Select Committee on Delegated Powers and Deregulation Seventeenth Report



ANNEX 1

POSTAL SERVICES BILL

Memorandum by the Department of Trade and Industry

Introduction

1.  The Postal Services Bill was brought from the House of Commons on 19 April 2000. This Memorandum -

  • summarises the main provisions of the Bill,
  • identifies the delegated powers in the Bill, and describes the purpose and proposed use of those powers,
  • explains why the matters have been dealt with by creating delegated powers, and
  • explains the degree of Parliamentary control on the exercise of those powers.

Main provisions

2.  The Postal Services Bill contains 123 clauses and 9 Schedules. The main purposes of the Bill are to -

  • convert the Post Office from a statutory corporation to a public limited company (plc) formed and registered under the Companies Act 1985, owned by the Crown;
  • maintain the universal service and promote competition through the establishment of a new regulator the Postal Services Commission ("the Commission") to oversee a new system of licensing and regulation for postal services providers, operating in the "licensed area" of the market (which is currently reserved largely as a monopoly for the Post Office); and
  • give greater protection to consumers through the creation of the Consumer Council for Postal Services ("the Council").

Overview of the delegated powers

3.  The delegated powers to modify or suspend the licensed area are dealt with in paragraphs 23 to 40 below.

4.  The powers of direction relating to the licensing regime are discussed at paragraphs 42 to 48.

5.  The power to specify when the Commission's register of actions should be available to public scrutiny is dealt with in paragraphs 49 to 52.

6.  Details of the power to direct the Commission in relation to expenses are considered at paragraph 53.

7.  Details on the power of the Secretary of State to direct the Commission regarding free postal services for the blind are at paragraphs 54 to 57.

8.  Delegated powers and powers of direction relating to the information powers in the Bill are covered in paragraphs 59 to 67 and 146 to 149.

9.  The powers relating to the transfer of Post Office assets to the new company are considered in paragraphs 70 to 72.

10.  The dissolution of the Post Office is covered in paragraphs 91 to 93.

11.  Paragraphs 73 to 90 and 94 to 97 deal with delegated powers and powers of direction relating to the financial provisions for the Post Office and Post Office company.

12.  Paragraphs 101 to 106 deal with the power to change the legal relationship between a universal service provider and its customers.

13.  The power to direct the Commission or a licence holder in the interests of national security is covered in paragraphs 108 to 111.

14.  The delegated power to ensure compliance with the EU Postal Services Directive is covered in paragraphs 112 to 120.

15.  The power to make a scheme for the provision of financial assistance to public post offices is described in paragraphs 121 to 129.

16.  The power of the Treasury to make regulations with regard to the application of Customs or Excise legislation is considered in paragraphs 130 to 133.

17.  Order-making powers to amend existing legislation are dealt with in paragraph 136.

18.  In considering whether matters should be specified on the face of the Bill or allocated to delegated legislation, the Department has had regard to the need:

  1. to avoid too much technical detail and limit the length of the Bill;
  2. to ensure flexibility in the legal framework allowing for changes in the nature of the postal services market to be accommodated by the use of the delegated powers in the bill.

PART I: INTRODUCTORY

OUTLINE OF THE PROVISIONS IN PART I

19.  This Part creates the Postal Services Commission and the Consumer Council for Postal Services. It also sets out the primary duty of the Commission, which is to ensure the provision of a universal postal service, and - subject to that duty - sets out a second duty, which is to have regard to the interests of consumers of postal services.

20.  There are no delegated powers in this Part of the Bill.

PART II: LICENCES FOR POSTAL SERVICES

OUTLINE OF THE PROVISIONS IN PART II

21.  Part II sets out the system of licensing for postal services based on the prohibition that no person shall convey letters unless they are licensed by the Commission. There are a number of exceptions to this prohibition and these are all set out in clause 7. The main exception is for all letters costing £1 or more or weighing 350g or more.

22.  This part also sets out the methods by which the licence regime is to be enforced and the appeals mechanism for licensees.

DELEGATED POWERS IN CLAUSE 8

23.  Clause 8 enables the Secretary of State to modify clause 7 by order. This power permits the Secretary of State to modify the main exception relating to letters costing not less than £1 or weighing not less than 350 grams as well as allowing for new exceptions to be added and for other existing exceptions to be altered or removed.

24.  The Secretary of State may only exercise this power upon the recommendation of the Commission.

25.  Where the Commission makes a recommendation and the Secretary of State decides not to follow it, he must lay before each House a report containing his reasons for not following the Commission's recommendation.

26.  Before making a recommendation to the Secretary of State the Commission must consult the Council, license holders and such other persons as the Commission considers appropriate.

27.  An order under this clause can only be made if approved by a resolution of each House of Parliament (see clause 114 (9)). The Commission must consult the Council, licence holders and any other persons it considers appropriate before making any recommendation to the Secretary of State.

REASONS FOR A DELEGATED POWER IN CLAUSE 8

28.  Over time, the changes in the nature of the postal services market (for example as a result of modern technology) have highlighted inflexibility in parts of the existing legislation concerning postal issues. This clause allows the regulator to make recommendations to the Secretary of State on the need for changes to the exceptions to the prohibition on carrying out postal services without a licence.

