Wednesday, 10 November 2010

Postal Services Bill 2010

It is my view that Post Offices have been used as a political football, the strongest element of which is the excuse of the pensions deficit created by the Government, as a reason to privatise.

The Post Office is a public service that is prevented from operating on a level playing field subsidising private mail companies with uncommercial and restrictive door step delivery charges.

The Post Office network, described by many Conservatives as a socail service and/or the community hub in many rural communities has been undermined by aggessive market testing and withdrawel of services with no policy for growth of within business, or recognition of it's community role.

I am wholly opposed to privatisation and support the modernisation process within the context of 'more than just a business'.

1) Key Points - Postal Services Bill 2010

• Wholesale privatisation The Conservative – Lib Dem Coalition Government’s plans for the Royal Mail threaten to turn a public service into a private monopoly, with a maximum of 10% reserved for an employee share ownership scheme.


• Lack of information on employee share ownership. Labour would look positively on employee share ownership but we need to ask how the shares will be distributed, what employees can do with them, and what real benefits the proposals will bring.

• End of link between Royal Mail and Post Offices. The Bill will end the link between the Royal Mail and Post Office Limited, raising new concerns about the viability of many post offices. A privatised Royal Mail could use other outlets for its counter services, depriving the post office network of a third of its income.

• No firm basis for mutuals. Labour supports the principle of the use of mutuals to deliver public services, but the very people who would have to take up the mutual option - subpostmasters and mistresses – say that government plans for a mutual structure do not make economic sense. Mutuals without business will go bust.

• Threat to Universal Service. The Bill does not provide adequate long term protection for the Universal Service Obligation to provide a six-day delivery service at a uniform, affordable price throughout the UK.



Responding to the publication of the Postal Services Bill, John Denham, Shadow Business Secretary, said:

“The Government’s plans to privatise Royal Mail pose a threat to post offices and the six day service. Last year Labour set out how a publicly owned Royal Mail could benefit from private investment. Today’s plans threaten to turn a public service into a private monopoly.

“The Bill does not provide adequate long term protection for the six-day delivery service at a uniform, affordable price throughout the UK.

“The Bill will end the link between the Royal Mail and Post Offices, raising new concerns about the viability of many post offices.

“Labour supports the use of mutuals to deliver public services but mutuals without business will go bust.

“We will always look positively on employee share ownership but we need to ask how the shares will be distributed, what employees can do with them, and what real benefits it will bring.”


2) Privatisation of the Royal Mail

Government’s position
The Bill will lift all restrictions on the ownership of the Royal Mail and allow the Government to sell shares in the company. The Government does not believe there is a need for Government to keep a stake in the Royal Mail in the long term, and intends to keep the flexibility to negotiate the best possible outcome for both Royal Mail and the taxpayer, with any decision depending on market conditions, best value for the taxpayer and securing a sustainable future for Royal Mail. Legislation will be put in place and the regulatory regime reformed before any firm decisions are taken about securing private sector investment.

Labour’s Position
This contrasts sharply with Labour’s proposed Bill in 2009 which would have kept a majority stake in public ownership. Clause 3 of our bill explicitly stated publically owned.
3 (1) Each Royal Mail company must at all times be publicly owned.
Labour had envisaged that any private partner would be looking at something like a third ownership, and on no account would more than 49% go into private ownership.


What the subpostmasters say
The National Federation of Subpostmasters (NFSP) believes that, if Royal Mail is to be privatised, as it is a strategic UK company, it should remain in British ownership.
(see section (4) for what NFSP says on threat to post offices)


Majority of voters oppose privatising Royal Mail, according to A YouGov poll for the CWU .

Consevative voters
• 42 per cent of Conservative voters are against privatising Royal Mail with only 36 per cent in favour.
• 67 percent think prices would increase, as opposed to only 6% thinking they will decrease.

LibDem voters
Of Lib Dem voters, 56% are opposed to privatisation, 50% think the service will deteriorate and 74% think prices will go up.
YouGov / Communication Workers Union Survey Results

Sample Size: 1796 GB Adults
Fieldwork: 30th September - 1st October 2010
Voting intention
Total Con Lab Lib Dem
Weighted Sample 1796
Unweighted Sample 1796 535 561 187
% % % %
Would you support or oppose the privatisation of the Royal Mail?
Support 23 36 14 27
Oppose 54 42 70 56
Don't know 23 22 16 17

If the Royal Mail were to be privatised would you expect the postal service to get better, get worse or stay the same?
Get better 25 34 18 29
Get worse 48 37 60 50
Stay the same 14 18 12 16
Don't know 12 10 10 5

If the Royal Mail were to be privatised would you expect the cost of using the postal service to increase, decrease or remain the same?
Increase 72 67 79 74
Decrease 6 6 5 11
Stay the same 13 19 10 11
Don't know 9 7 5 4


Lib Dems split on Royal Mail privatisation
Speaking at a CWU-sponsored fringe at the 2010 Lib-Dem conference, Ed Davey LibDem Minister for Postal Affairs was challenged by party activists and backbench MPs.

