MPs condemn ‘untimely’ opening up of UK postal market
The postal regulator Postcomm’s decision to open the postal market to full competition from the beginning of next month is today criticised as “untimely” by a committee of MPs.
In a report published today on Royal Mail after liberalisation of the market, the trade and industry committee warns that Royal Mail “has been asked to prepare for competition at a time of great commercial uncertainty”. MPs say that at a time when Postcomm is reviewing the price that Royal Mail can charge for its regulated services, the company is facing “huge challenges in addressing its pensions deficit and investment needs”.
The committee says opening the market to competition did not pose a threat to Royal Mail’s obligation to deliver across the UK for the same price. But it warns that “the regulator must remain vigilant to ensure that competition in postal services does not come at the cost of universal service”. Any universal service which allowed exemptions such as rural areas was “not worthy of the name”.
Royal Mail is facing a pounds 4.5bn pension fund deficit and needs to find another pounds 2bn-plus to invest in the modernisation of its sorting operations. The committee chairman, Peter Luff, said he welcomed the regulator’s decision to allow a price regime that would see an average of pounds 320m a year go towards clearing the pension deficit and pounds 1.2bn in investment but he said customers alone should not be expected to pay for the pension deficit.
POSTAL REGULATOR FACES CRITICISM OVER ‘UNTIMELY’ DECISION ON MARKET COMPETITION
Financial Times UK, London Ed1, Sec. NATIONAL NEWS, p 2 12-20-2005
By By JEAN EAGLESHAM
Postcomm, the postal services regulator, will be attacked today in a Commons inquiry for its “untimely” decision to open the market to full competition on January 1, exposing Royal Mail to increased competition when it is suffering from a Pounds 4.25bn pension fund deficit and underinvestment, writes Jean Eaglesham.
A report by the trade and industry select committee cites “compelling” evidence that the partial liberalisation of the postal services market has resulted in improvements. But the MPs criticise the regulators’ move to open the market to full competition so far in advance of the 2009 deadline for liberalisation set under European laws, saying: “We regard Postcomm’s choice of dates . . . to be an untimely one . . . because Royal Mail has been asked to prepare for competition at a time of great commercial uncertainty.”
The report urges Postcomm to ensure that competition “does not come at the cost of the universal service” – Royal Mail’s duty to deliver mail to every UK address for a fixed price – warning any geographical exemptions would undermine this. It urges the government, the postal operator’s sole shareholder, to continue the policy of waiving dividends. Royal Mail’s plan to persuade ministers to agree to 20 per cent of its shares going to staff has failed to win over the MPs. The reportwarns the rationale for the scheme is “far from complete” and that “no coherent process for how these shares would be transferred or traded has been given”.