29.  This Bill removes the previous system of granting class licences (which were exceptions to the postal monopoly granted to the Post Office). Class licences gave the Secretary of State the ability to licence a "class" of activity (for example, document exchange services) rather than an individual, and thus take the whole of that activity outside of the monopoly area. In effect, each class licence was the same as a clause 7 exception, but in the past the views of Parliament did not need to be sought before exceptions were created or modified. The regime created by this bill means that in future all new exceptions or modifications to the exceptions set out in clause 7 will require Parliamentary approval.

30.  There is also a further reason for the ability to be able to modify the general level of the "licensed" or "reserved" area (which is effectively defined in the Bill by the exception set out in clause 7(1) namely that relating to the conveyance of letters costing not less than £1 or weighing not less than 350 grams). Under the Postal Services Directive (97/67EC) Member States may only maintain a reserved area "to the extent necessary to ensure the maintenance of universal service". Therefore, flexibility is necessary to be able to adjust the level of the reserved area accordingly.

31.  A similar power already exists in legislation. At present, the scope of the Post Office's monopoly is limited by the Postal Privilege (Suspension) Order (S.I. 1981/1483) as amended by the Postal Services Regulations 1999 (S.I. 1999/2107). This Bill retains the flexibility to alter the scope of the "reserved area", but restricts the Secretary of State's freedom to do so by preventing him from acting without the recommendation of the Postal Services Commission. Any order under clause 8 can only be made if approved by a resolution of each House of Parliament. We consider that this is an appropriate level of Parliamentary scrutiny for this power.

DELEGATED POWERS IN CLAUSE 9

32.  Clause 9 permits the Secretary of State, for whatever reason, to make an order suspending the operation of clause 6 (the licensed area) on the recommendation of the Postal Services Commission. This would have the effect of allowing any person to convey letters. The Commission would only make such a recommendation if it were satisfied that the universal service could be maintained without a licensed area.

33.  The Secretary of State can only act on the Postal Services Commission's recommendation and the order cannot be made unless it is approved by a resolution of each House of Parliament (clause 114(9)).

34.  If he chooses not to suspend the operation of the licensed area contrary to the Commission's recommendation, the Secretary of State must lay a report before Parliament giving his reasons.

REASONS FOR A DELEGATED POWER IN CLAUSE 9

35.  The suspension of the licensed area may be necessary in the future interests of consumers. Having considered all the circumstances carefully, the PSC may recommend a temporary or permanent suspension of the licensed area. Potentially, the Commission could find a situation in the future where it considers that it should recommend that the licensed area be suspended altogether.

36.  As mentioned above, under the European Directive on Postal Services, the reserved area can only be maintained to the extent that it is necessary to ensure the maintenance of a universal service. It is therefore necessary to allow for the possibility of reducing the level of the reserved area (as in clause 8), or even for its complete suspension, which this clause would permit. Due to the importance of the subject matter of the power, we consider that the affirmative resolution procedure is appropriate in this case.

DELEGATED POWERS IN CLAUSE 10

37.  Clause 10 will allow the Secretary of State, in the national interest, to suspend by order the licensing regime for a time-limited period not exceeding six months. Non-licensed persons would then be able to convey letters within the reserved area without penalty. The Secretary of State may also specify limitations on the extent of the suspension.

REASONS FOR A DELEGATED POWER IN CLAUSE 10

38.  This power is similar to, although narrower than, that contained in Section 69 of the British Telecommunications Act 1981. It allows the Secretary of State to suspend the reserved area in the national interest.

39.  The 1981 Act power has been used in cases of postal strikes, but also provides the basis for the present suspension of the monopoly to £1 (see clause 8).

40.  The power in this clause is intended for use in the event of, for example, strikes or other unforeseen events which would affect the provision of an effective postal service by licensed operators within the reserved area. Longer suspensions would require the use of clause 9. Clause 10 is a necessary safeguard for all consumers, ensuring that mail can be delivered by any person where the national interest would justify it. As this is an emergency power which would need to be exercised quickly, it is considered that negative resolution of either House of Parliament is the appropriate level of scrutiny in this case.

MODIFICATION BY ORDER UNDER OTHER ENACTMENTS

41.  Clause 21(4) provides that where the Secretary of State by order exercises any of the powers specified in Parts 1 and II of Schedule 8 of the Fair Trading Act 1973, such an order may also modify the conditions of a licence to such an extent as the Secretary of State considers necessary or expedient to give effect to or take account of any provision made by such an order. Although the Parliamentary procedures for such orders are already laid down, as this sub-section provided an additional element to those powers, it was considered prudent to bring the provision to the attention of the Committee.

POWER OF DIRECTION IN CLAUSE 14 AND REASONS FOR IT

42.  Under clause 14(5) the Secretary of State may direct the Postal Services Commission not to modify a licence with the consent of the licence holder if the Secretary of State considers that the modification should be made, if at all, under clause 17. This would mean that the modification could only occur following the completion of a reference to the Competition Commission.

43.  This power of direction mirrors legislation seen in the utilities sector and is an important check on the powers of the regulator. Where the Secretary of State considers that the proposed modification raises issues that mean that the modification should only occur, if at all, following a full investigation by a Competition Commission reference panel he can prevent the modification. It is a matter for the Postal Services Commission to decide whether or not to make a reference to the Competition Commission.

