Examination of Witnesses (Questions 60
WEDNESDAY 13 FEBRUARY 2002
60. With respect, it is not, because, if you
have a number of supermarkets, globally they provide enough food
for everyone and they make their choices. If I have to have two
or three different postal services running up and down my street,
there is an extra cost. It is also different to gas and electricity.
Would you accept that there are extra costs from that duplication
(Mr Corbett) Of course.
61. Who pays those?
(Mr Corbett) There are extra efficiencies
and benefits to consumers in terms of choice and innovation.
62. If we can try and make Consignia work rather
than having all this duplicated cost in the meantime, we might
end up with a better service. Do you not think the public want
to preserve the service, improve efficiency but not throw the
baby out with the bath water?
(Mr Stanley) That is exactly what we
want and that is what we think will happen.
63. If you said to a manager, "My first
priority is to get 92.5 per cent first class delivery by tomorrow
and 89 per cent is not good enough", do you not think his
logical response would be, "All right. I will only do one
delivery, not two"? Therefore, do you not feel that your
insistence on certain objectives is generating predictable results
that the public do not want?
(Mr Stanley) Our pressure is doing exactly
that. It is getting more and more mail delivered into the sorting
office in Bognor and elsewhere, early in the morning, able to
go out on the first delivery. If it can all go out on the first
delivery and you do not need to meet targets to do a second delivery,
we would all be happy.
(Mr Corbett) Postwatch has a very important role.
It is their job to keep sufficiently close to consumer opinion
to ensure that their recommendations for service standards are
responding to what consumers want.
64. This picture on the front of the NAO Report
is of a man going along on a strange tractor-like conveyance.
Presumably you accept that is a cost of universal delivery that
no incoming competitor would want to face?
(Mr Corbett) We did put out in June of
last year a consultation document on the costs of the universal
service. That contained a number of quite surprising conclusions
all derived from Consignia's own costing information. One of them
was that deliveries to the areas which are categories as rural
and deep ruraldeep rural really is deep ruraleach
of those areas, on its own, more than covers its direct costs.
Yes, there are going to be the occasional deliveries like the
one illustrated on this which
65. Would you accept that any competitor entrant
would make sure their marginal costs were going to attack the
most profitable areas first and Consignia's large, fixed costs
would be undermined very quickly?
(Mr Stanley) They cannot get rid of that
sort of delivery. The top 500 customers post 40 million items
between them every night. If an operator wants to take some of
that business, he has to go to one of those companies. Say, the
Inland Revenue or a bank. There is no way they would say, "We
will deliver all the attractive returns but you must isolate the
ones who live in farms and get somebody else to do them, so ask
your customers if they live on a farm."
66. Would you accept that the saving to Consignia,
for instance, of a Post Office closure is less than the social
cost, in many cases, of that closure? Similarly, the cost, for
instance, of slashing one of the services in the day. That saving
is less than the economic loss to the business community and therefore
you should have some understanding and factoring in, in your decision
making of those factors, rather than saying, "Here is something
that the public do not want"?
(Mr Stanley) We do recognise that and
we are very strong supporters of the rural network. We have already
produced quite major reports for the Secretary of State on the
farming network and we are very strong supporters of both the
urban and the rural network. They provide a fantastic service.
67. Do you accept any responsibility for the
closure of these Post Offices that we are seeing through the tightening
of your grip around Consignia?
(Mr Stanley) On the contrary. Our role
is to give advice. One of our separate roles, not covered in this
report, is to give advice to the Secretary of State on how she
should keep those Post Offices open. We are very keen on that.
Nothing in our proposals that we produced recently will affect
Post Offices in any way.
68. Would you turn to page two, paragraph eight?
If you read that paragraph, there does not appear to be the problem
that Postcomm say there is. I accept there are pockets of problems
but they can be put right, I suspect. We have what appears to
be around a 90 per cent next day delivery, mainly before 9.30.
We have a relatively cheap postage service compared to the rest
of the world. We have high levels of satisfactionsomething
like 75 per centwhich I fully endorse. Why in 3(b) in your
response do you infer the opposite to the response we have here?
