Run down and parcelled off

[TrueBlueTerrier]

http://www.guardian.co.uk/business/2008/mar/30/post1

Struggling Royal Mail is pushing through an unpopular deal to close 2,500 branches, but does it have a plan to safeguard the rest? Rivals want access to the network and say letting them in could keep the service afloat

* Nick Mathiason and Tim Webb
* The Observer,
* Sunday March 30 2008

Faced with forcing through the closure of 2,500 post office branches, Royal Mail was accused last week of focusing more on keeping competitors out of its market than on making its own service first class. The attack came not from a rival but from its own regulator, Postcomm.

As the number of first-class letters posted in the UK declined by 8 per cent and losses escalated to £29m, the network faces a battle for survival.

In addition, post offices' guaranteed funding from government runs out in three years and a key contract - the Post Office card account, through which four million claimants a week receive benefits - could go to a private-sector rival in the next few weeks. This comes after the loss of key post office functions such as handling BBC licence fees.

In the midst of this the Royal Mail is engaged in a controversial closure programme ordered by John Hutton, Secretary of State for Business and Enterprise. Savings made through closure will amount to £45m a year. Earlier this month the precise location was revealed of the 2,500 post offices to be closed, out of an existing 14,200. Up and down the country, notices were displayed in the selected branches saying customers had just six weeks to submit their responses to the proposal. The news heralded a wave of protests from rural and inner-city communities.

For Labour, details of the closures could not have come at a worse time. In five weeks, voters go to the polls in local and London mayoral elections. Post offices have become an election issue giving the Conservatives another stick with which to beat Labour, although the Tories admit it would close offices if in power. Ten days ago an opposition Commons motion demanding a suspension of closures until after a more rigorous assessment was defeated, although the government's normal parliamentary majority was significantly reduced.

Alan Duncan, shadow Secretary for Business and Enterprise, took delight in identifying those Labour MPs who had supported constituency protests but voted against his measure. 'We accept the network is going to shrink but we take issue with the pace, scope and rationale,' he said. 'We think a lot of post offices could be doing more business. I don't see why council services couldn't be done in post offices or business rates paid through them.'

Yet there are seemingly no shortage of subpostmasters wanting to take the compensation package, which works out at 28 months' pay.

The National Federation of SubPostmasters has backed the government's closure agenda, albeit reluctantly. George Thomas, its general secretary, said the union backed closures to provide a viable network to protect the remaining 11,700 offices. Thomas is engaged in almost daily conversations with government ministers to establish guarantees for the long-term strength of the network. So far none have been forthcoming.

Thomas believes the future of the service rests on it being allowed to become a postal bank - a facility that Royal Mail used to offer before being sold off by Margaret Thatcher. A post bank would offer current and saving accounts as well as mortgages and insurance. It would be particularly useful in rural areas and the parts of inner cities where banks have more or less disappeared.

Royal Mail has explored this option, as well as talking to leading high-street banks about allowing their transactions to be put through the network. Thomas said: 'The good thing is the penny has dropped that the Post Office plays an important part in social and financial cohesion. It keeps towns, cities and villages together. But what we don't need are platitudes. We need certainties and guarantees.'

But rival postal groups argue that many of the planned 2,500 post office closures could be averted if Royal Mail allowed other companies to use them. Royal Mail has an exclusive contract with the post offices, which means they cannot offer other services on behalf of rival companies. For example, customers sending parcels via the post have to use the group's own division, Parcelforce.

Guy Buswell, chief executive of Business Post, said: 'We would love to use the post office network for selling our services or as drop points for our parcel services. Post offices need creative ways of increasing footfall. The government has to wake up and do something to save the situation. The post offices have been neglected for years.'

Royal Mail is stipulating that in order to receive the full compensation package, postmasters cannot set up their own 'post office' for a year after their branch closes. The move is designed to protect the business of surviving branches.

The condition is set out in the agreement struck between the National Federation of SubPostmasters and Post Office Ltd in December: 'We appreciate that in the 12 months following a closure, the leaving subpostmaster may wish to offer certain products that are the same or similar to core products of Post Office Ltd (bill payment, premium mails, Camelot lottery and Bureau de Change). If the leaving subpostmaster chooses to do so there will be financial implications relating to their compensation. Clearly they cannot be paid compensation for work they are continuing to undertake by any other means.'

A report from a select committee of MPs into the Post Office closure programme published in February said Post Office Ltd must make sure the reduction in compensation is 'not excessive'. It also questioned whether it was reasonable to impose these penalties on rural post offices that are closing where the nearest branches is several miles away.