POWER OF DIRECTION IN CLAUSE 15 AND REASONS FOR IT

44.  Clause 15(5) contains a power of direction from the Secretary of State to the Competition Commission not to proceed with a reference made by the Postal Services Commission or a variation of such a reference.

45.  As for clause 14, this power exists in other legislation and is a necessary check on the regulator. Competition Commission references are a serious matter, costing all parties considerable time and money. This power of direction provides a counter balance should the Secretary of State believe that the Commission are making unnecessary references.

POWER OF DIRECTION IN CLAUSE 16 AND THE REASONS FOR IT

46.  Clause 16(4) allows the Secretary of State to direct the Commission not to publish in a final version of a Competition Commission report information which the Secretary of State considers would be against the public interest or any person's commercial interest. This power mirrors those seen in utilities and competition legislation and is necessary to protect information that may be in the public interest to protect or that is of a commercially sensitive nature.

POWER OF DIRECTION IN CLAUSE 18 AND THE REASONS FOR IT

47.  Clause 18 provides the Competition Commission with a power to direct the Postal Services Commission not to make modifications following a report of the Competition Commission if the Competition Commission considers that the modifications are not those needed for the purpose of remedying or preventing the adverse effects specified in the Competition Commission's report.

48.  This allows the Competition Commission to intervene where it believes that the Postal Services Commission is acting incorrectly following a report. This power underlines the more general principal that licences should be modified by consent where possible. Where the Commission makes a reference, this power will provide reassurance to licence holders that the Commission will act in a manner consistent with the Competition Commission's report rather than attempting to use such a report to pursue a wider regulatory agenda.

DELEGATED POWER AND POWER OF DIRECTION IN CLAUSE 38 AND THE REASONS FOR THEM

49.  Clause 38 requires the Postal Services Commission to keep a public register of actions taken by it in relation to the licensing regime. This includes details of licences issued, licence variations, revocations, and enforcement actions, including details of any fines or notices served for breach of licence conditions.

50.  Sub-section (7), contains a power for the Secretary of State to direct the Commission not to make an entry if he believes that such an entry in the register would be against the public interest or any person's commercial interests. Such directions are expected to be rare, the presumption being first that information relating to licences should be in the public register, and second that if not, the decision not to include something will usually be taken by the Commission. The power is, however, a necessary safeguard, to ensure that entries on the register are in the public interest and do not unnecessarily damage the interests of individuals or businesses.

51.  Sub-section (8) requires that the contents of the register are available for inspection by the public during such hours as may be specified in an order made by the Secretary of State. The matter of opening hours which it is proposed to deal with by delegated powers is appropriate for subordinate legislation because it is an administrative matter, and because it is a matter which requires the flexibility to respond to changing demand and other circumstances. We cannot anticipate at present the public access that will be appropriate in the market in, say, ten years time.

52.  Because this is a technical, administrative matter it is provided that an order under sub-section (8) will be subject to the negative resolution procedures.

POWER OF DIRECTION IN CLAUSE 39

53.  Clause 39 allows the Secretary of State to direct the Postal Services Commission to include in any licence, conditions requiring the payment of sums relating to the expenses of the Council or of the Secretary of State, in relation to the establishment of the Council. It also allows the Secretary of State to determine anything falling to be determined under such conditions.

POWER OF DIRECTION IN CLAUSE 41 AND THE REASONS FOR IT

54.  Clause 41 gives the Secretary of State the power to direct the Commission to include, as a licence condition, a requirement for licence holders, who are universal service providers, to provide free postal services for the blind and partially sighted. This provision is designed to continue the existing practice whereby the Post Office voluntarily provides free services for the blind and partially sighted.

55.  The clause sets out two powers of direction for the Secretary of State, one to set out exactly what such a licence condition should include, and to specify what articles may be included and the description of blind and partially sighted people included, and the other directing when the licence condition should come into force.

56.  The powers of direction in this clause would be used if the Secretary of State felt that there was a genuine likelihood that the Universal service providers (currently the Post Office) would not provide such services voluntarily.

57.  Powers of direction, rather than order-making powers, are appropriate in this situation, given the uncontroversial nature of such directions.

PART III: OTHER FUNCTIONS OF THE COMMISSION AND THE COUNCIL

OUTLINE OF PROVISIONS IN PART III

58.  This Part sets out the duties and functions of the Commission and the Council that are not covered in Part I.

POWER OF DIRECTION IN CLAUSE 44 AND THE REASONS FOR IT

59.  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, and elsewhere in order to facilitate the exercise of its functions. Sub-section (2) provides that the Secretary of State may give directions to the Commission indicating considerations to which it is to have particular regard in deciding the order of priority in which matters are to be reviewed in performing these duties. It is not expected that this power will be widely used, but it is necessary to ensure that the Secretary of State has a means of ensuring that matters of importance to the postal sector which it has identified, for example through its dealing as a Member State, are reflected appropriately in the review and information gathering activities of the Commission.

