Postal Services Bill

Public Bill Committee, 30 November 2010.

Clause 18

Nia Griffith (Labour, Llanelli)

I beg to move amendment 42, in clause 18, page 10, line 16, at end insert—

Anne Begg (Labour, Aberdeen South)

With this it will be convenient to discuss the following:

Amendment 96, in clause 18, page 10, line 16, at end insert—

Amendment 99, in clause 20, page 11, line 15, at end insert—

Amendment 101, in clause 24, page 13, line 7, after ‘RMPP’, insert ‘, such representatives of members of the RMPP as appear to him to be appropriate’.

Nia Griffith (Labour, Llanelli)

It is a tremendous pleasure to serve under your chairmanship, Ms Begg, particularly given the difficulty that some colleagues have had in travelling from Scotland. I inform Committee members that they will have to enjoy hearing my voice today, because they will not have the exciting alternation of different voices from the Opposition Front Bench to keep them amused.

The amendments relate to clauses 18, 20 and 24. Amendment 42 would insert a new subsection (2A) in clause 18 to prevent the winding up of the Royal Mail pension plan. Clause 18 allows the Secretary of State to amend the rules of the RMPP to enable the Government to assume liability for the deficit and to create a sectionalised scheme. Such a power is inevitable if the deficit is to be transferred and if the scheme is to be sectionalised. Subsection (2) allows the Secretary of State to amend the rules of the RMPP so that, when calculating benefits, years of pre-split pensionable service and past-service liabilities are transferred to the state and can be counted. That means that pre-split service can be paid on the basis of final pensionable earnings and pre-split years of service can be counted for ill health and redundancy enhancements. Subsections (1) and (2) are, therefore, acceptable.

The amendment seeks to ensure that, when using the power to amend the rules, the Secretary of State does not insert a winding-up rule. Such a rule is not required and is not in the current rules, under which I understand that the trustee has to consent to any amendment. A winding-up rule would also shift the balance of power between an employer or employers and the trustee in the structure of the RMPP, so allowing the employer to bully the trustee. Will the Minister look carefully at our amendment 42 to see whether there is any way in which he could accept it? If he is not able to accept it, is there any other way in which he might allay our fears and those of the members of the RMPP, and keep a degree of parity with the current scheme?

Amendment 96 is about consent. As we know, clause 18 enables the Secretary of State to amend the RMPP in ways that he considers appropriate in connection with an order under clause 16 or 17. For example, this would enable amendments to the scheme rules in relation to benefits payable in addition to the qualifying accrued rights, so that it was clear whether those benefits were met from the RMPP scheme or from a public service scheme.

Subsection (2) allows the Secretary of State to amend the rules of the RMPP, and is expected to dovetail the benefits payable under the new public sector scheme with the ongoing RMPP. The provision is for the benefit of members and is acceptable. The public sector scheme will pay benefits back to members on the basis of their accrued benefits based on pensionable pay as of the date of division. The RMPP will then top that up, linking benefits to actual pay at the point of retirement, and will top up benefits for members who retire early on the grounds of ill health or redundancy. The trustee has to pay the benefits, so it needs to be confident that the dovetailing is technically correct and that the scheme can be managed.

The Minister will probably tell me that the trustee must be consulted under clause 24. Consultation, however, is not enough. Why does he not consider it necessary to ensure that, before making an order, the Secretary of State must obtain the consent of the trustee of the RMPP? If the scheme is to be run by the trustee, it needs to be satisfied that it is workable. Its consent should, therefore, be obtained, which is the purpose of the amendment. If the Minister does not wish to accept the amendment, will he consider whether there is any other way in which the role of the trustee of the RMPP could be strengthened so that the major changes—it is the trustee that will be most affected by them—do not take place without its being directly involved in the critical decisions?

Amendment 99 relates to clause 20 on the transfer of assets of the RMPP. It proposes the insertion of new subsection (1A), which states:

“Before making an order under this section the Secretary of State must obtain the consent of the trustee of the RMPP to the selection of the assets to be transferred.”

Clause 20 provides for the division of the assets of the RMPP. Some of them will be retained by the RMPP, but most of them will be transferred to the Government. The public sector scheme is taking on accrued liabilities and therefore ought to receive an appropriate share of the assets that have been built up to cover them; otherwise, the public scheme will take on the entire liability rather than the deficit, and the RMPP will become massively overfunded.

The amendment relates to the selection of the assets transferred to the public scheme, and this involves two issues. First, the RMPP currently holds a mixture of equities, gilts, corporate bonds, real estate, managed funds, cash and derivative contracts. In broad terms, trustees usually match liabilities for older age groups with fixed-interest assets, such as gilts, cash and bonds, while benefits for younger and active members are matched with more speculative investments, such as equities. Property and managed funds fall somewhere in the middle, and derivatives are used to hedge risk. Someone needs to make the division. The new public scheme and the RMPP will have different age profiles. The trustee and its actuary are responsible for the RMPP and ought to have a say in that division. It is a monumental decision—we are talking about the huge number of different assets, the different ways in which they function, and the different potential for meeting the needs of the different sectors that will be divided.

Assets in the same class could have different characteristics. For example, shares in BP might be more volatile than shares in the Royal Bank of Scotland, or vice versa. Who knows? Or, to take an extreme example, corporate bonds are usually cast as relatively low risk, but possibly bonds issued by Icelandic banks might be a different matter. It is not right that the Secretary of State has the power to cherry-pick and to leave RMPP with an inappropriate mix of assets. We are simply asking for the direct involvement of those directly involved—the trustee should have the opportunity to give consent and therefore be fully involved in the division. I hope the Minister will consider accepting our amendments. If he is unable to do so, will he find other mechanisms to ensure the same effect—that the division is not made without the consent of the RMPP trustee?

Amendment 101 relates to clause 24. It requires that we insert the words

“such representatives…of the RMPP as appear to him to be appropriate”.

Clause 24 requires the Secretary of State to consult before a new public sector scheme is created, before a transfer is made to the new public sector scheme and before any amendment is made to sectionalise the RMPP or to amend its rules. The consultees are the trustee and the employers, and amendment 101 requires the Secretary of State to consult “representatives of members” as well. Member representatives, of course, means trade unions. The formulation comes from the Superannuation Act 1972, which set up local government, teachers’ and NHS pension schemes. Our amendment 101—what a coincidence. Might the trade unions get the impression that somebody was trying to do away with them—to put them into a room 101? The point is that we do not want such a thing to happen. We want them to be fully involved and we would like their involvement enshrined in the Bill, because there is a great variety of approaches.

In the civil service, the trade unions seem to be fully involved, whereas in one of the armed forces schemes they are much less involved, so there are different patterns. We want to see proper consultation before any amendment is made, in the same way as member representatives must be consulted before amendments are made to the local government, teachers’ and NHS pension schemes. Amendment 101 seeks to ensure that Royal Mail unions are treated in the same way. It does not give the trade unions a veto, whereas some other amendments might give the trustee a veto, so there is a difference in what we are asking for in some of our other amendments. Amendment 101 is about a proper consultation.

I should be grateful if the Minister would spell out exactly how he envisages consultation taking place, and if that is to be the norm, why is it not possible to include it in the Bill? I mention that because we have examples of practice differing between various Government sectors. It is therefore important to have this stated, so that we can reassure the trade unions about what is to happen. Knowing the history and given the tremendous improvements over the past two years in industrial relations, I think it would be a tremendous measure of good will and would show a genuine commitment to work with the trade unions in a very difficult period of change, when there will be tensions. We want to ensure that the very best results are achieved in respect of pensions, because that will be one of the major concerns of the members of the work force, and of course the former work force. Is there any way in which the Minister could include a provision for consultation with the trade unions? If it is not in the form of our amendment, there may be other ways to introduce such a provision into the Bill, so that we may have some assurance on that matter.

On that note, I conclude my comments on clause 18, and I hope that the Minister will respond to some of my questions.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

It is a great privilege to serve under your chairmanship today, Miss Begg. Although we are without the hon. Member for Ochil and South Perthshire, we hope that at some stage he will arrive, because he has been a very active member of the Committee, and we are always interested in his views. In moving the amendment, the hon. Lady has asked a range of questions, and I hope that I am able to answer her satisfactorily.

Two of the amendments under consideration—amendments 96 and 99—relate to obtaining trustee consent. We debated that during our consideration of amendment 43 last week, and no doubt we will reprise some of those arguments today. Amendment 42 seeks to protect against the future winding up of the Royal Mail pension plan. The final amendment, amendment 101, relates to consultation with member representatives.

I shall deal first with how clause 18 might be affected by amendment 42, were it to be accepted. Clause 18 provides powers that allow the Secretary of State to amend the Royal Mail pension plan in connection with any changes required during the setting up of a new public scheme and any division of the RMPP. The creation of a new public service scheme under clause 16 and the creation of a new section of the RMPP under clause 17 will require technical and consequential amendments to the rules of the RMPP. Such amendments are necessary both to ensure that changes are fully effective and to ensure that the overarching requirement for the protection of scheme members against adverse treatment can be fully met.

A major theme of part 2 is ensuring that there is no adverse treatment of any scheme members, and I shall cite two examples of that. The rules of the RMPP may need amending to make it clear that the liabilities for paying the pensions that transfer to the new public scheme no longer rest with the RMPP. It is important that we have clarity on the matter, and we may need to make amendments to ensure that. Another example of that is the creation of a new section for Post Office employees, which will require a number of changes to the RMPP rules in order to address the funding, investment and governance arrangements for the new Post Office section. The whole purpose of clause 18 is simply to make sensible amendments to the RMPP rules to give effect to other clauses in this part.

Amendment 42 would prevent the Secretary of State from amending the plan to include a provision permitting the scheme to be wound up—in other words, to be terminated by discharging its liabilities. Before considering the amendment in detail, it would perhaps be helpful if I were to outline the current winding-up provisions in the RMPP. The RMPP is unusual in that, under the scheme rules, the company has no express power to wind up the scheme, and because of that the employer would need to obtain the consent of the trustees or the members before the scheme could be wound up. That is an unusual, but very important, protection for members. We have said that, through the new public scheme, we will protect past accruals that members have built up, but future pension provision will, as now, be a matter of negotiation between the employer, the members and the trustees. The provisions in the current RMPP that restrict its winding up help protect members’ future interests.

I am sure hon. Members will appreciate that, as with so many amendments that the hon. Lady has tabled, I welcome the sentiment behind the amendment. The amendment’s purpose appears to be to ensure that the current position, which I have outlined, is maintained. Although I agree entirely with the spirit of the amendment, I do not consider that it is necessary. Any amendment to the RMPP rules that would allow the scheme to be more easily wound up would fall foul of the protection provided for members under clause 19(2), as any such amendment would have a material effect on members’ “relevant pension provision”. Under the terms of clause 18, the Secretary of State may only make such amendments as he

“considers appropriate in connection with any order made under section 16 or 17”

and given that our intention is to take on the historic deficits for the Royal Mail together with a more manageable scheme, it would not be appropriate for the Secretary of State to make any amendment to the RMPP that would allow the scheme to be wound up. So there are two very strong protections there, which mean that amendment 42 is simply not needed. Given those strong assurances, I hope that the hon. Lady will withdraw the amendment.

Amendments 96 and 99 would require trustee consent to be obtained before certain actions by the Secretary of State. Under amendment 96, trustee consent would be needed before an order could be made to amend the RMPP by way of the powers in clause 18. Under amendment 99, trustee consent would be needed over the type of assets that would be left with the RMPP to fund its ongoing liabilities. As discussed during Thursday’s debate, we are working in close partnership with the trustees on the implementation of all our proposed changes, including those relating to the RMPP rules and the transfer of assets. When the chairman of the trustees, Jane Newell, gave evidence, she confirmed how closely she and her colleagues are working with the Government on this.

Under clause 24, as the hon. Member for Llanelli was good enough to admit, we are duty-bound to consult with the trustees on the orders that are laid under this part of the Bill. However, while it is important to recognise the need for close consultation, requiring the consent of the trustees to legislation is a very different matter.

Nia Griffith (Labour, Llanelli)

Can the Minister envisage a situation where consent would not be given by the trustee? Can he envisage a situation where there would be an impasse and a real divergence of views? How would that be resolved in the current situation and how might it be resolved if our amendment were accepted?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am grateful to the hon. Lady for that intervention. The way that we are working with the trustee, the track record of close partnership working and the way that we are binding ourselves to continue that consultation suggest that her concerns will not arise. The way in which Jane Newell talked about that in her evidence to the Committee was particularly interesting. Just as I said when we discussed amendment 43, which would have imposed the same requirement on the operation of clause 17, amendment 42 would place a significant responsibility on the individual trustees of the RMPP, which would be neither necessary nor appropriate. The hon. Lady is not taking the extra responsibilities that will be placed on the individual trustees into account.

In addition I should like to assure members of the Committee that the Government’s amendment power in clause 18 is constrained by the protection against adverse treatment for members provided for in clause 19. I am sorry that I keep coming back to the protection for members in clause 19 but it goes throughout this part of the Bill and is critical to the way that we have drafted the Bill. It should give members of the Committee and members of the RMPP a great deal of reassurance that there is no ill intention at all—quite the reverse.

Those constraints mean that the RMPP could not be amended to make the members any worse off than they were before that amendment. Forcing the trustees to provide their consent to any changes under clause 18 would not increase protection for members. While I understand the hon. Lady’s intent, I do not think it is needed, again because of the protections for members. Given that this key safeguard is in the Bill and given the need for the Government to retain responsibility for the implementation of the provisions in the Bill and not to put extra responsibilities on the trustees, I hope that the hon. Lady will not press amendment 96.

Under amendment 99, the consent of the trustee must be obtained regarding the selection of assets to be transferred. Before dealing with the details of the amendment, I think we have to outline the purpose of clause 20 and remind hon. Members of our intentions on the transfer of assets.

Clause 20 provides that the Secretary of State can, by order, transfer assets from the Royal Mail pension plan to the Government. The provisions of the clause, which should be read with the provisions of clause 21, mean that such an asset transfer order can be made only in conjunction with the transfer of liabilities from the RMPP to Government and where it will not worsen the proportion of assets to liabilities remaining with the RMPP. Those are two clear criteria.

Clause 20(1) contains provisions for where the assets will be transferred to. We intend any gilts and cash transferred to go to the Treasury and the Consolidated Fund respectively. The other assets will go to a fund established by the Secretary of State and be sold in a measured fashion, with proceeds going to the Consolidated Fund.

We estimate that around £27.5 billion of assets will be transferred to the Government, compared with the liabilities of approximately £35.9 billion, meaning that the Government will absorb a deficit of £8.4 billion. We intend that only liabilities relating to the salary link—the real growth of salaries for active members—and ongoing pension accruals that build up after the cut-off date will remain with the RMPP. We estimate that that will amount to approximately £1.5 billion of liabilities in the RMPP, at the point at which the Government will implement the measures in part 2. Subject to state aid clearance, we intend to fully fund the liabilities remaining with the RMPP, so that it will also retain £1.5 billion of assets.

Before any assets are transferred, a valuation of the RMPP will be made. The valuation exercise will follow standard actuarial principles and reflect the assumptions agreed between the trustees and the Royal Mail in the recently agreed March 2009 triennial valuation. The output of the valuation will be an up-to-date view of value of the assets and liabilities in the plan. As a result, there will be nothing to be gained in terms of value from the RMPP retaining one type of asset rather than another. However, as we heard last week from the hon. Member for Ochil and South Perthshire when we debated amendment 43, careful consideration will need to be given to the type of assets that are left with the RMPP to cover residual liabilities, and to how those assets are to be allocated between the Royal Mail and Post Office Ltd sections.

We fully recognise that the assets to be left with the RMPP should reflect the future investment strategy of the trustees. Again, Jane Newell mentioned in our evidence session that she would look to engage the Government on that point. Now that we have come to a view on the level of liabilities that will remain with the RMPP—when I made an announcement to the Committee regarding the cut-off date—we can commence discussions with Jane and her team.

Members of the Committee need to bear it in mind that trustees will be free to sell assets and change investment profiles as they see fit. However, given the charges that will be levelled by selling assets and changing investment profiles, it is in everyone’s interests that we work together to reach a satisfactory agreement.

I hope that I have assured the hon. Member for Llanelli of our commitment to work hand in glove with the trustees on the matter. I do not think there should be any doubt in her or anyone else’s mind regarding our intention to work incredibly closely with the trustees. In light of the aligned interests of Government and the trustees to ensure that the assets left with the scheme will fit the residual liabilities, and the arguments that I have outlined on amendments 43 and 96—that it would be unnecessary and inappropriate to require trustee consent as well as consultation—I cannot see any advantage to the hon. Lady’s amendment 99, and I hope that she will withdraw it.

The final amendment in the group, amendment 101, would require the Secretary of State to consult member representatives, Royal Mail and the trustees of the RMPP when making orders under part 2 of the Bill. Throughout our discussions on part 2, we have been in complete agreement that member interests should be at the heart of the pension changes. As the hon. Lady admitted in previous debates, almost all of part 2 reflects the 2009 Bill and follows heavily on its protections of members’ interests, which is why clause 24 provides for consultation with the RMPP trustees. The trustee has a number of responsibilities and must always act in the best interests of all the plan beneficiaries, including deferred members and pensioners as well as active members. That obligation means we can be sure that the interests of all beneficiaries are represented.

It is also important to recognise that the trustee board has strong member representation at its heart. There are 11 trustee directors, four of whom are nominated by the unions. One is elected by a ballot of pensioners and the chair is an independent trustee appointed by Royal Mail with the agreement of the unions. What we can say absolutely about the trust is that it is extremely representative of members. The broad range of stakeholders represented on the trustee board highlights how well positioned they are to represent the interests of members to the Government. That is why the commitment to consult them is covered by the Bill. There will then be no doubt that they will be consulted and their interests taken into account.

We recognise that it is also important to engage widely with other groups that have an interest in the measures under part 2, which is why we have held several meetings on pension issues with the Communication Workers Union and the National Federation of Occupational Pensioners. In our debates last week, I read out a series of meetings that I, the Secretary of State and officials have had with the CWU about pensions. I reiterated that I was happy to meet the CWU again to talk about pensions so there should be no doubt that the door remains open to discuss matters with the CWU and other representatives of members of the pension fund, should they wish to avail themselves of such an opportunity.

We will continue to engage with the important stakeholders throughout the implementation stages. However, given the central role that the trustee holds in representing interests of all members of the pension scheme and the obligation under the Bill to consult with the RMPP trustees, it is neither necessary nor appropriate to broaden the obligation to cover other member representatives so I trust that the hon. Lady will withdraw amendment 101. As I think that I have dealt with all her points, I hope that she can withdraw the group of amendments, particularly as it has been left unchristened by my good self.

Nia Griffith (Labour, Llanelli)

I shall begin with amendment 42. The Minister has spoken convincingly and helpfully about it. Obviously, there will always be a feeling at the back of people’s minds about what could happen in the future, the inevitable position and so on, but his words will offer some reassurance about that. The hon. Gentleman highlighted liability as well as consent, and we hope at least that the trustee would be firmly at the centre of what is going on. It sounds as though his intention is that that should be the position, given the number of meetings that have been held. He has again offered several very helpful comments on the matter.

On amendment 101, the Minister said consultation with the Treasury and representatives is mentioned explicitly in the Bill. We hope that he will take the issue seriously and consult them fully, as much as possible, in every phase of the Bill, to ensure that interests are fully taken account of and that no one ends up feeling that they have been badly dealt with because the proper procedures were not followed through.

With the assurances that we have been given, I will not press amendments 96, 99 and 101 to a vote, and I beg to ask leave to withdraw the amendment.

Clause 19

Nia Griffith (Labour, Llanelli)

I beg to move amendment 97, in clause 19, page 10, line 28, leave out subsection (3) and insert—

Anne Begg (Labour, Aberdeen South)

With this it will be convenient to discuss the following:

Amendment 98, in clause 19, page 10, line 31, leave out ‘(3)’ and insert ‘(2)’.

Nia Griffith (Labour, Llanelli)

May I clarify, Miss Begg, whether you will be offering a separate opportunity to speak to clause stand part?

Anne Begg (Labour, Aberdeen South)

Yes. I always give that chance.

Nia Griffith (Labour, Llanelli)

Thank you. I will, therefore, focus specifically on amendment 97, to which amendment 98 is closely attached.

Clause 19 is intended to ensure that the benefits payable by the new public sector scheme, when added to the benefits payable by the Royal Mail pension plan, are at least as good as the benefits currently payable by the RMPP.

Pensioners and deferred pensioners will not be materially worse off under the new public sector scheme. They should have exactly what they have with the RMPP as it is now—clearly, as worked out in the past, things should be there for them. I am sorry; some of my notes have been printed wrongly, so I am trying to find things—my sincere apologies, I have a copy without half the words.

Active members, however, will be treated rather differently when the scheme is divided, being treated as deferred members. From the public sector scheme, they will be paid deferred member benefits, which between the dates of division and of retirement will go up in line with the consumer prices index. Anything else will come from the Royal Mail pension plan.

Clause 19 allows the RMPP to top up in three respects. Members of sections A and B of the RMPP currently accrue final salary benefits, and final pay is likely to be higher than pay at the division plus the CPI increases. The RMPP provides notional added years of service for some members who are made redundant; redundancy pensions are payable immediately. Thirdly, for members who retire on grounds of ill health, an immediate and in some cases enhanced pension is payable.