Platform speaker Dr John Pugh - Lib Dem MP for Southport - reminded delegates that not so very long ago a "very famous and exalted person in the Lib Dems" (one Vince Cable) had won considerable acclaim for his observation that the taxpayer bailout of the banks looked not at all unlike the "privatisation of the profits and nationalisation of the losses."
Referring to Government plans to take on Royal Mail's pension liabilities before pressing ahead with the privatisation of a deficit-free Royal Mail, Dr Pugh warned delegates: "There is a distinct danger that what we are presenting here could look a bit like that," adding that the danger of being seen to have 'privatised the profits and nationalised the losses' would be even more acute if the end result failed to result in "a Royal Mail system that the country is comfortable with for the next 20 to 30 years."
Dr Pugh concluded: "I still come down to pondering with a relatively open mind as to whether a complete privatisation is the answer - and whether or not it is possible for Royal Mail in its current state, or even in its post regulatory change state to survive in the public sector.
" I do wonder, if a private sector company did take over, what would happen to the universal service obligation.
"I'm sure they would have to sign up to it (initially) - but what will then happen as the years roll by?

Dr Pugh concluded: "The CWU is asking for specific detail of what funding is actually required for modernisation and I think that is a legitimate expectation, because I think the one thing this Coalition ought to pride itself on is evidence-led policy."

Clarity on the funding issue was also demanded by Lib Dem MP for Argyll & Bute Alan Reid - who pointed out that in rural areas, such as his own constituency, there was real nervousness about the impact that privatisation of Royal Mail could have on service levels.

"We rely heavily on the universal service obligation - in fact for us it is not just the 'last mile' but often the last 100 miles. Obviously we have concerns about privatisation, because unless contracts are fairly watertight then the private contractor might not deliver the USO to the extent it is required."

Citing the steady withdrawal of Government work from Post Offices (including benefit payments) Mr Reid added he was concerned that a lack of "joined-up thinking" in Government could end up affecting services - possibly ultimately costing the taxpayer even more.

Meanwhile, the Association of Liberal Democrat Trade Unionists (ALDTU) has expressed its own disquiet at the privatisation of Royal Mail. The organisation - which apparently has over 200 members across the country, is urging the Government to "treat the issue of the pension deficit in an intelligent way - and don't use it as an excuse to privatise".























3) Employee share ownership scheme

The Bill contains a provision requiring the creation of an employee share scheme, which will hold at least 10% of the equity in Royal mail in the future. This is one of the largest percentages of any privatisation (cf BT 5%, British Gas 5%, British Airways 9.5%, Rolls Royce 10%)

Labour will look positively on employee share ownership but we need a lot more information
How will the shares be distributed?
What will employees be able to do with them?
What real benefits will the share ownership scheme bring?

What Dave Ward, CWU deputy general secretary, says:
" On shares, our members will know that there are no free gifts. If it really is about engaging and motivating employees there are far better ways to achieve this.”
























4) The threat to local post offices
The Postal Services Bill 2010 poses a very real threat to local post offices – the Government needs to come clean about what happens to the post office network when Royal Mail is privatised.
• The Bill will end the link between the Royal Mail and Post Office Limited. A privatised Royal Mail could use other outlets for its counter services such as supermarkets or a high street chain, thus depriving the post office network of a third of its income.
• We put in significant funding to enable Post Office Limited to maintain its current network of 11,500 branches. It is not clear how the government intends to put Post Office Limited on a firm financial basis, which would be a pre-requisite for interesting anyone in a potential mutual ownership structure. Neither is it clear what support, if any, the post office network would receive after mutualisation.

What the Subpostmasters say
George Thomson, general secretary of the National Federation of Subpostmasters, says he fears that most post offices would be unable to continue without a 10-year Inter Business Agreement. Any less than that would be "catastrophic", with a deal of half that length meaning "falling off a cliff" in five years. "The majority of postmasters would go out of business,"