Mail Boxes Etc, owned by UPS, operates about 100 independent post offices in the UK and is understood to be furious that Royal Mail is discouraging closing branches from joining other franchises.

One postmaster, who did not want to be named, said: 'Royal Mail does not want anyone to go near the post office network.' But whether there will be a network to go near in future is uncertain: key post office contracts are up for grabs and the doubts over long-term government funding continue.

'A confused dinosaur'

The Royal Mail's prospects are bleak. Last Thursday, the regulator, Postcomm, warned it could go into administration because of its falling profits and the £28bn of pension liabilities round its neck. Because the pension scheme is £5bn in deficit, Royal Mail will have to pay up to £800m a year to cover this for the foreseeable future.

Last year, its profits fell by a third, but following last autumn's disastrous walkouts by postal workers, this year's figures will be even worse. The company itself estimates it will be technically insolvent for the next three years.

But the last thing the postal group can expect is sympathy. Whichever way it turns, Royal Mail faces a barrage of criticism.

Egged on by private-sector rivals, Postcom accuses it of stifling competition in the postal market. Yet whenever chief executive Adam Crozier tries to modernise the business to help it compete against its rivals, angry trade unions invariably rise up to block him. Postcomm regulates the price of stamps and, Royal Mail argues, forces it to provide unprofitable services

Royal Mail cannot even count on its owner - the government - as a friend. Last December, ministers announced a wide-ranging review of the postal market. When it reports this summer, the review is likely to recommend a radical restructuring of Royal Mail which could eventually lead to it being broken up.

Jonathan DeCarteret, analyst at consultancy Post-Switch.com, which promotes competition in the postal market, does not mince his words: 'Royal Mail seem more like a confused dinosaur being picked apart by a market that no longer offers a monopoly protection.'

Royal Mail makes most of its money from delivering letters to homes, mostly from companies sending out mailshots. But the growing use of email - particularly for marketing purposes - means that volumes are falling. Rival companies such as Deutsche Post and Business Post are also eating into Royal Mail's market share.

Even Royal Mail's trump card - its letterboxes and the postmen and women who make up the 'last mile' of delivery - is under threat. Most post, whether sent and sorted by Royal Mail or one of its rivals, arrives at a Royal Mail delivery office and has to be put through the door by one of its staff. This network is a natural monopoly because it is impractical to have more than one set of delivery workers.

But some rival operators say this network should be separated from Royal Mail to ensure that everyone gets fair access to it. The same could be said of Royal Mail's post office network, which could be demerged from the rest of the group's activities. Royal Mail has successfully rebuffed any such demergers in the past, but this time it may be too weak to resist.

[plodsie]

I am certain that given the chance Royal Mail could have entered the postal markets of Europe and done very well. But thanks to our glorious hero Bliar, we opened up our postal market years before anyone else has, (look at the mess and you understand why they are reluctant to do so now!) they've turned a very profitable dinosaur into an extinct dinosaur. The 'competition' complain about RM's monopoly, yet theirs remains untouched. While they've covered most of our turf, we are still in the starting blocks. It has been the same with every industry that we have allowed Europe to control, particularly our fishing one. RM is a British success story, there is no other company like us and yet our Government has thrown everything that is good in this country to the dogs of Europe, while they only seem to just s**t on our carpets and tear up our law books. Those who take pleasure at RM's demise should remember that as Europeans, whether they like it or not, no jobs are now safe. No companies are untouchable, Every industry is expendable. We are at their mercy because unlike our European 'partners' who always seem to play with their own deck, we only have one card... the Joker that is Gordon Brown. God help us all!

[pinstripe]

I am certain that given the chance Royal Mail could have entered the postal markets of Europe and done very well. But thanks to our glorious hero Bliar, we opened up our postal market years before anyone else has, (look at the mess and you understand why they are reluctant to do so now!) they've turned a very profitable dinosaur into an extinct dinosaur. The 'competition' complain about RM's monopoly, yet theirs remains untouched. While they've covered most of our turf, we are still in the starting blocks. It has been the same with every industry that we have allowed Europe to control, particularly our fishing one. RM is a British success story, there is no other company like us and yet our Government has thrown everything that is good in this country to the dogs of Europe, while they only seem to just s**t on our carpets and tear up our law books. Those who take pleasure at RM's demise should remember that as Europeans, whether they like it or not, no jobs are now safe. No companies are untouchable, Every industry is expendable. We are at their mercy because unlike our European 'partners' who always seem to play with their own deck, we only have one card... the Joker that is Gordon Brown. God help us all!