(Mr Stanley) When you look at paragraph
eight, the most startling figure there is towards the end where
it says, ". . . over 60 per cent of large users were either
satisfied or very satisfied . . .". There is a rather worrying
40 per cent of large users who are simply not satisfied with Consignia.
69. Come on. If you can get 60 per cent of the
public to say they are satisfied in this day and age, it is a
miracle. Ask people who travel on the trains if they are satisfied.
(Mr Stanley) The worrying thing is that
this is not the public. This is large users who between them post
40 million items a night.
70. They are still the public.
(Mr Stanley) These are companies, banks,
building societies, gas companies, big advertisers and so on.
These are the people who post most of the mail and who support
the universal service. When you talk to these people, they say,
"What we want Consignia to do is (a) provide a more reliable
service" because they are not happy with the reliability,
"and (b) to provide the sort of service that helps us run
our businesses more effectively."
71. Where is it failing?
(Mr Stanley) If you are trying to do
a big advertising campaign to sell cars or beer or anything, you
want the documents to drop through your letter box on the same
day, for instance, that the advertising hoardings go up or the
television campaign begins. If the stuff arrives early, people
start ringing your lines or sending the forms back when you are
not ready for them. If they arrive late, you miss the boat. Consignia
will not do that on the day you ask. Even if you give them stuff
now for 1 March, they will not deliver on 1 March. They will try
to but some will arrive early and some late.
72. You are going to change the whole of the
system because of this?
(Mr Corbett) It is important to remember
that Postwatch, which is the body set up to keep in touch with
customer opinion, takes a very concerned view about the quality
73. Customer opinion is very good at 75 per cent.
(Mr Corbett) They have seen a doubling
of the number of customer complaints over the last year and there
is widespread concern which was reflected most recently in the
Watchdog programme a week ago.
Chairman: I am sorry to interrupt. Your answer
is very interesting, but each Member has only a quarter of an
74. If you say all of this, how can you guarantee
that your suggestions are going to make it any better?
(Mr Stanley) For the reasons we gave
earlier. We believe competition will be the spur to the company.
If nobody else can provide a better service, they will not lose
any business but if others can come along and do better they will
lose business. Do not forget that the Postal Services Act says
our duty is to introduce competition.
75. Turn to page four, paragraph 14, the second
box: ". . . the introduction of competition could result
in a breakdown in the delivery of a universal service at a reasonable
uniform price." Your recommendations could do that.
(Mr Stanley) The first box says
76. I am talking about the second box.
(Mr Stanley) What we recognise is that
we have to form a judgment. We have to balance risks. We have
to take the best thought through route that we have. There is
a real danger of too little competitionthat is the first
boxand a danger of too much competition, which is the second
box. That is what we try to do.
77. Is it not clear from your recommendations
that competitors are going to be able to cherry pick all the most
profitable customers and services and that is the service that
clearly pays for the Royal Mail at the moment or Consignia at
the moment? You are going to take away their life blood.
(Mr Stanley) No, because the profits
are in bulk. The bulk mailers by definition want their mail delivering
everywhere. There may be a small number of large customers who
have a localised delivery requirement. Lambeth Council, for instance.
As soon as you get to anybody that has a national reach, they
are the really big ones, Centrica, the AA, British Gas and so
on. They cannot cherry pick. They want their mail delivered everywhere.
78. Of course they can cherry pick because they
just take the best contracts.
(Mr Stanley) How are they cherry picking?
If they take the whole of British Gas's mail, they have to deliver
to every gas customer in the land. That is taking the best and
the worst together.
79. In 5(b), you respond to that particular accusation
that the competition could result in a breakdown in the delivery
of a universal service at a reasonable uniform price. I read that.
It was absolute waffle, was it not? You did not give any reasons.
"Competition would provide incentives to Consignia. Royal
Mail is a leading brand name with an exceptional customer base."
That does not tell me anything. Explain to me in more detail why
it will not breakdown the universal service at a uniform rate.
(Mr Stanley) I am sorry you thought it