DELEGATED POWERS IN CLAUSE 58 AND REASON FOR IT

60.  Clause 58 sets out the Council's power to require information. It gives the Council the power to serve notice on the Commission, a universal service provider or a licence holder (who is not a universal service provider), requiring the production of information specified in the notice which the Council may reasonably require in exercising its functions.

61.  The Commission may refuse to supply information and may determine that other persons may refuse to supply information if the Commission, in specified circumstances, so determines. These circumstances are where the Commission considers that: (a) the Council does not reasonably require the information in the exercise of its functions; or (b) the information is of a description specified in an order made by the Secretary of State; or (c) in circumstances specified in such an order.

62.  It is necessary to achieve the correct balance on information-gathering powers through a combination of checks and balances. The Council needs information-gathering powers to be able to carry out its functions and duties effectively. But these powers need to be checked to ensure it requires only such information as is necessary to carry out its designated functions.

63.  The Commission has a range of duties, including ensuring the provision of the USO, promoting effective competition and furthering the interests of users. Because it is in a more impartial position to be able to balance the interests of operators and consumers, it is best placed to judge whether the Council may reasonably require the information in the exercise of it functions.

64.  The assumption is that the Counsel and the Commission will work together harmoniously without the need for intervention by the Secretary of State. It is, however, necessary to have this order-making power in reserve in order to ensure that the Secretary of State can set down further guidelines if that is desirable at some future date to ensure the effective and efficient working of the regulatory system. It is considered that the procedure of negative resolution of either House of Parliament is adequate for such a regulatory function.

DELEGATED POWERS IN CLAUSE 59 AND REASON FOR IT

65.  Clause 59 requires the Council to provide information to the Commission if the Commission requires it in the exercise of its duties. It provides that in some circumstances the Council may refuse to provide such information, including where the Secretary of State has made an order specifying information that the Council may refuse to provide.

66.  The order-making power is set out at subsection (2). It provides the Secretary of State with the power to make an order specifying:

  1. descriptions of information which the Council may refuse to supply, and;
  2. the circumstances in which the Council may refuse to provide information.

67.  It is necessary to get the balance right on information-gathering powers through a combination of checks and balances. These are built into the Bill on the assumption that the Council and the Commission will work together harmoniously. As with the delegated powers provided in clause 58, it is necessary to have this order-making power in reserve in order to ensure that the Secretary of State can set down further guidelines if that is desirable at some future date to ensure the effective and efficient working of the regulatory system. The negative resolution procedure is considered appropriate again for the same reasons as apply in respect of the power contained in clause 58.

PART IV: REORGANISATION OF THE POST OFFICE

OUTLINE OF PROVISIONS IN PART IV

68.  Part IV of the Bill allows for the creation of a new Post Office company, which will be publicly owned, and for the dissolution of the statutory Post Office corporation. This Part also restricts the disposal of shares in the Post Office company and its relevant subsidiaries. Any proposal to dispose of shares put forward by the new Post Office company under the provisions of clause 67 (which permits disposal in certain circumstances to cement a commercial alliance with a business partner) requires the prior approval of Parliament. This is obtained by a resolution of each House of Parliament passed on a motion moved by or on behalf of the Secretary of State

69.  Part IV also contains financial provisions that allow for the restructuring of the Post Office's balance sheet, and establish the financial regime in which the new company shall operate.

DELEGATED POWER UNDER CLAUSE 62 AND THE REASONS FOR IT

70.  Clause 62 is the clause which changes the status of the Post Office from a statutory corporation into a public limited company. It does this by giving the Secretary of State a power to make an order setting the day for the transfer of the property, rights and liabilities of the Post Office to a company formed and registered under the Companies Acts. Such an order can be varied or revoked by a subsequent order at any time before the vesting of any property, rights or liabilities in the new company. The clause also imposes a requirement that the company to which the transfer is made is wholly owned by the Crown at the date of vesting.

71.  This transfer is an essential part of the reform package for the Post Office and will underline the new commercial freedoms of the Post Office and the new arm's length relationship between the Post Office and Government.

72.  This power is required to allow flexibility in setting the date of transfer and to avoid including unnecessary detail on the face of the Bill. It is not considered necessary for such an order to be subject to any Parliamentary scrutiny.

POWERS OF DIRECTION IN CLAUSE 63

73.  This clause enables the Secretary of State to direct the Post Office company or a subsidiary of it to issue securities (as defined in clause 82) including shares, share rights and debt instruments. The direction may require that the securities are issued to the Secretary of State or the Treasury. The clause also permits the Secretary of State to direct the Post Office company or a subsidiary to issue shares or share rights direct to a third party, provided the Parliamentary approval procedure has been followed. It further permits the Secretary of State to direct a relevant subsidiary of the Post Office company to issue shares or share rights to the Post Office company or another subsidiary of the Post Office company of which it is itself a relevant subsidiary. But no direction can be given by the Secretary of State without the consent of the Treasury.

74.  Should the company cease to be wholly owned by the Crown (in the event of an approved disposal to cement a commercial alliance) it would not be proper for the Government to have these powers of direction, because the other shareholders would have an interest in the issue of securities and preferential powers for the Government would be unfair to the other parties. Accordingly the power of direction may not be used when the Post Office company is not wholly owned by the Crown.

