Examination of Witnesses (Questions 20-39)
KEN HANBURY AND GARY WATKINS
WEDNESDAY 1 MAY 2002
20. You suggest in your memorandum to us that, in the longer term, Postcomm's liberalisation proposals will present a threat to specifically the rural post office network. Could you explain why you believe this is the case?
(Mr Watkins) We have already seen, from the Post Office's resourcing announcement, that around 3,000 mainly urban post offices are likely to close in its first phase of its reorganisation. If the Postcomm proposals are introduced in the manner in which they are currently framed, it is likely that competitors will be able to cherry-pick the profitable parts of the postal market, which will mean that a business which is already under considerable financial pressure will have little option other than cutting back further on its non-profitable services, such as the rural post office network.
21. And you talk about the consultation period being too short as well; could you explain a bit further? What new ideas do you have; how, by extending it, do you think it will help?
(Mr Watkins) The consultation period has now closed, is my understanding of it. But that was the first, initial response from the union; so that the union are trying to respond to a lobby etc. Myself and Ken have been busy with the Welsh Assembly, talking to those and talking to people like yourselves, to try to influence your opinion on things, and I think the original consultation period was so short we just could not respond in time, so that was why we wanted a longer consultation period.
22. And you say this presents a threat to the closure, and you talk about the pace of competition because of the European legislation for 2009, for example, and 2006, and you are asking for that to be extended. By 2009, do you think that the rural post offices will be around at that time, what are you saying the threat will be, what is your scenario?
(Mr Watkins) There are two different things there. If you are talking about rural post offices, I take it you mean actual sub-post offices, rather than the delivery service.
23. Yes, well both, actually.
(Mr Watkins) The two are interlinked, in a way. If you have a sub-post office in a village that people are going to go to, maybe it is a corner shop as well, and they can go and use that, then they are more likely to post letters into the network. If they have got no reason actually to go in and use the post office then they might look at other alternatives, for instance, paying their bills, and things like that. So the two are actually interlinked.
24. But you mention about the timetable, and what I am really trying to say is that you think that Postcomm's proposals by 2006 is far too tight; but if they were to go with the European legislation to 2009, what difference would that make?
(Mr Watkins) The European legislation, opening up the postal market, is a different model from what Postcomm are actually proposing. The model that they are suggesting is steadily to open up the weight actually to competition, to free up the actual weight. What Postcomm are proposing is, you actually open up bulk mail postings, which the union and Consignia believe are the most profitable areas; and it is by taking the profitable area out and opening it out to competition that undermines the actual viability of the service that is left.
25. PostWatch Wales suggest that the network requires an element of systematic subsidy to support the public service dimension of post offices' work; do you agree with that?
(Mr Watkins) I think the simple answer is that, at the moment, up until the last few years, the Post Office has been very profitable, and while it has actually remained profitable it is able then within its own internal finances to subsidise the less profitable area. So the short answer is, well, why ask the taxpayer to bail out the rural areas, if you like, when, if the Post Office can now be able to continue as it is, it does not need to.
26. You say that you have got concerns about the way the Code of Practice on consultation is operating before branches are closed. PostWatch Wales have also raised a number of specific issues with us. Could you elaborate on what your concerns are?
(Mr Watkins) My understanding is there is a new type of consultation, and the Communication Workers Union has not actually been involved in that, and I have no information on that at all; so we have not actually been involved in that decision-making process. What I understood the problem to be was that, in fact, the consultation on the closure of offices was not actually a consultation, they were consulting on whether or not you had wheelchair access, for instance, in the new office, but the decision was not open to consultation, the decision was made, and that was not open to consultation. So the decision whether or not to close it and to move it somewhere was not actually open for consultation, that was our criticism of it, and I understand it was a lot of other people's criticism as well.
27. Can I ask a supplementary to that. Are you aware whether the Federation of SubPostmasters were consulted, and whether that consultation was different from the one you have identified?
(Mr Watkins) I do not know.
(Mr Hanbury) I believe they were consulted, yes.
28. But are you familiar with the method used, when they do consult with the Federation?
(Mr Watkins) Yes, we are aware of the Code of Practice, the national union is aware of the Code of Practice. But the point I was making before was, we were not involved in setting it out at all.
29. If you were familiar with the Code of Practice, were you happy with the Code of Practice and the method used?
(Mr Watkins) Like I said, I am not aware of the new procedures. All I can say is, before, the criticisms that we had of the old way of doing it were the fact that you were not consulting on the decision to close, you were consulting about maybe where it was located, or whether there was wheelchair access, or what have you. So that, for public bodies to actually get in on the consultation, they were not able to get to whether or not they wanted to keep it as a main post office or not, that was not part of the consultation process.
30. So what you are saying is, it was not a proper consultation exercise, is that what you are saying?
(Mr Watkins) Yes.
