsibility for introducing greater liberalisation within the reserved area. The total value of these benefits is difficult to quantify as any benefit will be dependent upon decisions the Commission may take in the future and the extent to which competitors wish to take advantage of any new opportunities. The Post Office estimates that the total value of the market in the reserved area is currently in the region of £5 billion.

256. Greater competition in postal markets will bring benefits for consumers as it has in markets such as telecommunications and electricity where liberalisation has provided a spur for efficiency and benefits for consumers in terms of choice, price and quality, while universal service obligations have been maintained. The primary duty of the Commission will be to promote and protect the interests of consumers of postal services. The total value of the postal services markets in the UK is around £8 billion. So, as an illustration, a 1% improvement in efficiency would give a benefit to the economy of around £80 million.

257. The largest regulatory impact of the Bill will be the creation of a new Commission, which will be a fully independent regulator in contrast to the advisory role of the existing Commission. The main impact of this and other provisions in the Bill will be on the Post Office. The precise costs incurred by the Post Office will be dependent upon the terms of their licence and upon any future decision that the Commission may make to reduce the monopoly or to licence competitor operators within the reserved area and how the Post Office responds. This is for the Commission to decide and cannot be prejudged. The Post Office will also incur one-off costs in making arrangements for the transfer of all of its assets to the new Post Office company, and in creating a Memorandum of Understanding and Articles of Association for the new company. It will also incur minimal costs in registering the new company.

258. No new regulatory requirements will apply to the Post Office's competitors, unless they already hold a niche licence or seek a licence from the regulator to enter the area of the market that is currently reserved to the Post Office. A niche licence is one to provide a specified service within the reserved area. Any regulatory requirements that would be imposed by the licence (as determined by the regulator in order to ensure the continued provision of the universal postal service in the United Kingdom) would affect only a business which sought to engage in areas of business in which it is currently unable to engage, and becoming subject to such regulation would be a factor in the decision whether to enter the market.

259. The costs of operating a licence regime and the regulation of that regime will be met through the licence fees. These costs will initially fall to the Post Office as the main licensed operator. Over time, some costs will be met by other licence holders.

COMMENCEMENT

260. Some technical provisions of the Bill will come into force on Royal Assent. The substantive provisions of the Bill will come into force on such a day, or days, as the Secretary of State shall determine.

EUROPEAN CONVENTION ON HUMAN RIGHTS

261. Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement before Second Reading about the compatibility of the provisions of the Bill with the convention rights (as defined by section 1 of that Act). Lord Sainsbury of Turville has made the following statement:

"In my view the provisions of the Postal Services Bill are compatible with the Convention rights."

 
 
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Prepared: 20 April 2000