75.  Clause 63 ensures that the Government can obtain securities issued by the Post Office company and its wholly owned subsidiaries - securities here having the meaning given in clause 82 embracing both shares and share rights, as well as debt instruments e.g. debentures and bonds.

POWER OF DIRECTION IN CLAUSE 69

76.  Clause 69 empowers the Secretary of State to guarantee the discharge of any financial obligation of the Post Office company or any of its subsidiaries. Under subsection (3), if any sums are paid by the Secretary of State in fulfilment of a guarantee given under this clause, the Secretary of State may then direct the repayments of the principal and interest by the Post Office company or the subsidiary concerned in respect of the sums discharged.

77.  This power of direction enables the Secretary of State to set the terms on which the Post Office company or the subsidiary concerned will make repayments to him in respect of the sums discharged by the Secretary of State.

DELEGATED POWERS IN CLAUSE 70 AND REASONS FOR THEM

78.  Clause 70(1) empowers the Secretary of State, to cancel by order any liability of the Post Office company (or its subsidiaries), in respect of the fulfilment of guarantees given under section 38 of the Post Office Act 1969 or clause 69 of the Postal Services Act 2000. Under clause 70(2), the Secretary of State may by order also extinguish any liabilities to him specified in the order except those which can be extinguished by virtue of clause 70(1) and those which relate to tax, duties or fines. As there is no express power in Clause 70 to extinguish the principal or interest on loans owed to the Secretary of State and payable into National Loans Fund, such liabilities may not be extinguished.

79.  Under clause 70(5) 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.

80.  This clause is intended to facilitate the restructuring of the balance sheet by 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 accumulated reserves in the form of gilts and National Loans Fund deposits on its balance sheet. In effect these reflect accumulated dividends which could not be paid over to the Exchequer since the relevant legislation did not provide for the Post Office to do so. External advisers have been appointed to support the Government with this work.

81.  The provisions of this clause, if required, will be carried out by means of the order-making power. The provisions are included to provide flexibility when decisions are taken about the restructuring of the balance sheet. The powers given by it may, for example, be used to cancel certain liability with a view to its replacement by new debt which may better meet the Government's and the Post Office's restructuring objectives, but without conferring any unjustified commercial advantage or disadvantage on the Post Office company. These powers are only to be exercised after consultation with the Post Office company, or with the Post Office company and the subsidiary, if the liability of a subsidiary is to be extinguished. The consent of the Treasury is also required before the powers may be used.

82.  All the orders under this clause are subject to negative resolution in either House of Parliament.

DELEGATED POWERS IN CLAUSE 71 AND REASONS FOR THEM

83.  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 in draft by a resolution of the House of Commons. A limit is set in the Bill in part 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 reassurance that unlimited calls may not be made on monies to be provided by Parliament.

84.  The figure of £5,000 million is based on a commonly used formula for calculating the top stop on company indebtedness and has been calculated on the basis of the Post Office's current financial position. But flexibility has been built into the clause by providing that the limit may be increased by an order approved in draft by the House of Commons should this prove necessary in the future. The bringing forward of an order to effect an increase would depend on whether it was considered at the time that the Post Office company could sustain a higher limit. As a higher borrowing limit would almost certainly entail greater borrowing from the National Loans Fund, the draft order requires the approval of the House of Commons, rather than being subject to the negative resolution procedure.

POWERS OF DIRECTION IN CLAUSE 72

85.  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.

86.  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 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.

87.  This clause and the powers of direction therein are intended to help facilitate the restructuring of the balance sheet of the Post Office company by 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, which could be viewed as accumulated dividends, which were not payable to the Consolidated Fund. This clause will allow the Government to extract an agreed amount in respect of these accumulated reserves by providing for the creation of specific distributable reserves within the meaning of the Companies Act from which the Post Office company (or its subsidiaries) can pay over to the Government a dividend which in turn will be paid into the Consolidated Fund.

88.  No direction can be given by the Secretary of State under clause 72 without the consent of the Treasury and the Secretary of State must consult the Post Office company before giving any direction.

DELEGATED POWERS IN CLAUSE 74 AND REASONS FOR THEM

89.  Clause 74 gives the Secretary of State further powers for the purposes of restructuring the balance sheet of the Post Office company by injecting debt to create a commercial level of gearing and removing from the balance sheet accumulated reserves, which, as explained above represent accumulated dividends to Government that could not be paid over because the relevant legislation did not require the Post Office to do so. It enables the Secretary of State to create debt owed by the Post Office company, including debt in a form of debentures or bonds. These powers are only to be exercised after consultation with the Post Office company. 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.

90.  However, under clause 70(6), the Secretary of State may by an order, which is subject to negative resolution of either House of Parliament, repeal the section. 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. It is considered that the negative resolution procedure is appropriate for such a provision.

DELEGATED POWER UNDER CLAUSE 75 AND THE REASONS FOR IT

91.  Clause 75 provides that the Post Office continues in existence after the appointed day (the day when all the rights, liabilities and property transfer to the Post Office company) until it is dissolved in accordance with this clause. The Secretary of State may not dissolve the Post Office until he is satisfied that nothing further remains to be done by the Post Office under paragraph 8 of Schedule 3 (which relates to the vesting of any foreign property).