Has the Minister considered clarifying the relevant pension provision in line 28, to ensure that the section refers to both the RMPP and the new public scheme? Why should pensions or other benefits payable not include benefits payable in the event of early retirement, on the grounds of ill health, a contingency or otherwise, or on the exercise of a discretion by the trustee of the RMPP in accordance with its rules? Furthermore, does the Minister agree that if the amount of a pension or other benefit is calculated by reference to a person’s remuneration at the date of leaving the RMPP by reason of death, retirement, or otherwise, the remuneration for the purpose of establishing all relevant pension provision should be taken to be the remuneration at the date of leaving the RMPP by reason of death, retirement or otherwise, and not the remuneration at the date of the exercise of the power to make an order?

Acceptance of that direction would make enhancements for ill health and redundancy explicit. It makes the earnings link explicit too, and it is important for anyone that the trustee decides is entitled to an ill health or redundancy pension, while the RMPP part will be payable immediately and in some cases will be enhanced, with any enhancement coming from the RMPP alone.

The public sector scheme benefits are ordinarily payable at retirement age. If the Minister agrees with that line of thought, it would mean that where the trustee decides that the member is entitled to RMPP benefits, the public scheme has to fall into line and pay out immediately. That could avoid any conflict between the trustee and the Secretary of State. In order to ensure that the intended safeguards, which include clause 19, also cover associated benefits payable under the RMPP, we propose to replace subsection (3) with the following:

(3A) If the amount of a pension or other benefit is calculated by reference to a person’s remuneration at the date of leaving the RMPP (by reason of death, retirement or otherwise), his remuneration for the purpose of establishing all of his relevant pensions provision shall be taken to be his remuneration at the date of leaving the RMPP (by reason of death, retirement or otherwise), and not his remuneration at the date of the exercise of the power to make an order.’.”

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

I believe that the CWU has an agreement with the Royal Mail on early retirement through ill health for people who are part of the pension plan, so that they can get access to their pension on leaving employment through ill health. The clause, as it stands, does not cover that agreement with the union.

Nia Griffith (Labour, Llanelli)

My hon. Friend makes a good point. The difficulty is that a gap seems to be left, and it is possible that when the division is made and different groups are put in different sections, this may be an area where some people miss out, which needs to be looked at. That is the point of the amendment; it is about making sure that we try to get the best, most appropriate deal for those who have given many years of service but have to leave the scheme for the reasons outlined. The new subsections would replace subsection (3), which is why we have tabled amendment 98, so that the wording will fit appropriately. Has the Minister given the issue any thought? It is worrying some people, and it clearly needs to be dealt with correctly, ensuring that nobody is disadvantaged in any way.

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

I want to make some brief points on amendments 97 and 98, which relate to clause 19. That clause suggests that the benefits in the public sector scheme are at least as good as those that are currently paid and that pensioners and deferred pensioners are not worse off under the proposed new scheme. The unions, as well as the Opposition parties, welcome that element of the proposals. Active members may be treated, however, slightly differently to deferred members of the scheme, as we heard earlier from my hon. Friend in relation to the calculation of those pensions and CPI.

The redundancy element of the RMPP is an issue, and that goes back to my earlier point in my intervention on my hon. Friend. Currently, the redundancy pensions are paid with immediate effect, and the issue is with early retirement and ill health. The existing scheme has a negotiated and agreed arrangement with the CWU that remuneration of the pension is available for those who are leaving on ill health or for the next of kin following a death. The existing employment law does not cover pensions for all schemes for early retirement through ill health. From my own experience at Forgemasters, for example, we had members leaving employment because of high-level hand-arm vibration syndrome. The company was trying to get rid of four individuals, who were union members at the time, through ill health, giving them the option of redundancy, but not ill-health retirement. Ill-health retirement and redundancy were seen as separate issues. The CWU arrangements with Royal Mail are that, in the case of ill health, redundancy and access to pensions are somewhat different. Those elements need to be explored before clause 19 goes ahead, and amendment 97 explores that issue further. Without amendment 97, there is a possibility that existing agreements may not be carried.

My main concern, which I will close on, is that that may present the danger of TUPE and custom and practice elements within the arrangements, under employment law, being undermined. Amendments 97 and 98 allow those existing arrangements to be examined in greater depth, and I would suggest that they be added to clause 19.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am grateful to the hon. Member for Llanelli for tabling the amendment, because it enables me to both reassure her and the hon. Member for Middlesbrough South and East Cleveland and ensure that the intent of our provisions in clause 19 can be put on the record.

I will begin by christening the amendments to clause 19. I have established a tradition that groups of amendments get a particular soubriquet, and I christen these “the retreads,” because they were tabled to the relevant section of the 2009 Bill in the other place and have been debated before. Therefore, I am grateful to be able to refer to those, as I no doubt will do in due course.

This group of amendments relates to the vital protection for members that is provided by clause 19. Amendments 97 and 98 seek further information on the particular benefits that are covered by that protection and any circumstances in which that protection might not apply. Amendment 97 seeks to refine the description of “relevant pensions provision” that is provided in clause 19(3). It is an important amendment, and I understand why it was tabled before and has been tabled again, because it relates to important safeguards for RMPP members.

We must return to the essential feature of clause 19, which is that it is critical to part 2 of the Bill. It requires that the Secretary of State protects members of the RMPP from being detrimentally affected by the Government’s proposals. Subsection (2) requires that in establishing a new scheme, in transferring rights to the new scheme, in splitting the RMPP into sections, or in amending the RMPP, the Secretary of State must ensure that he does not negatively impact the “relevant pensions provision” of members, comparing the position immediately after the exercise of the power with that immediately before. The relevant pensions provision is defined in subsection (3) as

“the provision for the payment of pensions or other benefits which is contained in the RMPP or in a new public scheme.”

The payment of “pensions or other benefits” is deliberately a very broad definition. Whether one has a broad definition, which can encompass things about which we have not necessarily thought, or a narrow definition, as in the hon. Lady’s approach, is key to the debate.

Our approach speaks from the 2009 Bill, when Lord McKenzie of Luton debated a similar amendment in the other place. He made a number of points, which I echo. He said:

“We do not want to risk narrowing the definition of relevant pensions provision set out in the Bill.”—[Official Report, House of Lords, 31 March 2009; Vol. 709, c. 997.]

That is why he asked Members of the House of Lords to reject a similar amendment. As I get into the detail, I want hon. Members to be aware of that. If we narrow the definition as it is in the amendment, there is a real risk that we will undermine the benefits to members, which I am sure Opposition Members would not wish to do.

The broad definition includes pensions that are already in payment to RMPP members, and benefits relating to past accruals, which will become payable when members retire. Those will include revaluation and indexation in accordance with the scheme rules. The definition is much broader than that in the amendment—it includes discretionary benefits and survivor benefits, such as a widow or widower’s pension, which is payable on the death of a member. It also includes provision for early retirement, in accordance with the rules of the scheme, including retirement on the grounds of ill health. I assure Opposition Members, therefore, that the existing definition in subsection (3) covers those specific benefits that are set out in paragraphs (a) to (c) of the amendment. I hope that my putting that on the record will reassure the hon. Member for Llanelli.

The “relevant pensions provision” also already includes any increases that active members may receive in respect of past accrual, as a result of their pensionable salary growing in the future. I confirm that the existing broad provision in clause 19(3) already covers the salary growth that is described in proposed new subsection (3A).

The reason for the broad definition in subsection (3) is to ensure that all the benefits that members have accrued are protected by clause 19. It would be unnecessary and confusing to substitute a narrow definition and might even risk arguments that not all possible benefits are captured by clause 19; that is why I cannot support the amendments.

I know from our consideration of part 2 so far, that hon. Members do not want members of the RMPP to receive a lower level of protection; I want to ensure that their rights have the greatest possible protection, and that is why the clause has been drafted so broadly. Considering the size of the trust deed and its rules relating to the RMPP, it and related documents potentially have a whole range of benefits, so any specific and detailed definition would require an extremely long clause. I assure the hon. Member for Llanelli that I have asked whether we should have specific, detailed references in the Bill, or whether we should go for the very broad definition. The previous Government concluded, as have I, that the broad definition is the best way to ensure that we have the widest possible member protection.

I hope that hon. Members are assured by the strength and depth of the protection provided by clause 19, and I hope that the hon. Lady will withdraw amendment 97.

Amendment 98 also relates to clause 19. Clause 19(4) means that the Secretary of State is not required to include provision in the new Government scheme that would be incompatible with any obligations under UK or EU law. The amendment would require the Secretary of State to replicate in the public scheme RMPP pension provisions that were, or had become, unlawful under UK or EU law.

I assure Members that clause 19(4) is included in the Bill only to make it clear that although the Secretary of State has to ensure that members’ pensions are protected—as in clause 19(2)—he also has to act within the relevant UK and EU laws, and we are not aware of any rules in the RMPP that are not compliant with such legislation. Subsection (4), therefore, is not included in the Bill to address a specific issue that we have identified.

However, developments in case law or EU legislation might mean that before the public scheme is established, an RMPP provision could become incompatible and would need updating. The inclusion of the subsection means that the public scheme is not bound to replicate unlawful provision and set it in stone to preserve “member protection”; rather, the scheme can amend unlawful provision, in the same way as the RMPP will have to in the light of legal developments.

In establishing the new public scheme, the Government must act in compliance with general law. If not, the new scheme will be open to challenge, just as it would be if it failed to meet the member protection requirements. In practice, we expect any legal issue to be identified and resolved before the transfer of liabilities, with full consultation, once again, with the RMPP trustees. I hope that the information that I have provided regarding the purpose of the subsection will persuade hon. Members not to press amendment 98.

The hon. Lady made one or two other points, which I hope I can deal with. She wondered whether the clause needed to be amended so that it referred to both the RMPP and the new public scheme. Clause 19(3) makes it clear that the relevant pension provision covers both the RMPP and the new scheme, and I hope that that reassures her.

The hon. Member for Middlesbrough South and East Cleveland was worried about ill-health early retirement and a deal with unions, and I hope that I reassured him about that in our discussion about the very broad definition. Members already have an entitlement to early retirement under the RMPP and they will continue to have that, whether on ill health or other grounds. To the extent that there are agreements with Royal Mail on redundancies, made perhaps with the CWU, that are not within RMPP rules, that will remain an issue for Royal Mail in negotiations with the CWU, as I am sure the hon. Gentleman would expect. If he would like me to, I am very happy to clarify that and any other worries or concerns that he might have. I can assure him that we are trying to mirror the protections and, indeed, strengthen them.

I think that I have answered all Opposition Members’ questions, and I hope that they feel able not to press the amendments.

Nia Griffith (Labour, Llanelli)

The key issue is ensuring that no one is disadvantaged. We take sincere note of the Minister’s words about the clause perhaps being broader and covering some of the people whom we include in our amendment. There is no way that we would want to leave any one out, or create a worse situation. I think that the Minister is putting on the record a commitment to ensuring that the categories in our amendment are not be left out, and saying that the clause is phrased broadly and therefore covers more contingencies. In that respect, I beg to ask leave to withdraw the amendment.

Anne Begg (Labour, Aberdeen South)

With this it will be convenient to discuss new clause 10—Protection for certain members and prospective members of the RMPP —

Nia Griffith (Labour, Llanelli)

The clause as a whole is about protection against adverse treatment. I would like to explore a number of issues with the Minister, and perhaps he will be able to put some reassuring detail on the record.

On pensioners and deferred pensioners, by and large the value of their transferred entitlements should not cause any great complications, because those entitlements are already determined at the point of their retirement or departure. One issue that needs to be considered is the basis on which pensions are increased. Will that be in line with the retail prices index or the consumer prices index? The Government have already said that other public service pensions will be indexed to the consumer prices index, not the retail prices index.

The members’ guide for sections A and B of the Royal Mail pension plan states that pensions are increased in the same way as official pensions and when that switches to the CPI, the CPI will apply to those two parts. The guide to section C states that pension increases will be in line with the RPI, capped at 5%. Will the Minister clarify how exactly those pension increases will be dealt with? Clearly, people will ask that question and will want to know exactly how their pensions will be calculated in the future. A number of pensioners’ organisations are already concerned about the effect of that change from RPI to CPI, and they will be concerned for a number of years because the cumulative effect will be significant. Two systems are operating, and it would be helpful if the Minister gave us some clarity on the thinking on that and how it will be taken forward.

When it comes to the active members, the calculations on entitlements are slightly more complicated. The entitlements for active members will be divided at the specified date, but it is not as simple as saying that everything earned up to a point is paid by the state and that everything after that is paid by the RMPP. At the specified date, the entitlements of active members will be calculated as if they were early leavers and left the RMPP immediately before the split. The Government will pick up the early leaver entitlements and the RMPP will pay everything else.

Provided that the package of benefits is the same, no value is lost. That means that part is paid by the Government and part is paid by the RMPP. Some enhanced benefits need to be based on all service, however, and all benefits need to be based on salary on the date of retirement or leaving. The detail of the division and the arrangements for ensuring that the overall package is the same will, no doubt, be spelled out in legislation and in the revised rules of the RMPP.

What steps will the Minister take to ensure that the overall package is the same and what consultation procedures will he use? Does he envisage any particular areas of difficulty, where it might be necessary to make some compromises or changes? Will he ensure that the arrangements do not, in any way, leave anyone in a detrimental position?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

To ensure that I can be of assistance to the hon. Lady, would she repeat some of that? What exactly does she want consultation on?

Nia Griffith (Labour, Llanelli)

Can the Minister explain to us what will happen for active members, where part of their pension entitlement will be paid by the Government and part will be paid by the Royal Mail pension plan? Some enhanced benefits need to be based on all of a member’s service—including previous service—but all benefits need to be based on their salary on the date of retirement or leaving. I assume that there will be more detail in the legislation and in the revised rules of the RMPP, but what steps is the Minister taking to ensure that the overall package will be the same—in other words, that somebody will not lose out because of the transfer or because their final salary is not taken into account? That is the key issue. Does he see any areas of difficulty or areas where that might not occur?

The background to this is that most of the pension entitlements of RMPP members are based on their final pensionable salary. For deferred pensioners, that means their salary at their date of leaving, which is what the new Government scheme will pay. For example, if a member has 10 years of membership at the split and earns £25,000 now, his or her early leaver’s pension is 10 sixtieths of £25,000 and will be paid in about 30 years’ time. Between now and retirement, it will increase in line with inflation, capped at 5% for members of section C.

At retirement, however, that member’s pay will have increased in line with pay inflation and not with retail price inflation. Given people’s usual progress in their job and taking promotions into account, pay inflation is often reckoned to run about one percentage point ahead of prices. In other words, a member’s pay inflation is likely to be higher than price inflation, and there is a common argument that we have heard about on whether final salary schemes are affordable.

The growing gap between the value of the deferred pension, which increases in line with prices, and the pension that would have been paid, which increases in line with salary, is called the salary link. The previous Government gave the assurance that the cost of the salary link would be met by the RMPP and not by the Government. Of course, there could be a very different scenario, under which the salary link would go altogether, so that pensions at the date of the division are effectively frozen and receive only the minimum statutory increases that have to be given to deferred pensions.

The Minister will see why I am raising this concern, and I would be grateful if he enlightened us about his thinking so far. What does he understand the plan is in this respect? Will there be a commitment to the programme that we envisaged in government, or has it been left as a blank space on which different ideas might be brought forward? I hope that he will give us some reassurance on that point and put his answer on the record.

On the situation about enhancements paid in ill health and redundancy cases, such enhancements are payable to active members, but not to early leavers. Early leavers receive an immediate pension if they have to retire on ill health grounds, but they receive no additional service credits. Therefore, if members are made redundant or retire early on ill health grounds in the future, the pension that they will receive from the Government for service before the date on which the pension scheme is divided will not be enhanced.

The previous Government stated that such additional benefits—for members who retire on redundancy or ill health grounds—would also be paid by the RMPP, meaning that service accrued before the date of the split would be counted when calculating additional service credit. What reassurances will the Minister give us that all service will be counted when calculating additional service credits in ill health and redundancy cases? In other words, will the fact that people have worked for many years be taken into account, or will it be thrown to the wind?

Those are the questions that people will be asking about the split-up of the pensions. Will everything that they have done until now be safeguarded, or will there be a little clause that they will not know about or will not understand? It never occurs to people to look at such things until they are hit by ill health or something similar, or until they look at the detail of their final salary scheme. Many people will be transferred, and we need assurances that they will not miss out. I would be grateful if the Minister gave some guidance in response to those questions.

I will spare you the ordeal, Miss Begg, of listening to me read new clause 10 aloud. Members of the Committee can read it at the end of the amendment paper. The Bill provides for the transfer of past service liabilities to the state where they are effectively guaranteed, but future service rights are not protected in any way. The Government could not realistically allow Royal Mail to go bust, so, at present, future service rights are protected. Following privatisation, however, they will be at risk in two ways. First, the new private employer could go bust or run into financial difficulties. Secondly, if the service rights are transferred, or transfer voluntarily, from one Royal Mail company to another, they could lose out financially.

Under the current RMPP, if a member transfers their pension scheme membership, it can be counted as continuous and there should be no change whatever to their benefits. Under a post-privatisation transfer, when the RMPP will be sectionalised or bits of it will be floated off to form another scheme, a member’s accrued rights will be converted into a notional capital value—called a cash equivalent transfer value—which will be paid to the trustees of the new employer’s scheme, and it may be used to pay money purchase benefits or may be converted back into a period of years and days of notional service in the new scheme.

Either way, the member is likely to lose out, because the money purchased benefits are not necessarily as good, and the period of notional service is, as a result of assumptions made about the salary in the process of conversion and back again, almost always smaller than the actual service in the first scheme. Those are considerable and genuine concerns. The splitting up of subsequent transfers is of as much concern as the initial division. We have discussed the potential for Royal Mail to be split up and sold in different parcels, and that could happen during the initial sale or later on.

The new clause is modelled on the protection given to employees in the railway and electricity industries when they were privatised. Their pension schemes were sectionalised in the same way as that proposed for the RMPP, with one section for each employer. They were given two protected person rights, and the new clause seeks to achieve the same protection for RMPP members.

First, they were given an unrestricted right to remain in their existing scheme or an equivalent one if they transferred from one electricity or railway employer with no break in continuity of employment. Secondly, they were given protection so that their future service rights would be at least as good as the benefits provided by the pre-privatisation of the electricity supply and British Rail schemes. The new clause would not protect new entrants to the industry. Only members who were in the RMPP, or who were in a waiting period before they could join the RMPP, would be covered.

Proposed new subsection (1)(a) says that qualifying members of the RMPP—to all intents and purposes, active members of the RMPP at the time of privatisation—cannot have their future benefits worsened if their section of the RMPP is wound up. What that has meant in the railway and electricity industries is that people were transferred to another company in the same industry with their accrued benefits intact. In other words, it is as if they had not had to make that transfer. Proposed new subsection (1)(a) also says that no amendment that would reduce members’ right to acquire benefits in the future or increase their contributions may be made to the RMPP.

Proposed new subsection (1)(b) says that active members of the RMPP and Royal Mail employees who are in a waiting period, or who have an unrestricted right to join, must, provided that their continuity of employment is unbroken, be given the right to retain their RMPP membership if their employment transfers to another participating employer. Proposed new subsection (1)(c) says that if their employment is transferred to another employer that is associated with the first employer without breaking continuity, and the new employer does not participate in the RMPP, they must be provided with benefits that are no worse than the benefits under the RMPP.

Lord Clarke tabled a similar new clause in the debate on the previous Bill. The then Government said that the clause was unnecessary because people would remain members of the same scheme—the RMPP—unlike what happened with the railway industry, where the old scheme was scrapped and a new scheme created. Lord McKenzie said that protection against winding up or worsening future service benefits was not necessary because the RMPP would not have been able to be wound up or worsened without trustee consent. In a part-privatised industry, those arguments have some force, as the state would still be able to dictate pension scheme membership and dictate that employees remain members of the RMPP. However, with total privatisation, an employer could go bust or be in such a precarious position that the trustee would have to agree to amendments to worsen benefits. There is also nothing to prevent new employers from opting out of the RMPP altogether.

Under the previous Bill, the employer would remain the same, and all the employers would remain at least partly owned by the state, whereas in the case of the railways, employees were transferred to new employers. Under the current Bill, employees may have new employers, and there is no guarantee that the new employers will remain associated with, or still be in, the RMPP. Nor will there be any provision to ensure that members who transfer, or who are transferred, within the industry will be able to transfer pension rights without loss of benefit.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am listening to the hon. Lady intently, and I think that she is making a mistake in assuming that somehow the state owns the RMPP. The RMPP is a trust where the employer, Royal Mail, puts in money for its employees, and negotiations happen between the company and the trustees. The Government do not control or own those schemes, which is why we are having to have the provisions in the Bill.

Nia Griffith (Labour, Llanelli)

As the RMPP is essentially a scheme that was paid into by, and benefited, people who are employed in an industry in which the Government had a large stake, the assumption is that there would be some guarantee and backing, in the same way as that pension deficit coming over to the Government. Again, there is a feeling that that would be backed.

When things are completely privatised and we see fragmentation and fractionalisation, it will be a much more tricky situation. The options that have been made available for those working in the railways and the electricity companies could be looked at very carefully and perhaps something similar could be drawn up for Royal Mail.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

We are talking about the legal position here. The legal position is that the RMPP is not owned by the state. It is a separate trust operated by the trustees. The hon. Lady is missing that legal point.

