Part III Other Functions of the Commission and the Council

Section 42: Duties in relation to public post offices

60. Section 42 imposes a duty on the Commission, in consultation with the Council, to provide advice and information to the Secretary of State about the number and location of public post offices and their accessibility to users. In the Act, a public post office means any post office from which any postal services are provided directly to the public (whether or not together with other services).

Section 43: Duties in relation to social and environmental matters

61. Section 43 provides that the Commission, in exercising its functions, should have regard to any guidance issued by the Secretary of State issued under this section. Such guidance, which will need to be laid before each House of Parliament and subsequently published, will be concerned with social and environmental policies which may include policy on ensuring access to the post office network.

Section 44: Review and information

62. Section 44 requires the Commission to keep under review and collect information about the provision of postal services in the United Kingdom, other member States of the European Community and elsewhere in order to facilitate the exercise of its functions, and to enable comparisons to be made between the efficiency and economy of different postal operators.

63. It also provides for the provision of information, advice and help to the Secretary of State regarding any matter in relation to which the Commission has a function; and for the collection of such information as is necessary for it to comply with a requirement of the Council under section 58(1).

Section 45: Annual and other reports: the Commission

64. The Commission is required to make an annual report to be sent to the Secretary of State and published. Section 45(2) specifies what the report should include. The Commission also has the power to make other reports in respect of its functions.

Section 46: Publication of information and advice: the Commission

65. Section 46 allows the Commission to publish information and advice to universal service providers, licence holders who are not universal service providers and users of postal services. The Commission is required, so far as practicable, to ensure that any such publication does not seriously and prejudicially affect a person's interests or, if it does, that the person consents to publication or publication is in the public interest.

Section 47: Power of the Commission to require information

66. Section 47 provides powers for the Commission to require information and documents from any person for any relevant purpose; "relevant purpose" is defined in subsection (6). But no person may be required to provide information or documents which he could not be compelled to produce or supply in evidence in civil proceedings before the court.

Section 48: Information powers: enforcement

67. Section 48 makes it an offence for a person, without reasonable excuse, to fail to provide information and documents required by a notice under section 47. An offender is liable on summary conviction to a fine not exceeding level 5 on the standard scale. Under subsection (4) it is an offence for a person to alter, suppress or destroy documents which he has been required to produce, or knowingly or recklessly to make a false statement.

Section 49: Powers of entry and seizure

68. Section 49 provides a power of entry and seizure where, on an application by a constable or the Commission, a justice of the peace or sheriff is satisfied that there are reasonable grounds for suspecting that a person has committed an offence under section 6. A warrant may be issued for an appointed person to enter premises, search for articles or documents, and seize and remove items. In order to respect the principle of the inviolability of the mail, the power to seize documents does not extend to items of mail. The section also sets out procedures and powers in relation to the use of a warrant.

Section 50: Codes of practice

69. Section 50 provides that the Commission shall prepare, and may revise, a code of practice governing the discharge of its functions. In preparing or revising the code the Commission shall consult the Secretary of State, the Council, universal service providers, licence holders who are not universal service providers, and such other persons as the Commission considers appropriate. The code and any revisions must also be published.

Section 51: Relevant postal issues

70. Section 51 lays the foundations for setting out the functions of the Consumer Council for Postal Services by defining the postal issues and services that are to be covered. Relevant postal issues are defined by reference to relevant postal services. Relevant postal services are defined as those provided in connection with the provision of a universal postal service and any other postal services provided by licence holders in accordance with a licence under Part II.

Section 52: Provision of advice and information to public authorities and licence holders

71. Section 52 gives the Council the duty of providing advice and information, representing the views of users in relation to relevant postal issues and making proposals on relevant postal issues to the Secretary of State, the Commission, the Competition Commission, other public authorities, universal service providers, licence holders who are not universal service providers and any person whose activities may affect the interests of users. Subsection (3) requires the Council to secure as far as practicable that no information is disclosed to a licence holder or person whose activities may affect the interests of users under this section which might seriously or prejudicially affect the interests of the person to whom it relates (unless by virtue of subsection (4) that person consents).

Section 53: Publication of information to users

72. Section 53 requires the Council to make available and gives it power to publish information for users of postal services about relevant postal issues and services, and the Council itself and its functions. It includes a similar provision about disclosure of information to that in section 52.