92.  The Secretary of State may not dissolve the Post Office unless he has consulted both the Post Office and the Post Office company.

93.  It is not considered necessary for any Parliamentary scrutiny of this clause.

POWER OF DIRECTION UNDER CLAUSE 76

94.  Clause 76 provides for the Secretary of State to prepare accounts for each financial year, prepared in the form and manner directed 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 into the National Loans Fund.

95.  Provision is made for the accounts to be prepared as the Treasury directs in order to ensure that the department with responsibility for the public finances can determine the form and manner of the information which is prepared for audit and eventual presentation to each House of Parliament.

POWERS OF DIRECTION UNDER CLAUSE 79

96.  If the Treasury, or the Secretary of State with the Treasury's consent, appoint a person to act as their nominee for the purposes of clause 63 (Government holding in the Post Office company and its subsidiaries), clause 64 (Government investment in securities of the Post Office company) and clause 74(3) and (4) (Further provisions relating to the capital structure of the Post Office company), then the nominee shall hold and deal with the securities or debt securities on such terms and manner as directed by the Treasury, or with the consent of the Treasury, the Secretary of State.

97.  The powers of direction enable the Treasury and the Secretary of State to ensure that their nominees hold and deal with any securities in accordance with their intentions.

PART V: OFFENCES IN RELATION TO POSTAL SERVICES

OUTLINE OF PROVISIONS IN PART V

98.  This part creates offences of interfering with the mail, prohibits the sending of certain articles by post and provides protection for universal service providers, their post boxes and post offices.

99.  There are no delegated powers in this Part of the Bill.

PART VI: UNIVERSAL POSTAL SERVICE: SUPPLEMENTARY

OUTLINE OF PROVISIONS IN PART VI

100.  Part VI makes supplemental provisions about the universal postal service. It provides for the limitation of liability for universal service providers. It also provides for the inviolability of the mail by making it immune from examination, seizure or detention as if it were the property of the Crown. This Part also sets out how mail should be considered for harbour charges and by harbour authorities and states that universal service providers are not "common carriers" insofar as they are providing a universal postal service. It provides for exemptions from postage for certain petitions and addresses sent to parliament.

DELEGATED POWER IN CLAUSE 93 AND REASONS FOR THEM

101.  Clause 93 creates a power for the Secretary of State to modify clauses 89 to 92 by order.

102.  Clauses 89 to 92 concern the legal relationship between a universal service provider and its customers. They enable a universal service provider to make and operate schemes setting out the terms and conditions for the provision of postal services in place of contracts, limiting liability, in particular the liability for consequential losses. They replace similar provisions in sections 28 to 30 of the Post Office Act 1969 that dealt only with the legal relationship between the Post Office and its customers.

103.  The available evidence supports the need for the continuation of schemes of this sort in order to ensure the continuation of an affordable, accessible universal postal service. But that does not mean that it will always be the case, or that the scope and nature of the provisions might not need to be adapted to reflect changing circumstances.

104.  The postal services market is at the beginning of a period of rapid change. We cannot anticipate with any certainty what changes, if any, might be desirable or necessary in the future. But the need for and scope of the provisions relating to schemes and limitation of liability needs to be kept under review so as to ensure that they continue to be in the best interests of users of postal services. In practice this will be monitored and reviewed, as appropriate, by the Postal Services Commission.

105.  The order-making power is necessary to ensure that the conclusion of any such review could be implemented without unnecessary delay. Without it, further primary legislation would be required to effect any changes. Delay in such circumstances, particularly if it were for a number of years for want of a legislative slot, could be detrimental to the interests of users of postal services.

106.  Before modifying the provisions the Secretary of State must consult the Postal Services Commission, the Consumer Council, and such other persons as the Secretary of State considers appropriate. Also, because these provisions are potentially critical to the nature of the universal postal service, an order under this clause requires the approval by resolution of both Houses of Parliament (see clause 114(9)).

PART VII: MISCELLANEOUS AND SUPPLEMENTARY

OUTLINE OF PROVISIONS IN PART VII

107.  Part VII of the Bill concerns miscellaneous and supplementary provisions including the reserve powers of the Secretary of State to give directions in the national interest and ensure compliance with the Postal Services Directive. It also includes evidential provisions. It requires the owner of the Postcode Address File to maintain it and make it available on reasonable terms to those who wish to use it.

POWER OF DIRECTION IN CLAUSE 100 AND REASONS FOR IT

108.  Whilst not strictly a delegated power, in the sense of a power to make regulations, we believe it worth highlighting the reserve power of the Secretary of State at clause 100 to direct the Commission or a licence holder as he considers appropriate if he considers it expedient to do so either in the interest of national security or in order to discharge an international obligation; to meet the object of an international organisation of which the Government is a member or agreement to which they are party; or to enable the Government to become a member of such an organisation or party to such an agreement.

109.  The directions should generally be laid before Parliament but there are exceptions to this on specified grounds. It is an offence to contravene a direction or, in certain circumstances, to disclose it.

110.  These powers of direction are necessary to ensure that national security and international obligations can be maintained. They provide very limited powers of direction, particularly when compared with the range of powers of direction in the existing postal legislation (under sections 11 and 12 of the Post Office Act 1969).

