Select Committee on Constitution Minutes of Evidence


Examination of Witnesses (391-399)

WEDNESDAY 30 APRIL 2003

MR GREGOR MCGREGOR AND MR ANDY FREWIN

Chairman

  391. Right; we can move on to our second set of witnesses this afternoon. Welcome; and, before we get underway again, may I invite you to introduce yourselves for the record?

  (Mr McGregor) Thank you, My Lord Chairman. I am Gregor McGregor. I am the Chief Executive of Postwatch, and Andy Frewin is the Senior Director within Postwatch who is responsible for our external and parliamentary relations. First of all, could I thank you very much for the invitation to come here this afternoon. Could I begin perhaps with an apology on behalf of my Chairman, Peter Carr, who very much would have wanted to be here this afternoon, but unfortunately he has had a long-standing prior engagement overseas. We explained the circumstances to your Clerk. He wished me to apologise on his behalf for his not being able to be here. Perhaps if I could say just one or two brief words, by way of introducing ourselves. We have been established now for a little over two years, and our establishment was part of the Government's agenda to reform and liberalise, and indeed commercialise, the postal market and the provision of postal services within the UK. The Government at the time that we were set up gave a very strong commitment to there being a central consumer voice within the decision-making processes within the new regime that has been set up. In setting us up I think they recognised that there are quite a number of competing interests, as there always are, you have the interests of the management, you have the interests of the shareholder, you have the interests of the trades union, you have the interests of employees more generally, and, in the case of the postal industry, of sub-postmasters and sub-postmistresses. And I think the experience had been that, in trying to balance all of these different interests, the interests of consumers were the ones that were coming actually at the bottom of the heap. Consumers tended to be regarded as tail-end Charlies. We regard it very much as our role to reverse that tendency and to make sure that consumers are central to all of the decisions that are taken. And that the interests of consumers, in a sense, come first on as many agendas as we can put it on. In order to do that, we believe that we have to be commercially literate, we believe that we have to be economically literate, we believe that we have to be legally literate, and, of course, we believe that we have to speak with a high degree of legitimacy on behalf of all postal consumers, be they social users of the post or the large mailers, or the more medium-sized users. And, in order to achieve that, I think like WaterVoice we have established a regional structure. We also have a number of mechanisms whereby we have a regular dialogue with the key players within the market-place.

  392. Fine; thank you very much. If I can open really by picking up on that, because you mention you are appointed by statute, you are there to represent consumers, and you touch upon, in your memorandum, at paragraph 20, how you operate. I wonder if you could just say perhaps a little more about the mode of operation, particularly in relation to the consumer. It is a question similar to that which I put to our previous witnesses: how do you know that actually you are speaking for the consumer?
  (Mr McGregor) We have a Council that is appointed by the Secretary of State for Trade and Industry, so we are very much at arm's length from the economic regulator, and, indeed, apart from the appointment process, we are independent from Government. That Council comprises nine regional members, and four or five national members. We like to think that there is a balance within the Council. Each of our regions has a regional committee, it varies, but often there are between about 10 or 12 people, who will devote probably about two or three days a month to Postwatch issues. In turn, each of the regions operates a series of interest groups, focus groups, sub-committees, and, in all, we hope to involve, on a reasonably regular basis, some 1,000 people across the country who have, on a largely voluntary basis, an interest in postal matters. In addition to that, we have three or four more specialist groupings, for example, we have a grouping of some 20 interested parties who look at Post Office Counter issues, and, of course, at the moment, with the major closure programme underway, that arouses quite a lot of local and national sensibilities. Also we have a grouping with the major customers, through their major trade associations, so we know, through regular dialogue with them, what their concerns are. Also we have a grouping that tries to bring together the smaller or medium-sized operators, together with charities, other voluntary groups, people who generally express an interest in postal matters. And, obviously, what we do is maintain a dialogue through these organisations, to bring them up to date with what we perceive as being the latest issues, but we use that then also to collect back in views from what we hope, as a result of these consultative mechanisms, is the full range of consumer voices.
  (Mr Frewin) In addition, My Lord Chairman, we take about 8,000 telephone calls a month, so we are dealing with customers there; they are not always complaints, often they are inquiries, often we put them in touch with other, relevant organisations who can help. But we gather information from them.

  393. Thank you; and just on the point about the appointment of, say, the regional Councils, that, presumably, is by the Secretary of State identifying people for appointment, or in consultation about appointment; do people get appointed on the basis of public advertising that places are available, or through people actually suggesting themselves for appointment?
  (Mr McGregor) All our Council member posts are advertised, and are appointed through Nolan Principles. We also advertise for members of our regional committees and we follow the same principles for making those appointments.

  Chairman: Thank you very much.

Lord MacGregor of Pulham Market

  394. I want to ask you a question about transparency and the accountability of your regulator, Postcomm, and use your own very helpful paper in doing so. In paragraph 13, you criticise Postcomm for not having published any accounts, despite having been in existence for three years. In paragraph 17, you say it is not accountable to postal users, and you criticise the way in which it negotiates with Royal Mail in private. In paragraph 18, you say that its consultation processes are not soundly based. And in paragraph 20 you say that there seems to be reluctance on the part of Postcomm to publish as much as they can to help all stakeholders understand the whole picture. Have I got the right message, that you are very critical of the transparency and accountability of Postcomm?

