Examination of Witnesses (680-696)|
WEDNESDAY 11 JUNE 2003
CORBETT CBE, MR
Lord Lang of Monkton
680. Mr Corbett, looking at the article in the
Independent on Sunday on the things that Mr Leighton was
going to say when he came here today, and has said but has not
come here to say, and comparing them with your presentation of
Postcomm as a benign, reasonable, entirely understanding organisation,
I cannot understand why there seems to be such a vibration of
animosity between you and Royal Mail. It is not as though you
preside over a large empire of unruly children, like some other
regulators. Why do you think we see this disparity?
(Mr Stanley) If you are inside Royal
Mail at the moment, it is a very difficult organisation, under
enormous stress and strain. The whole of the Royal Mail Group,
as we all know, is losing buckets of money. The mails business
however is not. The mails business, our bit, is profitable, but
the rest of it is having the most terrible time. So that colours
your approach to life. A regulator that does not give you a price
rise on the mails business is making your life more difficult.
Competition too is something that they are very scared of. They
genuinely do not know how fast it will come in, but of course,
they are much more pessimistic than we are. They told us last
year that they would by now have lost about five million letters
a day to their competitors. That has not happened, but they genuinely
thought it, and they were genuinely scared. They genuinely thought
we had gone far too far. It is those factors that colour the noise
that you get from Royal Mail but, as we heard earlier, when you
get down to the detail, relations are really not too bad.
(Mr Corbett) If you analyse most of the more robust
criticisms that are made about us, they have come from Allan Leighton.
Allan Leighton is someone with a very particular and very difficult
job to do, and to do that job he needs to be able to rally the
support of most of 200,000 people and to enable them to feel that
there is a real champion fighting their corner for them. I think
what is happening is that there is a recognition that Allan Leighton
has the job of really demonstrating that he is fighting that battle.
There are other people whose job it is to get on with the process
of making regulation happen. I have a huge regard for Allan Leighton,
and I recognise the scale of the task that he has taken on board.
I do not want to make his job any more difficult than it has to
be, and if it makes his job easier to have a good, old side-swipe
at us, then frankly, our shoulders are broad enough to do that.
681. Do you not think it would make his job
easier, and possibly yours too, and certainly be less costly for
him, if there were to be some kind of disputes resolution panel
rather than the nuclear option of judicial review, limited as
it is to the process?
(Mr Corbett) I am not at all sure that that is a proper
conclusion, actually. The real issues between us are being resolved
frequently, constantly, by the working level exchanges. I think
the worry about a disputes resolution, rapid-response service
is that it could become really quite addictive, and if you are
not very careful, you could find yourself running off with small
disputes to get someone else to step in. At the moment, for all
its imperfections, the fairly Draconian nature of the resolution
process means that there is a huge amount of pressure on both
sides to get it sorted out between them. I think that is good.
682. That implies that it is a discussion between
equals, but it is not, because ultimately, you can impose your
(Mr Corbett) Whether we are equals or not I leave
others to judge. I do not think we are at a particular advantage
or disadvantage compared with their position. After all, they
do have a pretty powerful shareholder.
Baroness Gould of Potternewton
683. Can I come back to another relationship,
and that is your relationship with Postwatch? I was particularly
interested in the points Mr Stanley raised about going round the
country and talking to the different customers. Of course, obviously,
there has to be a balance struck between all the different demands
that are made, but at the same time, it does seem that there is
a perception, whether real or not, of evidence of dissatisfaction
with the postal service. We have recently had a report which did
come from Postwatch, actually making that point. In your further
submission about the evidence that had been submitted by Postwatch,
you say it is regrettable that Postwatch appears to be unable
to acknowledge the successes. If they are finding that people
do not perceive any successes, surely they are doing their job,
which you would expect them to do. Thinking about the word "regrettable,"
is that not a little over the top? Maybe there needs to be more
of a dialogue between you to identify clearly where in fact successes
are being achieved.
(Mr Corbett) Despite the fact that I
actually wrote "regrettable" myself, I am going to ask
Martin to answer that.
(Mr Stanley) Postwatch and Postcomm share a common
understanding of the problems being encountered by members of
the public and businesses. The visits and meetings I talked about
are always joint Postcomm/Postwatch, so at that level we have
a very good, shared understanding and view, and to a great extent
a shared view of the way forward. Rather as with we and Allan
Leighton, we have seen a number of instances in recent months
of, to use your phrase, "over- the-top" criticism of
us, of some of our control decisions, some of which we saw in
their note to you, and I think they are regrettable, but deep
down, I think, as with Royal Mail, we have a basically professional
relationship at the working level which is effective.
(Mr Corbett) I should just mention on that that we
also comparatively recently began building a whole series of links
between their council members and our commissioners. It was very
clear to all of us that there were some problems at the top levels
of the executive, and that we needed to find a way of isolating
those problems to some extent, and ensure that we could continue
to have a good dialogue. So there is an important new initiative
which is going ahead there.