111.  The need for a continuing power of direction in relation to national security is necessary to ensure the continuation of vital postal services or take other action in the interest of national security. In relation to international relations the intention is to ensure that the power exists to support, as necessary, the Government's continuing role in relation to international regulation and related matters, including treaty obligations.

DELEGATED POWER IN CLAUSE 101 AND REASONS FOR IT

112.  Clause 101 provides an order-making power for the Secretary of State to ensure compliance with the EU Postal Services Directive.

113.  An order under this clause may make such provision as the Secretary of State considers appropriate to ensure that an obligation is complied with (for example the universal service obligation). In particular it may: confer or modify the functions of the Commission or the Council; require a postal operator to provide all or part of a universal postal service; specify terms and conditions for such services; provide for payment from public funds for any purpose of the order; and for the enforcement of provisions in the order.

114.  The purpose of this power is to ensure that the Government's obligations under the EU Postal Services Directive can always be met, in particular in the event that the reserved area is removed and with it the ability to impose the universal service obligation and related requirements through licence conditions. It is a fall back power.

115.  It is the primary duty of the Commission to ensure that the universal service obligation is delivered (as set out in clause 3 of the Bill). The intention is that they will do so through the licensing regime, in particular by imposing as a condition of a licence (on one or more operators) a requirement to provide a universal service or part of such service. It is also intended that the requirements on universal service providers, such as quality of service standards, regulatory accounts, complaints and compensation schemes will all be imposed and enforced through the licensing regime. The Bill is built on this foundation.

116.  It is envisaged that the licensing regime will continue for the foreseeable future. However, the Bill also provides (at clause 9) for the suspension of the licensed area. This is necessary because the European Directive on Postal Services requires that the reserved area can only be maintained to the extent that it is necessary to ensure the provision of a universal service. If in the view of the Postal Services Commission a licensed area was no longer necessary to maintain a universal service at a uniform tariff, then it would recommend that the reserved area be discontinued. The power to suspend the reserved area completely (under clause 9) would only be made on the recommendation of the Commission and on the basis that the market would provide the universal service.

117.  The order-making power in clause 101 will only apply in exceptional circumstances. The gateway for the use of the powers is narrow. They can only apply where the Secretary of State is satisfied that a Community obligation under the Postal Services Directive is not being met or will not be met (for whatever reason) and where he has been unable to obtain any undertakings from any person which are sufficient to satisfy him that the situation will be remedied. There is no expectation that these powers will ever be used. But they are necessary because we cannot rule out the possibility that there might be circumstances where they would need to be used to ensure that we continue to meet our EU obligations.

118.  The Government recognises that the power is in some respects a very wide one. But this flexibility is critical to ensure that the power is sufficient to deal with whatever circumstances the future throws up. We cannot know now what those circumstances might be but it is our duty to make provision in the Bill (which is intended to be capable of lasting for at least a generation) to ensure that the universal postal service which is central to the Bill, as well as other Community obligations, can be safeguarded.

119.  There are important limits to the order-making power. In deciding whether to make any such order the Secretary of State must have regard to the likely impact of the order on the business of the person on whom the requirement is to be imposed. Before making such an order he must also consult with any such person. In addition there is provision for the payment of sums out of money provided by Parliament for any purpose of the order. That could be used as necessary to reimburse a postal operator required to provide designated postal services for the cost of providing such services.

120.  It is proposed that this order-making power should be subject to the negative resolution procedure. The reason for this is that by its nature the power here is intended to meet and remedy exceptional circumstances where the market fails to provide the necessary minimum service and for which it may be necessary to move very quickly to ensure that services are resumed as soon as possible.

DELEGATED POWERS UNDER CLAUSE 102

121.  Clause 102 allows the Secretary of State, by affirmative resolution, to establish a scheme or schemes for the making of payments for the purpose of-

  • assisting in the provision of public post offices or public post offices of a particular description, or
  • assisting in the provision of services to be provided from public post offices or public post offices of a particular description.

122.  Where a scheme is about financial assistance for the provision of services, payments may only be made where the person responsible for making payments is satisfied that the provision of financial assistance for services from a public post office would assist in the provision of public post offices.

123.  Subsection (3) provides that this scheme shall be funded by the Secretary of State. Under subsection (6) the exercise of this clause is subject to the consent of the Treasury.

124.  By virtue of subsection (4), as part of the scheme, the Secretary of State must specify-

  1. the descriptions of payments which may be made under the scheme
  2. the descriptions of persons to whom such payments may be made
  3. the person by whom such payments may be made
  4. the criteria to which that person is to have regard in deciding whether to make such payments, and
  5. the amounts of such payments or the basis on which such amounts are to be calculated.

125.  Under subsection (5) the scheme may in particular provide that payments may be made subject to conditions, that functions under the scheme may be delegated and that where necessary the functions of a body established by enactment may be modified to take on these functions. The Secretary of State may also make payments to a person who exercises functions under this scheme.

REASONS FOR DELEGATED POWERS IN CLAUSE 102

126.  Considerable concern has been expressed by Members of Parliament and the public at large about the maintenance of an effective public post office network.