Nia Griffith (Labour, Llanelli)

I accept what the Minister says about the legal point, but the issue is to do with how things are funded. We are talking about a situation where there could be considerable pressure to cut down on pension costs. We have looked at the Government taking over pension costs, but we are looking at a situation here where reductions have to be made and there may be a temptation to make less favourable conditions apply. That is the situation. I am not saying that it is legally the case; the Minister makes the legal case perfectly clear. That is perfectly acceptable. I am simply saying that in an industry with much larger public involvement, there may be a tendency to ensure that there is no pressure to make any detrimental changes.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I want to make two points. We have to see the matter in the context of the wider policy point. First, we are leaving the scheme fully funded. That is why Jane Newell, the chairman of the RMPP trustees, made it clear that it was going to be a much smaller scheme that was much easier to manage and so much more affordable. Secondly, the hon. Lady suggests that there is the danger that, post-privatisation, the Royal Mail will somehow go bust. Because we are taking decisive and comprehensive action to secure Royal Mail’s future, the company will be sustained to ensure that the universal service is provided for the economy and that there are jobs in Royal Mail.

Nia Griffith (Labour, Llanelli)

I am perhaps giving the benefit of the doubt in respect of that being the only circumstance in which such a thing would be done. But I did hint, rather gently, that there might be other reasons why there would be pressures to change the pension arrangements.

It is important that some protection should be offered and it would be helpful to know whether there is a scheme that could assist if there were transfers into other companies, because that is one of the big worries. It may look rosy on the surface because the scheme is going over to the RMPP, and everything is put right and sorted at the beginning, but there may be subsequent changes and different groups may split off.

There could be some detrimental effects. There could be all sorts of other pressures that may mean that people will want to alter the type of scheme that is available. That is the real point. Once this has transferred, what will happen if there are subsequent splits and people move from one scheme to another? On that note, I conclude my remarks.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Lady has made a series of comments and I hope that I can address all of them in turn. Should I fail, I will write to her, but I may make quite a long contribution because there are a lot of important points. She has done a very good job in probing the Government on this area.

I shall start with new clause 10, which is intended to provide security for the pension arrangements of current active members of the Royal Mail pension plan. As the hon. Lady said, it is identical to a new clause that was tabled in the other place by Lord Clarke during consideration of the 2009 Postal Services Bill. We think that this new clause goes well beyond the commitments that the Government have made to secure the accrued pensions rights of members of the RMPP and will provide its members with a new right that they do not currently have.

Moreover, the new clause goes beyond the protections afforded to all employees of employers with occupational pension schemes; it is important that the Committee understands that it goes way beyond the norm. In particular, the new clause would allow the Secretary of State to make regulations that would, first, wholly protect members’ rights in the event of the RMPP partially or fully winding up; secondly, restrict the ability of the RMPP to reduce benefits, whether related to past or future accruals, or to increase contributions paid by members; and, thirdly, restrict the effects that any transfer of employment might have on a member’s continuing pension arrangements.

Our debates on the amendments to part 2 of the Bill have been well informed, and during those debates we have been united on many key principles—not least because this part reflects the equivalent part of the 2009 Bill. I shall reprise those principles. We have been united on the importance of timely and effective communication with members and of avoiding any inadvertent consequences when liabilities are transferred to the new public scheme. We have also been united on the fundamental role that trustees have in protecting members’ interests and the corresponding obligation on Government to working in partnership with the trustees to implement our proposed changes. Perhaps most importantly, we have been united in placing at the very heart of the pension solution the protection of existing rights, which members have worked so hard to build up.

I cannot agree that it is right to constrain future pension arrangements agreed between a sponsoring employer and the trustees of the scheme. That is currently an operational matter for the Royal Mail board, and it must remain so in the future for the Royal Mail section of the plan. Post Office Ltd will, of course, become responsible for its own section of the plan.

I hope that we can all agree that the provisions set out in part 2 of the Bill will put the RMPP in a vastly stronger position. First and foremost, the deficit of £8.4 billion will be assumed by the Government. Secondly, the new public scheme will take on the vast bulk of the historical liabilities, leaving Royal Mail with pension obligations that are proportionate to its size and fully funded. As a package of measures, those proposals not only safeguard the historical benefits that members have accrued, but significantly increase the viability of the scheme in the future. The scheme’s members will benefit from a stronger employer that is much better equipped to meet the costs of providing pension benefits for its employees.

New clause 10 goes significantly beyond Government policy and constrains the employers from making changes to the scheme in the future. As I explained during debate on amendment 42, the details of future pension arrangements are not necessarily matters for employers, trustees and members. Constraints on any future changes that might be made to the RMPP would apply regardless of economic conditions and changing commercial circumstances. Such constraints would be a significant burden on the employer.

I hope that hon. Members will bear in mind that there is already considerable protection for final-salary pensions. Labour Members can take pride in having introduced many of those safeguards: the statutory employer debt legislation that offers protection in the event of an employer’s withdrawing from a scheme; the pension protection fund that provides a safety net in the event of insolvency; and the pension regulator that exists to protect member benefits and maximise employer compliance.

Those protections and benefits are, of course, widely available in the economy, but my point is that they will be available to members of the RMPP in the future. Those bodies and those measures ensure that occupational pensions are protected in a proportionate way. In all that protection, it is recognised that employers need to be able to balance their future pension provision with other commercial concerns.

As I said during our debate on amendment 42, implementing the provisions set out in part 2 of the Bill will not change the protections that RMPP members enjoy with regard to the winding up of the plan. The company has no power to wind up the scheme and would need the agreement of the trustees to do so. The Government’s intervention will not change that.

I now come to the points made by the hon. Lady; I hope that I can reassure her. She made several comments about the recent move from the consumer prices index to the retail prices index in public sector plans, and she was concerned about the implications for the RMPP.

First, the Government’s intention is that there should be no change for members in terms of indexation as a result of transferring from the existing RMPP. The rules of the older sections of the existing RMPP are closely related to the public sector schemes, to the extent that those sections automatically track the move to the CPI for public sector schemes. They will continue to do so after moving to the new Government-backed scheme. Wherever they are in the existing or new scheme, the changes will have occurred anyway.

Some of the rules of the RMPP provide expressly for increases to be applied in line with the RPI, but capped at 5% in certain circumstances. They will continue to be applied after the transfer to the new scheme. The recent changes around the RPI are therefore unrelated to the Postal Services Bill, and the trustees made that clear in a recent newsletter to the scheme’s beneficiaries. The hon. Lady referred to the different parts of the pension plan—sections A, B and C. Sections A and B will broadly shift to the CPI. She knows show complicated this is. Section C would remain linked to the RPI, because it is expressly subject to the 5% cap. I hope that that reassures the hon. Lady. In no way does the Bill make any changes to that.

The hon. Lady was worried overall about the split and its implications. She asked how we will ensure that active members receive their full entitlement, because of the splits and complications. I have to go back to clause 19(2). I have done so on several occasions during our exchanges. Clause 19(2) includes salary growth for active members, so it requires us to ensure that members do not lose out on the salary link. It sometimes looks as if our proposals are quite complex and technical, but they are relatively simple compared with the way in which many occupational pension schemes are administered.

Many schemes have changed the way in which benefits accrue over time—for example, by changing accrual rates or evaluation measures—and many have an underpinning arrangement relating to the guaranteed minimum pension. That means that in many such schemes, there are multiple blocks of separate benefits that need to be calculated and aggregated before payment. That is effectively how we intend the process to work for active members of the RMPP.

We intend that members will receive one cheque, albeit in respect of separate blocks of benefit. Indeed, that already happens in the RMPP—for example, when members have a block of service accrued on a final-salary basis and a block of service accrued on a career-average basis. The scheme administrators calculate two separate benefits that are added together before payment. There are complexities, but administrators take care of it in a way that assists scheme members.

The hon. Lady asked specifically about the salary link and how it relates to pay inflation. The March 2009 RMPP valuation made an assumption on future salary growth above inflation. That is a requirement of a triennial valuation—a number of assumptions are made about future salary growth. It equates in value to about £1.5 billion of liabilities. As I have said on a few occasions in the past, the plan is to leave assets to match that liability. Of course, when we go forward, decisions on actual salary growth will be a matter for Royal Mail, as it is now. The Government can ensure only that the scheme is fully funded at the point of transfer. It would be odd for the Government to take on liabilities for salary decisions to be made for a future Royal Mail. The previous Labour Government did not take that view and nor do we.

The hon. Lady made a number of points about what happens if an employee leaves Royal Mail and goes to another employer, and how that will affect the pension. As discussed, creating a separate section for POL employees is covered by clause 19, so she can rest assured about them. In future, a member of the RMPP wanting to transfer between POL and Royal Mail would be an operational matter for the two companies. A member leaving the RMPP when moving to another employer is a matter for the individual employee, as it is now; there is no change. The rights in RMPP accrued by the employee until the transfer of employment are protected. That is the normal way in which occupational pension schemes operate.

The hon. Lady asked specifically about taking account of service when someone is ill and has to retire on grounds of ill health. That, again, is protected by subsection (2), which is probably the part of the Bill that I refer to most, because it is so important.

The hon. Lady referred back to how the railways pension plan was constructed when the railways were privatised. She wanted to know whether there could be similar protections in the Bill. The two processes, however, are quite different. The proposed Government support for the Royal Mail pension plan is pretty unique—we can all agree on that—and is not comparable with how previous Governments supported pension schemes such as the railway one that was mentioned.

The protection provided to employees of the railway industry at privatisation, back in 1994, was in different circumstances. The historic British Rail pension scheme was abolished and replaced, as I think the hon. Lady said, with a new industry-wide scheme. In addition, employees were transferred from British Rail to a new employer, one of the newly created private-sector rail companies. Neither of those changes applies now.

The Government are not proposing any changes to the RMPP, apart from making it smaller. Royal Mail will continue to be the sponsoring employer of the scheme, together with Post Office Ltd, and that is a big difference. In 1994, too, pensions legislation contained limited protection for members in the event of a winding up of their pension scheme. Far greater protection has been put in place since then, in particular by the Pensions Acts of 1995 and 2004. The hon. Lady’s example, therefore, although important for the debate, should not change how we approach the issue, because of the different circumstances.

I think that I have covered all the points made by the hon. Lady; I certainly see no other pieces of confetti before me, so the inspiration that a Minister can receive on such occasions must no longer be required. I hope that we have covered all the detailed points. As I said clearly, if she wants to come back on anything of substance, now or afterwards, I will be happy to put things on the record or to clarify them in writing. However, I hope that she will withdraw new clause 10 and that clause 19 will stand part of the Bill.

Nia Griffith (Labour, Llanelli)

The Minister has certainly allayed some worries. It is a momentous time for people, and they will be particularly concerned about how having the two parts of their pension in two different places will work. They will be worried about what might happen further down the line—there might be more than one event or privatisation and other fractionalisations and different arrangements might come along, or there might be different types of organisations. Certainly, some things need to be considered, and the Minister has made a number of helpful points. However, I have reservations, and some areas are still difficult to cover, perhaps because, as the Minister has pointed out, it might not be easy to indicate what one private scheme can do with another private scheme further down the line. There are some difficulties.

On that note, we have had a very full debate, and I will therefore not the press the matter.

Clause 22

Nia Griffith (Labour, Llanelli)

I beg to move amendment 100, in clause 22, page 12, line 18, at end insert—

As this issue is neither long nor complicated, I hope that the Minister will be able to deal with it in a straightforward manner and that we will all agree on it. It is a technical issue, but it is, I hope, not controversial.

Members of a registered pension scheme are entitled to convert part of their pension into a tax-free lump sum, through a process called commutation. In broad terms, the amount that can be converted is about 25% of the total value of the member’s benefits. The maths might be more complex than that in a final salary scheme, and I will not go into the detail here. If a member has benefits under two registered pension schemes, they can convert only 25% of the benefits held in each and, because of how the maths works out, that can be less than 25% of the total benefits. What can the Minister do to ensure that a new public sector scheme and the RMPP are treated as a single scheme for the purposes of commutation, so that the total lump sum is greater than if the schemes are treated separately? He might simply tell me that the Bill allows tax rules to be adjusted to fit the circumstances of the RMPP and a new public scheme, which is true, but we want to ensure that the commutation issue is not missed.

I would be grateful if the Minister considered the amendment and spelled out the assurances that people want on such an extremely important issue. The lump sum is of immense importance, and people are concerned that all the years that they have put towards accumulating their pension are not wasted, and that they do not end up with less than they had hoped for because the amount is suddenly diminished because of the split between two schemes. We want an assurance about how the rules will apply and about what people will be able to do in order not to be disadvantaged when they look to convert part of their pension into a tax-free lump sum.

Tom Blenkinsop (Labour, Middlesbrough South and East Cleveland)

Given that the total gained by an individual from the two pension schemes can be affected in that way, people will be pushed towards the option of a smaller lump sum and greater monthly pay-outs. That can affect people who have ill health, because if their life is limited, they are prevented from getting a better lump sum, compared with other people who can retire in their 50s or early 60s and take a smaller lump sum for a larger monthly payment.

Nia Griffith (Labour, Llanelli)

Everybody’s personal circumstances are different, and there are significant decisions that need to be made on pensions and lump sums. As my hon. Friend has pointed out, that can be poignant for some people, because they may not live that long and may have to make appropriate arrangements for their situation. Those are the issues that people will worry about, and they will want some reassurance. I hope that the Minister will give that reassurance, because we do not want anybody to be disadvantaged by the enactment of the Bill, which splits up the two pension schemes.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Again, I thank the hon. Lady for creating this debate, because it enables the Government to reassure her and the members of the scheme by putting on record the protections that we are putting in place. What we have done on this problem is an improvement on the 2009 Bill, because we learned from the debates during that Bill’s consideration in the other place.

Amendment 100 would require the Treasury to make regulations to ensure that, for tax purposes, benefits paid out of the RMPP and the new public scheme are treated as if they were paid out of the same pension scheme. The hon. Lady has explained why she feels that that is important, but I assure her that the amendment is unnecessary. During the debate on the 2009 Bill, similar concerns were raised that splitting benefits between the new public scheme and the RMPP would mean that some members would not be able to take as much of their additional voluntary contributions in a cash lump sum, which would have been the case had all their rights remained in the RMPP. In response, we have added a provision to the Bill to ensure that members will still be able to take as much of their AVCs in cash as they can today, despite having the benefits in two separate schemes. I refer Members to clause 16, which states:

“A new public scheme may…include provision for the transfer of money purchase benefits under the RMPP into the scheme (whether or not the contributions to which those benefits are attributable are made before or after the qualifying time) and the conversion of those benefits into benefits under the scheme.”

To put that in a different language, it allows for the transfer of money purchase benefits from the RMPP into the new public scheme. That is designed to allow RMPP members who have made additional money purchase of AVCs to transfer a portion into the new Government scheme immediately prior to retirement to ensure that all relevant rights are contained in the same pot for tax purposes. The Government prefer the flexible approach of clause 16 to the rigid requirements of the amendment, which would oblige the Treasury to make regulations to treat the benefits as payable under a single registered pension scheme, whether or not those regulations were the best way to resolve the issue.

The amendment has the additional drawback of attempting to create the illusion that the benefits of the two schemes are paid out of the same registered pension scheme for tax purposes. As each registered pension scheme has to appoint a person responsible for its tax issues, the amendment would introduce unnecessary confusion on who is responsible for payment, without providing any additional advantage over the provisions in clause 16. The Government think that clause 16 is the best way in which to deal with the tax consequences for members who have entitlement under two pension schemes as a result of the new organisation planned under part 2. I hope that I have reassured the hon. Lady. Once again, we are attempting to protect members’ benefits in as comprehensive a way as possible, so I invite her to withdraw the amendment.

Nia Griffith (Labour, Llanelli)

I have listened to what the Minister had to say and have taken on board what he said is included in the measure. I am still to be convinced that things will run all right on the day, but if clause 16 includes the necessary provisions, rather than introducing a complicated additional taxation clause, I accept his comments. I beg to ask leave to withdraw the amendment.

Clause 27

Nia Griffith (Labour, Llanelli)

I beg to move amendment 71, in clause 27, page 14, line 30, leave out ‘may’ and insert ‘will’.

Anne Begg (Labour, Aberdeen South)

With this it will be convenient to discuss the following: Amendment 72, in clause 27, page 14, line 31, leave out ‘may’ and insert ‘will’.

Amendment 85, in clause 34, page 19, line 17, leave out paragraph (b).

Amendment 51, in clause 35, page 19, line 35, leave out ‘may impose a designated USP condition on a universal service provider’ and insert ‘must impose a designated USP condition on all designated universal service providers’.

Amendment 52, in clause 35, page 20, line 9, leave out ‘may’ and insert ‘must’.

Amendment 53, in clause 35, page 20, line 9, leave out ‘only’.

Amendment 54, in clause 35, page 20, line 23, leave out ‘may’ and insert ‘must’.

Amendment 70, in clause 38, page 22, line 33, leave out ‘may’ and insert ‘must’.

Amendment 62, in clause 46, page 28, line 36, leave out ‘may’ and insert ‘must’.

Amendment 50, in clause 47, page 29, line 22, leave out ‘may’ and insert ‘must’.

Amendment 63, in clause 49, page 30, line 33, leave out ‘may’ and insert ‘must’.

Amendment 65, in clause 50, page 31, line 35, leave out ‘may’ and insert ‘must’.

Amendment 66, in clause 50, page 31, line 45, leave out ‘may’ and insert ‘must’.

Amendment 55, page 90, line 21 [Schedule 8], leave out ‘may’ and insert ‘must’.

Nia Griffith (Labour, Llanelli)

I want to discuss this large group of amendments—some of the amendments relate to other clauses. My explanation of the amendments will be complicated, but I hope that we shall be able to make some progress. Part 3 of the Bill is important. We recognise the role that regulation will play in respect of a privatised Royal Mail, and we want to ensure that this part of the Bill will be as robust as possible. We heard representations in our evidence session with Consumer Focus about its concerns and how it considers that the word “must” should be used in several provisions, not the word “may”. Opposition Members share that feeling, and suggest that there is great fluidity and rather too much wriggle room as a result of which Ofcom could decide to put several issues to one side and not necessarily be indulgent in following each one through.

A phrase including the words “may be” means that issues will be followed up only if regulators have the time, if they want to do certain things and if they have the resources, but that it not good enough, because we want the provision to mean “must do”. As a result, no matter the resources, the time or personnel constraints, there has to be a priority and a way in which to ensure that the provisions are then carried through. Otherwise, regulators will be able to wriggle off the hook and say that the legislation stated that they only “may” do such and such, and that they were under no compulsion to carry out such tasks. In particular, if pressure came from a privatised monopoly, which, in some instances, is what they would be dealing with, there could be considerable pressure to drop certain requirements, because the company did not want to deal with them itself.

From the evidence sessions and the Hooper report, we understand that there is a definite reason for the move to Ofcom and that that should prove to be a much more successful relationship than that with Postcomm. Being a small regulator dealing with one company, Postcomm experienced difficulties, which was unsatisfactory. Ofcom, however, has assured us that, with its broader outlook of effective regulation of other great and good organisations, it has more of an outside view, and it should, therefore, be stronger.

Nevertheless, rather than leaving everything a little bit open and fluid, there are many amendments where a “must” would add some bite and give Ofcom the extra bit of oomph that it needs to be able to say, “We, as an organisation, have to do this. You have no choice, Royal Mail. We are going to tell you x, y and z.”

I will begin by discussing amendments 71 and 72. Clause 27 enables a shift from a licensing regime, as established by the Postal Services Act 2000, to a new regulatory framework based on general authorisation, which is a significant difference and gives things a different feel. It means that providers will be able to provide postal services without applying to the regulator for a licence, but they

“may be subject to regulatory conditions”.

Those conditions are important, because it will not be a matter of having to pre-comply in order to get a licence; it will be a matter of complying with the conditions.

In the light of that move away from a licensing scheme, the role of the regulator assumes greater importance. The regulator must have the necessary tools to do the job properly and to designate and impose appropriate regulatory conditions. The clause allows for conditions to be imposed on many areas, and several of our amendments seek to strengthen the requirement for regulation in those areas. As those areas are expanded upon elsewhere in the Bill, some of the amendments that have been selected for discussion refer to clauses further on in the Bill, and I will address some of those shortly.

The types of conditions that can be imposed are:

In the light of the shift from licensing to general authorisation to provide postal services, our amendments to clause 27 are about strengthening the regulatory framework. It is apparent that if Ofcom is going to be able to do a thorough and meaningful job, it needs the strongest possible framework in which to work. Everyone—our witnesses, Hooper and the previous Government—agrees that the relationship with Postcomm was unsatisfactory. It has been noted that it was difficult for a regulator to regulate one provider.

In an oral evidence session, Ofcom informed us that it had much greater breadth of experience, which enabled it to be a stronger regulator. It was able to take a broader view, bring in its experience in dealing with other service providers and maintain a greater distance from Royal Mail. Ed Richards told us that there were “Quite a number” of advantages to Ofcom taking over that work. He said:

“I think that, over many years, experience tells you that single-company regulators find life really hard. It is not anybody’s fault; it just creates a situation that is very tough. We regulate a lot of very big and powerful companies, all of which you will be familiar with, so I will not name them all. One of the virtues of that is that I can have a difficult conversation with, or we can make a difficult or uncomfortable decision for, certain corporate interests one day, but we move on to something else the day after. It just makes the whole environment more manageable, and I would envisage our relationship with Royal Mail and, indeed, any other postal operators being of that nature. That is the first reason.