Section 54: Exercise of functions: general

73. Section 54(1) requires the Council to have regard to the interests of different users of relevant postal services including the interests of users in different areas.

74. Subsection (2) requires the Council to have regard to the interests of certain specified groups. The specified groups are qualified to make clear however, that this is not intended to be an exhaustive list and it should not be taken as implying that regard should not be had to the interests of other descriptions of persons.

75. Subsection (3) requires the Council, as far as practicable, to collect and review information about the provision of postal services and the interests and views of users and matters affecting them.

76. Subsection (4) requires or allows the Council to set up certain committees. It requires committees to be set up for each of Wales, Scotland, and Northern Ireland and for there to be at least one committee in relation to England. It allows for committees to be set up for England and for areas within England, Wales, Scotland, and Northern Ireland.

77. Subsection (5) sets out the purposes of a committee established under subsection (4), which are to provide advice and information to the Council about relevant postal issues affecting the area for which it is established and such other purposes as the Council may determine.

78. Subsection (6) requires the Council to maintain in each of England, Wales, Scotland, and Northern Ireland at least one office where users can apply for information.

Section 55: Annual and other reports: the Council

79. Section 55 requires the Council to make an annual report to be sent to the Secretary of State and published. The Commission also has the power to make other reports in respect of its functions. So far as practicable, the Council should exclude from the report information about a person which might seriously and prejudicially affect that person's interest (unless that person consents).

Section 56: Complaints referred to the Council

80. Section 56(1) provides that the Council shall investigate complaints by or on behalf of users of relevant postal services as it thinks appropriate if:

• the matter has previously been the subject of a complaint to a person providing the services concerned and has not been satisfactorily resolved, and

• it does not appear to the Council to be of a frivolous or vexatious nature.

81. Subsection (2) requires the Council to refer any complaint to the Commission if, as a result of an investigation under section 56(1) it considers that:

• a licence condition may have been contravened

• the matter is a referable matter (as defined in subsection (3) of section 56)

• it is appropriate to do so.

82. Subsection (3) requires the Council to agree with the Commission what are referable matters for the purposes of subsection (2)(b).

Section 57: Power of the Council to investigate other matters

83. Section 57(1) allows the Council to investigate any matter, not being a matter it has a duty to investigate under section 56 which appears to it to relate to the interests of users of relevant postal services (defined in section 51) or which relates to the number and location of public post offices.

84. Subsection (2) allows the Council to send reports on any matter investigated under subsection (1) to specified public bodies.

85. Subsection (3) allows the Council, subject to the requirements of subsection (5), to send reports on matters investigated to persons who the Council thinks might have an interest in these matters, or to publish a report in any manner the Council considers appropriate.

86. Subsections (4) and (5) require the Council, so far as practicable, to exclude from any report sent to any person or published under subsection (3), any matter which might seriously or prejudicially affect the interests of the person to whom it relates (unless that person consents).

Section 58: Power of the Council to require information

87. Section 58 gives the Council the power to require information which it may reasonably require in the exercise of its functions from the Commission, universal service providers, or other licence holders. The Commission or other persons specified in this section, may refuse to supply information to the Council under certain circumstances.

Section 59: Provision of information by the Council to the Commission

88. Section 59 gives the Council the duty to provide to the Commission information which the Commission may need in order to carry out its functions. But this duty is limited by the Secretary of State having the power to make an order specifying the conditions in which the Council may refuse to provide information to the Commission. If the Council refuses to supply information to the Commission, it must give notice to the Commission explaining why it has reached this decision. The Commission has the power to publish this notice.

Section 60: Memorandum of understanding

89. Section 60 gives the Council and the Commission the duty to make arrangements on co-operation and exchange of information between them and on consistent treatment of matters which affect both of them, and also the duty to prepare a document setting out these arrangements (a Memorandum of Understanding; MoU). The Council and the Commission have the duty to send this MoU to the Secretary of State who has the duty to lay it before each House.

Section 61: Forward work programmes

90. Section 61 provides that the Commission and the Council shall publish forward work programmes before the beginning of each financial year with a description of the projects each intends to undertake during that year. Such descriptions need not include routine activities in exercise of their functions. The description of the projects shall cover the objectives and the estimated costs to be incurred during the year in question.

