Overall reaction

  (a)  We welcome the Government's acceptance of most of our proposals made in January 1998, and its response to our December 1998 requirements as to the substance of the White Paper; we have however to record some dismay at the time it has required to complete a review initiated in May 1997. While a number of aspects of the White Paper require critical scrutiny, we share the broad consensus that the White Paper does at last provide what the Post Office and its millions of clients and customers require. It is however questionable how far either new borrowing facilities at commercial rates or the Treasury foregoing the excessive level of dividend previously taken can fairly be represented as "providing" vast sums of extra money for the Post Office (paragraphs 3, 5, 27).

Strategic Plan

  (b)  We recommend that the Strategic Plan be revised prior to approval by Ministers so as to reflect as fully as practicable the effects of the Horizon decision and the White Paper proposals, so that profit forecasts and dividend figures are based on realistic forecasts (paragraph 6).

Legislation

  (c)  It is desirable that a legislative slot be found as soon as possible for Post Office reform, in tardy fulfilment of the UK's obligations under the 1997 EU Directive, and in the light of repeated delays to the programme of review. We note the Secretary of State's recent remarks on the prospects. If it proves impossible to find time in the 1999-2000 session, Ministers should consider the production of a draft Bill, and a relatively faster passage in 2000-2001 (paragraph 7).

Structure

  (d)  Many would now accept that there is indeed value in using the tried and tested status of a plc. While tempting to use the forthcoming legislative opportunity to create some theoretically admirable hybrid structure, it could confuse those in the UK and overseas likely to be commercially involved with the Post Office in future years (paragraph 9).

Ownership

  (e)  The remaining issue is fundamentally one of ownership. Given the potential sensitivity of a limited sale or exchange of equity, particularly with the likelihood of it involving an overseas post office or postal services company, the definition of the proposed exemption for limited sales or exchanges of shares is crucial and must be openly addressed before the presentation of legislation. It is at the subsidiary level that joint ventures and partnerships are formed. Whether it is desired to exclude the possibility of sale or exchange of even limited amounts of equity in subsidiary companies without explicit Parliamentary consent, or indeed to facilitate such deals without requiring that consent, the question of the application to present and future Post Office subsidiaries of the latest undertakings on equity sales or exchanges needs to be explicitly and urgently addressed (paragraphs 10 to 12).

Monopoly threshold

  (f)  The purpose of what is described as a "first step"[in lowering the monopoly threshold] is evidently as a signal that there will be more competition in a liberalised marketplace, and to expose the Post Office to a foretaste of the chill winds of competition and liberalisation to be introduced under a regulatory regime. Ministers have in effect substituted their judgement for that of the prospective regulator. Given that the regulator may be in office by the autumn, we recommend that the Government consider withdrawal of the Order so that the Postal Services Commission can consider evidence put to them of the effect of a reduction in the monopoly threshold, and recommend to Government an appropriate monopoly threshold (paragraphs 17 and 18).

Draft regulations

  (g)  We welcome the ready response of Ministers to our request for publication for purposes of consultation of a draft of the Regulations to establish the Regulator and to enshrine in UK law the terms of the Universal Service Obligation, and the publication therewith of a memorandum setting out in detail the proposed transposition of the relevant EU Directive into UK law. We recommend that the Cabinet Office ensure that in future an equivalent implementation memorandum be made available to Parliament together with primary or secondary legislation giving effect to EU Directives (paragraph 19).

Social and environmental guidance

  (h)  We hope that the Secretary of State will draw on the experience of similar social and environmental guidance to the utilities and use the opportunity to go beyond pious generalities (paragraph 20).

Regulation and consumer representation model

  (i)  It would be helpful for the Government to set out how the regulation and consumer representation model proposed for postal services differs from the reformed regime proposed for the privatised utilities, together with the reasons for those differences (paragraph 21).

Information - gathering powers

  (j)  In drawing up the primary legislation, we recommend that due weight be given to requests from the regulatory Commission now established for extensions in its powers to gather information (paragraph 22).

Devolved administrations

  (k)  While we appreciate that postal services are a reserved matter, we recommend that the Chairmen and members of the proposed POUNC country committees in Scotland, Wales and Northern Ireland be appointed following consultation with the devolved administrations (paragraph 23).

Exemptions and privileges

  (l)  The pending preparation of primary legislation offers a good opportunity for a detailed revisiting and consolidation of the mixed bag of the Post Office's statutory exemptions and privileges (paragraph 25).

Parcelforce

  (m)  An early task for the regulatory Commission will be to reassure commercial competitors of Parcelforce that they are not being subjected to unfair competition (paragraph 26).

Borrowing

  (n)  We broadly welcome the arrangements proposed for the introduction of at least quasi-commercial borrowing by the Post Office, although of course much depends on how they work out in practice. The 28 day period [for reaching a decision] must be treated as a maximum and not a standard period, given that any formal application from the Post Office should have been preceded by substantial communication at official level. We recommend that a degree of flexibility be given to the Post Office to carry forward unused loan facilities from one year to another and that the £75 million threshold for Ministerial approval of borrowings be subject to formal review after two years of operation of the scheme (paragraphs 28 to 30).

Transparency

  (o)  We recommend the greatest possible degree of transparency compatible with the genuine requirements of commercial confidentiality on this [German Parcel] and future major purchases by the Post Office (paragraph 31).

Dividend

  (p)  We recommend that the level of minimum fixed dividend to be taken from the Post Office be set low rather than high, to give the Post Office a reasonable level of retained profits in years of disappointing results (paragraph 32).

Pay

  (q)  We look forward to publication in due course of details of the pay regime envisaged going beyond the "warm words" referred to by the Chairman of the Post Office, and expect it to give the Post Office some degree of genuine flexibility over pay settlements (paragraph 35).

Network

  (r)  Given the fragility of the network, only in part owing to the change in benefit payment systems, it is time for Government to consider whether it should continue to rely on income generated from a range of postal and other services to maintain a national network which it regards as necessary for broader social and economic objectives: or whether it should accept that the network is a national asset — as recently demonstrated by its role in providing more or less instant passport renewal services — which may require an appropriate level of national financial support (paragraph 37).

Crown Offices

  (s)  We welcome the prospect of additional Crown Offices, and in particular the commitment to improved procedures on public consultation on conversion of Crown Offices, following our earlier recommendations (paragraph 38).