The second reason is that we have currently sufficient scale, as an organisation, and sufficient complexity and range of interesting issues to be able to attract very high quality people to work at Ofcom. That makes a huge difference when you are arguing detailed economic and legal issues with some of the most well-resourced companies not only in the UK and Europe, but in the world. If we cannot do that, and if any regulator cannot do that, you can forget it.

The third reason is that we know about network industries, and this is a network industry. We know about telecoms. We know about broadcasting. They are obviously different, but there are similarities in how you think about the underlying economics in particular.

The fourth reason why I hope we can bring something useful to the table is that, in all of the areas that we regulate at the moment, we have to blend and balance both economic regulatory objectives and social objectives.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 44-45, Q90.]

Clearly, Ofcom is a more powerful organisation and is in a better position to deal with such regulation than Postcomm. Nevertheless, the first clause that covers the work that Ofcom will do includes the word “may,” which immediately weakens the strength that it would bring to such work. We have to get the framework absolutely right for it to do the job properly. We cannot expect it to do its job with its hands tied behind its back. That is why we have tabled amendments relating to the role of Ofcom, through which we seek to strengthen the language in the Bill.

We fear that the use of “may” in many instances, including twice in the first relevant clause, gives a lot of wriggle room and might lead to important aspects of Ofcom’s role in regulating postal services being completely left to one side. There might be pressure from those it seeks to regulate—for example, they might say that they have difficulty in providing certain information. If the regulatory framework is only defined by the word “may,” it would be easy to put the requirements to one side and to persuade Ofcom that they are unnecessary. One can already hear the providers insisting that the requirements on them are far too great, and Ofcom would not be under any pressure to insist—it would be under no obligation to insist; it would simply have a framework under which it “may” intervene.

That is why we have tabled amendments 71 and 72, which would change “may” to “will”, in which case clause 27(1) would read: “Persons may provide postal services without the need for any licence or authorisation, but the provision of those services by postal operators will be subject to regulatory conditions that OFCOM will impose on them under this Part.” That would mean that all of the subsequent paragraphs under clause 27(2) would have to be done, rather than being done if somebody felt like it. Establishing the role of Ofcom is an extremely important beginning to this part on regulation, which seems to be lacking in foresight.

I want to address amendments 51 to 55 before moving on to the other amendments. The Bill suggests that the only requirement for a USP to publish information about its performance against specified standards comes from a designated universal service provider condition that Ofcom may impose. Amendments 51 to 55 would ensure that Ofcom is required to impose a designated universal service provider condition on USPs and is required to designate one or more operators as USPs in order to ensure safeguards are in place in relation to access points.

Damian Collins (Conservative, Folkestone and Hythe)

I appreciate that those amendments relate to clause 27, but clause 28(1) states:

“OFCOM must carry out their functions in relation to postal services in a way that they consider will secure the provision of a universal postal service.”

Does the hon. Lady not believe that that “must” makes clear Ofcom’s obligations with regard to USPs?

Nia Griffith (Labour, Llanelli)

We can further strengthen the Bill by ensuring that that provision is also in clause 27. If we want something to be done, it seems proper to be consistent. Clause 27 contains a number of provisions, some of which are not so strongly expressed as in clause 28(1), as the hon. Gentleman has rightly pointed out. All the provisions are important. They are part of a whole—they are part of a jigsaw—and it is for that reason that we want to make this Bill as strong as we possibly can. He is right that clause 28 provides a greater degree of strength.

The purpose of the amendments is to ensure that Ofcom is required to impose a designated universal service provider condition on USPs and is required to designate one or more operators as USPs in order to ensure that safeguards are in place in relation to access points, standards of service and performance targets. The amendments would also ensure that Ofcom is provided with information from operators, which would allow it to monitor those crucial elements of service. Condition 4 of Royal Mail’s licence currently stipulates standards of service, monitoring and quarterly performance reporting of those service requirements to Postcomm and Consumer Focus—Royal Mail is also required to make those reports publicly available on a quarterly basis. In effect, we do not require something totally new; we require something that is currently provided—the information collecting is being done and the action is being taken. We want to ensure that that continues to happen, and that it is not put to one side. For example, the standards of service include statements that 93% of first class domestic mail should reach its destination on the next day, that 99.9% of delivery routes should be completed each day and that 99.9% of collection points should be served each day. We want such things to continue, and we want to ensure that the legislation is strong enough for that to happen.

It is not only Ofcom that has a role here. Some of the legislation derives from EU legislation, and Ofcom will be using those directives in addition to any further requirements that we see fit to include. Articles 6, 16 and 19 of EU postal directive 97/67 relate to this matter. Article 6 stipulates:

“Member States shall take steps to ensure that users are regularly given…information by the universal service provider(s) regarding the particular features of the universal services offered, with special reference to…prices and quality standard levels.”

Such issues are important. We will return to the issue of price, because the recent news about a first class stamp going up to 46p has been a shock to some people who worry that privatisation might herald further increases. They are particularly concerned because the requirements under the European legislation on uniform affordable prices are in fact, under European legislation, only on an affordable price. What exactly is “affordable”? Our users want a uniform price as well as an affordable one, so we will certainly return to that issue in more detail.

To continue, article 16 of the EU directive states:

“Independent performance monitoring shall be carried out at least once a year by external bodies having no links with the universal service providers”.

Obviously, that is the framework in which we expect Ofcom to operate, and that monitoring

“shall be the subject of reports published at least once a year.”

The appropriate regulator should be able to assess how well universal service providers are meeting the standards of service requirements, in order to take steps to rectify any emerging problems, in advance of those problems escalating. In other words, we expect to have that information as well as proper reporting, so that the analysis can be made and the necessary steps taken, if it is found to be unsatisfactory.

It is very important for consumers that there is transparency around what providers are doing and quality of service. It helps consumers see exactly what is going on—of course, that is not only for residential consumers, but for business consumers and their representatives, who should be able to access information about quality of service. Clearly, many businesses depend on a reliable postal service, and they want to know how the service is performing, what the universal service provider is doing rightly or wrongly and whether there are ways in which performance can be improved. Businesses will want to see those reports and have access to appropriate information, which Ofcom should be able to provide having received it from the universal service providers.

The evidence that Consumer Focus provided to the Committee states:

“Likewise, the only requirement for a USP to publish information about its performance in relation to specified standards comes from a designated USP condition. However, Ofcom is under no obligation to impose this condition, and indeed can only do so if it feels that it is necessary to do so to secure the universal service. Directive 97/67/EC [8] states that Member States shall ensure that users are given information, published in an appropriate manner, about the services offered, particularly prices and quality standards, by universal service provider(s). We believe that provision of information to consumers by the operators themselves is another basic safeguard that is sufficiently important to warrant inclusion as part of the minimum universal service requirement rather than being left to the discretion of postal operators.”

Consumer Focus clearly sees this as a minimum universal service requirement and thinks that the provision of information to consumers is an important safeguard.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Lady knows that I wrote to the Committee to reassure it over some of the points made by Consumer Focus. I want to make sure that things are as accurate as possible before discussing other clauses. For example, on the point that she is making, I refer to clause 36(1), which states:

“A designated USP condition must include provision requiring the universal

service provider concerned—

(a) to publish information…and

(b) to publish annually an independently audited performance report.”

Those provisions will ensure that information is made available.

Nia Griffith (Labour, Llanelli)

That is precisely why it seems strange to not have the provision in clause 27. There seems to be a number of other clauses where there is only the word “may”, and those are the ones where we have tabled amendments to suggest that the word should be “must”. As the Minister has pointed out, in clause 36, we have a “must”, which is also the case in clause 28 as the hon. Member for Folkestone and Hythe has pointed out. There are some “musts” there, but our point is that we would like to see clause 27 included, so that it is not a matter of, “We will have this, that and the other,” or “We will leave out some of the other bits, because they might be a bit more hard work, or cause a bit more aggro.” We want to have the full package, as laid out in clause 27, and we want to have the obligation on the regulator from the beginning.

The situation is enhanced by later provisions, but there are some loopholes. That is why other amendments in this group relate to those clauses where there are loopholes. We would like to see much tighter legislation here, where we can get a clearer indication right from the beginning that the regulator is going to be powerful. The amendments that I have mentioned are important for the reasons that I have stated, and they preserve the vital levels of information that protect our service. The information may be lost if the amendments are not accepted by the Minister. If we have a “must” rather than simply a “may”, residential consumers, businesses and consumer watchdogs, which we hope will not be crushed up in the later stages of the Public Bodies Bill, will have their opportunity to see what is happening, in addition to the regulator of Royal Mail meeting the necessary statutory requirements and analysis.

I am sure that the Minister agrees with me and my hon. Friends on the issue and that he understands the need for tighter regulation. He has rightly pointed out that there are already some “musts” elsewhere in the Bill, so he could quite happily accept one of the amendments to strengthen the Bill a little.

Moving on to amendments 62, 63 and 50, amendment 50 is another “may” and “must” amendment, which relates to clause 47. It addresses the question of “Essential conditions” under clause 47. Clause 26 contains a list of conditions, but there has been some cherry-picking—some of the provisions later in the Bill have got “must”, while some only have “may”; we think that they should all have “must”. Amendment 50 changes the “may” to a “must” in clause 47. The essential conditions are imposed on postal operators in relation to mail integrity, and we feel that Ofcom should be required to impose essential conditions on postal operators.

What do essential conditions do? They guarantee mail integrity—confidentiality, security and data protection. Many times we hear terrible stories about identity fraud and people’s details being stolen. One of the great things about Royal Mail at the moment is that tremendous integrity and security. People have great trust in Royal Mail, and we want to ensure that we have the strongest possible regulator input on essential conditions. Such things are an absolute minimum requirement for an operator providing a communications and logistics service. No one could possibly want to have anything to do with any service that was likely in any way to not have integrity, confidentiality and security on data protection.

Condition 8 of the Royal Mail licence currently stipulates that all licence operators must comply with the Postcomm code of practice on protecting the integrity of the mail. The code of practice requires all operators to submit to Postcomm and Consumer Focus annual reports setting out the number of or, where precise numbers are not known, reasonable estimates of the number of code postal packets that were lost, stolen, damaged or interfered with, and details of any trends, patterns or other notable features, such as above-average incident levels at certain premises in relation to the loss or theft of, damage to or interference with code postal packets. All licence operators must also submit with each report a statement of the measures that they intend to take to remedy any failure or patterns of failure in order to achieve mail integrity objectives and to reduce the number of code postal packets that are lost, stolen, damaged or interfered with.

That requirement is straightforward and basic, so for it not to be put in as a “must” is strange. We simply have:

“OFCOM may impose an essential condition on…every postal operator”.

Not to have so important a requirement seems peculiar, and I am reminded of that amazing, rather quirky and amusing little Norwegian film, which I am sure that the Minister has seen, about the postman who regularly takes his sack of mail and shoves it down a railway tunnel. If the Minister has not seen the film, I strongly recommend it—it has a real anti-hero feeling and is a sweet and irreverent piece.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I hope that the hon. Lady will give the Committee a full reference to that film, because I am sure that we all want to watch it on YouTube or elsewhere. However, I am sure that she would not want to suggest that any Royal Mail employee would act in that way.

Nia Griffith (Labour, Llanelli)

Absolutely not. I alluded a moment ago to the Royal Mail’s reputation and the tremendous confidence that people have in it. The film is particularly quirky, and I am sure that it is not representative in any way of the average Norwegian postman. The truth remains, however, that we are privileged in this country. We have an excellent Royal Mail service, and people are always amazed that packages with fragmented addresses arrive at their destination. There is an old joke about a Welsh village in which Dai the spy receives his package because the postman knows where he lives, but that example is on the other end of the scale. We respect our postmen and women, who do a fabulous job deciphering handwriting and so on. Their integrity and confidentiality are superb.

We are entering a new phase with a privatised provider, and there is no reason why any provider that provides an excellent service should not want to boast about its good figures and how well it has done. In fact, nowadays, companies probably put things like “100%—nothing ever lost” on their websites and wave their flags. It is not extraordinary or unusual to ask Ofcom to look at the essential conditions. It is appropriate, and I hope that we will be able to convince the Minister that the essential conditions in clause 47 should become a “must” instead of a “may”.

All licensed operators should submit with each report a statement of the measures that they intend to take to remedy any failure or patterns of failure to achieve their integrity objectives. That is the whole point of any sort of stock take, regulation or assessment. There is no point to it unless something is then done to put things right. It is similar to when Ofsted inspects a school—the action plan is what matters. That is what comes out of it and where one goes next, and that is exactly what we expect. The statement should say something like, “We didn’t do very well in a particular place and we have a problem in a particular depot, so we need to look at that and push on.” It is important that we receive the statement of measures of what the operators intend to do to remedy any failure, so that they will improve and not continue to perform at a low level. We want to know what they are going to do to reduce the number of company and personal packets that are lost, stolen, damaged or interfered with. We do not want complacency; we want to make things better.

Article 5 of EU directive 97/67/EC on postal services stipulates that one of the requirements that the universal service provision should meet is

“a service guaranteeing compliance with the essential requirements”.

Residential and business consumers require that confidence in the integrity of the postal system or operator, and the EU requires it in its directive. It is therefore sensible that Ofcom should be obliged to do something about it rather than be asked to look at it if it is not too busy sorting out broadband or any of the other wonderful things that it does. We want a “must” that makes it an obligation. Leaving it to Ofcom to determine whether the essential conditions should be imposed on postal operators could lead to a significant unreported detriment and a lack of confidence in the postal system. We want to make sure that Ofcom “must” rather than “may” impose the requirement to produce that report.

Sir David Amess (Conservative, Southend West)

I remind the Committee that with this we are discussing the following: amendment 72, in clause 27, page 14, line 31, leave out ‘may’ and insert ‘will’.

Amendment 85, in clause 34, page 19, line 17, leave out paragraph (b).

Amendment 51, in clause 35, page 19, line 35, leave out ‘may impose a designated USP condition on a universal service provider’ and insert ‘must impose a designated USP condition on all designated universal service providers’.

Amendment 52, in clause 35, page 20, line 9, leave out ‘may’ and insert ‘must’.

Amendment 53, in clause 35, page 20, line 9, leave out ‘only’.

Amendment 54, in clause 35, page 20, line 23, leave out ‘may’ and insert ‘must’.

Amendment 70, in clause 38, page 22, line 33, leave out ‘may’ and insert ‘must’.

Amendment 62, in clause 46, page 28, line 36, leave out ‘may’ and insert ‘must’.

Amendment 50, in clause 47, page 29, line 22, leave out ‘may’ and insert ‘must’.

Amendment 63, in clause 49, page 30, line 33, leave out ‘may’ and insert ‘must’.

Amendment 65, in clause 50, page 31, line 35, leave out ‘may’ and insert ‘must’.

Amendment 66, in clause 50, page 31, line 45, leave out ‘may’ and insert ‘must’.

Amendment 55, page 90, line 21 [Schedule 8], leave out ‘may’ and insert ‘must’.

Nia Griffith (Labour, Llanelli)

What a shame you missed the beginning of this debate, Mr Amess. However, I shall not repeat it. We shall make a bit of progress.

We are considering a large group of amendments relating to clause 27, but amendment 62 relates to clause 46. The Bill proposes a radical transformation of the regulation of the postal market by removing the mandatory licensing regime and replacing it with a system of authorisations, although persons may provide postal services without any licence or authorisation. The Bill states that the Secretary of State may require postal operators to notify Ofcom before carrying on business. A system of notifications is a basic minimum for a regulated market, and the Bill should stipulate that regulations must be made requiring all postal operators to notify Ofcom of their activities as a minimum obligation, in order to ensure that it has an overview of the postal sector.

A complete regulatory framework cannot be established without full information about provision of the postal service. Lots of discussion on the Bill has been about individual words, but they are all important. As I pointed out, where the wording has not been carried through, we want it strengthened, and as Government Members said, where “must” has suddenly appeared in a clause, there is clearly less need for amendments. Amendment 62 is one of many of our amendments that would simply change “may” to “must”, which would have a significant impact.

Amendments 65 and 66 relate to clause 50, but link into clause 27(2)(g), which relates to a consumer protection condition. Clauses 49 and 50 relate to that paragraph. Our amendments pertain to clause 50, which deals with the provision that may be made by consumer protection conditions. The purpose of our amendments is to strengthen the clause and ensure the best possible service and protection for the consumer. As I said this morning, the public in this country are impressed and pleased with their postal service. I have experienced other countries where nothing like the same level of service is provided, and where there are myriad tales of items being lost and suppositions by the public about what happened to their mail. We are fortunate in that that is extremely rare here, and that we have a good service.

We are also lucky to have a good first-class service that arrives the next day. I have been visited by friends from other countries who have been staggered that I can send a birthday card the day before the birthday. Yesterday I sent some Advent calendars full of chocolates to my nieces and nephews, expecting them to arrive today—as of course they have—ready for tomorrow. We have a good service.

I am sure that many hon. Members have tales similar to the one that I told this morning: poorly addressed envelopes are still looked after and delivered to the correct address, despite scrawly handwriting or a half-constructed address. The postmen and women do an excellent job. However, when there is a complaint, satisfaction levels with its handling are not so good. That is why we want this clause to be as robust as possible. A consumer protection condition would cover complaints handling procedures, including whether the complaint was dealt with courteously, efficiently and promptly and whether all the necessary information was made readily available to ensure a full and fair investigation into the complaint; dispute resolution and redress schemes; what the procedures are and whether they are used effectively; and the publication of information about complaint numbers and complaint handling. That is the sort of information that we want to know. The public, quite rightly, expect to know about such things.

The Bill, as currently drafted—[Interruption.] I must congratulate my hon. Friend the Member for Ochil and South Perthshire on his safe arrival. He has had a terrible ordeal. We believe that he has been stranded in an airport for more than 24 hours. We are very pleased indeed to see him. In fact, we will give him an envelope to show him how pleased we are. Just to let him know, we are on clause 27, and we are looking at amendments 65 and 66.

As I was saying, when the complaint happens, that is when there is less satisfaction. It is rare for people to have a complaint, but when they have, the way in which the complaint is handled is not always ideal. The Bill, as currently drafted, suggests that Ofcom “may” impose consumer protection conditions on postal operators and “may” require the reporting and publishing of complaint numbers and compliance with complaints handling standards.

The existing licence, legislation and consumer protections ensure that consumers’ key interests around an accountable and high quality postal service are met. Without a mandatory consumer condition, postal operators will be able to operate without sufficient regard for consumers.

Postcomm’s 2009 customer survey found that of the 8% of residents and 13% of small and medium-sized enterprises that made a complaint to Royal Mail, 73% of the residents and 70% of the SMEs were not satisfied with the customer service that they received, which is obviously a very serious issue. Things do go wrong and it is not always easy to say why it has happened or whose fault it is, but nevertheless there are proper ways in which to deal with complaints. It is sad that 70% of the complaints handled were not handled to the satisfaction of the complainant. The figures indicate the problems that consumers experience, even with legal protection. Imagine how much worse the situation is likely to be if there is less protection, as there would be if the Bill were kept in its current wording.

Ofcom should be required—[Interruption.] My sincere apologies. My phone was on only to check whether my hon. Friend was on his way. I should have switched it off earlier. Technology! Let us go back to the post if we possibly can.

Ofcom should be required to impose a consumer protection condition on all postal operators providing either a universal service or a service within the scope of the universal service, as under the current system and as set out in the Postal Services (Consumer Complaints Handling Standards) Regulations 2008 and the Postal Services Regulated Providers (Redress Scheme) Order 2008.

Article 19 of directive 2008/6/EC stipulates:

“Member States shall ensure that transparent, simple and inexpensive procedures are made available by all postal service providers for dealing with postal users’ complaints”.

I am sure that I do not need to tell the Committee that the force of the provision is in the word “shall”, and am sure, too, that hon. Members all know how the verbs go: one says, “I shall, you will, he will” if there is no sense that something must be done; but if one intends something to be done one says, “I will, you shall, he shall.”

Postal consumers should receive at least the same level of protection, in terms of the quality of providers’ own complaints-handling schemes, access to alternative dispute resolution, and information about ADR, as Ofcom will require from telecoms providers from July next year.

Postal operators should be required to be members of an approved redress scheme to ensure that complaints-handing standards can be monitored and independently investigated. Indeed, Consumer Focus has specified that in its written evidence to the Bill Committee. It tells us:

“It is of significant concern to Consumer Focus that the Bill does not require Ofcom to impose consumer protection conditions on postal operators.”

We should listen to Consumer Focus on this matter. It has considerable experience of dealing with consumer issues and of raising problems about provision for the customer and the way customer complaints are dealt with. It makes it clear that that is an essential part of any regulator’s job.

Consumer Focus continues:

“From July 2011 telecoms providers will have to meet new regulatory requirements in relation to their complaints handling systems. They will have to adhere to a minimum set of standards and procedures; belong to an approved ADR scheme and adhere to its decisions; provide information on the ADR schemes on consumers’ bills; and write to consumers with unresolved complaints to inform them of their right to access ADR. The Postal Services Bill should provide postal consumers with, at least, the same level of basic protection.”