No comfort from the Minister
The Post Office Minister Ed Davey confirmed in a briefing with MPs on the Bill on 20th October that the Government would have nothing to do with the IBA and it would be entirely down to relations between Post Office and the Royal Mail. A supermarket chain could turn to a privatised Royal Mail and say we could provide ‘post offices’ to Royal Mail more cheaply than Post Office Limited by excluding as many loss making areas as possible. This would be a disaster for rural and non profitable urban post offices.
4a) The threat to the link between the Royal Mail and Post Office Limited
• Currently the Royal Mail and Post Office Limited are part of the same state owned business. As a result of an Internal Business Agreement (IBA), Royal Mail is required to take all of its Post Office Services from Post Office Limited.
• The Government implies that a privatised Royal Mail would still use the Post Office to provide its counter services. It has been suggested that Post Offices might be protected by the terms of the Internal Business Agreement until 2014-2015.
• However, as it is not a commercially binding agreement, this is NOT the case.
• In selling off the Royal Mail, the Minister's priority will be the sale price. Potential purchasers will want to reduce the number of outlets they are required to use, so that they can reduce costs. They will be looking for terms which require as few post offices as possible.
• Once the Internal Business Agreement ceases to apply Royal Mail will be free to use any partner to supply Post Offices.
• A third of Post Office Limited’s revenue comes from Royal Mail. Without this revenue, Post Office Limited would be unable to keep many Post Offices open.





4b) The threat to the number of post offices in the network

• The conditions in the Royal Mail Group’s licence regarding the number of post offices required were left in the past to Postcom, with agreement of the relevant Minister to define. These conditions could be met by keeping just 4000 Post Offices open.

• However the Labour government, as owner, introduced access criteria and insisted that Post Office Limited maintained a network which met a set of criteria which ensured that no one in any part of the country was too far from a post office. An estimated 7500 post offices were required to meet the previous Labour government’s criteria for access to services available at the Post Office. The Labour government then provided a subsidy to ensure that the Post Office could finance this.. On top of this, the Labour government provided funding for a further 4000, making a total of 11,500 post offices.

• The Conservative – Lib Dem Government is creating a legal mechanism in the new Bill whereby setting the number of Post Offices will be the consequence of a commercial negotiation between the Royal Mail and Post Office Limited.

• Going forward, Royal Mail will want to reduce the price it pays for post office services to Post Office Limited. It will therefore ask all potential bidders to provide the number of Post Offices consistent with Royal Mail Group meeting its licence obligation. If the privatized Royal Mail license conditions are the same as Royal Mail Group’s (which itself may not be a safe assumption), bidders will have to offer post offices in only the minimum 4000 locations, not 11,500. Post Office Limited will either have to shut the remainder or make very large losses.

• No doubt the Conservative – Lib Dem Government will then blame market forces for any reduction in the number of post offices, conveniently ignoring the fact that this will be a consequence of the way the Government will have structured of the market.


4c) Questions the Government must answer

As this Bill will do away with the existing Internal Business Agreement and the existing licence, and does not set criteria for access points for counter services (whereas it does mention criteria for deliveries)

• How can the Government make a privatised Royal Mail undertake to honour the current Internal Business Agreement with Post Office Limited?
• How will the Government ensure that a privatised Royal Mail honours that agreement right up until 2014?
• How will the Government respond to potential purchasers who do not want to be tied to this agreement?
• How can the Government influence what happens to the agreement after 2014?
• An obligation to provide fewer access points for counter services would make the Royal Mail more attractive for prospective purchasers. In other words, more post offices closed, better sale price for Royal Mail.

What will the government do? Maximise the sale price of Royal Mail for the taxpayer or protect local post offices?

5 ) Lack of clarity on mutualisation and support for post offices

We have fine sounding words from the Government but no explanation about what they will actually do. Even putting money in is not enough to guarantee future viability – they need to find ways of increasing footfall. (NB see section 7 below for summary of past Labour support for post offices)

The Government’s says:
o the Post Office is not for sale.
o There will be no new closure programme
o They envisage new funding to safeguard the network’s future
o They see mutualisation, handing over the ownership and running of the network to employees, subpostmasters and communities as an exciting part of the Big Society.
o They realise the network will need a secure financial footing before mutualisation
o They are looking into exciting new ideas and opportunities for the network
o They are committed to a role for the Post Office as “Front Office for Government”
o The CSR (p51) merely mentions commitment to maintain and modernise the Post Office network

What the National Federation of Subpostmasters says
George Thomson, general secretary of the National Federation of Subpostmasters says, “Subpostmasters across the country have real concerns about this Bill and its potential impact on their post offices and their customers. Unless ministers swiftly put in place measures to safeguard our post offices their very survival will remain in jeopardy risking the wellbeing of 20 million customers.
"Proposals for a mutualisation of POL are welcome - currently subpostmasters have £2 billion of their own money invested in the post office network, but must be granted a far greater say in how POL is run. However, mutualisation would inevitably fail unless backed by solid actions to get the post office network back on its feet."
Questions the government must answer
• How are they going to put the Post Office on a firm financial footing?
• What new funding do they envisage for the Post Office network? How much? For how long?
• What will this funding achieve?
• What do they mean in the CSR by “a commitment to maintain and modernise the Post Office network” (Spending Review 2010 page 51) ?
• How will they increase footfall ?
• What exciting new ideas and opportunities do they have for the network?
• What new business are they planning for post offices?