Part IV Reorganisation of the Post Office

Section 62: Transfer of property etc. to nominated company

91. Section 62 permits the Secretary of State, after consulting the Post Office, to transfer by order all the property, rights and liabilities of the Post Office to a company wholly owned by the Crown which has been formed under the Companies Act 1985. He may vary or revoke the order with a subsequent order before any transfer has taken place. Further provisions about the transfer are made in Schedule 3.

Section 63: Government holding in the Post Office company and certain subsidiaries

92. Section 63 requires the Post Office company or any of its wholly owned subsidiaries to issue securities (securities are defined in section 82) upon the direction of the Secretary of State with the consent of the Treasury. Those securities shall, as directed by the Secretary of State, be issued to the Treasury or the Secretary of State, or to a person approved for the purpose of a disposal under section 67, or to the Post Office company or a relevant subsidiary (as defined in subsections (8) and(9)). Section 79 has the effect that nominees may be appointed by the Treasury or the Secretary of State for the purpose of receiving securities issued under this section. The Secretary of State's power to direct for the purpose of section 63 ceases in the event that the Crown no longer wholly owns the Post Office company.

93. Securities issued under this section can be issued at such times and on such terms as the Secretary of State directs, but any shares issued will bear a nominal value, as directed by the Secretary of State and be treated as if fully paid for the purposes of the Companies Act 1985 or the Companies (Northern Ireland) Order 1986.

94. A relevant subsidiary is defined in subsection (8) as one which delivers, collects, receives, sorts or conveys relevant postal packets (of the type defined in section 4) in the United Kingdom or which provides a registered postal service in the United Kingdom or any other subsidiary of the Post Office company which holds shares or share rights in, or is connected to, any such subsidiary. A subsidiary is connected to another under subsection (9) for the purpose of the section if it forms part of a chain of subsidiaries of the Post Office company, each holding shares or share rights in the other, which includes the relevant subsidiary.

Section 64: Government investment in securities of the Post Office company and its subsidiaries

95. Section 64 empowers the Treasury or the Secretary of State (with Treasury consent) to acquire any securities issued by the Post Office company or any of its subsidiaries. The Secretary of State can only dispose of such securities with the consent of the Treasury. The Secretary of State does not require the consent of the Treasury for disposals permitted under section 67 nor for a disposal to the Treasury or the Treasury's nominee. Section 79 has the effect that nominees may be appointed by the Treasury or the Secretary of State for the purpose of this section.

Section 65: Restriction on issue of shares to third parties

96. Section 65 prevents shares or share rights in the Post Office company or any relevant subsidiary being issued to anyone other than the Treasury and the Secretary of State (or any nominee of either of them), unless approval has been given by Parliament under the procedure set out in section 67 to dispose of shares to a named third party. Subsection (2)(b) also permits shares or share rights in relevant subsidiaries being issued to the Post Office company or another relevant subsidiary of which the subsidiary concerned is itself a subsidiary.

Section 66: Restriction on disposals of shares to third parties

97. Section 66 prohibits the Treasury and the Secretary of State (or any nominee) disposing of shares or share rights in the Post Office company (or any relevant subsidiary) other than to each other, as permitted by subsection (3). However, the prohibition does not apply if the prior approval of Parliament has been obtained in accordance with section 67. This follows the policy, set out in the Government's White Paper (Post Office Reform, cmnd 4340), that after transformation to a Companies Act company, the Post Office company would remain Government-owned and shares would only be exchanged or sold in order to cement commercial strategic alliances.

98. Subsection (2) prohibits the Post Office company or any of its subsidiaries (or their nominees) disposing of shares or share rights in any relevant subsidiary (as defined in section 63), though subsection (4) permits their disposal to the company or another subsidiary (or their nominees). Again, in accordance with subsection (5), the prohibition does not apply if Parliamentary approval has been obtained under the procedure in section 67.

Section 67: Approved disposals

99. Section 67 sets out the procedure to be followed in order to obtain the approval of Parliament to make share issues or disposals of shares or share rights which would otherwise be prohibited by sections 65 and 66.

