Examination of Witnesses (Questions 40-56)
KEN HANBURY AND GARY WATKINS
WEDNESDAY 1 MAY 2002
40. Well, it is ducking the question, because, obviously, you are representing the people you represent, who probably know better perhaps than we do what their opinion is, rather than, we may never get to the facts, but we would like to know what your opinion is?
(Mr Hanbury) There must be a huge wastage somewhere, because I have mentioned before the wages that are paid by Consignia, whichever business you look at, they are not huge wages by any means. It is a labour-intensive market, I accept, but they are now looking for a reduction, I have heard, 30,000, last autumn, but I have also heard the figure of 40,000; and that relates to a spokesperson telling me, not so long ago, in Wales alone, there could very well be a loss of 2,000 jobs. That is a massive turnaround, in the last two to two and a half years. I cannot put my finger on it, but what I am saying to you is that it is mismanagement at the highest possible level.
41. By that, do you mean the Government?
(Mr Hanbury) No, I am meaning the senior management.
42. Are we not putting words in his mouth.?
(Mr Hanbury) Yes, but I am not falling for it; in fact, Post Office managers are far better than you are at putting words in my mouth. But what I am saying is that senior management, which I do not meet, in Consignia should be held responsible.
43. You say that Postcomm's proposal for introducing competition into the postal services market will threaten the universal service provided by the Post Office. The Postal Services Act 2000 requires Postcomm, and I quote, "to exercise its functions in the manner which it considers is best calculated to ensure the provision of a universal postal service," which means at least one daily delivery or collection "except in such geographical conditions or other circumstances as [Postcomm] considers to be exceptional." Can you explain why this safeguard is not sufficient to ensure a continuing universal service?
(Mr Hanbury) I do not really follow it. Possibly, it should be directed at management, rather than the trade union.
44. Okay. Do you think there are any parts of Wales where there are exceptional geographical conditions where that exemption is likely to be invoked?
(Mr Watkins) To be honest with you, I think we touched on it before. Up until very recently, when the Post Office was turning over a profit, everybody was sort of reasonably happy with what we were doing; and the phrase, "If it's not broken, don't fix it," sort of comes to mind, really. If what the regulator is saying is that, by creaming off what they would like to do, creaming off the profitable bits, it is going to undermine the rural areas, then Postcomm are almost saying that, "Well, we'd better put in a safeguard." But you do not need to put the safeguard in if you leave things as they are, because, up until recently, they have tended to be working quite well.
45. The trouble with leaving things as they are, I sought to get your opinion on what is actually wrong, but, a business that has been successful for as long as we discussed earlier and is now not successful, you cannot just leave it as it is, or can you; that is why I was interested?
(Mr Watkins) To be honest with you, we are talking at slightly cross-purposes. I am talking about the actual level of service offered to people; how the business then rights itself and brings itself back to profitability is one thing, but the question about zoning out certain difficult geographical areas is almost like a separate taxpayer subsidy, from what I interpret it to be. What I am saying is, why do you need to do that, if you can allow the Post Office to still deliver the more profitable parts and then subsidise that anyway; do you see what I mean?
46. I am not part of the Government, so I quite sympathise with that. But I think we have to recognise that there are 2,000 jobs at risk here, and there are large parts of Wales where there are geographical difficulties, and that is where the question is coming from. So, while I accept your response, I think that, actually, it is a subject where we do need to perhaps look a little further?
(Mr Hanbury) Can I just say about the regulator, because I know the consultation period has passed, but the regulator's priority, I am sure Consignia would agree with the union on this, that the regulator's first priority should be to protect the universal service. But with the proposals that they have got, and just looking at my notes here, with a similarity to only Swedish Post, if you like, now Swedish Post has experienced a doubling of postal charges, a 20 per cent reduction in the workforce, and failed to make a profit in the last two years. Now, again, under Postcomm's proposals, if there was the liberalisation at the speed that they wanted to go, Deutsche Post would be able to compete for British postal services, while Consignia would be banned from the German market. Now this does not make sense; whichever way you dress it up, it is a complete nonsense. I am pretty sure, and I really am hoping, that commonsense will prevail and we do not go down that road.
Chairman: I think it is fair to say that the PAC's report this morning actually said that.
47. This Act, the Postal Services Act, also says that the universal service has to be provided at affordable prices, in accordance with a public tariff which is uniform throughout the UK. So would you think that that provision in the Act should be enough to prevent operators charging higher prices in areas where it is much more expensive to deliver the service, the remote geographical areas?
(Mr Hanbury) It does not really mention what is an affordable service; an affordable service to you could be very different from what I perceive to be an affordable service. So there is a little bit of leeway for mischief there, if you like.
48. But it should be uniform, should it not?
(Mr Hanbury) I think it should be uniform, yes; but what is a uniform price, I am not sure. And once competition comes into play, you could find that a universal price is far more than 27 pence; certainly, in rural areas it would be.
49. So you do not think the Act is strong enough to protect from that sort of thing happening?
(Mr Hanbury) I am not so sure it is.
50. I am just a bit concerned that you seem more determined to protect the universal service actually than to protect the consumer, the actual person who uses the postal service?
(Mr Hanbury) The universal service must be protected, but our biggest concerns have got to be people in rural areas. Now once you start introducing competition we know what is going to happen, the term has been used many times, cherry-picking will go ahead, and whether it is Hays, or any of the other people that are in the market for that, you are looking at, it is not profitable to operate in a rural area, so they are not going to compete. And the non-profitable areas would be left to Royal Mail to deal with; and that is where the losses are going to be made.
51. I appreciate that concern of yours, and I think that is what everybody is worried about, the cherry-picking element; but, going back a few moments, we talked about a management issue as to why a business that has been worth millions of pounds in the past is now not making a profit. If it is simply a management issue and another of these companies can manage its business properly and can make a profit then why can they not be accepted, that they will run the same business but profitably, instead of at a loss to the taxpayer, and still deliver the same service. That is the dilemma I think you face?
(Mr Hanbury) They will not deliver, that is the point, they will not deliver.
52. But you do not know that?
(Mr Hanbury) They will not deliver a universal service, because anybody with any business sense, certainly if I were a businessman I would not want to get involved in a service of processing, delivering, despatching mail anywhere in Mid Wales, or North Wales, for that matter, because it is not going to bring in money for me, I am not interested.
53. But, surely, if it was able to be profitable before, it is able to be profitable again, because you yourself have blamed the management? If it is the delivery of services in North Wales and rural areas, that is the problem, that is a very different crisis facing the postal service, and you never said that earlier on?
(Mr Hanbury) But it is only profitable if, for instance, I am living in Cardiff and I am posting a letter, 27 pence, across the road, now that is subsidising the rural areas, it always has and it always will, if things remain the same. But Hays, this morning, which is a private competitor, has already made application to the regulator, to Postcomm; now Hays has said they are prepared to deliver if there is a dispute next week in 50 major cities in the UK, they never mentioned any rural areas.
54. Why should they?
(Mr Hanbury) I would not expect them to do that. So the universal service, at 27 pence, as it is at the moment, and I do not know if I am explaining myself as you would want me to, that is subsidising rural areas, and you will not get that off Hays or any other private postal service.
55. Okay; well let me put back to you the question I asked originally, which is, why is the postal service, Post Office, Consignia, call it what you like, making a loss; is it management, or is it delivering to rural areas?
(Mr Hanbury) It is a combination. It is certainly not the union, but you can ask management the same question.
56. I will.
(Mr Hanbury) I do not know, I am not the manager.
Chairman: Thank you very much, Mr Hanbury and Mr Watkins for coming this afternoon.