• What support will they give to make the post office a “Front Office for Government?”
• What extra business will they give it?
• How will they persuade people to use the post office for government services?
• How will they award contracts to the post office? How will they square that with the competitive tendering process?


Will the Government match the level of support Labour gave? For how long?
(Since 1999, the Labour Government has invested £3.7 billion in the Post Office. This includes an annual subsidy of £150 million to 2011 to support the approximately 7,500 non-commercial branches that might not survive without Government support. In March 2010 we announced a further £180 million of new Government funding for the network for 2011-12, beyond the £1.7 billion that was already being invested from 2007 to 2011.”)

How will the Government interest subpostmasters and communities in the idea of mutual ownership?
(The National Federation of Subpostmasters is rightly very cautious about mutualisation – why would anyone be interested unless the business is viable? They want the government to make Post Office Limited a profitable company, guarantee more government business and guarantee them a ten-year contract with Royal Mail – see extract from their website below)
Previous Tory and Lib Dem positions on support for the Post Office Network
The Tories on the Post Office
• The Tories put no money into post offices when they were last in government, and 3,500 post offices closed under the previous Tory government between 1979 to 1997. No compensation was paid to sub Postmasters. When in opposition they failed in 2008 to match Labour’s commitment to subsidise the Post Office network by £150m a year. Nevertheless in 2008 the Tories distributed material saying they were opposed to closure plans. Their plans encouraged their activists to organise petitions etc quickly – in case the Lib Dems got in first!

• When the Tories were in Opposition, they accepted the need for Post Office closures. In the Opposition debate on 19 March 2008, their spokesman Alan Duncan said;

o ‘’We have to face facts about the future of the postal offices in this country’’
o ‘’We understand that the Post Office is haemorrhaging around £4million a week’’.
o ‘’Let me make it clear that we fully expect the network to shrink in size’’
o ‘’It must be admitted that the internet has displaced much of the revenue-earning activity preciously enjoyed by post offices’’

• During the opposition day debate on the 19 March, in response to Martin Salter MP, asking him to;

‘’…give an undertaking on behalf of his party to put £1.7 billion of investment into the network so it can be sustained…’’ Alan Duncan replied; ‘’ I will not do that, and further more I do not need to do that to win the argument today’’

The Liberal Democrats on the Post Office
At their Spring Conference in 2006 , the Lib Dems voted in a new policy for Royal Mail and the post office network (Resolution F6: Securing Royal Mail and the Post Office, 4 March 2006).

1. They would separate Royal Mail (which collects, sorts and delivers the mail) from the post office network in order to privatise it.
2. They would then put a statutory requirement on the Government to maintain the Post Office network, no matter what the cost.

Typical fairyland economics from the Lib Dems – of course they made no credible attempt to work out how much their programme would cost. And now with this Bill, how do they propose to make a privatised Royal Mail do business through the post office network ?
6) National Federation of Subpostmasters’ views on the Bill
The National Federation of Subpostmasters, representing the very people who would be key to any mutualisation programme, has set out three key areas where the government must take action to sustain the national network of post offices, if plans to separate Royal Mail and Post Office Limited are to succeed and a stand-alone Post Office Limited is to survive:
* To allow post offices to fulfil their long-promised potential to serve as a 'front office' for government in the heart of communities across the country. Contracts must be awarded for post offices to maintain and expand government-related transactions, information and verification, to complement existing online government services.
* A minimum ten year contract must be put in place to allow post offices to continue to offer Royal Mail services to the public and small businesses. Last year post offices carried out £1.6 billion in transactions for Royal Mail; one third of POL's income and one third of subpostmasters' income comes from Royal Mail business, which is also responsible for half of all customer visits to post offices. In addition, protection must be given to the 900 rural post offices where subpostmasters also provide premises, facilities and supervision for Royal Mail delivery staff.
* Prior to separation from Royal Mail Group, the government must act to transform POL from a struggling, loss-making company into one which is profitable and fit-for-purpose.

7) The threat to the universal six-day delivery to the whole of the UK at a uniform, affordable price.
Clause 33 of the bill allows the OFCOM regulator to review the universal service obligation to provide a six-day a week delivery service to the whole of the UK at a uniform, affordable price. Once the regulator is dealing with a privatised Royal Mail, there is likely to be pressure to reduce this, especially if the choice is between higher prices or fewer deliveries. Although there is an EU directive, it only requires a five-day delivery, so we could see the six-day delivery reduced to a five-day delivery.

