Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 380 - 399)

MONDAY 25 MARCH 2002

MR JOHN ROBERTS CBE, MARISA CASSONI AND MR STUART SWEETMAN

  380. So when you say just under eight billion is that incorrect?
  (Mr Roberts) Yes, it would be incorrect.

  381. It is not just under eight billion?
  (Mr Roberts) No, it is just over eight billion.

  382. 8.4 is quite a lot over eight billion, it is 500 million, which happens to be the amount of money you were making a few years ago. Just to be clear: your total revenues are £8,400 million?
  (Ms Cassoni) That is what the forecast for this year is.

  383. What were they five years ago?
  (Mr Roberts) I would say they would have been around £7 billion five years ago, six point something to seven.

  384. Six point something?
  (Mr Roberts) Yes.

  385. They have gone from six point something to 8.4 billion in the last five years. What has happened to your costs over the same period?
  (Mr Roberts) Our costs would have increased slightly more than that because in the first period we were making profits, in the second part of that period we were making losses and I would have expected our costs to have gone up. We are now at what?
  (Ms Cassoni) About the same £8.4.

  386. Which is why you are making a loss? You see the concern again, it goes back to what Mr Osborne was saying earlier, is that you have been letting costs rip out of control while faffing around with things like changing your name. How do you respond to that?
  (Mr Roberts) I do not accept that at all. We had one year when we made losses and in that year we had a large increase in costs, part of the reason I was starting to explain there. Some of those costs were within our control, and we put them up with our eyes open, which was the new package of Working Practice Changes where we paid an upfront sum to the union, some of them were outside our control, which was the new agreement with all the European postal nations which we are under the aegis of the Commission for which added £137 million to our costs. We had a decision over automating Counters which cost us nearly £100 million in additional operating costs once that decision had been taken which was a decision which came out of a Government study. We had increases in fuel costs. I could take you through the whole lot to a billion pound increase in costs.

  387. I have some figures from Postwatch, the consumer watchdog, which suggest that over the last five years your costs have risen by 13 per cent on average while your revenues have grown by only three per cent. Does that sound about right?
  (Ms Cassoni) Over which period?

  388. The last five years?
  (Mr Roberts) No.
  (Ms Cassoni) That is not correct. If I put it differently. I do not know those figures because I was not here five years ago but basically over a period of the 1990s the revenues were growing, principally in the mid 1990s, in real terms at about four or five per cent and the costs were growing at under two per cent.

  389. Let us think about cash. Would you mind sending us a note?
  (Ms Cassoni) We can give you the amounts.[6]

  390. Would you explain exactly what has happened in percentage growth terms to the costs and to the revenues over the last five years. If you could let us have a note about that afterwards I would be very grateful. Mr Roberts, when you bought City Mail in Sweden what did you pay for it?
  (Mr Roberts) I am sorry offhand I have not got that figure in front of me. Sorry, I am told £26 million.

  391. That was for both the stakes you bought a few years ago and the increase in the stake?
  (Mr Roberts) That was the whole lot.

  392. When you sold it to Norway Post, what did you sell it for?
  (Mr Roberts) About £16 million. We lost about £10 million on that deal.

  393. Why did you sell it? It was losing money, was it?
  (Mr Roberts) It was losing money in the end, yes.

  394. You have had another overseas venture, have you not, looked at by this Committee, German Parcel?
  (Mr Roberts) Yes.

  395. How is that going?
  (Mr Roberts) That is making money.

  396. How much money is it making?
  (Mr Roberts) I would rather not say openly because we are very competitive with both the Germans and the French but it is low double figure million pounds worth of profit.

  397. It is profitable?
  (Mr Roberts) Yes.

  398. I would like to ask another question on profit. Postcomm's Report, the main one, on page 34 says all the routes, different delivery densities, city centre, urban, suburban, rural and deep rural make an operating profit, is that correct?
  (Mr Roberts) I do not think that is so.

  399. I have a summary which it gave to the Committee. It struck me when I read it—this is the summary of the Postcomm Report—it says "Rural and deep rural locations are both contributors to operating profit", is that correct?
  (Ms Cassoni) I think contributors, ie making a contribution, is different from being profitable. I think it means it makes a contribution.


6   Ev, Appendix 2, p 52. Back


 
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