Examination of Witnesses (660-679)|
WEDNESDAY 11 JUNE 2003
CORBETT CBE, MR
660. Do you think, just picking up on the points
you have touched onconsultation, listening to the other
people involved in the process, that in terms of transparency
you go as far as you could do? Do you give any credence to the
recommendation that this is not peculiar to this sector, because
other bodies have made the same recommendation to us, that regulators
should publish minutes of meetings and other material that they
do not at present put into the public domain?
(Mr Corbett) I am not going to say that we go as far
in the area of transparency as is possible; we could always do
more. I would be profoundly sceptical, frankly, of the benefits
of publishing meetings of our discussions. Janet has already described
to you the way in which we pull together our thinking and I think
it is a very iterative process which goes backwards and forwards,
and I think to spell that out would mean that we would be spending
a quite unreal amount of our time in trying to record in a way
that was readily capable of being put out in the public domain
exactly where we got to and how each individual played his or
her part. Secondly, we do put out very extensive decision documents
and I would be very happy to produce some of our decision documents
for the Committee to see the way that they go. What those do effectively
is provide a very full analysis of all the observations that have
been made to us and how we have responded to them, why we have
responded to them in the way we have, and those, if you like,
are the publishable form of the discussions that we have within
Lord Holme of Cheltenham
661. Mr Corbett, could I ask you or Mr Stanley
to help us with one thing. You described yourself just now as
an economic regulator and, of course, this is what most utility
regulators are described as, but if I look at your definition
of duties in your very helpful note to us, the provision of a
universal postal service or furthering the interests of disadvantaged
users are, I suppose, in many criteria social matters which you
are supposed to regulate, so you have multiple duties and roles,
and of course, it would be quite likely, if there were friction
between the regulator and the regulatees, it would lie precisely
in the area of what weight and priority you give to the various
duties that are laid on you. For instance, you might decide that
the way to promote efficiency and economy of postal operators
was through maximum competition, or you might decide that the
need to ensure licence holders were able to finance activities
required by their licence was to give them as much freedom as
possible on pricing and so on. The thing that is most difficult
for non-regulators like ourselves to understand is how you reconcile
these multiple obligations and reach the right decision, trying
to balance out criteria in a way which is transparent and understandable,
not just that you have done it properly, but the weighting that
you are giving to these various obligations. I suppose the tough
question is, do you think there is a hierarchy of obligation here,
or do they all co-exist, and you have to try and put them together
as best you can?
(Mr Corbett) There is undoubtedly a hierarchy
of obligation. The Postal Services Act makes it quite clear that
our primary responsibility is to ensure the preservation of the
universal service, and only to the extent that we are satisfied
on that score, are we then enjoined to do all these other things,
like introducing efficiency where appropriate by way of competition,
and so on. This is at heart the reason for our existence altogether.
If indeed there were no non-economic criteria, one could almost
say, subject to the provisions of the Competition Act, "Why
do you need a regulator? Just let the Competition Act take over."
We see as one of the most important functions of our decision
documents to seek to respond precisely to the question that you
have put, to set out the way we see our hierarchy of obligations,
and to explain how, in the light of those obligations, we have
arrived at the conclusion that we have. Very particularly in terms
of market opening, much of the market opening consultation document
was devoted to explaining how we came to the conclusion that competition
would actually enhance the security of the universal service rather
than detract from it. That was a crucially important finding.
It was an issue that we felt it was necessary to have out for
consultation for some considerable period of time, and interestingly,
we received over 2,000 representations on that paper, which I
think must be almost a record for a regulator's consultation document.
So yes, we take those requirements very seriously, and they do
form a major part of our decision process.
662. I am interested that you use that example,
because if your primary obligation is to ensure the provision
of a universal postal service, and one of the subsidiary obligations
is to promote competition, is it the fact that in your market
opening document, even if you had not had the obligation to promote
competition, you would still have come to the conclusion that
competition was one of the best ways of securing a universal postal
service? In other words, did it spring from your secondary obligation
or did it spring from your analysis of how to meet the primary
(Mr Corbett) I think it is an interesting comment.
I believe it sprang from both, but you could reasonably argue
that, had there been no obligation imposed on us by statute, we
might still have come to that conclusion. It so happened that
we had a happy coincidence of the conclusions on that point, but
we had no idea when we embarked on that exercise that we would
be likely to come up with a conclusion which actually gave us
quite an easy route forward in finding that competition would
actually enhance the universal service rather than be any sort
of a prejudice and jeopardy against it.