100. Subsection (2) specifies the minimum information to be contained in a motion to be presented for the approval of both Houses.

101. Subsection (3) sets out the conditions that must be met before a motion relating to the disposal of shares or share rights in the Post Office company may be moved, notably that the company has agreed to take part in a joint venture or other partnership which it considers to be in its commercial interests, which involves the issue or disposal of shares or share rights in the Post Office company. In addition the motion may not be moved unless the Post Office company has recommended to the Secretary of State that the disposal takes place, the Secretary of State is satisfied that the issue or disposal secures the proposed arrangement and that it is in the commercial interests of the company; and the Treasury has given consent to the proposed issue or disposal.

102. Subsection (4) sets out the pre-conditions to be met before moving a motion relating to issue or disposal of shares or share rights in a relevant subsidiary (as defined in section 63) in order to enable the Post Office company or a relevant subsidiary to take part in a joint venture or other partnership. The pre-conditions are generally similar to those set out in subsection (3).

Section 68: Loans by the Secretary of State to the Post Office company and its subsidiaries

103. Section 68 empowers the Secretary of State, with the approval of the Treasury, to lend to the Post Office in any currency once it becomes a company and authorises the necessary funds to be provided from the National Loans Fund. The section provides for lending either to the Post Office company or direct to any of its subsidiaries on terms to be agreed (with the Treasury's consent) between the Secretary of State and the Post Office company/subsidiary, except that interest rates are to be as directed by the Secretary of State with the approval of the Treasury. The lending and issues from the National Loans Fund may be in any foreign currency if the loan is to be in that currency, as well as sterling. Any monies repaid to the Secretary of State in respect of interest or capital on the loan will be repaid into the National Loans Fund. The provisions of this section make section 5 of the National Loans Act 1968 applicable to the rate of interest payable on loans and the rate will be subject to the requirements of that section.

Section 69: Guarantees by the Secretary of State for the Post Office company and its subsidiaries

104. Section 69 empowers the Secretary of State to give guarantees in respect of any financial obligation of the Post Office company or its subsidiaries. This power is taken because under Treasury guidance, it is usual practice for nationalised industries which are borrowing from non-Government sources (e.g. to provide an overdraft facility) to obtain a Government guarantee to secure the cheapest available funds for the public sector. However, this may not be appropriate in all circumstances, and it is not envisaged that this power would be used often in the case of the Post Office or its subsidiaries.

105. The Secretary of State must make a statement to Parliament about the giving of any such guarantees as soon as practicable after they have been given. If any payments are made by the Secretary of State under a guarantee, the Secretary of State will direct the terms (as to interest and capital) on which the monies are repayable by the Post Office company or, as relevant, by the subsidiary.

106. As soon as practicable after the end of any financial year in which any monies were paid by the Secretary of State in respect of a guarantee, a statement will be laid before each House of Parliament stating the sums paid. A statement will also be laid before each House as soon as practicable after the end of each financial year regarding the amount of any outstanding debt or obligation which is the subject of the guarantee given by the Secretary of State. This will allow Parliament to be informed about the remaining risk under any outstanding guarantees. In addition, the statement laid must include any amounts received by the Secretary of State during the financial year concerned in repayment of sums, or interest on sums, paid by the Secretary of State in fulfilment of any guarantee given under this section. The statement must also include any amount outstanding and unpaid at the end of the financial year in respect of the sums paid by the Secretary of State. This will allow Parliament to be informed of what has been paid back to the Government by the Post Office company or its subsidiaries in respect of any guarantees fulfilled by the Secretary of State and what amounts remain to be repaid. These statements will cover both the principal and the interest and are intended as an aid to public accountability.

Sections 70, 72 and 74: Provisions about financial restructuring

107. Sections 70 and 72 are intended to facilitate the restructuring of the balance sheet by 1 April 2002, as announced in the White Paper. The balance sheet will be restructured in order to place the Post Office company on a more commercial footing and allow benchmarking against its competitors. At present the Post Office holds on its balance sheet the government securities and deposits with the National Loans Fund (NLF) which represent accumulated reserves, in effect accumulated dividends, which were not payable to the Consolidated Fund.