8) Labour’s proposals in the 2009 Postal Services Bill
• The aim of Labour’s proposals in the Postal Services Bill 2009 was to ensure a level playing field for Royal Mail, secure its future in public ownership, and protect the universal postal service. The Labour Government's Postal Services Bill 2009 completed its passage through the House of Lords but was postponed in the House of Commons due to fact that market conditions were not favourable and would have made it more difficult to reach a settlement suitable for Royal Mail. Throughout the entire process, the best interests of Royal Mail and its customers were central to our approach.

• The Postal Services Bill 2009 was developed as a response to the Hooper Report

• The Hooper Report published in December 2008 recommended that:
o if the universal postal service is to survive Royal Mail needs to forge a strategic partnership with one or more private sector companies;
o responsibility for regulation of postal services should move from Postcom to OFCOM;
o in the context of the package of changes, the government should take over responsibility for the historic liabilities of the pension deficit.

• The Hooper Report recommendations suggested no changes to the ownership of Post Office Limited.

• Labour’s proposals in the Postal Services Bill 2009 would have meant:
- No to privatisation. Royal Mail would have remained in public ownership.
- No to downgrading the universal service obligation now or in the future.
- Yes to greater security on Royal Mail pensions. Sorting out the spiralling pension fund deficit so that the benefits of changes the Royal Mail made went back into improving the business, not used to fund the pension deficit
- Yes to outside investment and management expertise in Royal Mail.
- Yes to a partnership with another major postal company so that Royal Mail would have been able to compete and lead internationally as European postal markets liberalise
- Yes to a new system of regulation that worked with the company and workforce, and that put maintenance of the universal service obligation as the top priority
- Yes to expanding the role of the subsidised Post Office network into financial services

• The top and bottom line is that the Labour Government policy would have kept Royal Mail in the public sector and our legislation made this clear.

• Our intention was to fulfil our manifesto commitment to “a publicly owned Royal Mail fully restored to good health, providing customers with an excellent service and its employees with rewarding employment”. Bringing in a partner through a minority stake in the Royal Mail’s postal business was to help us deliver that goal. It was to bring the Royal Mail fresh investment, new opportunities to grow in Europe and internationally and to offer new services. It was to provide a fresh new impetus to modernising the Royal Mail and securing the universal service.

By retaining a majority stake in the Royal Mail, we would have retained decision-making power in a way that is not guaranteed by the Conservative – LibDem proposals in the 2010 Bill, which will allow the complete sell-off of the Royal Mail, with a 10% stake for an employee share ownership scheme.

9) Labour’s record of support for Royal Mail
• Over the 8 years, from 2000 to 2008, the Labour Government made available funds totalling £3.5bn to Royal Mail.
• The Labour Government provided £500m in loans in 2001 to fund the acquisition of European parcel companies (notably German Parcel) that now comprise Royal Mail’s successful European logistics arm, General Logistics Systems (GLS).
• In 2007, the Labour Government agreed to provide £1.2bn in debt facilities to assist Royal Mail’s modernisation plans.
• Also in 2007, we agreed to the use of £850m of reserves on the Royal Mail balance sheet to support the pension fund.
• Prior to 1997, management and unions were pressing to be given greater commercial freedom (including the ability to make joint ventures and acquisitions). The Postal Services Act 2000 delivered this.
• The CWU was also pressing for independent regulation and a strengthening of the consumer representation body. The Postal Services Act 2000 delivered this.
• The CWU wanted an RPI – x price control for Royal Mail’s monopoly services. Postcomm adopted this.
• We put the requirement for the provision of the universal postal service into primary legislation for the first time.
• We were fully committed to a post office network that offered a broad range of financial services throughout the country, supporting both financial and social inclusion.
• We have supported Post Office Limited’s Joint Venture with the Bank of Ireland to offer a wide range of financial products.
• We have ensured that the Post Office retained the contract for the Post Office Card Account, meaning that 4 million Post Office Card Account users could continue to access benefits and pensions at their local Post Office.
• We have worked with the Select Committee on Business and Enterprise to examine what further services the Post Office should offer.




















10 ) Labour’s record of support for Post Offices
(to rebut accusations that Labour closed post offices in the past)

• Labour put in £2.0 billion of taxpayer funded support between 1999 and 2005.
• On top of this Labour put in a £1.7 billion package in 2007 which includes an annual subsidy of £150 million to 2011 to support the approximately 7,500 non-commercial branches that might not survive without Government support.
• In March 2010 we announced a further £180 million of new Government funding for the network for 2011-12

• We are fully committed to a post office network that offered a broad range of financial services throughout the country, supporting both financial and social inclusion.
• We have supported Post Office Limited’s Joint Venture with the Bank of Ireland to offer a wide range of financial products.
• We have ensured that the Post Office retained the contract for the Post Office Card Account, meaning that 4 million Post Office Card Account users could continue to access benefits and pensions at their local Post Office.
• We have worked with the Select Committee on Business and Enterprise to examine what further services the Post Office should offer.

