Royal Mail and the Post Office

I am grateful to the hon. Gentleman for that intervention and I completely agree with him; I intended to mention that point later. The hon. Gentleman's intervention leads nicely on to the next part of my speech, which is to point out that Royal Mail is at a serious disadvantage compared with its competitors. It has to deliver mail to every home in the country. That obligation is often called ““the last mile””, although in the case of my constituency ““the last hundred miles”” would be more accurate. The private sector clearly picks the profitable side of the business. There will never be competition to deliver mail to rural areas, which is the expensive side of the business. Going back to the Fionnphort example that I gave earlier, we will never see two mail delivery vans rushing nose to tail down the single track road to Fionnphort. That scenario conjures up an image of the driver of the leading van ignoring all the signs urging him to be a courteous driver and to use the passing places to allow overtaking. However, that scenario will never arise; deliveries to Fionnphort will always be left to Royal Mail. It is evident that Royal Mail requires more investment if it is to continue to deliver the USO without constant and large increases in the price of a stamp, so there are some issues that I would like the Government, the regulator and the review panel to consider. First, there is what is known as the ““access headroom”” rule. Royal Mail is required by its licence to maintain a minimum gap, known as the headroom, between the prices that it charges retail customers and the amount that it can charge its wholesale customers to use its network. The access headroom regime has paved the way for the fast growth of upstream competition—a rate of growth that is far ahead of all predictions. I understand that no other postal market in the world has an access headroom regime that imposes such competitive constraints on the universal service provider; nor is there a market that makes new entry to the upstream market so easy by enabling competitors to rely on the existing infrastructure of the universal service provider to deliver ““the last mile””. The UK's access headroom regime is something that must be looked at. It certainly appears to be very unfair to Royal Mail. Another way of paying Royal Mail for delivering the USO relates to a point I made earlier; we should take advantage of the clause in the European directive that allows a charge to be levied on mail companies that do not deliver a universal service, and use the proceeds to pay Royal Mail for doing so. If those private companies are cherry-picking the profitable parts of the business, they should compensate Royal Mail adequately for carrying out the unprofitable parts of the business. At the moment, it appears that Royal Mail is cross-subsidising the universal service obligation from other parts of its business, which makes it harder for it to compete. Royal Mail desperately needs more investment and the Government must either provide that investment themselves or ensure that private sector investment is secured for the company. I turn to post offices. My constituency has already suffered from the latest post office closure programme; several post offices in my constituency have already been closed, so there is no point in my revisiting that ground. Instead, I want to look to the future. The post office closure programme in Argyll and Bute reported in January. As well as closing several post offices, the report contained one piece of good news. Post Office Ltd said that it wanted to reopen one post office, in the village of Otter Ferry, which had closed several years ago. That seemed to be good news. However, yesterday—four months further on—the Post Office told me that it was still working to try to restore the service to that community, but it was not yet in a position to confirm anything. That certainly worries me; four months have passed and no one has been found to take over the post office in Otter Ferry. To add to those worries, the post office in the village of St Catherines closed suddenly in the middle of February. Again, the Post Office told me that the closure was only temporary and that it was planning to find somebody to take over the post office. However, three months later, the Post Office has again not managed to find anybody. I know that throughout the highlands and islands, there are post offices that are supposed to be temporarily closed, but they have been in that position for several years. It certainly worries me that, when a postmaster gives up a small village post office, it seems to be extremely difficult to find anybody to take over the business. That suggests that people looking at those businesses do not regard them as profitable, so I am worried that even after the closure programme we might continue to see a gradual decline of the post office network. The key to keeping post offices open and profitable is clear—to ensure that the contract to pay pensions and benefits stays with the Post Office after 2010. We must not see a repeat of the TV licence fiasco, when the contract to renew TV licences was given to PayPoint, an organisation that lacks a rural network.