Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 420 - 439)



  420. It is possible they want it back.
  (Ms Cassoni) We have to discuss how we would restructure the balance sheet efficiently in terms of debt and cash.

  421. You have got 1.8 billion quid there and potentially, depending on what Government said, you could go and use that, is that correct?
  (Ms Cassoni) We would have to agree with them how those funds would be used.

  422. How do you account for the fact that Parcelforce has never made a profit in its ten year existence? There have been lots of other profitable parcels businesses around the world but what is it about Parcelforce?
  (Mr Roberts) I think it is a number of things. First of all, it is one of the few parcels businesses that works in every sector of the market. Many of the ones that have made profits have concentrated, as we are now doing, purely on the time sensitive, the express side of the market. I think the history of Parcelforce over that period is it went through a period, particularly in the mid-1990s, when there was the whole question of whether it was going to be sold off, when no investment was being put into it, that was at around the time of the privatisation debate, and as a result of that we certainly lost time, we were running a parcels business not on the kind of model that most of the competitors were using, we did not have any track and trace technology, which is now very important for tracking parcels through. We have managed to get that done and we have made a lot of changes in Parcelforce in conjunction with the unions over working practices, but we have still maintained a presence in this slow parcel market, the more than three day market, which has been the consistent loss maker. What we have done today is to say that we have got to have a fundamental restructuring, we are not ever going to make any money if we stay in that part of the market, so we are refocusing on the areas where people do make money.

  423. You mentioned the unions and earlier you mentioned you had £137 million of cost for the International Mail Agreement and you mentioned the union agreement. How much of the 1.2 billion of the extra cost that you have had was due to the union?
  (Mr Roberts) One hundred and eight.

  424. And you have got these productivity and technical practice changes included in the agreement. Have they been delivered or not?
  (Mr Roberts) They are about 75 per cent through. We have to make changes in every one of our big sorting centres and then we also have to make changes in all the individual delivery offices up and down the country. We have completed all the changes bar one in the 71 main sorting centres. We are about 60 per cent of the way through delivery offices. The scheme is due to produce about £63 million worth of productivity improvement this year, the year that ends next week.

  425. I would like to go back to the question of the name. You spent half a million pounds, apart from the physical costs, what was that half a million on?
  (Mr Roberts) Basically on consultants, on design consultants, on all the discussions that went into producing the name.

  426. So you had sessions with consultants who went out and did market research, opinion polls and that sort of thing?
  (Mr Roberts) Yes.

  427. You could buy quite a lot of opinion polls for half a million pounds. A lot of political parties would love to have half a million to go and spend on opinion polls. How is it that you got it so hideously wrong?
  (Mr Roberts) I do not think we did get it wrong.

  428. The Secretary of State does. She said in the House of Commons this afternoon, "the sooner it changes the better". How do you respond to her view?
  (Mr Roberts) I do not agree with the Secretary of State.

  429. You do not agree with the Secretary of State?
  (Mr Roberts) No, I do not.

  430. You do not agree with your Chairman or the Secretary of State?
  (Mr Roberts) No. I think the reason we put the name in was done for the right reasons but as a name it has become, sadly, synonymous with all the things that have happened over the last 12 months.

  431. Did no-one point out to you that the word "Consignia" and the verb "to consign" are related in a rather negative way potentially?
  (Mr Roberts) Yes, although consigning and consignments are what our business is about, which is one of the reasons why we used the name.

  432. I have read through the Secretary of State's statement and I have read through Consignia's statement and I did not see any reference to the fact that the name was going to change back but it seems to be in the ether, everybody seems to be saying it is going to change back. How have they got that idea?
  (Mr Roberts) I think they probably got it from the Chairman's statement that he was not very keen on the name. I think he has also made it clear that—

  433. So you are going to change it?
  (Mr Roberts) No. He has also made it clear—

  434. You are going to leave it as it is?
  (Mr Roberts) Sorry?

  435. You are going to leave it as it is?
  (Mr Roberts) Yes, for the moment we are going to leave it as it is. As far as I am concerned I have not got any proposals, nor has he, to change the name. He has made it clear that while he does not like the name, the name is not the issue, the issue is getting the business right. The names underneath, as I have said before, the names Royal Mail, Parcelforce Worldwide and Post Office, meaning the network of branches, are the names that we use, they are the key brands and that is what we are continuing to press.

  Mr Bacon: I am rather inclined to agree with Mr Osborne that the name is part of the issue because it is symptomatic of so much more, but my time has run out. Thank you.

Mr Steinberg

  436. I feel a little bit sorry for you this afternoon actually. I am going to be very pleasant to you. Regardless of the present profitability problems that you have, if you turn to page two, paragraph eight, of the report, which is what we are discussing this afternoon, do you not think that Postcomm have exaggerated your problems because if you read paragraph eight it says that you have 90 per cent next-day delivery, mainly before half past nine, it is relatively cheap compared to the rest of the world and there are high levels of satisfaction, something like 60 per cent. That sounds quite good, does it not?
  (Mr Roberts) Yes, and I think that there are a lot of things about the organisation that are good and I think they are being slightly overwhelmed at the moment by a lot of other things. There is no doubt that if you go back 12 months, Mr Steinberg, the organisation hit a low point, we had a lot of industrial action and as a result service was poor. I think since that period, and Lord Sawyer's study into industrial relations, not only have we had a much calmer period of industrial relations with both sides working together very constructively, but service has improved and a lot of mail that people were complaining about not getting through is getting through and is getting through to the 91.6 per cent level I talked about earlier. There are a lot of underlying very good things about this organisation. I do not think it will take a lot to get it back to the level that it was before.

  437. In the Daily Mirror at the beginning of the month, the 1st of the month, they gave a league table where it gave the 20 worst performing areas and the 20 best performing areas. The 20 worst performing areas which were not getting near targets were basically all in London.
  (Mr Roberts) Yes.

  438. East London, Uxbridge, West Central London, South Central London, Harrow, West London, North London. The 20 best performing areas were Lincoln, Sunderland, Bradford, Sheffield, Leicester, Teeside, Darlington, Durham where I live. Why do you have major problems in London compared with not so many problems in the other areas?
  (Mr Roberts) I think industrial relations in the big cities, London in particular, has always been one of the most difficult areas for us. Because of travel to work patterns and pay for postmen in London, it is an area where we get probably the highest turnover. If you get the combination of those two things then that probably puts the biggest strain on the service.

  439. I was going to ask you how the rail service has affected the service particularly in the North of England with the horrendous accidents that we have had and problems that we have had over the last 18 months but it does not seem to reflect in that. Although the service is bad in London it has not been affected by the rail service and the service where I live is quite good so that is obviously not an excuse.
  (Mr Roberts) It depends. There is no doubt that post Hatfield we have probably had something like a one per cent overall over the whole country hit on the service. Trains going up the East Coast main line to start with were those which were most affected. A lot of the service in London is still delivery service, that is where we have the biggest problem with staff, getting deliveries done on time, and of course we measure it end to end. So the transport is only one factor in it. We reckon that the impact of the rail problems probably cost us about one per cent on a first class service in the year after the Hatfield disaster.

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