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Postal Services Sector

Volume 697: debated on Monday 17 December 2007

My right honourable friend the Secretary of State for Business, Enterprise and Regulatory Reform (John Hutton) has made the following Written Ministerial Statement.

The Government set out their vision for postal services in the UK in their 1999 White Paper Post Office Reform: A World Class Service for the 21st Century and took this forward in the Postal Services Act 2000. The Act had as its prime objective the maintenance of the universal postal service. It was designed to provide both social and business consumers with a more efficient and effective postal service through the introduction of competition and greater commercial freedoms for the Royal Mail to operate within a fully liberalised market while maintaining the provision of the universal postal service. We remain committed to this vision.

It is now seven years since the Act passed through Parliament and there have been significant developments since then.

The postal services market was fully liberalised by Postcomm nearly two years ago on 1 January 2006. The Government believe that this has brought considerable benefits for the users of postal services. Royal Mail has, through the efforts of management and postmen and women up and down the country, significantly improved its performance, delivering quality of service levels that in the last full year were at record breaking levels. New market entrants are providing increasing choice for consumers and pushing innovation in the industry.

The Government have demonstrated their commitment to seeing Royal Mail compete effectively in this new market place through an unprecedented level of additional investment—£2.1 billion in 2007—to enable the company to modernise. The result of the recent ballot on pay and modernisation means that management and staff have given the Royal Mail a mandate for modernisation.

It has become clear that the market conditions for all postal service operators are challenging, with growing evidence of e-substitution and more sophisticated use of mobile communication. Postcomm's Strategy Review, Postal Market 2010 and Beyond—Emerging Themes, published in August 2007 noted that the postal market is changing and that they expected market volumes to decline. The European Union, supported by the British Government, recently set a clear timetable for a fully liberalised European postal services market by the end of 2010.

In the light of these significant developments, and in line with their manifesto commitment, the Government are launching a review of the postal services sector. The review will be led by an independent panel chaired by Richard Hooper and comprising Dame Deirdre Hutton and Ian Smith.

Its terms of reference are:

to assess the impacts to date of liberalisation of the UK postal services market, including on the Royal Mail, alternative carriers and consumers;

to explore trends in future market development and the likely impact of these on Royal Mail, alternative carriers and consumers; and

to consider how to maintain the universal service obligation in the light of trends and market developments identified.

We are today issuing a call for evidence for the review so that the review panel's analysis of the market can take into account the view of the widest possible range of interests.

It is expected that the review will report its conclusions next year.