Examination of Witnesses (Questions 20
WEDNESDAY 13 FEBRUARY 2002
20. Would there be any harm in reducing it down
to 50 pence?
(Mr Stanley) We think the first and best
way to go is to open up large mailings, as you have seen. The
question is should you do other things as well, and I think for
the moment we worry that it will just be an another straw on Consignia's
back. Eventually, of course, we will indeed, if our proposals
go through, reduce it down to zero grams.
21. You have just contradicted yourself. There
is no demand for it to go down and yet it will be the final straw
on the camel's back for Consignia. I do not see how it could be
(Mr Stanley) Perhaps you are right, it
is something we could do. Certainly throughout Europe the limit
will be coming down in 2003 and 2006 to 100 grams and then 50
grams. I have no doubt we will follow that in one way or another.
(Mr Corbett) I think in the two-step process towards
total liberalisation we are proposing in our document, we have
felt it was very important to be able to define pretty clearly
the extent of the market opening so that Consignia could gear
themselves up to cope with it. We recognise that the challenge
we are setting Consignia in moving to a totally liberalised market
over a four-year period is a serious challenge. They need to be
able to gear themselves up to it and the more scatter gun approach
to liberalisation, the more difficult it is, frankly, for Consignia
to know how they should be responding. We felt that the process
of going into clearly defined areas of the market and consolidation
gave Consignia the opportunity to do that. So we rather turned
our minds against dropping by price and weight, as it would be
extremely difficult for anyone to really judge in advance quite
what the effect was going to be.
22. You were not influenced by the trade union,
because they put a lot of pressure on not to reduce it to 50 grams?
(Mr Stanley) I am worried we might be
slightly at cross-purposes because the large mailings we are opening
up are, of course, taking it all the way down to zero pence and
zero grams. We were not influenced by the unions at all.
23. I understand that. I am talking generally.
The Communications Union did not have any influence on your decision
not to recommend?
(Mr Stanley) Not at all.
24. What is your view about the discrepency of
VAT treatment between Consignia and their competitors?
(Mr Stanley) It is an issue that we have
yet to look at in detail. Basically we would like to see parity
of VAT treatment, but inevitably it is a matter for the Chancellor.
25. What about the privileges that the Royal
Mail have so far as traffic wardens and traffic regulations are
concerned? They can stop on double yellow lines to empty the post
boxes or deliver packages whereas TNT cannot? Is that fair?
(Mr Stanley) In principle we would like
to see equality of treatment.
26. There are many references in the Report to
the difficulties faced in obtaining information from Consignia.
Why are Postcomm facing these difficulties? Are Consignia being
(Mr Stanley) Bluntly, they do not have
the information themselves. Not having had to face competition,
not having had to operate in the world they are moving into, they
simply did not have the systems that would have provided the information.
27. What kind of information are they saying
they do not have?
(Mr Stanley) It is basically the cost
information and in particular attributing costs to income streams.
It is a slightly difficult business when you think about it. A
lot of us go and buy stamps but it does not mean that we are immediately
posting letters, so there is no immediate link between a payment
and the taking of a service, so there are all sorts of difficult
problems which I am not an expert in but which I am assured are
there which do cause them real problems in answering the Regulator's
questions. We are not critical of them but we are putting them
under quite a lot of pressure to improve their systems.
28. What proportion of domestic post is delivered
to customers by 9.30 am?
(Mr Stanley) I do not have the figure
in front of me but we could certainly find out. Essentially in
towns and cities they aim to deliver by 9.30, not country wide.
Most are delivered by 9.30.
29. That is not my experience either in my flat
in London or, more importantly, my home in Bognor Regis, the town
which might ring a bell because it is referred to on page 40 of
this Report. I went on a shift at Bognor Regis sorting office
from 5 am through to the end of the shift. I do not know if you
know the life of a postman but they get there for 5 o'clock and
they then have to sort the post into the different slots for the
street numbers and streets. When it is all sorted then they can
head out on the round. I got there at five o'clock. We did not
leave the sorting office until nearly 8 o'clock because of the
volume of post the postmen had to deliver. There is the same number
of postmen at that sorting office as there were ten years ago
yet the volume of post has increased hugely. Because we did not
leave until 8 o'clock we could not get it delivered by half past
nine. It was nearly 11 o'clock before we had it delivered. This
is a regular thing in Bognor Regis. How widespread do you think
this is across the country in terms of early morning delivery?
(Mr Stanley) I think what is interesting
about Consignia's performance is that it is very patchy. The number
of people you could meet and that write to us and say, "Our
service is wonderful. We have wonderful postmen and postwomen.