663. Given the obvious unhappiness of your major
regulatee on the issue of the timing of competition, I think it
would be fair to say, rather than the substance of competition,
at what rate it should be introduced, in explaining how you have
arrived at the decision to liberalise, if I can put it that way,
to open the market up to competition as fast as possible, do you
feel you have done an adequate job in terms of transparency or
communication in explaining to your constituency, your "non-marriage
partner", why you arrived at that conclusion, not just on
the substance but on the timing?
(Mr Corbett) Yes. Do remember always that we are the
regulators for the postal industry, not for the Royal Mail, and
that has to be our point of focus. Having concluded that opening
up the market to competition would be good news, we were quite
keen on being able to move ahead fairly swiftly, and in the first
of our consultation documents we recommended that the market should
be opened up by statute, the final step being in March 2007. As
a result of very widespread discussionsand I have talked
about the 2,000-odd representations we hadof many meetings
with MPs, with union representatives, and with others, and with
other operators coming into the market, we concluded that it would
be no significant detriment to what we wanted to achieve to extend
that by a year. That was a result which everyone accepted with
a greater or lesser degree of good will, and we believe that that
was a reasonable outcome of a very widely conducted consultative
664. As you can imagine, we have had a variety
of descriptions of the duties of a regulator. One of them was
"to deliver government policy." In paragraph 4 you describe
Postcomm as a non-ministerial government department. Would you
say that part of your duties is to deliver government policy or
(Mr Corbett) I am going to ask Martin
Stanley to comment on that, but my helicopter view of that is
that our job is to deliver government policy to the extent that
that has been enshrined in an Act of Parliament and to the extent
that it is delivered to us in terms of social and environmental
guidance. Beyond that, no.
(Mr Stanley) I agree entirely. I was told in the very
early days of this job by our expert legal team that we are a
creature of statute. The Postal Services Act is our bible. We
do what it says in here: no more, no less. In the sense of government
policy being in here, we certainly promote government policy,
but only to the extent that it is in here.
665. Have you ever felt pressure from government
to deliver a policy which you did not deliver?
(Mr Corbett) In one respect there was indeed such
an occasion, at the moment when there was a proposal to permit
a merger to take place between Royal Mail and TNT, and we were
frankly unhappy that the special provisions that would have been
necessary to introduce into the market opening regime to permit
that to happen were not explained to us with sufficient clarity
for us to be clear that this was actually going to be in the interests
of users of the postal services. So we said that we could well
understand that there might be benefits to the government, as
shareholders of Royal Mail, to bring this about, and if that was
what the government actually wanted to do, then obviously government
should be allowed to get on and do what they want to, but they
would have to take us out of the loop before they would be able
to do that; they could not expect us just to sit there and say,
"If that's what you want, you have it." We had to be
formally disenfranchised, so to speak. However, it was not a bad-tempered
discussion; it was a very serious constitutional issue as between
where our responsibilities ought to stop and where government's
ought to start.
666. Was your response readily accepted by government?
(Mr Corbett) In the end it did not go ahead.
(Ms Lewis-Jones) I think we drew a line with a firmness
which will not be forgotten, which did not involve actual hostility.
Lord Jauncey of Tullichettle
667. Mr Corbett, could I ask you to have in
front of you paragraph 14 of your document, dealing with appeals.
If you decide to refuse the issue of a licence on an application,
or if you issue a licence with conditions which are not acceptable
to the applicant, has he any means of redress? Can he appeal to
anybody, or is your decision on that final?
(Mr Corbett) He can certainly appeal
under the judicial review process. There is no appeal to the Competition
Commission because no licence exists by definition, and you can
only finish up in front of the Competition Commission when you
are wishing to amend a licence in a way which the licensee is
not prepared to accept. So it would have to be a judicial review.
(Ms Lewis-Jones) The issue of a licence would have
been preceded by a very long period of discussion with the applicant,
so that they would have had plenty of chance to tell us what they
were unhappy with and to argue it through with us. But once a
decision is taken, that is the only route.
668. You do not envisage a situation where it
would be desirable that an applicant whom you thought perhaps
ultimately was undesirable should have a right of challenging
(Mr Stanley) Personally, I think judicial review is
absolutely the right thing to do.
669. Yes, but we know the limitations of judicial
review. Suppose your decision were reasonable.