31. In your memorandum, you suggest that the migration of benefit payments to Automated Credit Transfer from 2003 will result in a loss of around 30 per cent of the Post Office's revenue. But many people who currently do not have bank accounts will need to make use of new banking services provided at the Post Office, including the Universal Bank and services provided on behalf of some high street banks, which I think you have welcomed, in your memorandum. Could the switch to ACT actually work in the Post Office's favour?
(Mr Watkins) I am not overly familiar with ACT, but the way I would see it is, looking at it in a simplistic way, my understanding is that the Post Office will not have a say in whether and how people have the choice when they switch over. For instance, I understand that it will be the Benefit Agency which will direct people in which service actually they wish to take up, I do not think the Post Office will be involved in that, and it depends on the Government Department as to how much emphasis they want to put on the actual individual person still wanting to use the post office.
32. I understand what you are saying, but I think the Government's approach is that they want the choice to be the individual's, rather than the Post Office's, or the Agency, and they are trying to ensure that somebody will always be able to use the post office and get cash from their local post office. So I am just looking, is the glass half-full, or is it half-empty; the way the world is moving anyway, there is a positive opportunity opening up here, is what I am suggesting?
(Mr Watkins) There could be, it could be positive. I think it is too early to say, to be honest with you. I understand the universal banking service is having some setbacks and having some difficulties, but I would not comment on that, it is just too early to say whether or not it is going to be beneficial or not.
33. In your written evidence, you say that the true cost of delivering a letter from North Wales to West Wales is about £2, whereas the cost the customer pays is only 27 pence. What does this imply about the importance of the Post Office's universal service and uniform tariff for the people of Wales; if the system is broken up, will we suffer more in Wales than, say, England?
(Mr Watkins) I think we would have to say, on the face of it, yes, because we are predominantly a rural country; most of our deliveries to addresses are classified as rural, taking away, obviously, the Swansea, Newport, Cardiff areas. So I think we would be at a disadvantage.
34. Can I come in here and ask you, I understand that Consignia is losing vast sums of money daily, at present, I understand the figure to be something like £1.5 million a day. To what extent do you think a penny increase in the first and second class letter rate would help the company to recover, not to close post offices and offer the same universal services; what is your view?
(Mr Hanbury) I think much of that we agree with Consignia, that there must be an increase, because over the years, I cannot remember, I am sure that management side can give you dates on when there was the last increase in postage, but certainly an increase of a penny, and possibly tuppence, the union would say. I think we put a figure on a two-pence increase, certainly to stablise things and assist in some way the business. Whether or not that will come about, I do not know. I do not believe the public will oppose a penny increase on a stamp, when you look at the postage, I think it is only Spain that is cheaper, we are one of the cheapest certainly in the European Union, on postage rates, anyway, but it would certainly be a great benefit if that were to happen.
35. So you see that as the way forward, you consider that to be a modest increase?
(Mr Hanbury) I am not a manager, but, certainly, if I were, I would certainly say a penny or even a two pence increase on the postage rates would be quite modest, yes.
36. And you see that as a positive way forward, and would result, do you think, in avoiding some of these measures that we are reading about?
(Mr Hanbury) It could very well be the only way forward, if we want to retain the postal service that we have got in this country, which is still certainly one of the best in Europe, if not in the world.
37. But do you think that we would need a greater increase, rather than the penny increase on first and second class, as I mentioned?
(Mr Hanbury) I would take the trade union line, the CWU line, and say that we should be looking more at two pence, rather than a one penny increase.
38. I personally would support that; but, playing devil's advocate, if postage is to be increased by one or two pence, without the management being reformed, without the proper management in place, is it not a case of throwing good money after bad? That is the easy option; given more money for sorting out the management, the management side of it?
(Mr Hanbury) You would expect me to say this, as a trade unionist, but it is something I do believe, even if I were to take my hat off and become Joe public for a minute, any business that had made profits for something like 23 years, hundreds of millions of profits, every year, and over the last two and a half, maybe three years at the most, and now show huge deficits, I would expect the private business to be concerned, and managers may very well have had a career move by now, if nothing else. That does not happen in the Post office, you will find the same people there, day in, day out, year in, year out. So looking particularly at an Early Day Motion, that I was looking at, which went through the Commons, I would certainly be interested in management being brought to book on what has happened to the Post Office.
39. Can you go on along those lines; why do you think, after all these years of success, the last three, it has suddenly gone wrong? What is your view on that?
(Mr Hanbury) I would like to know the answer to it, but I am not responsible for investment, I am not responsible for running the service, and, quite often, over the years, I have been told by many managers, "Ours is to manage, yours is to represent the workforce," and I accept that. And, if that is the case, and it is not ducking the question, so be it.
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