Westminster Comment - Postal service threat

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Given the large rural nature of much of the North-east I have long been a supporter of the Universal Postal Service obligation that is placed upon Royal Mail. It is an obligation to collect and deliver mail at a uniform price no matter where it is from or to.

This Government has made it a legal duty for the regulator, Ofcom, to protect that delivery service. Currently the Universal Service, in difficult to reach areas, is maintained by the profits made by Royal Mail’s deliveries in the easier built up towns and cities.

Those profits have been at risk ever since the last Government introduced competition into the postal market. When they introduced competition it was under a new regulator known as Postcom.

I remember at an early meeting with Postcom warning them not to go too fast in the introduction of competition. The liberalisation in those early days went far faster and deeper than it did in most of the rest of Europe.

That meant foreign competitors could cherry-pick the easier business while Royal Mail could not compete in other markets. Postcom did open up the collection and sorting of mail to early competition and required Royal Mail to do the final delivery at a price that turned out to be loss making. At the same time, as a state-owned company, Royal Mail had difficulty getting the necessary investment to make its operations competitive. The new regulator has sorted out the access price problem and Royal Mail now has access to private investment, but the competition are now setting up rival delivery operations in the easier to deliver urban areas. This cherry-picking threatens the viability of the Universal Postal Service.

The regulator has promised a review in 2015. But I have tabled a motion in Parliament, with support from MPs in other parties, calling for Ofcom to bring forward its review to ensure competition is not threatening the Universal Service. They have the power to raise a levy on rival companies to subsidise the Universal Service or to consider other regulations that will ensure a level playing field.

Last Wednesday I hosted the Subsea UK reception in Parliament. In Westhill we have a world centre of excellence in subsea engineering. That expertise earns this country considerable export income and supports a supply chain throughout the UK. It may have the highest profile in Westhill but its reach extends to much of the country. It was a great opportunity to celebrate a success story rooted in the North-east.