127.  The Government recognises these concerns and is encouraging the Post Office's efforts to develop new revenue streams to ensure the future wellbeing of the network. However, the Government recognises the important social and economic role that post offices play, particularly in isolated rural and inner city communities.

128.  For this reason this Bill contains a power for the Secretary of State to make a scheme enabling him to assist in the provision of public post offices or to assist in the provision of services to be provided from public post offices. Government at present is not convinced that financial assistance is necessary, however it does not rule out the possibility in the future. A reasonable degree of flexibility about the nature of the final scheme is allowed in the Bill since the Government wishes to have the power to deliver assistance in the most effective and targeted way possible.

129.  It is felt that it is appropriate that such schemes relating to financial assistance be the subject of Parliamentary debate, hence the affirmative procedure for this power.

DELEGATED POWERS IN CLAUSES 103 AND THE REASONS FOR THEM

130.  Clause 103 applies customs legislation to postal packets. It re-enacts and updates the provisions contained in section 16 of the 1953 Post Office Act. It gives the Treasury, on the recommendation of the Secretary of State or the Commissioners of Customs and Excise, the power to make regulations specifying how the legislation should apply. This power is almost identical to the one that was included in the 1953 Post Office Act. The power has been changed only so far as is necessary to reflect changing market conditions by changing references to the Post Office to a postal operator. It is intended to maintain the powers that the Customs and Excise currently enjoy. The power in section 16 of the 1953 Act is the one under which the Postal Packets Regulations 1986 were made. The power allows HM Treasury to make regulations:

  • specifying which postal packets the clause applies to;
  • making any exceptions or modifications in how those acts apply;
  • enabling a postal operator to perform the duties of the importer, exporter or remover;
  • giving effect to arrangements for foreign postal packets;
  • securing observance of the acts; and
  • punishing contravention of the regulations.

131.  The power will be subject to negative resolution procedure in the House of Commons. It is considered that the procedure of negative resolution of the House of Commons is adequate for such a regulatory function.

132.  Customs and Excise legislation already applies to other goods being imported or exported but special provision is needed in relation to postal packets because they are not classed as goods and have special protection through the inviolability of the mail provisions.

133.  The new power like the existing one, will be limited by the extent of the Customs legislation.

CLAUSE 114

134.  Clause 114 sets out supplemental provisions relating to orders and regulations. It includes standard provisions to make different provisions for different purposes and to make incidental, supplementary, transitory, transitional and saving provisions as appropriate (clause 114(2)). It also specifies which procedures are to be applied to which order or regulation-making powers.

135.  We would point out to the Committee that clause 114(5) refers to paragraph 2 of Schedule 3. This previously contained an order-making power relating to the transfer of pension rights and liabilities. This was removed by a Government amendment at Report in the House of Commons and replaced by substantive provisions. This consequential amendment will be dealt with at Report in the House of Lords.

DELEGATED POWERS IN CLAUSES 119 AND 120 AND REASONS FOR THEM

136.  Clause 119 confers a power on the Secretary of State to make further modifications by order of enactments, instruments and other documents in consequence of the Bill. An order tabled under this clause will be subject to the affirmative procedure. Clause 120 confers a similar power, but in relation to local enactments. An order under clause 120 will be subject to the negative procedure as it is considered that modifications to local enactment will not be controversial. There are more than 1,600 consequential amendments to consider and it is impractical to include all these amendments on the face of the Bill. These consequential amendments will, for example, amend references from the "Post Office" to "Post Office company" or "universal service provider" and references to the existing legislation to "Post Office Act 2000". The order-making power in these clauses is necessary to complete the new framework for postal services provided by the Bill.

SCHEDULES TO THE BILL

OUTLINE OF PROVISIONS IN SCHEDULES

137.  Schedule 1 sets out a series of detailed provisions regarding the membership and constitution of the Commission, staffing and supplementary powers.

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

139.  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.

140.  Schedule 4 sets out the provisions for the treatment of tax for the transfer from the Post Office to the Post Office company.

141.  Schedule 5 sets out the detailed provisions on the compulsory acquisition of land by a universal service provider.

142.  Schedule 6 contains further provisions relating to land.

143.  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.

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

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

DELEGATED POWERS IN SCHEDULE 7, PARAGRAPH 4 AND REASONS FOR IT

146.  Schedule 7 applies to information obtained by virtue of the Bill and which relates to the affairs of an individual or particular business. It prohibits the disclosure of information obtained under the Bill relating to the affairs of an individual or a particular business, for the lifetime of the individual or so long as the business is carried on, unless the disclosure is permitted by the Schedule.

147.  Disclosure is permitted either where the individual, or the person for the time being carrying on the business, consents; or for the purposes as set out in paragraph 3. These gateways for disclosure follow normal precedents for provisions of this kind. They are, for example, similar to the restrictions on disclosure of information in the Water Industry Act 1991.

148.  Paragraph 4 provides a delegated power for the Secretary of State to modify by order the disclosures permitted under paragraph 3. This is a necessary technical order-making power to ensure that the gateways are kept up to date with changes in other legislation without the need for primary legislation, which would be cumbersome for such administrative matters.

149.  The order is subject to negative resolution in either House of Parliament which is considered the appropriate level of Parliamentary scrutiny.

May 2000


 
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