Amendment 50 relates to the same issue, and I shall not repeat all the points that have been made about it. Hon. Members will be pleased to hear that that means we have nearly finished discussing the amendments. We have covered a large number. Amendment 50 deals with the existing licensing legislation and is about protecting consumers’ key interests in relation to an accountable and high-quality postal service.

I have bad news for you, Mr Amess—I realise I have missed out amendment 70, and will come to it in a moment; it is on a separate issue. We feel that the amendments I have just been discussing are particularly important in the context of full-scale privatisation. In theory, people might say there should be no difference between a privatised and a public Royal Mail, but we are talking about a public service with a good record of service and a good reputation. Many people are all too aware of problems they have had with some privatised utilities. There is always the risk that a privatised company will put profit before people, in particular in an area in which that company has a monopoly service and so does not worry about losing custom. A privatised monopoly is likely to exert pressure on the regulator to reduce its requirements. We have, therefore, a particular reason for wanting to be absolutely certain that we are getting the strongest possible consumer protection. It is essential to get that protection and for Ofcom to have such powers.

Amendment 70 is about accounting separation and transparency of costs—in clause 38, but linked with clause 27(2)(c) on accounting conditions. Amendment 70 is pertinent to clause 38, about the universal service provider accounting conditions which Ofcom may impose on a universal service provider, in order to maintain separate accounts for different matters, as directed by Ofcom. Clause 38 also links in with European legislation—article 14 of the directive on the separation of accounts by universal service providers.

What is the intended effect of our amendment? The Bill as it stands provides that Ofcom “may” impose an accounting condition on a universal service provider, requiring a USP to provide greater transparency of its costs and accounting separation. However, Ofcom ought to be required to impose such a condition on all USPs.

I refer, again, to the written evidence of Consumer Focus to the Bill Committee:

“Without accounting separation and cost transparency Ofcom will not have the information required to implement effective regulation…and risks to the postal market, including a higher cost USO service than there needs to be and market foreclosure preventing lower cost providers from entering the market, will remain. The Bill should make the implementation of some form of accounting separation a feature of the minimum universal service requirement with Ofcom tasked with implementing the detail.”

Richard Hooper, in his 2008 report, explained clearly why we need to have as much transparency as possible and the difficulties of regulating without that cost transparency:

“A shared understanding of costs would bring benefits for all concerned...It would improve the quality of information available to Royal Mail to manage its business operations...It would enable the regulator”—

importantly—

“to monitor whether the universal service remains sustainable, and to assess the scope for efficiency savings within Royal Mail when setting price controls…Cost transparency would reassure alternative carriers that the regulator could respond effectively to any complaints about anticompetitive behaviour by Royal Mail…It would also answer the complaint often voiced that Royal Mail subsidises its competitors in relation to the access regime.”

Better and more transparent information, therefore, would be of benefit all around and could make everything clearer and more straightforward. Otherwise, there would always be some suspicion that things are not being expressed quite how they ought to be.

Hooper went on to recommend that

“Ofcom should…regard cost transparency as a major priority”

and that it should

“build its own detailed model of costs, in consultation with Royal Mail”—

in this case—because this

“has been the practice in other sectors, such as telecommunications.”

The whole point of bringing Ofcom in was to have a body with greater experience of regulating in other fields. If there is good practice in those fields, it seems logical to transfer it, to be continued in the good work that we hope Ofcom will do for the new Royal Mail set-up.

Hooper also said that Ofcom should

“consider how developing a system of separate accounts for different parts of Royal Mail’s network could improve cost transparency.”

To have the word “may” in the clause would mean that accounting separation and cost transparency could be treated lightly and, given the practical difficulties in separating out costs, it might be an area that is conveniently given lower priority. We can imagine the scenario whereby Ofcom is not bothered about that particular matter and Royal Mail finds it a bit awful to do and does not make it a priority. Ofcom does not chase it up and, lo and behold, the tasks are not completed to the standards that we would like.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I have been listening to the hon. Lady, but the idea that Ofcom as a regulator would not be interested in how Royal Mail is accounting for its costs is extraordinary. Surely that would have been one of its prime tasks in taking over the work that Postcomm has already undertaken. I am surprised she thinks that Ofcom would not be bothered about such matters.

Nia Griffith (Labour, Llanelli)

I am absolutely delighted that the Minister feels that such matters would be a priority for Ofcom. I very much hope therefore that he will consider the amendment and change the wording in the Bill so that it will refer to “must” not “may”. In that way, the self-evident priority will be in the Bill and be part of what everyone would expect Ofcom to do. If we are to be asking Ofcom to do a proper job, we must give it the proper framework within which to do it.

I have almost finished my explanation, except for one little reference to amendment 55 to schedule 8. It would simply change “may” into “must” in the information provisions and ensure that they match up with the other changes for which we have asked. On that note, I conclude my remarks.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

It is a real pleasure to welcome you to the debate, Mr Amess. The hon. Lady has made a long speech, albeit with a recess in the middle. Maybe she wanted to make sure that the hon. Member for Ochil and South Perthshire had arrived to find out whether he would be in charge of debating the next group of amendments. We wait with bated breath to find out. Sebastian Vettel-like, he has now come into his seat and we look forward to his contributing to this afternoon’s proceedings.

We have heard a lot about whether “may” should be “must”, and whether “may” should be “will”. We have had lots of musts and wills, and I shall deal with them in due course. However, this is the first time that I have had a chance to talk about part 3 and, before I go into detail about the group of amendments and christen them in my usual way, I shall explain briefly some of the key principles that underpin the regulatory framework in this part of the Bill.

Protecting the universal postal service collection and delivery, six days a week, at uniform affordable prices is at the heart of our Bill. The Government’s priority is to secure the future of the universal postal service. All the elements of the Bill, which must be seen as a package, are focused on that single objective. As Richard Hooper has made clear, the greatest threat to the universal service comes from falling mail volumes, and in particular the impact of digital media. The regulatory regime therefore needs to consider mail as part of a wider communications sector. To that end, the Bill transfers regulatory responsibility for the mail sector from Postcomm to Ofcom, which has a necessary overview of the whole communications sector. This was an idea first put forward by the previous Government. It was an idea with which we agreed in opposition and which we have accepted in government. The Bill ensures that Ofcom’s primary duty is to exercise its functions in relation to postal services in a way that will secure the future of the universal postal service. I want to underline the phrase “Ofcom’s primary duty” in relation to securing the future of the universal service.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Does the Minister agree that access points are a key part of the universal service, and why are they not put into statute in this part of the Bill?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

As the hon. Gentleman knows, we are looking forward to a long debate on access points and criteria later. He knows that the universal service, as defined in the legislation, mirrors what was defined in 2009, which takes its legal basis from the European postal directive. Unless he is suggesting that we are not securing the universal services demanded by the directive—indeed, as I have said before, we are gold-plating that—I am sure he will accept that we are meeting our legal obligations.

Ofcom will also need to have regard to the financial sustainability and efficiency of the universal service, which is critical to securing the service in the long term. I bring that particular duty to the Committee’s attention, because it was not in the 2009 Bill. In reflecting on whether the regulatory regime was strong enough to protect the universal service, I felt that we needed to have extra strength in it, hence the additional duties for Ofcom. So, as well as a change of regulator, the postal services sector needs a new regulatory framework. Regulation must be proportionate to the needs of the market, and the framework must allow for deregulation where there is competition. The Bill reduces the administrative burden on businesses by scrapping the licensing regime and establishing a more flexible authorisation regime modelled on that in the electronic communications sector. Indeed, the hon. Member for Llanelli welcomed the shift and understands that it is deregulatory and more flexible. Postal services operators, including Royal Mail, will consequently have more flexibility to innovate.

The Government have moved to a more flexible and deregulatory authorisation regime. The Bill sets out Ofcom’s overarching duties and gives it the tools needed to meet those duties. That will be at the heart of my response to the hon. Lady’s amendments today. Crucially, it also gives Ofcom flexibility in determining how to use the tools. As I said at the beginning, this group of amendments primarily seeks to substitute the word “may” with “must” or, in some cases, “will” in relation to Ofcom’s powers or the making of regulations.

I listened with great intent to the hon. Lady’s speech. She talked about the need to get more oomph into the clause, so I wonder whether we should call her amendments “the oomph amendments.” She also talked about getting a little more aggro in the determination of the regulatory regime, so perhaps they are “the aggro amendments.” However, I prefer to call them “the musty amendments”, because of the need that she sees to have “must” in them. I could have called them “the will ’e amendments”, but I thought “musty” was more parliamentary.

With the amendment grouping now christened, I understand the concerns of the hon. Members proposing them. They are keen to ensure that the regulatory regime imposed by the Bill is fit for purpose and can secure the future of the universal service. I share that concern and that is why, as I have already outlined, we are ensuring that the new regulator will have the necessary duties, powers and regulatory tools to regulate the postal services market effectively.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

I am listening further to what the Minister is saying, and I am quite unclear on this point: are access points not part of a universal service? If they are, why are they not in this part of the Bill?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman will know that there are three effective tiers of the universal service. The first is the postal directive, which is the underlying legal directive. Then we have the minimum requirements for the universal postal service, which we will come to in clause 30. Finally, as he knows, Ofcom must by order set out a universal postal service order. I think he will find that anything that needs to be in the universal service will be there in those three parts.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

I think the Minister understands, and it is inevitable, that there is a vagueness in what he said, for the simple reason that unlike the other parts of a universal postal service, statutory criteria for post offices or access points are not going to be in the Bill. The Minister began his discussion with a kind of philosophical grounding of the Government’s position. It seems odd that although we are talking about a universal postal service, access points and counter services are not seen as worthy of statutory protection, unlike the six-days-a-week service. I just want to ask him about that again.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Let me help the hon. Gentleman with one particular point: the access points that he seems to be concerned about—even though we will deal with them in due course. Clause 28(4), which mirrors the language used in the 2009 Bill and echoes in the current licence that Royal Mail has to agree with Postcomm, states:

“Ofcom’s duty under subsection (1) includes a duty to carry out their functions in relation to postal services in a way that they consider will secure the provision of sufficient access points to meet the reasonable needs of users of the universal postal service.”

That is in the legislation. It is quite clear and mirrors what the law has said in the past and what the 2009 Bill said.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

I think there are a couple of points to be made in response. The first is that the language clearly says “they consider”. The six-days-a-week service will be protected by statute, and Ofcom has to work around that. As anyone with a reasonable grasp of English can see, there is much more latitude for Ofcom vis-à-vis access points, for the simple reason that there will not be statutory protection.

The second point—I guess this anticipates something that the Minister will come to in later clauses—is that it is not good enough to compare the language to what was used in 2009, as there is a fundamental difference. It did not matter previously that there was no statutory provision for post offices because Royal Mail was not going to become a separate private entity with the right to contract with other parties. It was not going to have a legal duty to prioritise shareholder interests and profitability as its overriding concern. That seems to me a fundamental difference between any previous or putative legislation, when both were still in public ownership, and the situation that we are moving towards with a privatised Royal Mail.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman is in many ways repeating the argument that we had some time ago over the inter-business agreement, suggesting that the separation is somehow going to be inimical to the future of the post office network. We have dealt with that matter in detail. I am happy to deal with it again; although it is not absolutely germane to the amendments before us, it will be in due course.

I say simply to the hon. Gentleman: he is mixing up organisational structure with the law. The law under clause 28(4) will require exactly what the law required in the past. Therefore I am afraid that his point does not wash. We have had that argument before, and I am happy to have it again. However, if the hon. Gentleman can restrain himself, I would like to make some progress in answering the points made by his hon. Friend the hon. Member for Llanelli, which are germane to the amendments—his point is germane to a set of amendments that we are about to get to.

Gregg McClymont rose—

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman is irrepressible. I am extremely generous, and I will see what he wants to say about the “musty amendments.”

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

I was just going to say that I think the Minister is right to try to make some progress. I am sure that we will return to the matter.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am tempted to say “Danke schön” to the hon. Gentleman. It is absolutely essential, when we are considering every single clause in part 3 of the Bill, that the primary focus of the regulatory regime imposed by the Bill—indeed, the primary focus of the Bill itself—is to secure the future of the universal service. That is clearly set out in clause 28. My hon. Friend the Member for Folkestone and Hythe put his finger on that point in an earlier intervention, and explained why the arguments put forward by the hon. Member for Llanelli in most of these “may/must” and “may/will” amendments are completely misguided and reveal a misunderstanding of the way that the Bill works. He rightly referred the hon. Lady to clause 28(1), where the duty to secure the provision of a universal postal service is a must for Ofcom.

I will read subsection (1) and subsection (3) of clause 28, so that Committee members will be absolutely clear that it is an obligation and a must in terms of the overarching framework. Subsection (1) states:

“OFCOM must carry out their functions in relation to postal services in a way that they consider will secure the provision of a universal postal service.”

So let us be absolutely clear—that is a primary duty. Subsection (3), which is the new additional duty that was not in the 2009 Bill, strengthens the duties of Ofcom. It states:

“In performing their duty under subsection (1) OFCOM must have regard to—

So there we are. It is absolutely clear—the word “must” is used. It is the prime, overarching duty. With the many parts of part 3 where “may” is used for Ofcom operating the different tools, rather than “must” or “will”, as the hon. Lady would like, we are leaving it up to Ofcom to decide when and where it is appropriate for it to use those tools. It has to use them to meet the primary duty and it is absolutely clear that that is its legal obligation.

The amendments would risk constraining Ofcom and placing unnecessary duties on it. The amendments risk imposing unnecessary and excessive regulatory burdens on the postal industry. I hope that hon. Members would be against that. As I have already outlined, by shifting to a new regime based on general authorisation—one that is more aligned to a modern, liberalised market—we are seeking to reduce the bureaucratic burdens on operators. The amendments would seriously undermine that approach and could place unnecessary regulatory burdens on postal operators.

Nia Griffith (Labour, Llanelli)

By saying that the amendments would undermine that approach, it sounds to me as though the Minister is saying that he would not expect Ofcom to carry out certain tasks. If he expects Ofcom to do those tasks, surely the word “must” would not present such a problem.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

There may be cases in the future with different operators where Ofcom will choose not to use particular powers. I will go through the amendments that the hon. Lady has tabled. Hopefully I will reassure her that the structure ensures that we get what both Parliament and the public want, which is a universal postal service, but with the regulators deciding how and when they use their various powers. That seems appropriate, rather than requiring them—here, in 2010 and for the foreseeable future—to use a particular power in every case, in every place. We are giving them flexibility. That is the approach that works, and the regulatory provisions in the Bill are written to reflect the provisions that Ofcom relies on in the telecommunications market, in many ways. In the same way that the Bill is drafted, those provisions are permissive, rather than directive. Ofcom finds that, in practice, that gives it—in a market as complicated as telecommunications—the flexibility that it needs to do the job, without in any way weakening it as a regulator. It is important to remember that we have a duty not to over-regulate—there has to be a balance. If we were to follow the hon. Lady’s suggestion, we would be in danger of going down the road of over-regulation.

I note something in passing that Opposition Members do not like me to say, but I shall continue to do so: on each of the clauses that are under discussion, the Bill takes exactly the same approach as that of—you guessed it—the 2009 Bill.

Nia Griffith (Labour, Llanelli)

I shall make a point about other bodies that Ofcom regulates. The Minister will have heard that from July 2011, telecoms providers will have to meet new regulatory requirements. Therefore things are not necessarily always perfect as they are; we often need to search for better ways of doing things. The Minister commented on Ofcom’s not regulating so much, but there are some musts for it, too—and it appears that there will be some more.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

If the hon. Lady can provide chapter and verse on that, I will be keen to examine it. Ofcom, however, has a record of deregulation. Only recently, it removed some regulation on BT in the final mile to enable it to change the way in which it bundles different services together, which it had been prohibited from doing. It has been using its regulatory powers flexibly in the telecommunications market and we hope and expect it to do so in this market. The more we require, force and demand Ofcom to use the panoply of powers that we are giving it, the more we will constrain it and the more we will thus impose the necessary regulatory burdens on the postal industry.

The hon. Lady must understand that regulation is not necessarily the best way to run businesses and markets. Surely we would like Ofcom to decide that the universal postal service and quality services to postal customers—be they residential or business customers—can be provided through a competitive market, and then we can take off those burdens.

The whole thrust in the DNA of Ofcom is to deregulate. It seems that the hon. Lady wants to perform some sort of surgical operation on it to take away that DNA, and replace it with some new DNA that would make it a force for more and more regulation. I assure her that that is not what this Government want; it is not what the previous Government wanted, so I am surprised that she wants to do that.

Karl Turner (Labour, Kingston upon Hull East)

Does the Minister not accept that although the measure mirrors the 2009 proposals, there is an essential difference? This measure will privatise 90% of Royal Mail, whereas the previous Government’s proposal aimed for majority state ownership.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Ten out of ten to the hon. Gentleman for noticing the difference. That point has cropped up on the odd occasion during our deliberations, but it is not relevant to the amendments.

Amendments 71 and 72 seek to substitute the word “may” with the word “will” in clause 27, which gives effect to the new authorisation regime. General authorisation is more aligned to a liberalised market of services and reduces the bureaucratic burden on postal operators. The Bill allows for certain kinds of regulatory condition to be imposed on postal operators by Ofcom. Such conditions must be targeted, proportionate and justifiable—some may apply to all postal operators, while others may apply only to those operators that supply certain types of services. Again, that is why we need flexibility. Ofcom should have discretion to impose regulatory conditions where and when appropriate, and all regulations should be proportionate, justifiable and not imposed without good cause.

Amendment 85 would delete subsection (7)(b) from clause 34. Clause 34, which we will consider in more detail in due course, concerns the designation of universal services providers. Were we to remove subsection (7)(b), Ofcom would still be able to review designations, but there would no longer be a separate express power to consider whether designated universal service provider conditions should continue to apply to a universal service provider. That would make no difference to Ofcom’s general power to revoke or modify conditions, which is set out in schedule 6 and in law generally. In order to be able to revoke or modify a condition, Ofcom will obviously first have to consider whether to do so, so we think that amendment 85 is unhelpful.

Amendments 51 to 54 relate to clause 35 and concern designated USP conditions. Amendment 51 would change “may” to “must” in subsection (1), which would mean that Ofcom would have to impose in any and every circumstance a designated USP condition on a universal service provider. The amendment would limit Ofcom’s flexibility, effectively tying the hands of the regulator, and could create needless bureaucracy and regulation.

Gordon Banks (Labour, Ochil and South Perthshire)

I apologise to the Minister for not being here earlier to take him though the amendments, but I am sure that my hon. Friend the Member for Llanelli did a sterling job. Following the comments he has just made, can he tell me what impact amendment 51 would have that would be detrimental to the Bill?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Amendment 51 seeks to change the words

“OFCOM may impose a designated USP condition on a universal service provider”

in clause 35(1) to “OFCOM must impose a designated USP condition on all designated universal service providers”. The clue is in the change in the words. It would restrict Ofcom’s flexibility. That is the general point that we are trying to make, and it is what we have learnt from the previous Government. The primary duty is set out in clause 28(1) and (3) and uses the word “must”, and that is in relation to the primary duty of securing the universal postal service. That is the overarching duty, and underneath it there are a set of tools and a set of actions that Ofcom can choose to meet that primary duty. Therefore, we have put forward an approach that ensured that we achieve that objective without imposing too many requirements and burdens that would result in too many regulations on the industry. We think that we have got the balance right, and I am afraid that the hon. Gentleman’s approach, and that of his hon. Friend, would constrain Ofcom in meeting its primary duty.

Gordon Banks (Labour, Ochil and South Perthshire)

If the USP condition on a universal service provider is of such monumental importance, surely “may” must be “must”.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I have no doubt that there will be circumstances in which Ofcom will want to impose a condition, and it will do so in order to comply with its primary obligation. I am afraid that I have to bring the hon. Gentleman back to the primary obligation. If Ofcom believes that it needs to impose a USP condition on a universal service provider in order to meet the primary duty of securing the provision of a universal service, it will no doubt do so. That ought to be clear to the Committee. That is the logic behind the Bill, and it is the same logic that was behind the 2009 Bill. It seems to me to be a sensible and proportionate way of developing the regulatory framework.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

The Minister has made a number of references to the fact that the provisions are similar to those that were in the 2009 Bill, but does he not think that it is a very different situation when the Government are privatising Royal Mail? We are moving into a very different context, so does he not think that that has profound implications?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

In terms of the regulatory framework, a little too much can be made of that distinction. Of course it is important, and I do not seek to diminish the importance of change of ownership, but the approach in the Bill and the measures we are taking are much more likely to secure the future of Royal Mail and the universal service. Therefore, this Bill is much preferable to the 2009 Bill. Let us be absolutely clear, lest the Committee is in any doubt: I fully expect that Ofcom would choose to impose a designated USP condition, which is one of the reasons that we put the power in the Bill. However, the question is, should we for every regulatory tool in part 3 require and mandate Ofcom to do it?

Gordon Banks (Labour, Ochil and South Perthshire)

Yes.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman from a sedentary position says yes, but I am afraid that that reflects the underlying differences in philosophy—possibly not between the previous Government and this one, but certainly between the Opposition and this Government. Where possible it is much better if the regulator is enabled to deregulate and not impose regulations. I have had this debate with many people over the course of developing the Bill. I have been clear that flexibility for the regulator is a good thing. Ofcom’s duties in the Bill, alongside the duties in the Communications Act 2003—an important Act to be read alongside the Bill, which I shall come to in more detail later—can ensure that we can deregulate as much as possible when competition allows.