Background to the 2008 closures

The background to the 2008 closures was that by 2006 changing market conditions resulted in:
 The Post Office losing £3.5m per week, up £1.5m per week from 2004
• 4 million fewer customers using the Post Office per week, compared with 2004

However, despite a £2 billion investment between 1999 and 2004 and increased taxpayer support for the Post Office network, it was clear by 2006 that the scale of changing lifestyles meant that maintaining the network which then had 14,000 branches would be impossible without ever increasing public subsidy. Labour therefore agreed
• a funding package of up to £1.7billion on top of the money we had already put in to give the network on a more stable financial footing and to continue the annual network subsidy until 2011, with a commitment to continue to subsidise the network beyond that time.
• Access criteria for the first time to determine the minimum provision of post office services throughout the UK
• A compensated closure programme of up to 2,500 branches, and funding for around 500 new ‘outreach’ services.

Without this funding from the Labour Government, thousands more branches would have been under threat. Of the 14,000 branches then in the network Post Office Ltd estimated that only about 4,000 were operating commercially.

This package of reform was designed to ensure the viability of the remaining 11,500 Post Office network and minimise the risk of further taxpayer subsidy beyond the substantial levels already committed.

This need for this programme of Post Office closures was recognised by George Thomson, Secretary of the National Federation of Sub Postmasters, who said, “Although regrettable we believe that closures are necessary to ensure the remaining post offices are able to thrive in the future.”

11) Access Criteria

Labour believes that a viable sustainable Post Office network is a critical part of the social infrastructure for many communities.

That is why, in addition to the additional taxpayer investment in the Post Office network, the Labour Government introduced for the first time, new national ‘Access criteria’ to ensure that communities would continue to be fairly served by a national Post Office network despite the 2,500 closures.

The Access criteria meant that even after this closure programme:

• Nationally, 99% of population will be within 3 miles of their nearest outlet and 90% will be within 1mile;
• Deprived urban areas: 99% will be within 1 mile;
• Urban areas: 95% of the total urban population within 1 mile;
• Rural areas: 95% of the total rural population within 3 miles;
• 95% of people in each postcode district within 6 miles.

The purpose of the access criteria is to ensure reasonable access to Post Offices in both urban and rural areas. Without the criteria there would be no control of the overall shape of the How Labour has supported the post office in the past network.

How Labour has supported the post office in the past

Labour has taken action over the long term to create more sustainable business for the Post Office.

• 5 years ago, Labour took action to ensure that the post office was not left behind by putting in modern computer support (the “Horizon” system),

• We have enabling the Post Office to offer banking services through its wide range of outlets across the country. We also asked all the banks to make their basic bank accounts accessible at post offices.

• In addition, many of the banks reached commercial deals with the Post Office, enabling their customers to withdraw cash over the counter at local outlets.

• As a result, about 60% of bank accounts can now be used at the post office; and the Post Office has developed a range of “own brand” financial products, many through its partnership with Bank of Ireland.
• Today the Post Office is developing new products and services to give customers new reasons to visit their local post office. Post Office Ltd is now: the largest provider of foreign exchange in the UK; the third largest provider of travel insurance and the country’s fifth largest fixed-line telephone service provider (in partnership with BT).












12) Rebutting the Government’s “myth –busters”

On the Department for Business, Innovation and Skills website, there is a ‘mythbuster’ rebuttal page.
( http://www.bis.gov.uk/policies/business-sectors/postal-services/postal-services- bill-2010/mythbusters#myth2)

This ‘mythbuster’ has now also been posted out to all MPs.

The Government’s mythbuster says:

“Privatising Royal Mail will lead to Post Office Closures?

No. Royal Mail and the Post Office are separate and distinct businesses. The Post Office is a unique national asset and it is not for sale. There will be no repeat of the Post Office closure programme of the previous Government. Separation will give Post Office management greater freedom to focus on growing its revenue and getting the most out of its branch network – and furthermore, the two companies have a long term contract in place and will continue to work closely together.”
Taking each ‘mythbuster’ sentence in turn:

(1) Mythbuster: Royal Mail and the Post Office are separate and distinct businesses.