108. Section 70 empowers the Secretary of State with the consent of the Treasury by order to cancel any liability of the Post Office company or any of its subsidiaries, including any in respect of sums paid in fulfilment of guarantees, but not principal of or interest on loans owed to the Secretary of State and payable into the National Loans Fund or any form of taxation duty or fine. The Secretary of State must consult the Post Office company before extinguishing any of its liabilities and must consult that company and the subsidiary concerned before extinguishing any liabilities of a subsidiary. However, the Secretary of State may by order repeal the section, with the consent of the Treasury, and it would be the intention to do so once the purpose of the section is spent, i.e. the restructuring of the balance sheet of the Post Office company is complete.

109. Section 72 empowers the Secretary of State, after consultation with the Post Office company and with the consent of the Treasury, to give directions to the Post Office company requiring it to allocate amounts to general reserves or to reserves for a particular purpose; and to reallocate those reserves to other specified purposes. The Secretary of State may also direct the Post Office company to cause any of its subsidiaries to create such reserves or to reallocate them for other purposes.

110. The Secretary of State may also direct how amounts allocated to a reserve are to be applied and may require such amounts to be paid out as if they were profits available for distribution within the meaning of section 263(1) of the Companies Act 1985 or Article 271(1) of the Companies (Northern Ireland) Order 1986 (distributions to be made out of profits). This provision therefore enables the Secretary of State to require the payment of dividends out of these reserves.

111. Subsection (4) provides that no reserve created under this section shall count as an undistributable reserve for the purposes of section 264(3)(d) of the Companies Act 1985 or Article 272(3)(d) of the Companies (Northern Ireland) Order 1986 (restriction on distribution of assets). However, under subsection (5), amounts allocated to reserves, apart from any amounts which the Secretary of State has authorised to be applied as if they were profits available for distribution, shall be treated as if they were unrealised profits of the company (for the purpose of section 264(3)(c) of the Companies Act 1985 or article 272(3)(c) of the Companies (Northern Ireland) Order 1986). This means that the reserves created under this section would only be distributable once the Secretary of State has given a direction requiring their application as distributable profit.

112. This section enables the Government to extract as a dividend, payable to it and then into the Consolidated Fund, the Post Office company's holdings of government securities and deposits with the National Loans Fund which represent accumulated reserves.

113. Section 74 gives the Secretary of State further powers for the purposes of restructuring the balance sheet of the Post Office company by April 2002 by injecting debt to create a commercial level of gearing and removing from it value representing reserves accumulated because the company could not as a statutory corporation pay government a dividend. It enables the Secretary of State to create debt owed by the Post Office company including debt in the form of debentures or bonds. These powers are only to be exercised after consultation with the Post Office company and with the consent of the Treasury. They are not limited to the time when the company is wholly owned by the Crown as the timing of restructuring in relation to any commercial partnering of the Post Office cannot be predicted and flexibility is required. However the Secretary of State may by order repeal the section and it would be the intention to do so once the purpose of the section is spent, i.e. the balance sheet of the Post Office company has been restructured. The section contains a definition of "debt securities" for the purpose of Part IV of the Act and this includes debentures, bonds and loan stock.

Section 71: Limit on loans and other arrangements with government

114. Section 71 sets a limit of £5,000 million on the total of the Crown's financial arrangements with the Post Office company and any of its subsidiaries and defines what is to be included in the calculation of the figure. The Secretary of State may increase the limit set out in the Act by an order approved by a resolution of the House of Commons. The limit is in part required in order to provide assurance to Parliament that the Post Office company and its subsidiaries are not being afforded unlimited access to the National Loans Fund. The limit also provides assurance that unlimited calls may not be made on monies to be provided by Parliament.

Section 73: Statutory accounts of the Post Office company

115. Section 73 provides for continuity in the business across the transfer from statutory corporation to public limited company by providing that the Post Office's closing accounts are in effect also the Post Office company's opening statutory accounts. The section will mean that assets and liabilities of the Post Office are to be taken as transferred at the value given by the accounts of the Post Office for its last accounting year. It also means that anything done by the Post Office is treated for accounting purposes as if it had been done by the Post Office company. For example, the profits of the Post Office are carried forward and treated as profits of the Post Office company and the same would be true of losses, if there were any.