(Mr Corbett) Nevertheless, it is a very significant
sanction. There is no regulator that would care to be taken to
judicial review and lose on the grounds that they had failed properly
to take account of the arguments put forward by an applicant for
670. Your position is then that you do not consider
that there is any need for a decision on the merits of any decision
by you refusing an applicant's licence? 
(Mr Corbett) I am certainly not aware
of any at the moment, but I think it is worthwhile making the
general point that every time you build in another set of protections,
another layer of appeals, another degree of bureaucratic process,
you slow up the regulatory process, and you create greater regulatory
uncertainty rather than less. Whilst I am not saying I cannot
imagine a set of circumstances in which we might want to take
that route, I would have thought that it was right to be very
cautious about the consequences of going that way, unless someone
can actually demonstrate, chapter and verse, that here is a case
where an injustice was seen to be done which would not have been
done had there been a proper appeal process.
671. It has been suggested, perhaps rather contrary
to the evidence we have just heard, that you have an over-close
relationship with Royal Mail, to the detriment of other interested
or potential applicants. Have you anything to say on that?
(Mr Corbett) Absolutely nothing. I think it is total
672. Finally, does "universal service"
mean that everybody living in these islands has a daily postal
service? Does it mean that that is restricted to letters only,
or does it mean they are entitled to a letter and a parcel post?
(Mr Corbett) I would like, if I may, to take a minute
or two to respond to that, because this is crucially important,
and your previous witness was being quite critical of the decision
that we made to move ahead with market opening and price control,
before defining "universal service". The statute that
set us up has a very broad-brush description of the universal
service. It is delivery every working day, collection every working
day, to the door for delivery, including a registered mail service,
and at a uniform price up to 20kg (letters and parcels). That
is about it. For the rest, you are on your own. Royal Mail, because
there was no reason for them not to, had always in the past tended
to regard everything they did as being part of the universal service130
or whatever it is different services, many of which ordinary members
of the public would never see from one end of the year to the
other. We felt that to move ahead, the right thing to do was to
accept Royal Mail's definition, so the whole of price control
and the market opening has been put together on the basis that
Royal Mail's definition, a very important definition, of "universal
service" would continue to apply, unless and until there
was clear understanding that it should be limited in some way,
which may well require new legislation to enable it to happen.
It is only this year that we have embarked on the very beginning
of a consultation exercise about what it is that people actually
want of the universal service. Is it there for its economic benefits?
Is it there for its social benefits? If it is social benefits,
how should they be defined? Is this something that should apply
to just the second class post as the underpinning service? Should
it go to first class? We put out a consultation paper, which has
a range of questions and absolutely no answers at all; we are
not trying to push in one direction or another. That is a process
that is going on now. We will get the answers back from that over
the summer. We will put out a second consultation which will try
to get a bit more focus on these issues thereafter. I do not believe
that this was an exercise that it would have made any sense at
all for us to have attempted before we had actually dealt with
the immediate problems of trying to tackle the levels of efficiency
and service that are being applied to postal services as they
are now. I think we have the timing and the sequencing right,
and we now want to have a wide range of debate, in which I hope
we will get a lot of participation, particularly from consumers,
from those representing disadvantaged groups, from bulk users
and from others, out of which we will then be able to start fashioning
a far more coherent picture of why the universal service is there,
and then we can make certain that we can deliver it and secure
673. You made it clear in answer to Lord Fellowes
that you are not subject to undue government pressure. What other
pressures are you open to? Are you constrained only by your statutory
duty and judicial review, or does public opinion enter into it?
Are you an entirely clinically separate part of the country?
(Mr Corbett) I would, of course, love
to say that the overwhelming pressure is reason. We do take our
responsibility to the public interest very seriously indeed. We
take our commitment to the achievement of the vision that we have
set out in our paper very seriously. We think it is very important
that we have a pretty clear compass to guide the decisions we
are making so that we are not just gazing at the ceiling and saying,
"What would we like to do next?" Everything we do is
focussed towards the achievement of the mission, which in turn
is focussed towards what we see as the public benefit. I think
it is important to recognise that, as regulator, we have no animus
to any particular organisation or any particular group of interested
parties. What we want to do is to ensure that we can indeed deliver
the benefits set out in the mission, and there is no reason why
we should allow ourselves to be distracted by anything other than
that. So yes, we get masses of pressures on us. We get letters
from MPs, we get letters from unions, we get letters from postal
workers. We have a marvellous bulletin board at the back of our
website which is designed to enable everyone who feels explosive
rage at what we are doing to be able to evacuate their rage on
674. What effect does this have on you?
(Mr Corbett) The effect it has on us is to remind
us constantly that we do have a constituency of users, of employees,
of operators, all of whom are looking to us to satisfy their expectations.