Not correct. Currently they are part of the same state owned business. As a result of an Internal Business Agreement (IBA), Royal Mail is required to take all of its Post Office Services from Post Office Limited. In principle, it would have applied until 2014. It is unclear whether it applies if Royal Mail and Post Office Limited become fully separate companies as a result of new government legislation. Once the IBA ceases to apply Royal Mail will be free to use any partner to supply Post Offices.

A third of the Post Office’s revenues come from Royal Mail. Without those revenues, Post Office would be unable to keep many Post Offices open.

(2) Mythbuster: The Post Office is a unique national asset and it is not for sale.

Misleading. It is a unique national asset. It includes a large rural network which is currently not duplicated by any other potential provider of Post Offices. Much of the rural network is unprofitable and cross-subsidised by profitable urban post offices. The way that the Government is structuring privatisation, no one would buy it - as its principal customer (Royal Mail) will not be required to use it in the future. The Government has instead created the possibility of mutuals taking over a potentially failing Post Office business. However, the very people who would have to take up the mutual option – subpostmasters and mistresses – say the government’s plans don’t make economic sense.


(3) Mythbuster: There will be no repeat of the Post Office closure programme of the previous Government.

Misleading again.

It is true that the previous Labour government took its responsibilities seriously and reshaped the post office network to make sure the network was viable. The Labour government, as owner, insisted that the Post Office maintained a network which met a set of criteria which ensured that no one in any part of the country was too far from a Post Office and then provided a subsidy to ensure that the Post Office could finance this.

The Coalition Government is creating a legal mechanism in the new Bill whereby setting the number of Post Offices is the consequence of a commercial negotiation between the Royal Mail and the Post Office Limited. This will then appear to be the consequence of market forces to which the Government has to regretfully acquiesce, although it will be down to the Government’s structuring of the market.

The legal mechanism works in the following way:

Currently, the Post Office network has 11500 Post Offices. The current statutory rules contain hardly any rules. The licence conditions regarding the number of post offices had been left to Postcom, with agreement of the relevant Minister, to define in the Royal Mail Group’s licence. These rules can be met by keeping just 4000 Post Offices open. The number of post offices required to be kept open above this figure was determined by the government acting solely in its capacity as owner. It will not be able to exercise such a role after privatisation. (An estimated 7500 post offices were required to meet the previous Labour government’s criteria for access to services available at the Post Office. On top of this, the Government provided funding for a further 4000).

Going forward, Royal Mail will want to reduce the price it pays for post office services to Post Office Limited. Management bonuses will depend upon it. It will therefore ask all potential bidders to provide the number of Post Offices consistent with Royal Mail Group meeting its licence obligation. If the privatised Royal Mail licence conditions are the same as Royal Mail Group’s (which itself may not be a safe assumption), bidders will have to offer post offices in only the minimum 4000 locations, not 11,500. Post Office Limited will either have to shut the remainder or make very large losses.

The Government has given Parliament a control over universal services. However, this will only apply to a regulatory decision to require Royal Mail to provide extra public services. Parliament will have no control, under these provisions, over regulatory decisions to reduce public services. Regulatory decisions under these proposals are subject to direction and amendment by the Minister. The regulator will not be independent. We can therefore assume that parliament’s power is window dressing, as all the pressure will be to reduce public services.


(4) Mythbuster: Separation will give Post Office management greater freedom to focus on growing its revenue and getting the most out of its branch network – and furthermore, the two companies have a long term contract in place and will continue to work closely together.

Misleading again. The terms of the separation mean that Post Office management will have to start planning branch closures immediately as the Inter Business Agreement, if it even continues to apply post-privatization, will expire in four years time.










13) Hooper Review – Report Headlines 16 December 2008

Modernise or decline: policies to maintain the universal postal service in the UK
An independent review of the UK postal services sector

1. This review was established to maintain the universal postal service. The size and scope of the Post Office network – the country’s largest retail and financial chain – are largely outside its scope.

2. The universal postal service is important. The ability to deliver items to all 28 million business and residential addresses in the UK is part of our economic and social glue.

3. But the universal service is under threat. The explosion of digital media – internet, email, mobile text and broadcasting – has prompted an unprecedented decline in the letters market.

4. There is a positive future for the postal service, provided that postal companies are able to respond quickly to the changing needs of customers and embrace the opportunities which new technology brings.

5. The only company currently capable of providing the universal service in the UK is Royal Mail. But it is much less efficient than many of its European peers and faces severe difficulties.

6. There is a general consensus that the status quo is untenable. The universal service cannot be sustained under present policies.

7. A radical reform of Royal Mail’s network is inevitable. The company has a plan to achieve this. But the pace of change needs to accelerate significantly.

8. Unless Royal Mail can modernise faster, a forced restructuring under European rules is highly likely. That would be a costly and poor outcome for the taxpayer, for consumers, for Royal Mail and its employees.

