Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 280 - 299)

MONDAY 25 MARCH 2002

MR JOHN ROBERTS CBE, MARISA CASSONI AND MR STUART SWEETMAN

  280. Surely this is the central issue of all of them about the USO and the whole debate about which services are threatened, the question of whether or not urban is supporting rural as is the prevailing scent, although I do not accept that necessarily. The argument is the urban service is supporting the rural service. Why do you not know the difference in unit costs between the two?
  (Mr Roberts) I do know the difference, Mr Trickett, it is just that we do not have the information with us.

  281. Surely you have it in your heads?
  (Mr Roberts) No, I do not carry it in my head in an £8 billion business.

  282. Why not?
  (Mr Roberts) Because in an £8 billion business you do not carry that sort of information in your head.

  283. I find that absolutely extraordinary. I find it absolutely extraordinary that we do not know the difference. Can I impart my experience which is that I represent an area with a lot of villages, as many of us probably around here do, and you provide a wholly inadequate service to the rural villages which I represent. The fact is there is not a really universal service provided at all across this nation. You provide two services, one to urban dwellers and a much poorer service to the rest of us. I rather think the people of Hemsworth are subsidising the recipients of Leeds and the fact that you do not know whether or not that is the case is significant, is it not?
  (Mr Roberts) The organisation knows and the organisation will know. I do not happen to have it in front of me as I am in front of you today.

  284. Are you able to tell us? Give us a guess?
  (Mr Roberts) No, I am not going to guess.

  285. You have no idea at all?
  (Mr Roberts) I do not have the numbers in my head, no.

  286. Can I ask your colleagues, do they know?
  (Ms Cassoni) We publish our regulated accounts which break down our costs in a particular way. I think you are asking us what the different costs of the different products are.

  287. I am suggesting to you that urban areas receive two deliveries a day, the first of which is early in the morning, rural areas get a delivery, if you choose to deliver it, at whatever time of the day you choose to deliver it. It does seem to me that people of my constituency actually are subsidising the larger urban centres close by. Leeds needs to do well, it is my old city so that is not a problem. I rather resent the suggestion that you should be cutting rural services or maybe it is the rural burden which is crushing the post office when you cannot demonstrate that you even know.
  (Mr Roberts) I do not think anybody is saying that the rural burden is crushing the post office. Certainly we have not suggested we are cutting any rural services.

  Jon Trickett: The Committee might be interested to receive any statistics you can provide us with in relation to that.[3] I think I have asked you three questions, one on overheads—

Chairman

  288. Are we agreed on that, can you help?
  (Mr Roberts) Certainly.[4]

Jon Trickett

  289. Private sector comparators, rural/urban split and overhead direct cost ratios and so far we have not had much success, have we really? I want to ask you about Postcomm which strikes me as a rampaging elephant really, a rather clumsy one as well. I notice that Postcomm do not have a single member of staff where they need to, with direct experience at all of the postal business. What is your view of the motivation behind Postcomm's desire to proceed almost at reckless speed in relation to this matter? Why do you think they are doing this?
  (Mr Roberts) I think Postcomm have been set up with a clear mandate which is to introduce competition. They are doing that, I think, in the way that they think best. You have heard some of my discussion this afternoon around why I do not think that is the right way to go but I cannot really go any further than that. All we are clearly being told is that is their view, the Commission's view, about the right way to introduce competition and the right way therefore to improve the industry.

  290. I do not accept what you have just said. We can see on page 19 the duties of Postcomm are quite clear. The duties of Postcomm, the primary objective is to safeguard the universal postal service ".  .  .at a geographically uniform and affordable tariff". Its secondary function is to exercise its ". . . functions in a manner best calculated to further the interests of postal users . . ." and then it says ". . . wherever appropriate by promoting effective competition". You said its primary function was to bring about competition.
  (Mr Roberts) Sorry. You asked me what I thought their motivation was?

  291. Yes. Why are they allowing a secondary statutory objective—
  (Mr Roberts) I do not know, I think that is a question you may already have directed to Postcomm.

  292. I am wondering what you think.
  (Mr Roberts) Yes. What I was about to say is I think at the moment they have focused all their attention on that. In terms of why they are doing that, I do not know. Certainly everything that we have seen, and Mr Sweetman described to the Committee a few minutes ago that we thought they may have got the order wrong in looking at the USO later than looking at the competition and to that extent we would prefer them to look at the USO first and then look at competition. They have chosen not to do that and all I can think—and this is me trying to speculate about their motives—is they believe that by introducing competition in the way they have produced that is the best way to go about their role.

  293. Certainly I think something needs to happen to check out the complacency. I would have expected you to say that this is an inappropriate reading of the statutory functions which Parliament imposed upon Postcomm. You have said their statutory duty is to bring about competition. Would you agree that is not the case?
  (Mr Roberts) I actually said I thought that was what they thought.

  294. I see.
  (Mr Roberts) I think we set out to you earlier on, Mr Sweetman read it into the record, I think, what we thought was their primary role and their secondary role which is very much in line with this.

  295. I have two minutes left, if I may. I want to ask you about the USO. It is going to be reviewed. I do not believe we have a universal service, in fact I know we do not. I am sick of complaining to yourselves and failing to get responses about the poor service to business people and domestic customers in my patch. What do you think should happen to the USO? How do you believe it should be redefined, if it should be redefined at all?
  (Mr Roberts) I do not think that universal service should be redefined. I think that every post office in the world, all developed countries, provides a universal service. I think the universal service in the way that it is defined in the Act is fine. At the moment in spite of your views, and doubtless you have had experience in your own patch, we are providing services well above what the Act defines as the universal service so to that extent the Act defines a minimum and in many ways we are operating above that minimum in terms of the number of deliveries and other things that we do. I think the Act as a minimum sets out one delivery a day throughout the whole country, collections and everything else. I think that is a minimum and I think we ought to be trying to do better than that which we are. That is the whole aim for us.

  296. Can I ask, finally, about your rebalancing prices which we have just heard about a time ago. Rebalancing prices, which is your expression, implies differential pricing structures for different types of markets. In a sense that is in contravention of the USO, is it not? I just wondered if you want to say any more about your views in relation to that?
  (Mr Roberts) I think over the years—I will bring colleagues in—prices in some places, some products, some weight steps have got out of kilter with costs. Because we have had a uniform pricing we have had basically price averaging based on cost averaging, that tends to happen. If in fact the uniform price in particular is going to come under threat in the way that Mr Sweetman was describing earlier, then we would want the opportunity to look at certain products. I do not think it affects the universal service, in other words that service would still be provided. To go back into the discussion again about the uniform price and whether that can be maintained, our view is that we would prefer to maintain a uniform price, if that comes under attack that is the point at which we might want to propose some price rebalancing.

  Jon Trickett: I have had my final warning.

Mr Osborne

  297. If I can return to the job losses because certainly I have been confused by the answers you have given both to Mr Davies and to the Chairman. As I understand it, you have announced 15,000 job losses today.
  (Mr Roberts) Yes.

  298. You expect the total package to be around 30,000?
  (Mr Roberts) 30,000 redundancies, yes.

  299. However, if there is further liberalisation there could be up to 15,000 more as a rough guess?
  (Mr Roberts) I was invited by Mr Davies to try and do a calculation which I am slightly reluctant to do because I think it can mislead but if you are just assuming that all that £750 million had to come out of the cost base and it was staff, that is what it would roughly equate to.


3   Ev, Appendix 2, p 51. Back

4   Ev, Appendix 2, p 51. Back


 
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