Gordon Banks (Labour, Ochil and South Perthshire)

I am grateful to the Minister for giving way. We have taken him at his word on a number of occasions on amendments when he has said that it is the intention that x, y and z or a, b and c happen. Now he is saying that it is his understanding that Ofcom would—that is, Ofcom must—so why does he not remove all doubt by stating in the Bill that Ofcom “must” do this, not “may”?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I repeat: I expect Ofcom would use the power, unless it decided that it did not need to use it, to secure the universal service—its primary duty—as set out in clause 28(1) and (3), and I should have thought that the hon. Gentleman would agree that if it was able to meet that primary duty, it should not regulate unnecessarily. That seems to be quite an obvious point. Perhaps I need to say it in another way or in another language to explain it to him. I would have thought that with his business background, he would not want a regulator to impose unnecessary regulations when they are not needed to meet the primary duty.

Gordon Banks (Labour, Ochil and South Perthshire)

But the Minister just said that if Ofcom can regulate without making “may” “must”, that is what it should do. He suggests that that would be Ofcom not regulating, but that would not be the case according to the Minister’s own words.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am not sure if I followed that, and if my argument—

Gordon Banks (Labour, Ochil and South Perthshire)

You should spend the night at Edinburgh airport, then you would.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman says that I should spend a night at an airport. It is very tempting, but unfortunately, living in Surbiton and representing Kingston and Surbiton, I do not often have to use aeroplanes to fly to the House of Commons.

Let us be clear. What lies behind a lot of the hon. Gentleman’s interventions is the desire to suggest that seeking private capital and, potentially, a majority holding of private capital in Royal Mail creates a problem for the regulatory framework. The ownership of the universal service provider should have no impact on the regulatory decisions taken by an independent regulator. The postal service directive requires ownership and regulatory decisions to be kept separate. That is what the European postal directive says, and this is a regulatory framework for all postal operators, not just Royal Mail. I hope that the hon. Gentleman will also understand that point, unless he wants Ofcom, with each and every power it has, to impose regulations on the whole industry all the time. I think that if we adopted that approach, we would really see the death-knell of the postal industry in this country, because it would be hidebound with regulation, and the ability to be freed up, to innovate and to respond to consumer needs and to competitive pressures rather than regulatory pressures would be reduced, which would be very deleterious.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

The Minister is raising a really interesting philosophical distinction—if you want to call it that, which he has. As I listened to the Minister’s encomium to deregulation and what he calls an injection of private capital but is in essence a largely privatised Royal Mail, I was struck by the thought, “Do the events of 2009 and 2009 not suggest to all of us that perhaps we have to rethink in some ways our attitude to privatisation and deregulation?” Even if he does not think that the events of 2008 and 2009 would encourage such reflection, what about the evidence that has emerged in the last week about the energy utilities and about the inquiry that Ofcom is about to undertake into what seem to be massive hikes in profits and prices by energy companies operating within this kind of deregulated system that we have all been living with for 30 years?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I would be surprised if Ofcom is undertaking such an investigation and I rather hope that it is Ofgem that is investigating the energy market. However, I take the hon. Gentleman’s point and, as a historian of the guild socialists, he makes it in a particularly powerful way.

I agree with some of the thrust of what the hon. Gentleman is saying, and that is that the financial meltdown—I hope I’m not straying too far from the topic of the debate, Mr Amess; I am sure that if I do you will bring me back to order, but we want some “oomph” in this debate, after all. I have reflected on those events, and on what they suggest for economic policy. They did suggest that the last Government got the regulation of the financial sector wrong and I am delighted that this Government is addressing itself to that situation. My right hon. Friend the Secretary of State for Business, Innovation and Skills, working with my right hon. Friend the Chancellor, has set up the Banking Commission, which there was a debate about in this House yesterday. There are many measures that this Government are taking that the last Government refused to take, in order to address and learn some of the lessons from those events.

However, the idea that one should learn a lesson which the hon. Gentleman seems to want us to learn—that the private sector is wrong, that privatisation is bad, that regulation and nationalisation are good, and so on, is a completely illogical conclusion to draw and I certainly do not draw it. Indeed, one of the lessons that I draw is that sometimes competition is not strong enough and sometimes we see vested interests and markets that are not working well, which need to be corrected to ensure that they are functioning properly as markets. Often that is the lesson to learn, rather than the need for yet more onerous regulation.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

I was interested to hear the Minister’s train of thought, because he began by saying that he had reflected on those events of 2008 and 2009, but everything that he subsequently said was on the privatisation and deregulation model. I was trying to make a reasonably subtle point to him. I listened to what he was saying and the language that he was using was exclusively drawn from that school of thought. There are schools of thought among those who study politics, political science and history that say that language does not just reflect the world, it shapes it; and based on the language that the Minister is using, it seems to me that we have not learned any lessons and this Bill seems to reflect the fact that we have not learned those lessons.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Tempting though it is to engage in a wide-ranging debate on economic philosophy, which I am very happy to have with the hon. Gentleman and preferably with a drink in my hand, I would suggest that, yes, I am using words such as “privatisation” and “deregulation”—I make no apology for that—but we are dealing with a Bill that is about privatising the Royal Mail and introducing a more deregulatory framework, so perhaps that is why I am using those words a lot.

Lest the hon. Gentleman is in any doubt, there are cases in which the state should own organisations and in which regulation should be strengthened. If that reassures him and enables him to retain his sedentary position for a little longer, we should, I hope, be able to make some progress. In no way do I want him to go away with the impression that I am some sort of laissez-faire, let the devil take the hindmost, free-market Conservative; I am not. I have some colleagues in the Conservative party who would like that description of me, but there are differences between some people in the Conservative party and people in the Liberal Democrats; that is well known and is exhibited in the actions of different Ministers and in the coalition agreement. What is amazing—certainly in British history—is that we are putting aside differences and coming to agreed positions and taking the economy forward and dealing with the mess of the economy that was left by the Labour party.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Will the hon. Gentleman give way?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Does the hon. Gentleman really wish to prolong this? He may be testing Mr Amess’s patience.

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

I would not wish to test Mr Amess’s patience. My observation was less about the Minister himself as an individual and more about the language that this Bill is written in. It is very much the language that has been used by Governments on both sides. I am not making a partisan point. It just struck me as interesting when he added that he believed that the Government should own some things, which was a different position from that of Moya Greene in the evidence session. The point struck me as interesting; no more than that.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Well, indeed. We did have some of these debates earlier in our proceedings, Mr Amess, when I explained why I thought that developments in postal markets meant that a change of ownership was appropriate. The hon. Gentleman can take from that the implicit point that at certain times in history it made sense for Royal Mail to be publicly owned. For example, as it moves from an extremely labour-intensive industry to a more capital-intensive industry, from an environment in which paper communication is the norm to a communications market in which paper communication will not be the norm. During such changes, it makes sense to look again at the ownership question. We are not alone in doing that; other countries are doing it.

As the “production function”—to use the proper economic phrase—of collecting and delivering physical items becomes more capital-intensive, it makes sense for the ownership to change so that the organisation undertaking this more capital-intensive industry has easier access to more readily available and deeper sources of capital. We could continue to have this debate, but I would not mind going back to amendments 52 and 53 because they are deeply interesting. I am not sure whether they would result in any meaningful change in the legislation. Clause 35(3) states:

“OFCOM may impose a designated USP condition only if they consider it is necessary to do so in order to secure…the universal postal service.”

Given that Ofcom is bound by its overarching duty to secure the provision of the universal service, it would run the risk of being in breach of its duties if it did not impose a designated USP condition if it thought it necessary to fulfil its duty. That reprises the argument I have been making for some time. These amendments are, therefore, not needed.

Amendment 54 changes “may” to “must” in clause 35(6) and it places yet again an unnecessary additional duty on the regulator, which would create a risk of needless regulatory burden. Ofcom will be best placed to determine whether and when performance targets should be imposed. Making it a statutory requirement to impose them would eliminate Ofcom’s discretion.

Amendment 70 relates to clause 38 and USP accounting conditions. The amendment changes “may” to “must” in subsection (1) and provides that Ofcom has to impose

“a USP accounting condition on a universal service provider.”

As with the other amendments in the group, hard-wiring the requirement into the legislation is not appropriate for a light-touch general authorisation regime, with Ofcom seeking to minimise or eliminate regulation whenever possible.

In general we believe that achieving accounting separation—the hon. Member for Llanelli spoke a little about it—and cost transparency is a priority. Postcomm recently announced that it would be taking measures to deliver that; as outlined in a joint statement published alongside the Bill, Ofcom is committed to taking over that work once the Bill comes into effect.

The Bill allows Ofcom to impose accounting conditions if it deems them necessary. I hope that the hon. Lady welcomes that. She will know from her discussions with Postcomm and others that accounting separation and cost transparency have for some time been the subject of a big debate between it and Royal Mail. At its heart, it is important to understand whether the universal service obligation for downstream access pricing, headroom and the rest of it will impose extra costs on the universal service provider. I believe that Royal Mail will work with Ofcom to make that accounting separation a reality.

Some difficult accounting principles are involved; when one is dealing with a production process that has economies of scale and of scope, it is not easy to untangle the various costs and apply them appropriately. I believe that Postcomm and Royal Mail have done a good job in that respect. They are getting to the root of the matter, but they admit that there is still some way to go. It is important to give Ofcom this power, but the fact that progress has been made shows that it is much better to have “may” not “must”. If they can agree on a process, it will enable them to go forward and possibly settle some of the long-running debates.

Amendment 62 to clause 46 seeks to substitute “may” with “must”. Once again, it would force the Secretary of State to require all postal operators to register with Ofcom before carrying out their business. The Bill acknowledges that there may be a need for a registration system at some point by allowing for the possibility, but a registration system should not be imposed without clear justification.

Ofcom has the power to require notification in other areas of the communication sector, but has never seen the need to use it. Most important, it is able to take action against rogue operators without a registration scheme. Once again, I turn to Ofcom’s practice. It has the power to take action under the Communications Act 2003, but chooses not to use it; it does not need it to meet the public policy aims that it is tasked to undertake. It is a good example of what we mean by ensuring that Ofcom uses its powers when appropriate, but not requiring or forcing it do so when it is not appropriate.

There is no evidence to suggest that moving from a licensing regime to one of general authorisation would lead to a sudden increase in cowboy postal operators, a fear that may lie behind the amendment. We have talked a great deal about declining volumes in our debates over the last few weeks, but it is hardly a market in which fly-by-night operators would set up in order to make a swift buck, ripping off consumers in the process. Hon. Members are of course right to be concerned that Ofcom has powers to require pre-notification if needed, and it is something that the Secretary of State can provide for.

Amendment 50 to clause 47 seeks to replace “may” with “must”, thus forcing Ofcom to impose “essential conditions” on postal operators. The conditions listed in the Bill flow from the European postal services directive, and the universal service provision was required to meet those requirements. The UK already complies with many of the essential requirements under our national law. For example, we have legislation covering terms and conditions of employment, security schemes, data protection, environmental protection and regional planning. Such things are not peculiar to post, and will not need to be secured by imposing conditions under the Bill. Some aspects of essential requirements that apply specifically to post are already addressed in part 5 of the Postal Services Act 2000, which covers offences in relation to postal services and is not affected by the Bill. It remains on the statute book. In those contexts, it would not be necessary or appropriate to impose conditions on postal operators under the regulatory regime.

We will, however, still recognise the need to cover all eventualities. That is why the Bill accounts for essential conditions that may be applied where appropriate. Those conditions must be proportionate and justifiable, in accordance with a test for any new regulatory conditions imposed by Ofcom.

Amendment 63 to clause 49 would substitute the word “must” for the word “may”, thus forcing Ofcom to impose consumer protection conditions on postal operators. Amendments 64, 65 and 66 to clause 50 would replace the word “may” with “must”, which would force Ofcom, if it set any form of consumer protection condition, to require the postal operator associated with the condition to become a member of a redress scheme and provide and publish information on complaints handing.

It is at this point that we should perhaps stand back, because the amendments are about consumer protection, and I want to stress the fact that consumer protection is an important element of the new regime. Ofcom has a principal duty to further the interests of consumers, and that will apply to its new duties with respect to post. Everything that Ofcom does is guided by that principal duty. Its duty to protect the universal service, and the Bill, give it the tools it needs to fulfil those duties.

I wrote to you, Mr Amess, and the Committee on 22 November, to remind members of more details of consumer protection in the new regulatory framework for post under the Bill. I did so because several of the concerns that have been raised by the hon. Member for Llanelli were raised by Consumer Focus when it gave evidence to the Committee. I wanted to set out why I thought those concerns were not valid, or, at least, why we should not be as concerned as Consumer Focus.

One of the key arguments of my letter was that it was almost as if Consumer Focus and, indeed, the hon. Lady, were not reading the Commucations Act 2003 alongside the Bill. It is incredibly important to do so if one is to understand the statutory duties that apply to Ofcom, because many of the statutory duties applying to it under the 2003 Act will apply as it takes on its new responsibilities for postal matters.

The 2003 Act gives Ofcom a principal duty to further the interests of consumers. It is necessary to have regard to a range of things under the Act when performing its duties, including the needs of the disabled, the elderly, people on low incomes, the opinions of consumers, members of the public in general and the different interests of people in different parts of the UK, including those in rural and urban areas.

Those are not mere warm words; they are not mays. They are statutory obligations, which Ofcom must fulfil as it addresses consumer protection issues for postal affairs, once the Bill receives Royal Assent. I hope that that explanation, following on from my letter of 22 November, will reassure the hon. Lady, because I believe that Ofcom has consumer interests hard-wired into its constitution. If one considers its record, it has gone about those duties in an exemplary way.

I agree with the sentiments behind the amendments in question, but they would require Ofcom to do things that might be unnecessary and would risk putting excessive regulatory burdens on postal operators, especially those in competitive areas of the mail market, where contracts with customers already offer adequate protection. Where consumer protection regulation is needed, the Bill gives Ofcom the power to apply and enforce it.

The Bill maintains and provides the necessary protection for consumers, and allows us to implement our obligations under the postal services directive, including extending the requirement for simple, compact handling systems to all postal operators and not just those licensed under the licensing regime. That is another point that I wanted to bring to the attention of the hon. Member for Llanelli. The Bill is implementing obligations under the postal services directive, so we are strengthening the requirement on postal operators—mostly competitors of Royal Mail—to handle complaints more effectively than under the previous regime.

The hon. Lady raised the issue of alternative dispute resolution schemes. Let me reassure hon. Members that clause 50 allows Ofcom to approve a new redress scheme—in effect, an ADR scheme—which will cover existing licence holders. Ofcom is able to do that, so I hope that the hon. Lady is reassured. Basically, the approach is an improvement on the current regime. The Bill also allows Ofcom discretion and flexibility to ensure that the sector is not over-regulated and that all regulation is appropriate and proportionate.

Amendment 55 concerns schedule 8 and the information provisions. The amendment would force Ofcom, rather than allow it, to require information from postal operators, again restricting its ability to use its regulatory tools as it sees fit and only when it needs them.

At one point, the hon. Lady said that Ofcom would not get the information that it needs because there are too many mays in the Bill. If I refer her to clause 53 and to schedule 8, however, they make it clear that Ofcom can get all the information it needs. Paragraphs 1(1) and 2 of schedule 8 enable Ofcom to enforce the information-gathering powers. It has powers to obtain the information as required to meet its primary obligation to consumers.

It is important to look at the underlying legislative framework—not just the 2003 Act, but the directive. Ofcom is obliged to carry out its duties in accordance with any relevant EU law. The Bill provides Ofcom with all the powers necessary to meet the requirements of the directive in relation to the provision of information to consumers. That is what we have tried to achieve. We have built on the work in the 2009 Bill, so I hope that the hon. Lady is reassured on that point.

Before I conclude on the musty amendments, I would like to reflect on one or two of the hon. Lady’s other points. She talked about the importance of mail integrity and of ensuring that people are not opening the mail and somehow getting in the way of the mail arriving in the right place. She talked about a Norwegian film and a Norwegian postman putting sacks of mail in a tunnel—I think that was the reference.

It might interest the Committee to know that I once had the great privilege of going to Buenos Aires to visit Correo Argentino, in the early ’90s. The Argentine mail service was already liberalised—this will interest the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East—and there were many postal operators. In fact, I think a charge of $5 would get a licence to deliver mail in Argentina. At the time, a Bill was before the Argentine Parliament—very much ahead of us—proposing the privatisation of Correo Argentino. The Bill was controversial at the time because of the Minister sponsoring the Bill in Parliament. Unfortunately, there were not too many liberals in Argentina—

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Not too many here.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman is so wrong to say that there are not many liberals here. One could say that there are not many socialists here—that is the reality. I am happy to see my actions and those of my party judged by liberalism, and compare that with his party being judged by socialist theories. That would be an interesting comparison—I know which side would come out on top. However, he tempts me from my exposition of postal politics in Argentina in the early 1990s.

The Minister responsible for privatising Correo Argentino had a business associate who was a well-known gunrunner and drugs baron in Argentina. It was thought that he wanted to buy Correo Argentino as another distribution mechanism for his guns and drugs. A very interesting debate was reported in the Argentinian press at the time. Although we feel we have problems with mail integrity in this country, I pay tribute to Royal Mail and particularly to its employees, who do a fantastic job. One reason why mail flows in this country are still far higher than in many other countries, such as Argentina, is because people trust Royal Mail. It is a critical point for the industry. If the public and business do not trust the mail delivery company, they send less mail. For my sins, I once did an analysis of mail flow problems in different countries, and it was clear that where the legislation and the culture with respect to mail integrity was not as strong, mail flow volumes were lower. It is a critical point, which is pretty obvious on one level, but we sometimes forget the benefits of living in our great country.

Gordon Banks (Labour, Ochil and South Perthshire)

I do not disagree with what the Minister has said about mail flows and the integrity of the mail. But some members of the Committee, especially on the Opposition side, might think that the Minister is putting that whole objective in danger because of the privatisation.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Absolutely not. Evidence from Holland, Germany, Singapore and so on—

Gregg McClymont (Labour, Cumbernauld, Kilsyth and Kirkintilloch East)

Germany.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I was trying to provoke the hon. Gentleman, of course. The evidence is to the contrary. He is tempting me to talk about Servicio Postal Mexicano. When I visited it on the same trip, it was moving into the new age of technology with some bikes and jeeps from the United States Postal Service, thus improving its mail performance. In Mexico City, there was a particular problem because they did not have a well-developed postal code as we do in this country. There were 110 streets called Calle San Juan, which created many problems for the postmen trying to decide which Calle San Juan they had to deliver the mail to. I am straying slightly outside this group of amendments, but I have made my point in agreeing with the hon. Member for Llanelli that mail integrity is extremely important.

Throughout the regulatory part of the Bill, we aim to strike the right balance between ensuring proper protections and safeguards are in place in relation to the universal service and consumer protection, while at the same time freeing the sector from unnecessary burdens and regulations. The best way to achieve that is to give Ofcom clear direction through its overarching duties and then give it the tools and flexibility that it needs to do the job. The Bill allows Ofcom discretion to utilise regulation in the way that it considers most appropriate to meet its statutory duties. We feel that that is the right way to go about regulating dynamic markets. We do not believe that regulations should be made for their own sake, nor do we believe that regulations should be set in stone. The Bill strikes the right balance in terms of setting up Ofcom’s overarching duties and giving it the tools needed to meet those duties. I am delighted to have the full support of the Minister with responsibility for Ofcom.

Ed Vaizey (Conservative, Wantage)

You do.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I know that the Minister welcomes the provisions. Placing statutory requirements on Ofcom to use those tools in any and every circumstance, as this group of amendments does, is totally inappropriate and at odds with the entire thrust of the new regulatory framework that we are seeking to establish. I therefore ask the hon. Lady to withdraw the amendment.

Nia Griffith (Labour, Llanelli)

I thank the Minister for his exciting tour around the world. I am sorry he does not find T he Scotsman as exciting as the Argentinian press.

As far as I can make out, everything the Minister has said seems to reinforce the idea that we want Ofcom to do a good job. He implies that all the things that we have suggested they should do with better defined powers are desirable, which contradicts the idea that we do not put “must” in and that we stick to “may”. I find it a rather strange dialogue, to be frank. I noted the dialogue on integrity with particular interest. It seems that we have a very good service here; certainly those of us who have travelled to places where the service is not half as good understand that. The idea that anyone would want to lessen any measures that help to keep that integrity, the excellent service and the standards that we enjoy seems positively contradictory.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

If the hon. Lady were to conduct an analysis of the ownership of post administration vis-à-vis mail integrity and mail flow volumes, she would find that it would not support her argument. It is my contention that privatised postal administrations, which we have discussed at length with the help of the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, seriously outperform state-owned post administrations around the world.

Nia Griffith (Labour, Llanelli)

That is not what I am saying. What I am saying is that we have a very good service and that we should do everything we can to keep that service. One way in which we can do that is to have a proper regulatory framework and proper teeth for the regulator to use. We want the strongest possible expression of that in this Bill. Added to that, the Minister seems to think that all the things that we suggest that Ofcom should do and that are mays in the text are desirable anyway. Many of them are things that are being done, so having a “must” would simply confirm current good practice.