Never a letter been lost. What on earth are you doing to our great
national service?" Equally, lots of people complain to Postwatch
and also to us about the sort of thing you say. What is obvious
is that there are pockets of difficulty. It is not always obvious
why the problems should be in particular pockets but there was
a very serious problem around London where Consignia are having
difficulty recruiting the right number or the right quality of
30. How does cutting 30,000 staff help this recruitment
(Mr Stanley) I do not think there is
any question of them cutting staff in Bognor and places like that.
We could talk at great length about the efficiency savings they
could make, but I do not think anybody is seriously suggesting
that they are in the final delivery system. As you know and I
know, those poor men and women are carrying ever larger numbers
and ever heavier sacks year by year. Was it in the summer you
were in Bognor?
31. Yes it was.
(Mr Stanley) We understand that the Bognor
problem is very seasonal. It is easier, for obvious reasons, for
them to recruit and retain people during the winter and they do
have serious problems during the summer.
32. Would you come with me on a round in Bognor
(Mr Stanley) I would love to.
33. Starting at 5 am together. I will arrange
(Mr Stanley) I have done it before and
I will do it again.
(Mr Corbett) We have all done it.
34. I will take you up on that because the postmen
and women there do work extremely hard. The volume of post has
gone up. Sky Television manuals come out on a Tuesday and all
the junk mail the Chairman referred to and yet the number of postmen
and women in that office has not increased, so you are going to
have those problems. Thank you for that. Changing the subject
completely, what will Postcomm's attitude be to continued losses
by Consignia? Will they be allowed to put their prices up or will
you just allow those losses to continue year on year? It seems
to be an unfair competition vis-a"-vis the private sector.
No private sector company can survive with losses year on year.
What is your attitude to those ongoing losses?
(Mr Stanley) Let me give a top level
answer and Graham will no doubt add to it. One of our roles is
to make sure that the monopoly does not make excessive profits.
35. No chance of that at the moment!
(Mr Stanley) There is not much chance
of that except that we are supposed to assume an efficient operator.
We could discuss whether if Consignia made a number of changes
to its operations, it would start making profits as a monopoly.
Subject to that, we do not have an influence over the losses in
Parcelforce or the counter network. If the shareholder, ie the
taxpayer, is willing to carry on funding those and if the OFT
is willing to say they do not break competition rules, we do not
have a role.
(Mr Corbett) The point you raise is absolutely fundamental
and central to a lot of the work we have been doing. One of the
conclusions that drives our recommendations is that the greatest
risk to universal service, and indeed to Consignia itself, is
if everyone sits still and does nothing. Given that we are satisfied
that the way in which you propel Consignia into bringing those
efficiencies about is by bringing in competition, that is the
way that we think we actually make the greatest contribution to
the preservation of the universal service. The Chairman asked
the question earlier about the extent to which the public ownership
of Consignia actually limits the extent to which it is likely
to respond to pressures being put upon it. If the only tools in
our tool kit were the Regulator's tools of price controls and
enforcement actions and fines, I think that would be a very, very
grave concern. We recognise, and the NAO recognised in their Report
that those sorts of mechanisms are likely to be less effective
with a public sector body. The thing that we do not believe would
be less effective is the risk of seeing your market being taken
away by competitors. That is the moment at which you really start
to affect people's livelihoods and that is the moment at which
you will get action.
36. But how can competition flourish if you have
got a major competitor in the market generating hundreds of millions
of pounds of losses every year?
(Mr Corbett) To the extent those losses
are the consequence of inefficiency then the
37. If there is a lack of a management information
system, how do you know it is not just predatory pricing? How
do you know it is not just having the wrong price and just under-cutting
(Mr Corbett) Clearly that is one of the
exercises that we need to do. You will see references in our Report
to not only Consignia's assessments of the economies and savings
it ought to make, but the support that we have received for those
assessments from the studies that we commissioned from Frontier
Economics and WS Atkins. All of those studies point in the direction
of the potential for savings of the magnitude that Consignia themselves
have indicated, 1.2 billion, and two and a half per cent per annum
38. Do you think that Consignia should be in
the private sector?
(Mr Corbett) I do not believe that that
is a matter that is appropriate for us to consider. Parliament
decided at the time that it passed legislation that it wished
Consignia to remain in the public sector and public ownership,
and unless, and until Parliament decided otherwise
39. If you do not want to answer that question,
do not answer it.
(Mr Corbett) I think I have answered
Mr Gibb: That is it.
Chairman: Thank you, Mr Gibb. Geraint Davies?