684. My second point relates to the first page
of your first submission, in which you say that you have a role
to advise the Secretary of State for Trade & Industry about
the network of public post offices. Can you just elaborate on
how you draw up any criteria on which that advice would be based?
Obviously, closures and of post offices and so on are causing
a great deal of distress.
(Mr Corbett) This was a responsibility which actually
formed no part of the Postal Services Bill at all. It was after
we had come into existence that we were asked by the DTI whether
we would be prepared to accept a non-regulatory function of advising
the Secretary of State on the future of the network of post offices,
rural and urban. We felt that that was something that we could
do without any jeopardy to our independence for our regulatory
function. We do actually have a separate group within the office
that handles this work. We have submitted two annual reports and
the third one will be going in next month, which report to the
Secretary of State and to the public at large on the very considerable
amount of fairly basic consumer research, user research that we
do to ensure that the decisions that are madewhich are
going to be government decisions, not oursare based on
as full an understanding as one can reasonably achieve as to what
it is that people are concerned about in the service they get
from their post offices; what it is they would like to see, particularly
obviously with regard to the interests of the disadvantaged. One
of the crucial issues that we have been pressing on the Secretary
of State through our reports has been the importance of focusing
on the service that is offered rather than the bricks and mortar
with ivy growing over the porch, through which they are offered.
That is a theme which we will be continuing to develop to try
to focus more on how you make certain that there are mechanisms
to enable what people want of their post office services, whether
they be purely postal or otherwiseobviously cash and banking
transactions are very prominent in thinking at the present timeto
be delivered. So the answer to your question as to on what basis
we are developing our thinking, it is entirely on the basis of
the research we are carrying out as to what it is that people
want and expect and are concerned about.
685. Does not accessibility have something to
do with the service that the post office is offering? If a post
office is not accessible, then there is no service.
(Mr Corbett) Absolutely, and you will find that figuring
very prominently. If this is a subject which interests you, I
really would commend our series of reports. I think they are excellently
written, they are much more readable than most of the stuff we
produce on regulation, and they really tell you a lot about what
it is that people really need, and of course, access is a crucially
important part of that.
(Mr Stanley) Could I add that we do not get involved
in individual closure issues, whether an individual post office
should be closed. Postwatch look at those quite closely. They
are doing a lot of work at the moment very effectively on individual
(Ms Lewis-Jones) I think it is worth mentioning that
this is an area where we and Postwatch have worked together.
686. I can see in your further submission about
Postwatch that you might have disagreements relating to interpretation
of the Act and so on. One of the things which rather surprised
meand I appreciate this might be more of a question for
Postwatch than for youwas the actual factual errors.
(Mr Corbett) Yes, we were surprised at
those too. They could have picked up the telephone, but they did
687. Some of them are quite basic. Although
perhaps slightly worrying, this is not the first case where we
have come across this, where we have had the consumer body saying
"They do not publish accounts" and the regulator saying,
"Oh yes we do."
(Mr Corbett) We shared your disappointment at seeing
those, and the first few drafts of the response that we were going
to send to you were much more colourful than the one you were
Lord MacGregor of Pulham Market
688. Could I follow up Baroness Gould's question?
Mr Stanley made a great point about the fact that the Royal Mail
is profitable, and you have that in your second submission to
us in response to Postwatch, but in looking at the post offices,
one is looking at an area that clearly is making a big loss. You
are making recommendations or comments to the Secretary of State
about the post office, some of which, I suspectI do not
know how much you look at the cost-effectiveness of every proposalwould
involve continuing the losses. Are you able to take that into
account when you look at the decisions you want to make about
Royal Mail and the possibility that Allan Leighton, sitting in
his position, is having to subsidise one from the other?
(Mr Corbett) We do not believe that it
is any part of the regulated activity of postal services to provide
subsidies for post offices, and we take no account of any requirement
for any such subsidy to be financed through postal services. So
our regulatory decisions are based on postal services as a stand-alone
operation. The wider issue as to the extent to which the post
office network may be thought likely to be in deficit on a continuing
basis and what you actually do about it is obviously a subject
that figures very largely in our thinking, and I should say that,
in addition to the published reports that we put in on the perceptions
and needs of users of postal services and post offices, we also
submit a confidential report to the Secretary of State on financing
options, but what she does with that is entirely her decision.
You have seen the outcome of that from the £450 million that
is now being provided.
(Ms Lewis-Jones) It is a purely free-standing advisory
piece of work on the network.
689. So it does not influence the decisions
on the regulatory front and at the end of the day, it will be
a matter for the government to decide if it wanted to subsidise
following anything you put forward on the other front.
(Mr Stanley) I am not sure we have researched it properly,
but I suspect we could not, under the law, set a mail price to
allow a cross-subsidy. The economy and efficiency duties for a
start would suggest that we should not do that. Even without the
Postal Services Act, there is a deeper reason: if you put the
price of post up in order to allow a cross-subsidy, which I am
sure Royal Mail would love us to do, it puts people off using
the mail, cuts mail volumes, and harms the businesses that use
the mail services. So there are wider reasons why it would be
a dangerous road to go down, even if we were allowed to do it.