9. Now is not the time to reduce the universal service. Reducing the number of deliveries each week from six to five would be in no-one’s best interests.

10. Sustaining the universal service depends fundamentally on modernising Royal Mail.

11. The company urgently needs commercial confidence, capital and corporate experience to modernise quickly and effectively.

12. Modernisation will not happen through conflict or attrition. The CWU and Royal Mail must develop a more constructive working relationship in which both are engaged in the long-term strategic future of the company.

13. We recommend a strategic partnership between Royal Mail and one or more private sector companies with demonstrable experience of transforming a major business, ideally a major network business.

14. Given the wider social role of the Post Office network, Post Office Ltd should remain wholly within public sector ownership.

15. We also propose that the Government should tackle the historic pension deficit, to enable the company to reap the benefits of modernisation.

16. Effective competition can help realise a positive future. A new regulatory regime is needed to place postal regulation within the broader context of the communications market.

17. Parliamentary accountability for providing the universal service should be strengthened.

18. Our recommendations are a package. Each element of the package is needed if the universal service is to be sustained: modernisation achieved through partnership, tackling the pension deficit, and changing the regulatory regime.

19. Our recommendations require substantial change. But we believe that they are proportionate to challenges faced by the postal sector and can be implemented successfully.





































14) Hooper Review – Report Update September 2010

Summary of recommendations
All the following three recommendations should be taken together and implemented together, as was strongly emphasised in the 2008 report.

The introduction of private sector capital
In order to maintain and sustain the universal postal service - the key policy objective in 2008 and in 2010 - the introduction of private sector capital into Royal Mail is strongly recommended. This could be in the form of a sale to a partner/trade investor or an IPO.
Private sector capital will accelerate the all-important task of modernisation since it will:
• ensure that cash is available when needed to fund the accelerated modernisation programme
on a commercial basis;
• inject private sector disciplines into the business;
• reduce the risk of political intervention in commercial decisions;
• encourage Royal Mail to develop a more customer-focussed commercial strategy/
diversification for the digital age.

In addition to these reasons for private capital, there are today two new “external” factors.
• First, the state of the public finances means that Royal Mail will find it ever harder to compete for Government capital against other public spending priorities.
• Secondly, the Government has made employee ownership a key aspiration alongside the introduction of private capital. This could have the benefit of encouraging greater employee engagement within Royal Mail.

Pension deficit reform
The Government should relieve Royal Mail of its pension deficit as part of a wider package of measures. This will significantly help the sustainability of the universal postal service and the viability of Royal Mail. The need for that action is now greater than ever. Without such action, Royal Mail’s pension deficit will continue to threaten the universal postal service and will remain a barrier to the private sector investment and discipline which it desperately needs.

Regulatory reform
This update recommends that a two stage approach to regulation should be adopted and that the task of regulation should be transferred to Ofcom, but without delaying the much needed regulatory reform from 2012.

Stage one would focus ex-ante regulation on the monopoly and universal postal service parts of Royal Mail, put in place a new access regime and deregulate outside the monopoly.

Stage two would allow the regulator to review the effectiveness of ex ante access regulation in relation to the sustainability of the universal postal service. The Government should consider whether market uncertainty would be reduced by setting an agreed date for this review of ex ante access regulation in the postal market.

Ofcom must be given the tools and duties to focus regulation on providing a sustainable and efficient universal postal service, meeting users’ needs, whilst deregulating more quickly in competitive parts of the market.
Ofcom should build on the valuable work that Postcomm has undertaken since 2008 and the outcomes of their current consultation so that the new regulatory framework can be firmly in place from 2012. This would give certainty to investors in the postal sector in general and in Royal Mail in particular.

The primary duty of the regulator must be to secure the efficient provision of the universal postal service and there must be regard to the financial sustainability of the universal service provider.

Conclusion
Today, as was true in 2008, there must be no let-up in the pressure on Royal Mail management, workforce and unions to accelerate the pace of modernisation. The need for Royal Mail to get up to best in class as rapidly as possible remains. This is the key priority, alongside the need to give Royal Mail access to private capital, pension deficit relief and a change of regulator and regulatory framework. The recommendations above, if taken forward together, will establish a platform upon which this can be achieved. If all these policies are implemented without further delay, and Royal Mail modernises to best in class with management, workforce and unions working together, then despite the very real market difficulties the company has a healthy future. Building on its unique ability to visit 28m addresses on a daily basis, it can aspire to be the delivery company of choice for a wide range of physical mail from letters to parcels. At the same time it has the opportunity to develop new digital businesses for its huge customer base of senders and receivers in response to the erosion of the traditional letters business by the internet and mobile phones.