RM says 'severe cash constraints' mean it cannot pay....

[POSTMAN]

Royal Mail says 'severe cash constraints' mean it cannot pay customers hit by strikes

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Royal Mail is facing such a dire financial crisis that it cannot afford a bill running into tens of millions of pounds in compensation and penalty payments from last year's postal strikes.

Royal Mail is liable to have to pay out tens of millions of pounds to businesses customers whose mail was caught up in the backlog of 30 million letters and parcels between June and November last year.

But Royal Mail has asked for compensation to be waived because of 'severe cash contraints.'

The request, which will be made in person to the regulator by Royal Mail managers next week, gives an indication of the scale of the financial problems facing Britain's national postal service.

The Daily Telegraph revealed last week that ministers are considering urgent plans for a part-privatisation of the company, possibly by floating it on the Stock Exchange.

Ed Davey, the postal affairs minister, said: “The truth is that Royal Mail’s situation, if nothing is done, will become increasingly dire.”

The company says it cannot afford to pay £36million to customers, or absorb a £51 million penalty for the strikes which PostComm, the industry regulator, could impose as a revenue cap.

Royal Mail warned that, if it was forced to make these payments or lose extra revenue, it will have to suspend a £2.1billion modernisation programme which is vital to the future of the business. So far £1.6billion has already been spent.

The company argues that it should be exempt from the payments because it did its best to avoid the strikes, which were called by unions because of a row about pay and working conditions.

In a 150-page submission to the regulator, Royal Mail warned three times that it is facing "severe cash constraints" which mean that it could not fund its modernisation programme and pay the compensation.

It said: “Currently Royal Mail faces severe cash constraints, such that without relief from the effects of quality of service failures caused by IA [Industrial Action], it would be unlikely to be able to continue with its planned transformational changes.”

In its submission it also disclosed that the stoppages, which ran from 19 June to 5 November, meant that it lost 267,785 working days to strikes last year.

The strikes helped Royal Mail to miss six out of its nine performance targets last year, with one in eight first-class letters arriving late.

Royal Mail is required to deliver 93 per cent of first class letters on the next day and 98.5 per cent of the second class post within three working days.

Although Royal Mail made a £404million profit in the 12 months to the end of March, it paid twice that figure into its pension scheme, which is up to £10billion in the red.

Ministers are currently weighing up whether to sell a stake in Royal Mail or to float the business on the London Stock Exchange.

Former plans by Lord Mandelson under Labour to part-privatise the company were seen off by the CWU postal union and Left-wing Labour MPs.

Last week Ed Davey, the Postal Affairs minister, told The Daily Telegraph: “If we don’t transform Royal Mail, it will be dragged down by a lethal combination of falling mail volumes, low investment and potentially one of the worst pension crises for employees in UK history.”

A Royal Mail spokesman said: “This is a formal request for Postcomm to limit potential financial penalties against Royal Mail due to the damaging impact of last year’s industrial action on Quality of Service - and to recognise that any industrial action, or the threat of it, should not be allowed to hamper Royal Mail’s much-needed modernisation which is clearly in the interests of all our customers.”

A spokesman for Postcomm said: “Royal Mail has submitted an application to Postcomm to suspend the Bulk Mail Compensation Scheme, and for a dispensation from the quality of service adjustment factor, for the year 2009-10.

“Royal Mail will present its application at a meeting hosted by Postcomm on 22 June.

"Major stakeholders in the postal market have been invited to this meeting and will be given the opportunity to ask Royal Mail questions about this application.

“This will help ensure Postcomm has appropriately considered the views of all interested parties before it makes its decision.”

Robert Hammond, head of Post and Digital Communications at Consumer Focus said: "There may be a case for suspension of the bulk mail compensation scheme following industrial action last year, but only if it is proven that the strikes were consequences of the ongoing Royal Mail modernisation programme.

"However, this process must be properly scrutinised to ensure Royal Mail’s bulk mail customers are being treated fairly."

[stokes11eg]

Ah Ha, so they did have a plan B--get rid of the staff first, on the promise of modernisation, plead poverty, don't modernise, but do not replace staffing levels! As for paying tens of millions of pounds in compensation-- usually it's a book of stamps¬

[oypostie]

How about they use the boards bonuses to pay the compensation. After all, they surely won't be entitled to a bonus as so many targets have been missed

[andy2007]

How much profit did we make again?
Trust RM to BS their way out of paying what they owe people!

[fishtank]

How much profit did we make again?
Trust RM to BS their way out of paying what they owe people!

Our bulk mail compensation scheme (the Industry Compensation Scheme for Delay) came into effect on 1st January 2004 and applies to all postings of the products listed below:

1st and 2nd Class Printed Postage Impressions (PPI) (including Packetpost and Cleanmail)
1st and 2nd Class Response Services
Mailsort 1, 2 and 3 (including Walksort)
Presstream 1 and 2
This compensation scheme is set out in Postcomm’s Standards of Service Compensation Scheme decision of 7th October 2003.

The financial year 2009/10 is therefore the final one in which Bulk Mail Compensation is regulated by Postcomm. From April 2010 Royal Mail’s own scheme for compensation of Bulk Products, will apply.



One final flex of postcomms muscle maybe?