690. I can see that some postal users may have
a different view. You made a point about the two-monthly meetings
you have with other regulators. Presumably, you see yourselves
as in a very different position in that (a) your principal customer
is owned by the government, and (b) there is one major monopoly
supplier, whereas most other regulators are dealing with a large
number of providers. Does this mean in these discussions you find
yourselves in a rather separate category from the other regulators?
(Mr Corbett) To some extent, clearly. On the other
hand, most of them in their history have been through a period
of having one overwhelmingly strong regulated company and trying
to find ways of bringing others in. State ownership is a different
issue, and that does have some implications, I think mostly in
terms of how you set regulated cost of capital, because it is
very difficult to make a determination as to what the regulatory
assets of the business are without having had the benchmark of
a public offering to set some standard for it. For those who are
interested in that issue, we had to go through some rather careful
gymnastics in our price control recommendations as to how we dealt
with it for this first price control, and it is a problem that
we are going to have to deal with again when we come to the 2006
691. To some extent, do you feel that, unlike
the other regulators, you are there as a stand-alone organisation
on behalf of the government? I understand the point about other
providers coming in, but they are still very small. Therefore,
in that sense, you are operating in a way that the government
had to do before, but you are no longer part of the Department;
you are there in a slightly independent capacity, but still doing
a job that by and large, the government did. You are, in a sense,
protecting the Secretary of State.
(Mr Corbett) That is true to an extent, but I would
like also to feel that one of the reasons for wanting to set us
up in the first place was that the government simply had no appetite
for having to take the rather disagreeable decisions that were
necessary to move the Royal Mail forward to where it has been
moved to now, in so far as we can do things which government was
not readily able to do. I think that is pretty good news.
692. You put the point rather better than I
put it, actually, because that is what I was driving at. In a
sense, you are able to take those decisions without, as we have
heard, most forms of independent appeal, without political pressures
that a minister in a department might find.
(Mr Corbett) Yes. It is not without political pressures,
but they certainly are not the same political pressures that a
minister in parliament would have.
693. Are you intending to carry out post-implementation
appraisals of your decisions? As you come to do the next one,
clearly that will be helpful in deciding whether you got it right
this time or not, or whether Mr Leighton's criticisms were fair.
(Mr Corbett) That is a crucial issue for us, and one
of the things that we have spelt out at considerable length in
the latest version of our business plan, which went on our site
at the end of March, is the extent to which we are going to be
allocating resources to monitoring what is happening within the
market and making certain that we really understand the dynamics
of that, not only for the general health of the industry, but
also, of course, we have to make certain that we are not unwittingly
putting the universal service in jeopardy, and if for any reason
we were, we had better know about it pretty quickly.
694. Does that mean that before the next review
you will be looking regularly at the view you are taking about
the cost savings that should be made within the service and seeing
what the impact of those are, or whether in fact they are taking
(Mr Corbett) The service requirements are being monitored
in any event every three months, and we put information with commentary
on service standards on our website every three months, and the
latest have actually been very disappointing in terms of the trend
that seemed to be being experienced. The wider issues that you
touch on we will be looking at certainly every year, and we will
shortly be developing our outline plans for the 2006 price review,
which will need to get under way quickly, and all of that will
have to come back into the melting pot.
695. This is a fundamental question from the
perspective of this inquiry looking at accountability. You mention
in paragraph 10 of your submission the need to be clear as to
the respective roles of Secretary of State and Postcomm. You say
". . . including Postcomm's independence and direct accountability
to parliament." Can you comment on how you see your accountability
to parliament in terms of how adequate is parliament's role in
questioning you and giving you an opportunity to justify the decisions
that you reach?
(Mr Corbett) Our main channel of formal
accountability is clearly through the Trade & Industry Select
Committee, and I think we find the opportunities to explain what
we are up to, both formally and also in informal meetingswe
have regular informal meetings with members of that Committeeextremely
useful. As to whether they constitute a level of accountability
which continues to be appropriate to what is obviously a changing
world with changing expectations is a very proper matter for this
Committee to be looking into. From our point of view, we feel
comfortable with the accounts that we give to the various interested
parties, not only through the Trade & Industry Select Committee
and the Public Accounts Committee but also through our annual
reports, through other reports and through our decision documents.
We think it adds up to a pretty formidable stack of reporting
back and information. I would just repeat the earlier comment
that there comes a point at which the degree of oversight and
the number of bodies, if you add on the National Audit Office,
the Better Regulation Task Force and so on, become self-defeating.
I think it would be impertinent for us to judge whether we are
at that point now or not. We have obviously complied with whatever
obligations it is decided to put on us, but we feel we spend quite
a lot of time explaining ourselves at the moment.
696. Thank you very much. I am conscious of
time, but we are very grateful to you for giving up your time
to be with us afternoon, and also for the papers that you put
(Mr Corbett) If you have any follow-up
questions you would like to come back to us with, we would be
delighted to help in any way we can.