Let me turn to specific amendments and specific issues. For example, let us look at the issue of consumer protection in amendments 65 and 66. The Minister asked what I was referring to when I mentioned the additional requirements on Ofcom in respect of the telecommunications industry. It was precisely that area of consumer protection that interested me. From July 2011, telecoms providers will have to meet new regulatory requirements in relation to their complaints handling systems. They will have to adhere to a minimum set of standards and procedures and belong to an improved alternative dispute resolution scheme. It is precisely in the area of consumer protection that Ofcom is clearly seeking to strengthen the requirement. Our amendments on consumer protection are therefore important, and it would be helpful for Ofcom to have the “must” in there rather than the “may”.

Turning to amendment 51, universal service provision is a hugely important aspect of the Bill and of our whole discussion. To say

“may impose a designated USP condition on a universal service provider’

is obviously much weaker than to say

“must impose a designated USP condition on all designated universal service providers.”

The objectives that we want to achieve would be better served by stronger wording and by using the word “must” in that instance.

Graeme Morrice (Labour, Livingston)

Does my hon. Friend agree that the Minister has said that he fully expects Ofcom to do many of the things that we are asking for, yet he is not prepared to accept our reasonable amendments and include them in the Bill to strengthen the whole process? At the end of the day, it is about the best interests of the consumer, which Opposition Members—and I am sure Government Members—are putting at the heart of the process.

Nia Griffith (Labour, Llanelli)

Absolutely. The Royal Mail network has very particular circumstances. It is, in many ways, similar to other types of utility, where it is difficult to work out how much can be open to competition, because of the difficulty of the final “may” in the universal service provision. It is not quite as straightforward as other things. It involves the same sort of ideas that we have about water companies. It is not quite so easy to say that anybody and everybody can compete at every level. We might be able to say that for some parts of the industry, but it is not really a practical option to have more than one provider actually providing the universal service provision as we know it at the moment.

I did not spend a great deal of time discussing amendment 50, because it is mirrored by comments that I made on other clauses. Interestingly, however, there is an EU directive on essential conditions. So, again, on what we are suggesting Ofcom should do, much of it would be covered already by the instructions in that EU directive. Therefore, to say “must” rather than “may” again seems to be very sensible; it is putting everything into the same sort of context. So the EU says, “You’ve got to do this,” and we are saying likewise. That seems to be very sensible.

That brings me back to clause 27, which is entitled, “The general authorisation to provide postal services”. The initial statements are there about what Ofcom “may”—in the wording of the clause—do. It seems to me that we have looked at those different categories as we have gone through the different clauses in the Bill, and it is quite clear that they are all important. Therefore the idea that there should be a “may” in subsection (1) again seems to make nonsense of having those categories there, of having their importance explained in other clauses and of the Minister’s words about all the good work that Ofcom is doing.

Therefore, it seems to be very sensible to make this Bill look uniform and to make it look as if we mean what we say by having a “must” in clause 27, so that the fine words about what a good job Ofcom is doing and what a good job the postal services provider—Royal Mail—is doing can be put in legislation. They “must” do those various things to ensure that we continue to have a very good service and to ensure that where there are one or two problems, and we have noted that there are one or two problems—we know that there are not many, but there are some problems with complaints handling, for example—such matters can be dealt with. If there is a “must” in the wording of the clause, obviously Ofcom will carry out that work. Ofcom will find out where there are some weaknesses and, as I mentioned earlier, an action plan can be put in place to improve things. If we are to do what the Minister has clearly stated we should do, the word “must” should be put in the clause. Does the Minister want to come back on that point?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Is the hon. Lady telling the Committee that, in each and every case where she wishes to change “may” to “will” or “must”, she believes that Ofcom, in every case and every circumstance for ever, will want to use those powers and will have to use them? Can she envisage no circumstances, as the market becomes more dynamic and more competitive, where the regulator may not want to use those powers? If we accept her amendments, however, Ofcom would have to use them.

Nia Griffith (Labour, Llanelli)

Ofcom will obviously use its discretion on the methods that it actually uses, but Ofcom will want to know how the principles of accounting separation, universal service provision and consumer protection are operating. The minutiae include the details of what it will decide to require, the particular methods that it will want to use and the frequency and quantity of information that it will want to gather. Many of those decisions are, of course, operational, and I would not want for one moment to suggest that they are otherwise. However, what is stated in the clause is the general principles of the types of areas—

Gordon Banks (Labour, Ochil and South Perthshire)

It seems to me, listening to the debate on this issue, that the amendment would protect the level of service by changing “may” to “must”, which the Minister is resisting. Only by changing “may” to “must” can we ensure that the service, which may be very different in the future, is protected.

Nia Griffith (Labour, Llanelli)

This reminds me of what Moya Greene said. She gave her commitment on an inter-business agreement, but nobody knows what will happen if she gets a job somewhere else or if circumstances change. Nobody can be absolutely certain, because there will be nothing in the framework that will force that agreement between a privatised Royal Mail and Post Office Ltd. We have exactly the same situation here. We have got a lot of very fine words about what we want Ofcom to do, about how it is a jolly good thing and about how it is doing a jolly good job, but that does not match what we hear on giving it the necessary tools. For those reasons, I would like to see “must” not “may” in the clause. That is why we have tabled the amendments, and we want to press some of them to a vote.

On that note, I conclude my remarks. I will give you some indication, Mr Amess, if I may, on which amendments I want to press to a vote. Am I right in thinking that you want some guidance on our intentions on amendments relating to clauses further on in the Bill? Should I mention those amendments first, before I mention the ones relating to clause 27?

Sir David Amess (Conservative, Southend West)

If I can help the hon. Lady, we have already been given the guidance.

Nia Griffith (Labour, Llanelli)

In that case, I will confine my remarks to the amendments that are pertinent to clause 27 and, in that respect, I want to press amendment 71 to a vote.

Clause 28

Gordon Banks (Labour, Ochil and South Perthshire)

I beg to move amendment 40, in clause 28, page 15, line 4, at end insert

‘and to facilitate this, the current funding agreement of Postcomm in respect of regulating postal services will be transferred in its entirety to Ofcom.’.

I begin by thanking my hon. Friend the Member for Llanelli for holding the fort today. I am sure that she did a sterling job, and it is my responsibility to give her a little rest—“little” being the appropriate word given amendment 40. The amendment calls for a specific insertion in the Bill to transfer Postcomm’s current funding agreement to Ofcom. In one of the Committee’s evidence sessions, Mr Brown, the chief executive of Postcomm, referred to the relationship between Postcomm and Royal Mail as being like a marriage. He said that he sees an advantage in moving regulation across to Ofcom, because it has a wider field to regulate. In the same session, Mr Richards, the chief executive of Ofcom, said that he could see a number of advantages in regulating Royal Mail in the broader regulatory regime for which Ofcom is responsible. I believe that many Committee members agree that the experience of regulating many powerful companies, as Ofcom does, means that the focus would not stagnate on the single relationship as it could do—I am not saying that it does—in the current Postcomm-Royal Mail relationship. That could be a good step forward, because there would always be something new to move on to.

Mr Richards went on to say that he can attract high-quality people to the Ofcom work force and that that is vital in arguing detailed economic and legal issues with some of the most well resourced companies in the UK, Europe and, indeed, the world. He also said that it is important to know about network industries, such as Royal Mail, and that Ofcom currently regulates network industries, such as telecoms and broadcasting. I do not necessarily disagree with any of those statements, which go some way towards assisting me in building my argument on the amendment.

I asked Mr Richards whether there would be adequate resources to allow Ofcom to deliver a quality regulatory service that would not only protect but, where possible, stimulate the sector. I also asked him what portion of Postcomm’s budget Ofcom would receive, how many staff Ofcom would deploy on postal matters and how that would compare with Postcomm. In response, Mr Richards stated that Ofcom has already had

“a spending settlement that is demanding and challenging… I am confident that when we get to the other side of the changes we are making we will still have a very strong capability in the organisation.”––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 48, Q95.]

I hope that he is right—indeed, we need him to be right.

I think that Mr Richards meant that Ofcom’s budget had been reduced by 3.6% for this financial year, after it made a £7.5 million saving in the previous financial year. The latest annual report also refers to delays in the implementation of decisions as a result of its current responsibilities, and with those delays come delays in the benefits to consumers. He also highlighted additional operational and financial challenges in defending its positions in prolonged and detailed appeals processes, which have a significant impact on the financial operation. That reinforces the point about the need for top-quality staff who can argue Ofcom’s case well in those protracted discussions and legal arguments. As I have said, I hope that Mr Richards is right and that the operation comes through at the other side in such a way that people can do their current and future jobs—we are talking about future jobs in this regard—in a professional and rewarding manner and, indeed, with the range of responsibilities that Ofcom currently enjoys. We all need that to be the case.

Adding Royal Mail to Ofcom’s basket of responsibilities will undoubtedly place an additional burden on it, so there is a need to ensure that the organisation is funded and staffed in a way that is fit for purpose. This is not a debate about the funding of Ofcom in general, but it is a debate about the funding of Ofcom’s ability to regulate the postal sector appropriately, which is what amendment 40 is about.

Evidence given to the Committee was partly responsible for amendment 40 appearing on the amendment paper. Mr Richards told the Committee that

“we expect that the full complement budget for Postcomm would be the starting point for a further discussion between ourselves and the Treasury”.––[Official Report, Postal Services Public Bill Committee, 9 November 2010; c. 48, Q95.]

That suggests that he believes that the Treasury will be intent on reducing the £10 million budget currently enjoyed by Postcomm when responsibilities are transferred to Ofcom. I support Mr Richards in his hope that he will have the resources to do the job properly, and, although the budget is agreed with the Treasury, we all know that current Postcomm funding comes from the licensed operators, and therefore, largely from Royal Mail.

The amendment would ensure that Ofcom enjoyed the £10 million budget currently enjoyed by Postcomm when responsibilities are transferred. Perhaps we should look at some of the numbers, to put things into perspective. Postcomm, with its £10 million budget, employs approximately 66 staff to carry out its current functions on mail regulation. That includes interim staff members, external commissioners and directors. On the other hand, Ofcom has a budget of around £142 million and employs 873 staff, excluding non-executive members of the Ofcom board, content board and advisory committees, and employees seconded to Ofcom.

Seeing the comparative sizes of the operations gives me some concern. I fear that without the carry-over of Postcomm’s budget, there is a danger of future regulation in the Royal Mail sector being underfunded. If it is underfunded, it is under-resourced. Indeed, I wonder whether the Minister believes that, with the possibility of a range of players entering the market, there may be an even greater need to increase levels of funding in future. I will be happy to hear his comments on that.

The amendment provides Postcomm’s funding levels to Ofcom for the new job of mail regulation, for which it will be responsible. Accepting the amendment today will ensure that Mr Richards can get on with his job of running Ofcom, for all our benefits, instead of arguing with the Chancellor, which may be to nobody’s benefit.

Damian Collins (Conservative, Folkestone and Hythe)

Does the hon. Gentleman agree that, given Mr Richards’s background as a former adviser to Tony Blair, he probably has the experience to argue with a Chancellor if he has to?

Gordon Banks (Labour, Ochil and South Perthshire)

Mr Richards should be running Ofcom, not arguing with the Chancellor about budgets. That is the point that the amendment makes.

The future job of regulating Royal Mail will be more complex. In the immediate future, the transfer of responsibilities will undoubtedly be complex and, potentially, more expensive; perhaps the Minister can expand on that. Such things usually happen when transfers take place. I firmly believe that Ofcom needs to be funded appropriately for its new job, and the amendment creates the opportunity for that to happen. I urge the Committee to accept it. I am not concerned that Ofcom, in theory, will not be able to do the job, but if Mr Richards’s concerns come to fruition and extended discussions take place with the Treasury, I worry that the portion of the Postcomm budget that will arrive through Ofcom’s letter box—be it first class or second class—will not be guaranteed.

If the portion is not adequate, a number of things could occur. First, Ofcom may not, as I have said, be able to regulate the mail sector appropriately, and secondly, there may be pressure on its existing budget to incorporate some or all the costs needed to regulate the mail sector. Those things may lead to greater challenges and impacts on Ofcom’s carrying out the jobs that we expect it to do here and now. Neither potential outcome is desirable, and I am sure that when the Minister gets to his feet he will tell us that neither will occur; we argue that they will not if the amendment is accepted. I am sure that he would not want to be responsible for either outcome.

The Minister can ensure that Ofcom has the funding that would allow Mr Richards to create the staffing levels necessary to carry on the work of regulating Royal Mail, clearly and precisely, by securing the funding stream that Postcomm currently enjoys. That would ensure that when Ofcom starts to regulate the sector, it is adequately funded. I look forward to the Minister’s response.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

As the hon. Gentleman has said, amendment 40 relates to Postcomm’s current funding agreement being transferred in its entirety to Ofcom. I should welcome the hon. Gentleman back to the Committee—I had hoped that we would hear a detailed description of his journey. It is important that we understand that Royal Mail employees have to endure a lot of inclement weather at times, which can affect their journeys, so sharing such anecdotes helps us to have a full understanding of the industry that we are discussing. I am sure, therefore, that a detailed description would be in order.

In outlining Ofcom’s 2010 spending review settlement, the Chief Secretary to the Treasury made it clear that all responsibilities and spending powers for Postcomm will transfer to Ofcom. I hope that the Chief Secretary’s commitment will reassure the hon. Gentleman. Although there is no intention to reopen the settlement, the hon. Gentleman will understand that Her Majesty’s Treasury reserves the right to do so for any settlement should that be necessary to meet the Government’s deficit reduction plans. I hope that the hon. Gentleman will appreciate that that is the normal way of things with Her Majesty’s Treasury, and it is a prudent and sensible position to take.

It would not be sensible to try to bind the Treasury to the particular spending review settlement for Ofcom, as the amendment seeks to. Legislation is simply not a sensible and appropriate vehicle for making such spending commitments, and I am not aware of any precedent for doing so in primary legislation. It is possible that secondary legislation might be the recourse, because, as we all know, that can be changed relatively easily. I am not aware of any such primary legislation, but if the hon. Gentleman knows of any, I would like him to bring it to my attention and to that of the Committee. He did not do so in his initial remarks, which suggests that the proposal is not the usual way of going about dealing with budgets, be they for regulators or anyone else.

The hon. Gentleman was fair in his description of the position of Ed Richards, the chief executive officer of Ofcom. In my private meetings with Ed Richards, he has at no stage raised any concerns regarding the measure. In his evidence to the Committee, he was clear that he felt that some efficiencies should inevitably be found because of, for example, savings in back-office functions, which we want to see in a number of areas. He was in no doubt, however, that Ofcom would have the necessary resources to deal with its increased responsibilities in relation to post.

Gordon Banks (Labour, Ochil and South Perthshire)

I am grateful for the Minister’s comments and I shall return to them when appropriate. My concern is ensuring that there is an adequate amount of funding during the transfer. Transfer stages tend to be more expensive and less productive once a system is up and running. Are the Minister and Mr Richards convinced that there will be adequate funding transfer and adequate funding within Ofcom’s current budget, which can be sucked somewhere else if there is a short-term need for some additional money?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Having worked with Ed Richards and Tim Brown, who is the chief executive officer of Postcomm, I am impressed with how they manage their respective organisations. They have not raised the matter with me. Their joint statement at the time of the policy statement or the Bill—I forget which—set out their intention to work together to bring the measures in the Bill to fruition so that the transition from Postcomm to Ofcom could be as seamless as possible. It will not require the additional resources that the hon. Gentleman suggested.

Both organisations realise that we are in difficult financial circumstances. They know that they need to make the transition and realise the savings that Ed Richards said could be realised in the process. Some very talented people are in both organisations, and I take this opportunity to pay tribute to them.

For the record, it is worth my paying tribute to the chairman of Postcomm, Nigel Stapleton, who steps down at the end of this month, having served Postcomm for many years in two terms. He is extremely well regarded. He would agree that he and Tim Brown have overseen a professional approach in the past few months to ensure the transition from Postcomm and its employees under the auspices of Ofcom. I do not think that the hon. Gentleman has made the case for the need for huge extra amounts of money, which seemed to lie behind his questions.

Gordon Banks (Labour, Ochil and South Perthshire)

Does the Minister agree that the amendment is about appropriate amounts of money? It is about current amounts of money. Does he also agree that the transfer of responsibilities is a particular pressure point? It could impact negatively on Ofcom. The hon. Gentleman said that Mr Richards and Mr Brown said that they will do it, but will he acknowledge that the transfer period is a potential pressure point?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Organisations throughout the public sector have a degree of pressure on them at the moment. The Government have not sought to hide that. There is a need for all organisations to ensure that they are keeping their costs under control. It is fair to say, though, that the budgets of Ofcom and Postcomm have not been as severely hit as some other budgets elsewhere. There is a reason for that, of course. All of Ofcom’s work as a sectoral regulator is funded by levies on the industries that it regulates. The principle that the industry, not taxpayers, should pay for its own regulation is well established.

Under the current regime, licence holders and operators pay fees to fund Postcomm, according to the volume of mail that they handle. It is because the industry has been paying for Postcomm and Ofcom that their budgets have not been hit as hard as other parts of the public sector. The hon. Gentleman should take that into account. Those at Ofcom and Postcomm know that they still need to control their budgets even though, compared with some parts of the public sector, they have a degree of protection.

Gordon Banks (Labour, Ochil and South Perthshire)

The reduction in the budget that the Minister is referring to in respect of Ofcom is about 3.6%, which takes the budget for 2010-11 down to about £127.5 million, but one of my worries concerns the pressure point at the time of the transfer. I have been in businesses and organisations when there is an influx of new responsibility. Such times are always a pressure point, and all I am saying to the hon. Gentleman is that he should recognise it. It might not require money. Grit and determination, blue-sky thinking and bright guys might solve the problem, but will he acknowledge that such a transfer period is a potential pressure point and, as he suggested, an additional pressure point?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The pressures on organisations that are making such transitions are clear. Such times are particularly difficult for the staff. To be honest, management of staff is probably a bigger pressure and a bigger challenge for organisations, and those leading them, than budgets.

I pay tribute to Nigel Stapleton, Tim Brown and all senior managers and staff at Postcomm. They have had a difficult time; they were all geared up for change in relation to the 2009 Bill, but it was pulled by the last Government. Those in Postcomm who were getting ready to move to Ofcom were put on hold and had to stay in Postcomm. That created an awful lot of uncertainty for Postcomm staff. I am sure that the last Government regretted having to do that, but they nevertheless caused some pressure within Postcomm.

In discussion with Tim Brown and Ed Richards, I tried to ensure that we did not add to those pressures, which had been there for some time. We were aware of the difficulties that some talented individuals had in deciding on their career plan. My clear message to Ofcom and Postcomm was that they needed to work together for two big reasons.

First, we had to ensure that the transition happened as soon as possible. However, to get a transaction—we are trying to achieve it to secure the universal postal service—we needed to ensure regulatory certainty. We needed to ensure that Ofcom would be able to regulate the new Royal Mail after the transaction. We therefore had to make decisions about the time and speed of the transaction. We did that in consultation with Postcomm and Ofcom, and the Bill sets out a speedy transition.

It is important not only to get regulatory certainty for the transaction; we also need to give a clear path for employees who have had to live under a cloud of uncertainty for some time. Those are the real pressure points in this transition. When talking about merging quangos and abolishing one of them, we should remember that we are talking about people’s lives and jobs. Many talented people have given their time to this public service; it is they who are under the real pressure, and I have been mindful of that in respect of the change.

Again, I make it clear that the Bill provides for the costs of transfer to be recovered under the normal procedure for setting charges. Sub-paragraphs 2(3) and (4) of schedule 4 make provision for the costs of transfer to be recovered. I hope that I have dealt with the specific point, but I do not wish my answer to deflect from the overall point that it is the staff of the organisation that we should be thinking of, as it is they who are under pressure. Through the legislation and how we have worked with the organisations and encouraged them to work together, I believe that we have reduced that pressure. However, I realise that it is real.

Gordon Banks (Labour, Ochil and South Perthshire)

If you do not mind, Mr Amess, I shall regale the Committee a little with my journey, seeing as the Minister enticed me to do so. It started at 10 o’clock yesterday morning and finished at 3.30 this afternoon, when I arrived here. I am extremely grateful to the captain and crew of BA2391 from Edinburgh to Gatwick; it was the only flight to leave Edinburgh today or yesterday. The flight was excellent, although I am not so happy about the other three flights that did not leave. But that is enough about my journey.

I pick up on some of the Minister’s opening remarks. Perhaps I should have intervened on him earlier. Did he say that the funding of Postcomm was being transferred in its entirety, or did he say that all responsibilities will be transferred? It was not clear to me, but perhaps being up for 36 or 40 hours stopped my ears from working properly.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I feel that I ought to give the hon. Gentleman a moment’s pause after his arduous journey. I made it clear—indeed, the Chief Secretary to the Treasury did so—that all the responsibilities and spending powers of Postcomm will transfer to Ofcom.

Gordon Banks (Labour, Ochil and South Perthshire)

Responsibilities and spending power do not necessarily mean budget, but if the Minister means budget I will sit back down.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

It is nice to get on my feet again and to confirm that the money will transfer in its entirety.

Gordon Banks (Labour, Ochil and South Perthshire)

That is great news. Our probing amendment has teased out the information that we wanted to hear from the Minister.

I want to go back to the issue of a pressure point during transfers. I support wholeheartedly the Minister’s view that the pressure is on individuals. It is always the pressures on individuals, because individuals make organisations—without individuals, we have nothing. We need individuals to be creative and to have a work environment that allows them to be creative.

