BILLYS BLOG - SPEECH TO MP’S BRIEFING

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On behalf of the CWU welcome to this briefing.

In my remarks I want to give an overview to our policy, whilst my colleague – Dave Ward – will go into some more detailed questions.

The Hooper Report is now long anticipated, and its publication will open a serious debate about the future of the postal industry.

From our dealings with Hooper’s Team, we have been alarmed at the potential direction of the report.

But I do not intend to second guess; rather I wanted to lay out our view on the main developments.

Firstly, there has been a slow down in the use of letters internationally. This decline is uneven – with some national post operators continuing to grow.

But it is unclear how far this is due to the international recession, and how far it is due to other factors such as E Substitution.

What we do know is that in the recessions of 1980/1 and 1991/2, Royal Mail entered the recession early and exited early. Doubtless this is linked to the high proportion of mail which is essentially advertising.

What we cannot accept is that there is a perspective of terminal decline for mail.

On the contrary, we know that some categories of mail – parcels, packets, and business to customer mail generally, have a very healthy future. Certainly the internet is prompting new uses of these categories of mail.

We also know that the service provided by postal operators has an impact upon demand. The more the operator innovates, the more the take-up by customers.

In our view – Royal Mail continues to fall behind in service innovation.

It is now deploying technology which has been deployed by rivals for several years. This is a direct result of underinvestment in the industry, and management inertia.

More worryingly, there is a further generation of technology and services which other postal operators, or competitors, are developing.

For example, hybrid mail – where customers send computer data which the postal operator then turns into physical mail via printing, enveloping and delivery.

Royal Mail has not really caught on to this yet, unlike other national providers, and unlike UK Post / Business Mail.

Another example – US Postal Service is introducing ‘intelligent mail’. This is a system where items in a bulk mailing can be identified via track and trace throughout the postal network, up to and including up to the point of delivery. This is a fantastic marketing tool which Royal Mail is not yet seeking.

Or for new services – La Poste, the French postal service, is providing home collections which is linked to the growth of internet trading. Again such new services are not being pursued by Royal Mail.

Now the inevitable response from someone, perhaps the Hooper Team, will be to suggestion that privatising Royal Mail, perhaps via a joint venture, will introduce a discipline of innovation for the industry.

Yet privatised companies are also facing similar problems for Royal Mai:

 TNT – the privatised Dutch postal operator – registered serious losses in October.
 DHL – the privatised German postal operator – is withdrawing from the US express market with massive losses.
 Austria Post – which is 49% privatised – has just withdrawn its business plan – after Government vetoed proposals to close 77% of its post offices.

Nor is it all one way traffic towards privatisation:

 The French Government has decided not to sell off 30% of La Poste by January 2010.
 The United States Postal Service will not be privatised, nor have its monopoly withdrawn.

And in Europe, the recession is impacting upon liberalisation process.

Only four of the twenty seven EU members have fully liberalised markets – Finland, Germany, Sweden and the UK.

A number of Governments are pushing back liberalisation:

 The Dutch Government has decided against lifting TNT’s monopoly on items of less than 50 grams.
 Slovakia Post – supported by the Slovakia Government – is challenging the EU’s right to abolish its hybrid mail monopoly.

The recession is making Governments aware of the value of retaining industries and services in the public sector.

I certainly hope the Labour Government registers the value of Royal Mail for promoting economic and social development. Even if Hooper comes up with old dogmas about privatisation.

Of course, ownership issues are not the only ones we must examine.

The pension’s deficit is very serious. But there have been indications from the Labour Government – certainly from Government representatives at the Warwick National Policy Forum – and from BERR representatives – that the Government does have responsibility for Royal Mail’s pension deficit.

For the company to go forward this has to be addressed – this would immediately give the company around an extra £280m capital a year if the Government resolves the deficit.

Certainly the company cannot be a success without the Government taking its responsibility for the deficit.

This is peculiar to Britain. The United States Postal Service made a net loss last year of $2.81b. This was in part due to a payback of $5.6b to retiree’s health benefits.

Indeed from the next ten years the US PS has to pay over 5 billion dollars each year to correct the deficit.

There is a considerable lobby in the US to get Congress to resolve this issue.

So we expect the Government here to resolve the problem.

Equally we expect the Government to end the unfair competition rules that the regulator has imposed upon Royal Mail.

Ten EU Countries have established mandatory access to their national postal provided networks.

Only in the UK is the access price exclusive of maintenance costs for the network that provides the USO.

Only in the UK is the access headroom arrangement in place which effectively subsidies the competition.

If there is to be fair competition then the competitors must pay a fair price. And Royal Mail has to be freed from a position where it cannot win a contested access contract.

Finally, on the future of the Post Office Branches – the CWU like most of the country – was delighted when the Government set aside the tendering process to award the Post Office Card Account to Royal Mail.

We are equally delighted that the Government is considering ways to increase the financial services offer through Post Offices.

We hope the Government will join us in working towards the Post Office delivering a People’s Bank.

It is good that the Government wants also be examine what local and national Government services can be delivered through the Post Office.

This is a sensible shift – the Post Office is a trusted brand in difficult times. We will be preparing proposals for the Government to illustrate that there is a comprehensive future for the Post Office Branches.

But – the Government must reject the proposal from Postcomm to separate the Counters Network from Royal Mail. This would actually jeopardise the Universal Service Obligation. As it would inevitably reduce the access points to Royal Mail for domestic customers.

There are many areas we need to debate – and so I will hand you over now to Dave Ward.

Thank you for listening.

[DGP1]

The Dutch Government has decided against lifting TNT’s monopoly on items of less than 50 grams

Well they can hardly moan to much if the UK government kicks them out but knowing our wonderful leaders they'll give them even more

The whole competition thing has been a debacle for everyone involved, RM have to deliver more for less money and the DSA companies can't create an end to end network because there's not enough business around for it to be financially viable.