Exactly right, spot on and well said!

[Stormproof]

Planned Closures?? all the ones on the list in Kent have gone already and there was nothing anyone could do about it, the Council thought about taking action but could'nt be bothered in the end.

[saru]

A smaller article on page 2 - http://www.guardian.co.uk/business/2008/mar/30/post

Post offices face sell-off to rival firm
Tim Webb and Nick Mathiason The Observer, Sunday March 30 2008

Royal Mail could be forced to hive off its network of post offices under proposals being considered by the regulator, Postcomm.

It has also emerged that Royal Mail has told the estimated 2,500 postmasters and postmistresses whose post offices are closing that they will not receive the full compensation package if they set up their own rival independent branches.

In December the government ordered a wide-ranging review of Royal Mail and the postal market. Postcomm, which will make its full recommendations later this year, is concerned that Royal Mail's stranglehold over the post office network is stifling competition. Post offices are currently not allowed to offer services from rival postal operators, such as package deliveries.

Tim Brown, director of market development at Postcomm, said: 'We are looking at whether Post Office Ltd should be demerged from the rest of the business.'

But the National Federation of SubPostmasters argues that opening up Post Offices to competition will result in even more closures.

Some postmasters and postmistresses stand to receive as much as £50,000 compensation from Royal Mail. But the agreement, brokered in December, made it clear that this would be reduced - by up to £10,000 - if they started their own business within 12 months. Royal Mail said that this was designed to protect its surviving branches.

Mail Boxes Etc, which operates about 100 private-sector postal branches in the UK and is owned by UPS, said postmasters had been 'frightened off' from joining its franchise as a result.

Simon Cowie, chairman of Mail Boxes Etc, said: 'It is disturbing to see a state-owned monopolist deliberately restricting services to local communities in order to protect itself from competitors which are minuscule by comparison.'

A Royal Mail spokesman said the group would resist any attempt to demerge the post office network.

This weekend the National Federation of SubPostmasters is warning that thousands more post offices face closure if the government awards a lucrative contract currently held by the Royal Mail to the private sector.

Bids to run the card account contract, which issues pensions, tax credits and disability payments to 4 million people every week, are due to be submitted on Monday. Paypoint, Alliance & Leicester and Citigroup are expected to be among the firms vying to win the work.

If post offices were to lose this contract, the service would find itself under even more financial pressure. Post offices rely on card-account transaction payments to subsidise other, less profitable, services. A decision on who wins the contract will be made in the summer.

[Darren Bent]

ebayers will have a serious problem if they can't use post office to send parcels. This mean lot of income lost. Let say 1.50 for every packet x 250,000 every day that could be about 375,000 pounds lost each day. So this means it lose one hour of pay every day for every postman on average.

[Night Tonic]

It might but certainly a lot of ebay sellers (particularly power sellers) use Royal Mail because the VAT difference makes many other operators an unaffordable choice. There are lots of new services springing up that do parcel collection services that are only marginally more exensive than us because they're having to charge VAT. Once this is the same across all those in the parcel game (and will be soon), we'll lose a lot of that work anyway. Germans have it right with 24 hour parcel stations - pain in the rear in this country for anyone trying to work round delivery office opening times.

[DGP1]

It might but certainly a lot of ebay sellers (particularly power sellers) use Royal Mail because the VAT difference makes many other operators an unaffordable choice. There are lots of new services springing up that do parcel collection services that are only marginally more exensive than us because they're having to charge VAT. Once this is the same across all those in the parcel game (and will be soon), we'll lose a lot of that work anyway. Germans have it right with 24 hour parcel stations - pain in the rear in this country for anyone trying to work round delivery office opening times.

Will you stop going on about the VAT advantage, all prices in the commercial sector are quoted WITHOUT VAT so unless you're Joe Public the VAT makes NO difference

VAT is only a red herring so please stop about it.

[Night Tonic]

Well clearly its not because the intention is to lower it across the board. I can't see them doing that if it was, as you say, a red herring.

[DGP1]

The only people who pay VAT are the end users (ie. the general public) all business are able to claim back and charge on. If RM are to lose their VAT exemption then it would enable them to claim VAT back on all of their purchases (can you imagine the VAT on all the fuel used within the RM group?) instead of writing it off as an expense.

[POSTMAN]

I've just sold an old pair of pants on eBay,so when i sell the other pair i've got and the VAT thing is sorted,can TNT pick it up then?