MPs call for Ofcom powers to improve postal standards

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The regulator Ofcom should be given new powers to prevent a “race to the bottom” in pay and conditions among postal workers, a committee of MPs said today.

Politicians on the Business, Innovation and Skills Select Committee criticised rivals to newly privatised Royal Mail – highlighting Whistl for a “disproportionate” use of controversial zero-hours contracts among employees – in a report on competition in the sector.

The CWU postal union’s strong membership within Royal Mail has secured better terms for workers, although 48 per cent of Whistl’s staff are on zero-hours contracts, the report said. That has put Royal Mail at a competitive disadvantage to many other rivals in a cut-throat market, which saw City Link collapse last Christmas with the loss of 5,000 jobs among staff and contractors.

Ofcom currently has no mandate to comment on pay or conditions in the postal market, but MPs want the watchdog’s remit extended. The BIS committee chairman Adrian Bailey said: “We need to ensure greater competition in the postal sector does not lead to a race to the bottom in terms of the pay, terms, and conditions of postal employees. We also call on Ofcom to investigate the impact on customers, and the service provided to customers of any downward pressure on wages, terms and conditions of postal sector staff.

“To help guard against any downward pressure on the wages and conditions of postal staff, we recommend that Ofcom is given greater powers to comment on labour conditions and standards in the postal market.” The trade union Unite welcomed the move and also called for the outlawing of zero-hours contracts.

The committee said the universal service obligation, under which letters are delivered for the same price anywhere in the UK, was not under “immediate” threat. But it warned that market conditions were changing “rapidly” as rivals cherry-pick more profitable business. MPs want the regulator to provide regular quarterly updates on the viability of the universal service, and be prepared to act at short notice with new obligations on postal operators should it be at risk of failure.

Royal Mail said it shared the “committee’s concerns that Ofcom may not be able to respond fast enough to avoid a failure in the universal service, even in the short term” and welcomed the report.

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An influential committee of MPs has called on the postal regulator to show that it can react swiftly to changes in the postal market.

The Commons Business, Innovation and Skills Committee (BIS) said Ofcom had to perform a "balancing act" between encouraging competition and preserving the universal service obligation (USO).

This ensures that letters are delivered for the same price anywhere in the UK.

MPs said the regulator may need extra powers to protect the service.

While MPs said the USO was not under immediate threat, they warned that market conditions were changing rapidly.

Labour MP Adrian Bailey, who chairs the committee, said: "The fundamental principle of the universal service must be upheld. Ofcom need to move quickly to respond to any threat to the universal service and the Government should look to make changes to the regulatory framework to ensure Ofcom has the tools to do the job."

'Changing quickly'
The committee members called for accurate costings of the USO, along with a geographical breakdown of where it was profitable.

"Ofcom has a difficult role in ensuring the provision of a universal service is both financially sustainable and efficient," Mr Bailey said.

"The postal sector is changing quickly, with declining volumes of letters, and a sharp increase in parcel volume arising from the rapid growth of internet shopping."

Ofcom said it was pleased that the committee agreed with the regulator and did not think the universal postal service was under threat.

"If we identify a future threat, we have powers to step in quickly to protect the needs of UK postal users," a spokesman said.

Royal Mail said it shared MPs' concerns that Ofcom may not be able to respond quickly enough to avoid the USO failing.

Following the collapse of City Link over Christmas, Mr Bailey said it was important that greater competition in the postal sector did not worsen pay, terms and conditions for postal workers.

Royal Mail endorsed the committee's recommendation that the government considers extending Ofcom's remit to include consideration of labour costs, conditions and standards in the postal sector.

The company listed on the London Stock Exchange in October 2013. After rising above 600p early last year, the share price has since fallen by about 25%.

On Wednesday, Royal Mail shares closed at 437.6p, up 3.6%.

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It is the responsibility of central government to ensure that legislation is in place to ensure that employees are not exploited, it is not the role of a postal regulator.