Committee of Public Accounts: Press Notice

5th PAC Report 2006-07

Postcomm and the quality of mail services

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

“You would expect that a new regime for the quality of postal services would aim to improve collection and delivery times and reduce the number of pieces of mail lost by Royal Mail. If so, you would be mistaken.

“Neither of these aspects of performance is targeted under the current regime introduced in April of this year.  Given that people are now receiving their mail later in the day and that over 15 million letters and parcels are being lost, stolen or damaged in a year, it is pretty clear that the interests of ordinary users of the post are not an absolute priority.

“Royal Mail has indeed improved its performance since 2002. But there are still areas in the country - urban areas, particularly in London - where the postal service is chronically poor. Freeing Royal Mail as far as possible of the burden of regulation is crucial. The answer is to use the power of existing regulation to improve the black spots of postal service and that means having detailed information on what those black spots are.

“What Postcomm must get right is to encourage healthy competition in the postal market as a way of driving up the quality of the postal service, without damaging the interests of users of the post. It certainly cannot continue to rely on the main player, Royal Mail, as the principal source of information about possible conflicts.”

Mr Leigh was speaking as the Committee published its 5th Report of this Session which, on the basis of evidence from Postcomm (the Postal Services Commission), examined the regulator’s role in the design and implementation of the new quality of service regime and the progress made towards achieving Postcomm’s longer-term goal of introducing competition to the UK postal market.

In March 2006 Royal Mail accepted a new quality of service and price control regime proposed by Postcomm, the regulator of mail services in the UK. The new arrangements replaced the existing regime introduced in 2001 and will run from April 2006 to March 2010. The new regime allows Royal Mail to increase the price of first and second class stamps by 6 and 5 pence respectively over the period. It also has new quality of service targets and associated financial incentives aimed at improving mail services.

Postcomm had to introduce the original regime quickly in 2001 and it suffered from major flaws. For example, important aspects of mail service quality, like lost mail, were ignored and a complex system of financial incentives resulted in Postcomm undertaking burdensome investigations.

The new regime covers more aspects of service quality and has greater clarity and simplicity than the previous system. The new system will, however, only reduce burdens on Royal Mail if Postcomm can implement it in an informed and proportionate manner. Postcomm needs to monitor Royal Mail in areas where it is performing poorly or where there are no quality of service targets. For example, performance in some postcode areas in London is still poor and Postcomm is only now starting to monitor whether Royal Mail meets its internal targets for the times of collections and deliveries.

The postal market has been subject to some fundamental changes in the last year: full liberalisation; the agreement of the new price control settlement; and August saw the introduction of pricing in proportion, a new system in which price will be determined by size as well as weight. During the 2006-2010 regime, Postcomm needs to take measures which will create a thriving competitive market while at the same time protecting the universal service. Postcomm has recently launched a consultation on its strategy for the postal market in 2010 and beyond, including what consumers want from the universal service, how the universal service can be best protected and what more can be done to create a competitive environment.

Notes for Editors

1. Contact details for requests for further comment from Mr Edward Leigh are provided below. ISDN facilities are available for broadcasting purposes.

2. The full text of the Committee’s Conclusions and Recommendations is attached to this press notice.

3. This report can be accessed via the internet from around 11.00 am on the day of publication.

All media enquiries to:

Luke Robinson
Select Committee Media Officer
Tel: 020 7219 5693
Mobile: 07917 488549