  (Mr McGregor) I think it is fair to say that our experience over the past two years has been a curate's egg; it is best probably to refer to three major issues which we have debated with Postcomm over that period. The first was the issuing of the first licence for Royal Mail as a public limited company, and there we felt that there were significant last-minute changes that were made to a draft of the licence that had been consulted on. These were pushed through literally two or three days before the licence became operative. Then where pushed through with no consultation, no explanation, whatsoever. And we found that process simply was not transparent. Quite a number of the changes that were made we would have liked to have the opportunity to have debated and understood better, and also to have made sure that the consumer views, because they suffered as a result of some of these changes, had been properly taken on board; but none of those opportunities existed. A second issue was the Postcomm consultation around its reasonably controversial proposals to open up the postal market to competition: We felt that was a consultation which was handled completely differently by Postcomm and was much better, a proper timetable was set, there was the opportunity to make comments, views were taken on board and responses were given. We would like to think that the outcome from that was a much better decision as a result of that full interaction. But we have just gone through a final example I would like to quote, which is the setting of the price control, which Postcomm did at the beginning of this month. And there we felt that, although there had been a two-year period set aside in order to come forward with proposals for a new price control, and the level of prices for first- and second-class stamps and all the mail products that go with it, that Postcomm had so managed the process that we, as the consumer body, were given only six weeks, right at the end of this process, in order to try to digest some 200-odd pages of proposals: very complicated proposals, from Postcomm. To try to feed down through the various consultative mechanisms that I have already explained, and feed down to our regions and to our focus groups and other interested parties, then to discuss it and then garner comments back up again. And six weeks, frankly, was a ridiculously short time to try to do that; nonetheless, we did our best, and we put comments back in to Postcomm, not only did we but 19 other recipients of the consultation responded. And we were surprised, and I think the other respondents to this were surprised, when Postcomm took no account whatsoever of the responses that they had received and went ahead and implemented the licence changes exactly as they had proposed six weeks earlier; so we were left wondering what the point of that consultation exercise was.

  395. Have you anything to suggest by way of process to make this better? You refer, in paragraph 9, to the primary assessors of Postcomm's effectiveness being the House of Commons Trade and Industry Committee and the Public Accounts Committee. Now the Trade and Industry Committee cannot be monitoring and scrutinising this on a regular monthly basis, and very often the effects of some of these committee's works are variable, and the Public Accounts Committee looks at it mainly from the point of view of auditing the accounts and all of that, rather than the impact of the sorts of things you do. So have you any ways of suggesting how this could be improved? I know you make a recommendation about being able to go to the Competition Commission, but that would not always apply in these sorts of situations. So have you any suggestions to put to us?
  (Mr McGregor) Yes, indeed, and we have put these suggestions to Postcomm as well. It goes back to the Memorandum of Understanding which exists between us and them. And we had suggested quite a number of changes to the Memorandum of Understanding, so that, at the beginning of any consultation exercise, a very clear timetable would be set out, so everybody would know the processes that were to be gone through, and that we would have the ability also to make sure, in setting that timetable, that at each stage of the processes there was adequate time for not only us but the other stakeholders who are involved in these consultations to have their own internal consultations, to garner comments and to feed them back. So that is one area of improvement that we think is necessary. You have referred to the other area of improvement, because, if we find ourselves not being listened to by the regulator, at the moment we are left with a fairly stark choice of either put up and shut up or to consider judicial review. Judicial review, particularly for a relatively small consumer council like ourselves, is a very major and not to say expensive step, and it is something of a blunt instrument as well. It has the drawback that I do not think anybody would want to see of two publicly-funded bodies, fighting each other through the High Court. It seems to me that there ought to be better ways of ordering things, and the single major improvement that we could see would be indeed to allow us to have the ability to refer disputed licence changes to the Competition Commission. That would recognise that there are three key players involved in these changes. Obviously, there is the regulated company itself, there is the economic regulator, but also there is the customer, who, at the end of the day, is the person who has to pick up the bill.

Chairman

  396. Just a quick supplementary there. What could be done to enforce any agreement that had been reached? You were mentioning about the consultation process, agreeing a timeframe, and so on; now, if Postcomm reneged on it, and you have mentioned already some of the practices, that they have not actually kept to their own agreed timetables, I wondered what the mechanism would be to ensure that actually they kept to what they had promised to keep to?

  (Mr McGregor) I think, apart from the kind of moral consequences of them not adhering to a Memorandum of Understanding, or a pre-agreed consultation process, frankly, I do not think there are any sanctions. At the end of the day, it runs back to judicial review, because you can go to a judge and you can say "We believe that the process that has been followed has been inadequate, for the following reasons," or you can say "We believe that the results that have come out are inadequate, for the following reasons." Often the two go together, if you have got a poor process, it tends to lead to a poor outcome. But, at the moment, as things stand, I do not think there are any sanctions, and, in a sense, if an independent regulator is not willing to live up to not just the letter of a Memorandum of Understanding but also the spirit of the Memorandum of Understanding then it is very difficult to see what can be done in those circumstances.

  397. So you do not see a statutory mechanism for addressing some of the very specific problems that you identify in your memorandum?
  (Mr McGregor) No, I do not think we do; and, again, it is a matter of attitude, we think that if there is a willingness on both sides to make the arrangements work then they will work.

  398. So it comes back to, and we may want to come on to the appointments process of Postcomm, a lot depends on the quality of those who are the regulators?
  (Mr McGregor) Yes, that is right.

Lord Acton

  399. I wanted to ask about the same thing. Taking the third example, where they gave six weeks for you to consult down and up and reach a conclusion, and you came back as fast as you could, I think you said there were 19 different submissions to them, and they took absolutely no notice whatever and did what they had intended doing all along, as I understood it?

  (Mr McGregor) Yes, that is right.


 
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