Examination of Witnesses (Questions 40
TUESDAY 11 DECEMBER 2001
40. Can I just take you on to Parcelforce. Everybody
is aware of the losses year-on-year, we cannot get away from that,
but what is the future for Parcelforce?
(Mr Roberts) We think that there is a future for Parcelforce,
particularly in the express parcels business. What makes the money
for most parcel companies throughout the world is express parcels,
it is the time sensitive parcels, guaranteed delivery by next
day or whenever. What we are looking at is the way in which we
handle what we call the standard parcels, whether that should
still remain within Parcelforce, whether it should be part of
the USO within Royal Mail, and the USO must be maintained, we
are very clear about that.
41. That is the Universal Service Obligation.
(Mr Roberts) I beg your pardon, that is the Universal
Service Obligation. We are also looking at ways in which we can
better use the staff more flexibly in the way I talked about,
what we call mixed resourcing, some full-time staff, staff who
are employed much more flexibly, on delivery routes. The major
cost of running a parcels service is when you are making single
parcel deliveries to individual houses. You make money on parcels,
and we do it in Europe, when you have business to business parcels
and there are a number of parcels that you deliver to one address,
that is where it becomes much more economic.
42. I suppose you are aware of the press reports
that suggested ministers were considering a plan to merge Royal
Mail and Parcelforce into one again. Is that on the cards?
(Mr Roberts) No. I am not aware of ministers thinking
about that certainly. I think these days they would probably think
that was for us. What may have come about is the point I was just
making, that it may be easier for us to deliver the Universal
Service Obligation on parcels, the single parcels, through some
of the mail routeswe do a bit of that alreadyI think
that is possibly what might be behind those press reports.
43. Obviously there is the proposal by PricewaterhouseCoopers
to franchise Parcelforce's work to contractors, which you have
just touched on. Can you tell us more about the PricewaterhouseCoopers'
proposals? I know you have mentioned some of the plans but I would
like to hear a little bit more and then come back on that.
(Mr Roberts) Let me make it clear that they were not
PricewaterhouseCoopers' proposals. We used two consultants from
PricewaterhouseCoopers to help us do the study that we did. This
emerged out of the ministerial consideration of the last strategic
plan. In discussion with us we both agreed that we ought to have
a fairly wide ranging study of Parcelforce to see what we could
do to really get it back into profitability, or on track for profitability.
That was when we looked at whether we could go further in terms
of getting flexibility into labour, we looked at whether it was
sensible to get out of the business altogether, and we have concluded
at the moment that is not the right way to go. We have looked
at a lot of contracts, individual contracts, where we are not
making the right kind of returns for those. We have looked at
the nature of the network and whether we need all the depots and
delivery offices that we have got. It is a kind of fundamental
structural look at the business as a whole and that is what we
have started to consult the unions about within the last few weeks.
44. You mentioned about owner-drivers and things
like that. As you have already got the vehicles, you have already
got drivers, would the preference be to give the opportunities
to staff who are already employed or will you fall into the old
trap that the breweries fell into that instead of giving it to
the individual pubs they said "no, we will get rid of a job
lot" and you leave the poor workers high and dry?
(Mr Roberts) Our intention is always to give our own
staff the first opportunity to opt for those jobs which become
that kind of flexible approach. If we cannot fill it with our
own people that is when we would go outside. We have got a mixture
of both at the moment, a small mixture as it has just started.
45. Do you give them the option to buy the vehicle
from you or use that vehicle?
(Mr Roberts) Yes. We have got a system which we are
developing now which would help the individual purchase the vehicle,
or purchase a vehicle. Some of our vehicles are leased already.
The intention is to try to make it easy for somebody to do this,
not make it hard for them to do that.
46. So they would have not only the wish of
the company but there will be financial help as well to make sure
(Mr Roberts) Yes.
47. And is that working well and are the unions
(Mr Roberts) It is too soon to say whether it is working
well. We have got about 25 per cent of the routes, about 1,500
routes, at the moment affected by this. The Communication Workers'
Union recently reached an agreement with us over their members
actually taking on these kinds of roles, that was probably within
the last couple of months, and as a result I think it is a bit
too early to say. The union's major concern is about the longer
term future of Parcelforce, where you started.
48. Are you pleased with how it is going yourself?
(Mr Roberts) I think so far it is showing that we
can work it. In some of the depots where we have piloted it, and
I have seen it in Milton Keynes which is one of the depots where
we have been doing it, it seems to work very well for two reasons.
One, it does give us the kind of cost variability we want but,
secondly, it seems to work well with both those hauliers, if I
can call them that, who have come in from outside and with our
own staff and the two seem to be working well together.
49. But the test will be London, Liverpool,
(Mr Roberts) As ever, yes.
50. Just on a final point on Parcelforce. How
many studies have you had on Parcelforce in the last five years?
(Mr Roberts) In the last five years?
51. I think it is about that length of time
that you have been coming to the Committee when I have been chairing
it and there seems to have been at least one a year.
(Mr Roberts) No, I think you are
52. Am I being unkind?
(Mr Roberts) I do not think it is as many as that.
Maybe a couple.
Chairman: Maybe they took a long time.
Sir Robert Smith
53. You said that the individual deliveries
were not worth doing, or were not profitable, but why are rival
companies interested in doing those individual parcel deliveries?
(Mr Roberts) They are not.
54. My mother keeps getting mail order stuff.
(Mr Roberts) What they will do is they will probably
charge a much higher rate. The main competitors, TNT, DHL, the
others, basically are not interested in domestic parcel delivery.
