Royal Mail buyer will maintain universal service, minister insists

The UK government has insisted that any sale of Royal Mail will leave the country’s universal service obligation intact – and protected by law. The assurance came from Baroness Wilcox, the government’s junior business minister in the House of Lords, as the upper House debated legislation seeking to privatise the national postal operator.

Facing an array of concerns from opposition peers that the Postal Services Bill will open the door to asset strippers or cherry pickers from the private sector, the minister said regulator Ofcom would have the power to protect the universal service provision.

She said: “Ofcom will be watching like a hawk to make sure that there is a fair balance between Royal Mail and the consumers of the products that Royal Mail produces.”

The Royal Mail, currently a limited company owned by the government, would still have the obligation to provide mail deliveries six days a week across the entire country for a uniform tariff under the government’s proposals for private ownership.

The debate last night – the committee stage in the Lords for the Postal Services Bill, which has already passed through the House of Commons – saw concern among peers that selling off the Royal Mail could see new owners pricing their universal service out of the market to make it unattractive to consumers.

But the Baroness said the universal obligation was protected by Parliament under the terms of the Bill, and that Ofcom would ensure the minimum requirements of the obligation were upheld.

“As we know, the minimum requirements are above those set out in the European postal services directive in terms of the requirement to deliver letters six days a week and for a uniform tariff and service to apply,” she said.

In the “unlikely event” that the new owners no longer wished to provide universal service coverage, the minister said regulator Ofcom would have the powers to force Royal Mail to deliver on the obligation.

“Ofcom will also have the power to impose penalties on companies found in breach of the regulatory conditions,” the Baroness warned.

During the debate, peers expressed concern that the government would not report on the full value of Royal Mail and details of acquisition proposals before the sale is completed.

Peers including Lord Clarke of Hampstead, a former postman and postal trade unionist, warned that without detailing the scope of Royal Mail’s assets, the sale could be under-valued.

“A kind of Jurassic Park”

But the particular concern was that a sale would leave new owners skimping on their obligation to cover the final mile in all corners of the country.

The peers highlighted comments made last year at the European Postal Services conference in Brussels by Pieter Kunz, managing director of TNT, a company seen as among the favourites to buy Royal Mail. Kunz had said last spring that the universal service obligation was “a kind of Jurassic Park and we should get rid of it”.

Last night, Lord Clarke said: “If we rush into a sale and Royal Mail ends up in the hands of a particular private company, we shall know what to expect, because that company has already said that the universal service obligation belongs to Jurassic history. It even questioned whether there should be six deliveries a week. We have to be very careful.”

Lord Clarke said a number of European countries had now moved from having state-owned postal operators to 100% privatisation, and that in some of those countries the privatized operations are not required to deliver a universal service.

“My worry is that we could find ourselves in a position where a foreign buyer might already be in the business in a country that no longer has a universal service and that might decide in due course that it will no longer maintain a universal service in this country. That would be very bad indeed for Britain,” he said.

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