That is a pretty demanding set of pressures.
(Mr Stanley) Can I give an example? I am very conscious,
going out a lot, as I do, of two separate types of pressure from
the public. Whenever you go into the country areas, to the north-west
of Scotland, to Orkney and Shetland, there is a huge worry about
whether the universal service will be maintained, whether it will
be maintained at a reasonable price, whether people will still
be able to post letters, whether delivery will stop being every
day. You cannot attend a meeting up there or deal with correspondence
from MPs up there without getting a deep feeling for the importance
of the universal service to those communities. Equally, you can
go into south-west London or meet some businesses, and you cannot
come away from those sorts of meetings or discussions without
really feeling the passion of people that are badly hurt by the
very poor service they sometimes get from Royal Mail, or businesses
who spend a lot of money on the Royal Mail and are seriously inconvenienced
when things go wrong. That encourages us to improve the postal
service. We cannot do what one constituency wants entirely, beat
up the Royal Mail entirely. We cannot necessarily do what another
constituency wants us to do, but by meeting the public, we do
take great care over decisions, and then, when we have taken our
decisions, we also put a lot of effort into going out and explaining
(Mr Corbett) There is hardly a meeting of the Commission
when one or more commissioners do not wish to share with us some
arm-twisting experience at a cocktail party the night before.
We are very much out in the open. We do listen. We have to listen.
675. What are the considerations which you have
in mind in deciding the rate at which competition should be introduced?
(Mr Corbett) As I was saying earlier, this was really
what came out of the whole process of consultation. I am bound
to say that our own view at the end of the day was that there
would have been no significant risk in moving ahead as fast as
we had originally suggested, but equally, we perceived that there
was going to be a much greater degree of public acceptability
of what we were doing if we were to extend it by the addition
of a year, and it was clear that the speed at which would-be competitors
were going to be able to gear themselves up was not really going
to be influenced greatly. So that was a case where we were able
to move in a direction which would respond to public concerns
without any significant detriment, we felt, to the achievability
of what we wanted to put in place.
676. Presumably, one of the considerations you
have in mind then is the effect on the existing major supplier
of this service and on its very large number of employees. I wondered
whether the rate of introduction of competition was related to
the ability of that supplier to adapt to changing circumstances.
(Mr Corbett) Yes, indeed. We made it very clear that
one of the reasons for the change when we extended the introduction
period was because between our first and our second consultation
documents, or the consultation document and the final decision,
new management had come into Royal Mail. The whole of the renewal
programme had been put together with a three-year time horizon,
and we were anxious to provide the encouragement to Royal Mail
to be allowed to go ahead to the completion of that renewal programme
without imposing on them an excessive degree of market opening.
So yes, that was indeed one of the factors.
677. Do you have a collegiate relationship with
other regulators? If so, what do you gain from it, and if not,
(Mr Corbett) Yes, we have a collegiate relationship.
We meet, as I am sure you are aware, at about two-monthly intervals
at my level. We also have a series of meetings at director level
of people who examine how we are developing our thinking on return
of capital, and other regulatory issues like that. I believe they
are extremely useful. I think they are probably rather more useful
at the director working levels, where people are actually talking
about techniques and methodology, than at the top level. I am
not sure that any of us at the top level would think it was worthwhile
getting together for more than one meeting every two months, but
we think it is very important that we recognise each other in
the street and we know what we are doing.
678. From those encounters, have you come to
any conclusions about regulation generally, about how it could
all be done better, which you think would be of use for this Committee
(Mr Corbett) In so far as we were all very much involved
in the deliberations of the Better Regulation Task Force and subscribe
to what came out of that whole exercise, and certainly subscribe
to the five principles of good regulation, I think all of those
things have helped to let regulated industries understand what
the principles should be, and that must be a good thing. I do
not want to over-emphasize the benefits we get out of the exchanges.
One of the things that one learns very quickly is just how varied
each of the regulated industries are, and the lessons that you
can read across from one to another at the end of the day are
quite limited. But it is undoubtedly useful that we exchange views.
I do not think it would help to go very much further than we are
at the moment.
679. You are technically regulated by rather
different statutes as well.
(Mr Corbett) Yes.
12 The new Postal Services Regulations 2002 mean that
Postcomm is now required to give reasons for refusing an applicant's
licence. Postcomm has, so far, never refused a licence. Back