My worry about pressure points remains, although it might be unfounded. The Minister has already alluded to a lot of existing pressures on organisations such as Ofcom, and the initial transfer period might be one of those pressure points that I keep describing. Something might be needed to make the transition go as smoothly as we want it to. That something might not be pounds, shillings and pence. I am not asking for the Minister to say that if Mr Richards comes along needing another £1 million that he will be given it. I just want to be sure that the Minister recognises that such transfer periods are potential pressure points—on individuals. The Minister alluded to the impact on individuals, and that is what is driving this, because we want to ensure that the individuals responsible within Ofcom for regulating Royal Mail will have the resources to do the work. If they do not have the resources, they will not be fulfilled, they will not be able to do their jobs and they will probably not stay in Ofcom doing those jobs. [Interruption.]

I thought my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East was going to intervene, but obviously not.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am trying to assist the hon. Gentleman. I refer him specifically to schedule 4, on page 70, which is entitled “Recovery of administrative charges incurred by OFCOM”, and to sub-paragraphs (3) and (4) of paragraph 2. In particular, paragraph 2(3) says, effectively, that Ofcom can take steps to cover, through charges, the necessary amount

“in preparation for the carrying out of any of those functions”.

That is about the transfer of costs. The Bill makes provision for it, as did my right hon. Friend the Chief Secretary to the Treasury.

Gordon Banks (Labour, Ochil and South Perthshire)

I am grateful to the Minister for pointing that out, but the discussion has been useful in getting the information out in the open, not hidden away in the Bill, and in getting people’s understanding of some of the challenges that might be faced during the transfer of the responsibility from one organisation to the other.

That said, I am happy to beg to ask leave to withdraw the amendment.

Nia Griffith (Labour, Llanelli)

I beg to move amendment 73, in clause 28, page 15, leave out subsection (3).

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following: amendment 6, in clause 28, page 15, line 10, at end add—

I have not had guidance about amendment 6, which stands in the name of Mr Weir, who has also been unavoidably detained. I do not know whether the hon. Lady will speak to his amendment or whether it will just not be moved.

Nia Griffith (Labour, Llanelli)

I would like to speak to the amendment of the hon. Member for Angus.

I think that it would be very sensible to look, first, at the title of the clause: “Duty to secure provision of universal postal service”. That is extremely important, of course. We know that it is going to be taken over by Ofcom and we obviously know of Ofcom’s current role as a regulator, regulating the TV and radio sectors, the fixed-line telecommunications and mobiles, and the airwaves over which wireless devices operate. Moreover, we know that Ofcom has a reputation for ensuring that people in the UK receive the very best in their telecommunications service and are protected from scams and sharp practices. Indeed, that is Ofcom’s aim.

As has been mentioned earlier, Ofcom operates under the Communications Act 2003, which spells out exactly what Ofcom should do. It states:

“It should be the principal duty of Ofcom, in carrying out their functions…to further the interests of citizens in relation to communications matters; and…to further the interests of consumers in relevant markets and where appropriate, by promoting competition.”

Meeting those two duties is at the heart of what Ofcom does.

Accountable to Parliament, Ofcom is often involved in advising and setting some of the more technical aspects of regulation, in protecting and enforcing the law. It is particularly pertinent here to emphasise Ofcom’s concern with the “interests of citizens” and the “interests of consumers”, because that is very much the role that we want Ofcom to play when it takes over regulation of the mail services. It is one of the reasons why we are particularly keen to push amendment 73, which would amend subsection (3).

Of course, we all appreciate what the universal postal service is and how important it is to us in this country. People value that six-days-a-week service and they appreciate the uniform affordable price. I think that people would be quite horrified at the thought that there could be variable pricing according to how far they were going to send their letter, because they are so used to the idea that that is not the case and that, from the south-west of Wales to the north of Scotland, they can send a letter for exactly the same price that it costs to send a letter three streets from their home. So they are very much attached to the idea of that uniform price and to the six-days-a-week service.

Of course, the difficulty with trying to cut that service down is that, although businesses might like the Monday to Friday service, the home consumer service likes the Saturday service, because that is the day that they are at home. So there is really no way of pleasing people if we were to say that we should just use the European directive of a five-day service. That is not what we want; we want a proper six-days-a-week delivery service.

Gordon Banks (Labour, Ochil and South Perthshire)

I do not know whether my hon. Friend recalls our evidence sessions, but one of the witnesses—a representative from a mail forum or something of that nature—made that very point. If we were to go to five days, there is a real issue about who is appeased, whether it is individuals or businesses.

Nia Griffith (Labour, Llanelli)

Absolutely. So, quite clearly, what we want is a six-day system. We do not want a system where we are talking about five days, because we would not please everybody and both sectors are extremely important: businesses that depend on the service, and consumers, of course.

Hooper said in his update, which was published in September:

“The ability to deliver letters, packets, parcels and other items to all 28 million business and residential addresses in the UK six days a week, at uniform one-price-goes-anywhere tariffs, is part of the country’s social and economic glue.”

Hooper stressed that it is important for business that people can use the same price, however far they are sending something. It is also, however, important from a social point of view. We still enjoy sending things socially, and we expect to be able to do so. Clearly, there have been all sorts of innovative things, such as internet trading, which mean that some people who had previously stopped using postal services have returned. Personal things are still sent. While we may not get that weekly letter from family members—some of us will remember that from our youth when we first went away from home—we find that people are sending all sorts of greeting cards through the post. There has been a decline in things such as bills being paid through the post, but that is because there are so many other ways to do that. Nevertheless, keeping the universal service is crucial.

Some people may be confused and think that it is odd that we are proposing to remove subsection (3), so it merits some explanation. We are not saying that, because it was not in our 2009 Bill, it cannot be in this one. There is an important underlying principle behind why it was not in our Bill. The clause suggests that when Ofcom is considering how to regulate and influence the universal service provider, it needs to factor in financial sustainability and efficiency. That sounds absolutely fine—of course we want everything to be efficient and financially sustainable—but the difficulty is that that is the opposite of what a universal service is. If something is to be operated in as cost-effective a way as possible, post should not be taken to some of the UK’s remotest areas every day—certainly not to an island. If every bit of a service needs to be financially sustainable, the company will not want to pay for the hours and the fuel of somebody who is delivering a small amount of mail every day to a remote area. The company would say that it would be better to switch those areas to fewer services a week, as they do in Canada. That would make it more financially sustainable.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I draw the hon. Lady’s attention to the words in clause 28(3). That subsection discusses the need for a universal postal service to be efficient. It does not discuss a postal service being efficient. If those words had been in the Bill, the hon. Lady may have had a point. I am sure that she would agree that it is necessary for the universal postal service, delivering to all parts of the UK at a uniform price, to be efficient.

Nia Griffith (Labour, Llanelli)

Of course we want to see efficiency, but the danger with the clause is that it puts in certain conditions that may make people act in certain ways. If cost is all important, the operator may be driven to do things to the service which it might later regret or which might be detrimental to service users. For example, it might be inclined to cut things. Likewise, if the operator wants the service to be absolutely efficient, it would not deliver six days a week, because that is not efficient compared with delivering three days a week. A universal service provision of six days a week is not necessarily compatible with financial sustainability and efficiency.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Does the hon. Lady not agree that the universal postal service is set out elsewhere in the Bill? This measure is about the duty to secure the provision of the universal postal service, which is set out in other clauses—for example, clauses 29 and 30.

Nia Griffith (Labour, Llanelli)

The difficulty that I have is that this clause has been included specifically to indicate that those factors will be considered to be more and more important. In other words, will the service be viable? Will it be cost-efficient? Will it be financially sustainable to continue providing it at the current level? Obviously, we would like to see that important service at the affordable uniform price continue across the whole UK and every one of its 28 million doorsteps. The worry is that the clause will open the door to a different type of thinking, such as “That’s a bit expensive; we won’t bother with that. We won’t bother ensuring that the service runs for that many days per week and goes to remote areas.” If that idea is first and foremost in the regulator’s mind, the worry is that it may drive a different type of agenda from the one that we would like to see in order to safeguard the universal postal service.

The Minister may try to argue that the whole service will be taken into consideration and that it will all be financially sustainable and efficient. We would not argue with efficiency—any business would want to make itself efficient. The regulator’s role would concern what an affordable price to charge for the service would be. We want definite reassurances that this measure does not seek to drive some sort of agenda where cost is always the most important issue. There is more to universal service provision than cost. The whole idea is that it is universal, and we must accept that the service will not be cost-effective in some areas of the country and that higher volumes of usage in certain areas will help to cross-subsidise some of the more expensive routes.

The hon. Member for Angus has tabled an amendment in which he confronts the same problem from the other way round. We would remove clause 3 altogether, but he suggests adding another line to the legislation. The clause states that Ofcom “must have regard to”, and his amendment would add the interests of rural and remote communities, which are clearly the types of community that he represents and understands. He would strengthen the obligation on Ofcom to ensure that whatever it does, it will not be detrimental to businesses that operate in remote and rural areas. As I have mentioned, it is often difficult to attract big industries to the more far-flung corners of the UK, because they have to compete with companies that have lower transport costs.

A large number of small businesses in the more remote areas use the post. In my area, I know of a number of vibrant small companies that do a lot of business through the internet and make considerable use of the postal service. They often bring a fair amount of economic activity into the area and employ several people. A number of such businesses in a small area can soon have quite an impact on the economy.

Gordon Banks (Labour, Ochil and South Perthshire)

My hon. Friend has mentioned businesses, such as internet businesses in her constituency, that have a positive impact on the post. In many rural constituencies, such as that of the hon. Member for Angus, some areas have a challenge to receive internet access, and the mail is the business lifeline.

Nia Griffith (Labour, Llanelli)

Indeed. The “not spots”, as such places are called, are a problem in some areas of rural Wales. I am sorry to hear that they are also a problem in some areas of rural Scotland. We hope that such matters will be resolved at some stage. Yes, absolutely, there are difficulties for some people operating in these circumstances, and the post, therefore, is even more important for them to sustain their businesses.

My hon. Friend the Member for Angus is trying to say that if Ofcom has to have regard to financial sustainability and efficiency, we need an additional line in that subsection to say that it must not be at the expense of small businesses in rural areas. In other words, Ofcom must have regard to the interests of small businesses in rural areas, if there were any move to fragment and have a non-uniform price that would allow prices to develop in all sorts of different ways across the country. We must remember that the EU directive does not prescribe a uniform price—it talks about an affordable price. Therefore, if we are to ensure that the universal service provision is properly protected and that there is a uniform price, that would be another way in which to strengthen that particular requirement.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

While the hon. Lady is on the subject of uniform prices, I am sure that she is aware that this Bill has stronger protections for uniformity in pricing than the 2009 Bill.

Nia Griffith (Labour, Llanelli)

We welcome everything that strengthens the notion of a uniform price in the same way in which we welcome anything that strengthens the role of the regulator. We do not want to end up with what is a strength in one part of the Bill being undermined by what is a weakness in another part of the Bill. Two strengths are a good thing. There is no reason why that should not be defined elsewhere. We are afraid that this measure is introducing a completely new concept which has not been in the Bill before and which suggests that there could be a greater emphasis by Ofcom on obtaining maximum efficiency and financial sustainability at the expense of a commitment to a proper universal postal service. It is for that reason that we tabled amendment 73.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

Before turning to these two amendments, I want to make it clear that clause 28 has a central role in underpinning the entire regulatory framework in part 3 of the Bill. Clause 28 is essential in securing the long-term provision of a strong universal postal service. It gives Ofcom a primary duty in subsection (1) to ensure that when Ofcom carries out its functions in relation to post, it does so in a way that it considers will secure provision of a universal postal service. All Ofcom’s other powers in relation to post will be subject to this overarching duty, which is why it is so critical to the whole Bill. The clause should also be read in conjunction with paragraph 57 of schedule 12. Together, the provision explicitly requires Ofcom, when carrying out its functions in relation to postal services, to give priority to securing provision of the universal service if there is a conflict with any of its general statutory duties, which shows the strength of this primary duty.

Subsection (3) ensures that in performing its primary duty, Ofcom must have regard to the need for the provision of a universal postal service to be both financially sustainable and efficient. Ofcom will have to take those two facts into account at all times. As the hon. Lady has said, that requirement was not included in the 2009 Bill. I am glad that she is not moving her amendment simply because these extra duties were not in the 2009 Bill. However, it is important to recognise that there will sometimes be a tension in regulatory terms between encouraging competition and supporting the provision of a universal service. I want to emphasis that point to the hon. Lady and to Opposition Members. The duties for the provision of the universal postal service need to be strengthened, which is the reason why subsection (3) has been included. There is no other reason, so I hope that the hon. Lady is reassured.

Nia Griffith (Labour, Llanelli)

Perhaps the Minister will continue in this vein, but will he explain why he thinks the provision will strengthen the regulator in relation to the universal service provision?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

There are two reasons. Subsection (3)(a) notes that Ofcom must have regard to

“the need for the provision of a universal postal service to be financially sustainable”,

which means that, when Ofcom regulates the different markets within the postal sector, it will need to make sure that the way in which the regulatory framework operates enables the universal service provider to be financially sustainable. That is an important additional element for Ofcom to think about. I think that it is common ground that Ofcom has to secure the universal postal service, because it was in the previous Bill. However, I want to ensure that, when it thinks about how to do that, it has to ensure that the universal service provider is financially sustainable. That is an important development and I would have thought that Opposition Members would welcome it.

Gordon Banks (Labour, Ochil and South Perthshire)

The Bill refers to the need for the universal postal service, not the universal service provider, to be financially sustainable. They are different.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The universal service provider is, of course, the provider of the universal postal service. We are in danger of lapsing into tautology, but, if the hon. Gentleman has anything else to say, I am happy to give way.

Gordon Banks (Labour, Ochil and South Perthshire)

Subsection (3)(a) refers to

“the need for the provision of a universal postal service to be financially sustainable”.

It does not refer to the need for a universal postal provider to be financially sustainable.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I can only repeat myself. A universal postal service has to be provided and, in order to provide it, the provider has to be financially sustainable.

Gordon Banks (Labour, Ochil and South Perthshire)

That is not great.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman says that it is not great. I do not know how many universal postal service providers he wants to introduce. We will talk about the potential for more than one universal postal service provider in a future clause and, when we come to it, the hon. Gentleman will note that it is extremely restricted. I do not, therefore, think that he will want to push his point any further.

My second point is that subsection (3)(b) refers to

“the need for the provision of a universal postal service to be efficient.”

It is important for the long-term sustainability of the universal postal service that it is efficient. The hon. Lady spent some time trying to suggest that our introduction of the notion of efficiency is somehow a threat to the universal postal service when, in fact, the reverse is the case. I accept that it is likely that some elements of the universal postal service will cost more to provide than the revenue they bring in. That is a common finding in the analysis of postal markets. It is essential, however, that in meeting the standards of the universal service, the universal service provider should be as efficient as possible so as to avoid unnecessary cost to consumers and prevent yet more users from moving from post to other forms of communication. I would have thought that the hon. Lady would understand that a requirement for Ofcom to ensure that the provision of a universal postal service is efficient is actually in favour of the provision of the universal postal service and in favour of the sorts of things for which she has been arguing.

Nia Griffith (Labour, Llanelli)

Will the Minister give an example of how Ofcom would pursue its business in a way that it would not if the clause was not included in the Bill? In other words, what would Ofcom require from the provider under the clause? What would it say and do?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The whole point of having a regulator in the market is to ensure that the balance between the universal service provider and competitors in the market, who will no doubt want to have access to the downstream provision of the universal service—the last mile—is properly regulated. Regulating that will be a core task for Ofcom, as it has been for Postcomm. Ofcom will have to balance the interest between the competitors and the universal service provider. That is what happens now; it is what Postcomm has to do. In the 2009 Bill, certain duties were placed on Ofcom, as a new regulator, regarding how it should go about achieving that balance. When I looked at that Bill and asked myself whether we need to refresh or change it in any way, I thought that the balance in terms of the manner in which Ofcom was being asked to go about that duty was not sufficiently correct. I wanted to ensure that when it thought about the balance of those difficult judgments, which it must achieve on many things, one of the factors it took into account was the financial sustainability of providing the universal postal service. One could give almost any example of anything that the regulator must make judgments on in making that balance.

Nia Griffith (Labour, Llanelli)

Will the Minister give us an example of how a decision, requirement or interest might be different as a result of not having the clause in the Bill?

Edward Davey (Liberal Democrat, Kingston and Surbiton)

It will, of course, be for Ofcom to make that final decision. If I give a concrete example, what I do not want to do is to imply by my words in Hansard that that is what Ofcom should or ought to do. I want to make it absolutely clear, by those preliminary remarks, that in giving an example, I am not in any way saying that that is intention of the clause.

Hypothetically—again, this is not necessarily the intention behind the measures, but it may be the way that it chooses to use the powers—Ofcom might decide, in a decision on prices, that if it held the price down too much, it could create financial problems for the universal service, and hence it might not be financially sustainable. In making these fine balances, Ofcom might decide that it has a duty under subsection (3)(a) to ensure that the universal postal service is financial sustainable. It might—this is not a suggestion of what it should do—decide that the price that the universal service provider, Royal Mail, can charge to competitors accessing its downstream service could be a little bit higher to ensure that the universal service was financially sustainable. I hope that that is quite a central example and gives the hon. Lady some comfort.

Gordon Banks (Labour, Ochil and South Perthshire)

The Minister has just given an example of how the universal postal service, as it is written in the Bill, would be financially sustainable, and I thank him for that. However, I must take him back to his earlier remarks. He was talking about the universal service provider. Even if the service is financially sustainable, it does not mean that the provider is sustainable.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

If there is a universal postal service, it has to be provided; I think we can agree on that part of the argument. Therefore, there has to be a provider, or providers. If we are trying to make sure that the universal postal service is financially sustainable, we have to be sure that those providing that service are financially sustainable. I think there is a degree of logic in my argument; I am not quite sure how I am failing to get my point across to the hon. Gentleman.

Gordon Banks (Labour, Ochil and South Perthshire)

The universal service provider may be sustainable from other business.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The clause focuses on the universal postal service. The hon. Gentleman seems to be suggesting that the universal service provider would be cross-subsidising in some way, from another activity unrelated to the universal postal service. He is, therefore, strengthening my argument that we should specify in the Bill in terms of the universal postal service and not in terms of the universal postal service provider. If we had done what he is arguing, Ofcom could look at a particular company that was providing the universal service and say, “Well, it is financially sustainable, because it is in offshore banking somewhere in the Caribbean, and it is cross-subsidising. Therefore, we should not worry.” That is not what the regulator should be doing; it should be focusing on the universal postal service and whether that is financially sustainable.

Gordon Banks (Labour, Ochil and South Perthshire)

It is not what I was arguing; it was what the Minister was arguing in his earlier remarks, because he used “universal service provider” not “universal service.”

Edward Davey (Liberal Democrat, Kingston and Surbiton)

No, I’m sorry.

Gordon Banks (Labour, Ochil and South Perthshire)

Have a read of Hansard tomorrow.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

The hon. Gentleman is seeking to say that clause 28(3) should contain the phrase “universal postal service provider.” He is questioning why it contains “universal postal service.” I thought that I had answered that question. Reading Hansard tomorrow will be even more interesting than it normally is.

Returning to amendment 73, which would remove Ofcom’s requirement to

“have regard to —

and efficient when carrying out its functions in relation to post, we would strongly resist such a proposal, and I hope that that is self-evident. As I have already outlined, that requirement will ensure that, as it approaches regulatory decisions, Ofcom will look beyond the immediate term. The clause, as drafted, ensures that Ofcom considers the impact that it could have on the long-term sustainability of the universal service and ensures that it does not support the development of the market in a way that would undermine the long-term viability of the universal service.

It is also essential that that requirement should be balanced by a duty to have regard to

“the need for the provision of a universal postal service to be efficient.”

It is common ground that Royal Mail needs to modernise and to become more efficient. I would not want the Bill to require Ofcom to use its regulatory tools to entrench inefficiencies in the USP. That is in no one’s interest, least of all that of the users of the postal service. The Bill strikes the right balance in ensuring that Ofcom has regard to

“the need for the provision of a universal postal service to be financially sustainable”

and efficient.

Let me move on to amendment 6. I hope that the hon. Member for Angus will join us in due course. Perhaps we shall see him later in the week, although his part of Scotland might be difficult to leave at the moment. The aim of his amendment is laudable. He wants to ensure that the needs of small business in rural and remote areas continue to be met, no doubt come rain or shine. However, the hon. Gentleman need not worry as that is amply provided for under the Bill. Under the section 3(4))(l) of the Communications Act 2003, to which I referred in our previous discussion on consumer protection, Ofcom is already required to take into account the needs of

“the different interests of persons in the different parts of the United Kingdom…and of persons living in rural and in urban areas”.

In that context, persons can also mean businesses. We are extending the duties to the functions of Ofcom in respect of communications matters under section 3(1)(a) of the Act to include postal matters. Amendment 6 would therefore offer no new protection. Such protection already exists. The clause and subsection (3), in particular, provides the appropriate balance between protecting the long-term sustainability of a universal service, while ensuring that the regime promotes efficiency. The clause also ensures that the needs of small business in rural and remote areas continue to be met and provides ample protection. I therefore ask that the amendment be withdrawn.

Nia Griffith (Labour, Llanelli)

I remain unconvinced by the Minister. Subsection (3) will be opening the door to a different way of regarding the universal postal service. I shall press the amendment to a Division.