Where domestic parcel delivery is taking place you will often
find it is by own fleets from some of the major mail order people
like Gus or whoever, who own their own fleets, White Arrow, for
example. For most of the big parcel deliveries they are making
their money on business to business contract type arrangements.
55. I would like to move on to industrial relations,
if I may, but before I do I would just go back to the Chairman's
point about job cuts. In July you announced I think 2,100 cuts
at that time and, as reported in the FT, then you said
they were all to be at a managerial level and that you would not
be affecting front line staff because they were needed toand
I quote what was put in the papers"keep the group
competitive". That is clearly a very different picture from
the one you have just described to the Committee. What has so
fundamentally changed in the last five months that you now have
a very different picture and could it be related to the management
(Mr Roberts) It is certainly related to the management
position of the group. We knew at the time we were going to have
to look harder at Parcelforce. I am trying to recollect the quote
that you are speaking from, I think that was much more about Royal
Mail rather than Parcelforce. The Parcelforce issue was already
being studied at that time. No, the major issue, and I keep coming
back to it, is that five months ago, which would have been very
early in our financial year because we are an April to March financial
year, we would not at that stage have been clear about the level
of slow down in growth in Royal Mail. The second thing is that
we reached a big agreement with the Communication Workers' Union
about 12 months ago called The Way Forward which is about
working practice change, and that has come in slower than we had
expected. The combination, again, of not getting the costs as
variable as we would like as fast as we would like, plus the increased
slow down, is the fundamental change over the five or six months
of this financial year so far.
56. So moving on to things working slowly. In
2000-01 I understand that strike days have gone up to nearly 63,000.
(Mr Roberts) Yes.
57. Which I understand, also, is something more
than half of all the strikes in Britain during the same period?
(Mr Roberts) So I gather.
58. What caused the tripling of days off through
industrial action during that period and what steps are you taking
to improve your industrial relations?
(Mr Roberts) At the back end of the year 2000, we
negotiated, after some considerable time of trying, a big agreement
which changed the working practices in many of our mail centres
where we do all the sorting and the delivery offices. The agreement
was reached with the leadership of the Union. It went out to ballot
and it was approved by roughly 52 per cent to 48 per cent. The
agreement then has to be implemented up and down the country in
a large number of offices, some thousands of offices. The process
then started to implement it. I think it is fair to say that doubtless
in the 48 per cent of offices that were not in favour of the agreement
it has been much harder to implement it than in the 52 per cent
that were. This led to a period of large numbers of unofficial
strikes which both we and the Union tried very hard to get under
control. Our view being that unofficial strikes were just as much
a matter for the Union and its rule book and its membership as
it was for us. It was being jointly handled between us and the
previous General Secretary. We reached a point just before the
last Election when there was a major set of disputes which originated
in Watford and as a result of that, wethat is the General
Secretary and Iagreed that we would jointly appoint an
independent inquiry to look at industrial relations in a limited
number of units. The bulk of those days lost was coming out of
only nine per cent of the units that we run, so a very small percentage
of units were accounting for those large numbers of days lost.
We, therefore, asked Lord Sawyer to conduct an independent review.
He was helped by Nicholas Underhill QC and Ian Borket of the TUC,
one nominated by us and one nominated by the CWU. They produced
an independent report looking at six areas out of the 81 areas
which cover the whole of the country. Those six areas were Oxford,
Cardiff, Liverpool, Glasgow and then Leicester and Tonbridge,
which had a very good industrial relations record, and the intention
was to compare what was happening in those offices with perhaps
poorer industrial relations record and those with good ones. The
result of that was a very critical report of the whole of Consignia.
I am going to bring Jerry Cope in in a minute, if I may, to talk
about what has happened since. It also produced a large number
of recommendations which we and the union both accepted. We have,
since then, been working jointly with Lord Sawyer still chairing
the overall group which is looking after this to try and improve
the relationship not only in those offices but throughout the
whole of the business. One of the things which emerged from that
was that we would have a moratorium on any kind of strike action
from the union's perspective and any kind of executive action
from ours, that is where we take action having gone through our
normal industrial relations processes and say "Right, we
are going to implement this whether the union agree or not".
We have had now something like three or four of those strike free
periods which takes us up to about the middle of January. For
example, the days we have lost over the last three months are
still not good enough but it is in the few hundreds out of something
like 16 million working days a month. So, there has been a marked
change since about the end of July, August of this year. I do
not think it is any coincidence that in the same time the quality
of service has improved. But there are a number of important project
teams and work that are coming out of Lord Sawyer's study. If
I may, could I just ask Mr Cope to tell you what those are.
(Mr Cope) Yes. What we have done, following that report,
which both parties have accepted, we have brought in, also, our
Management Union, the CMA, into some joint working parties, some
of them led by us, some of them led by the union, on things like
communications, union structure, dispute resolution, the conduct
code we have with the aim of producing a way forward that underpins
a better industrial relations structure in this business. I think
the most important one is dispute resolution because I think unions
and management perhaps will often disagree on things, the issue
then is how you bring that disagreement to a mutually acceptable
conclusion. If those committees which are all underway and working
reasonably well produce their outputs in January we then hope
to put in place a new industrial relations structure in the first
six months of next year.
59. Are you confident that will happen?
(Mr Cope) I do not think in industrial relations I
am ever confident in the sense of betting my mortgage on it but
there is a hope and will on everybody's part to do it because
we know we cannot go on as we are at the moment.