Examination of Witnesses (Questions 100
WEDNESDAY 9 DECEMBER 1998
100. What about the consumer interest, which
was another key feature of it, the POUNC proposal referred to?
(Mr Roberts) No. The strengthening of POUNC was something
that came new to us.
101. A bolt from the blue?
(Mr Roberts) Well, from the blue anyway, yes.
102. One of the things where you will have
apparently greater freedom, and I use the word "apparently",
is in relation to the settlement of pay deals across the company.
Could you perhaps sketch in some of the detail there that you
are aware of or is it still one of these areas where we have to
await the White Paper?
(Mr Roberts) The answer to that is yes but I am not
sure whether we will get more details. My understanding of what
is in the statement is that pay policy will still apply to the
whole of the public sector wherever there is pay policy, but we
have been invited by the Secretary of State to come forward with
ideas that we might have in terms of rewarding our staff more
or getting them to share in our success or whatever the right
term is. We have not yet had time since Monday to find out how
much scope we have got within that but, and certainly you have
probably heard me on this before, I do believe that if we remain
as successful and profitable as we have been, we have got to find
ways of getting some of that success back to our own staff who
very much contribute towards it. What we want to do is to look
at ways beyond maybe just ordinary productivity schemesI
am now making this up. It is not without the realms of possibility
to think of some sorts of bonuses or something which may be related
to profits, I do not know, but it is in those sorts of areas that
I think we now want to look to see if there are ways in which
we could bring suggestions forward.
(Mr Cope) The key is to find a way that better enables
us to share both success and pain, because we have got parts of
the corporation which are successful and parts of the corporation
which are less successful, with the people who are working in
those bits of the operation. At the moment we are restrained from
doing that. I would understand the Secretary of State's statement
to say that we have got some opportunities to be imaginative in
terms of taking ideas forward that would meet those objectives.
103. In this area of pay there is always
a sensitivity but it is very simple and straightforward to reward
the upper echelons of management because there are not very many
of them. There is always a case that they can walk away and there
have to be arguments for golden handcuffs and things like that.
Would it be right to say that it would be a rather dangerous approach
to pay if you were to reward the officers of the Army and leave
the poor bloody infantry somewhere behind them, given the industrial
relations record that you have had in recent years?
(Mr Roberts) Yes. In fact, what was behind the answers
you got from the two of us, Chairman, was to start at the infantry
end and not the officer end. There are issues at the officer end,
if I can continue your analogy, and in certain cases we have found
it quite difficult to recruit people from outside because the
market rates for managers (and for example if we think now perhaps
of international managers) are going to be quite different from
the pay rates within the Post Office. The whole thrust of my answer
was very much about the mass of people who work in the Post Office,
not the top management or even the top two layers of management.
Let us start at the other end and then work from there.
104. The Chairman has used the phrase "golden
handcuffs". I was not necessarily looking at that as an example,
but we have had some evidence this morning about the very high
levels of staff turnover and surely that has to be some concern
of yours about your apparent inability to retain people in your
workforce at an infantry level, if we can use that military analogy.
That is obviously going to be, I would assume, some pretty heavy
financial burden upon the business to have that turnover of staff.
(Mr Roberts) It is very important. What we find is
that if we have high staff turnover the quality of service that
we give deteriorates. We are then faced with increased training
costs because of turnover and therefore, you are absolutely right,
what we would prefer to see is a very much more stable staffing
base. One of the things that we are doing at the moment and I
hope very much we will be able to conclude by Christmas is that
we are in Royal Mail in the very much later stages of a productivity
discussion with the CWU. If we can bring that to a head (and both
sides want to do that) that will give us the opportunity not only
to improve efficiency but also to pay some of that back through
increased earnings, and I hope that those kinds of things will
make a difference. Then I think we have to go beyond that and
look at whether there are other ways in which we can justifiably
get some sort of success sharing back to the staff and of course,
at the same, we have to look at what we can do for the customer.
There is a whole raft of things which this statement may well
start to open up in ways that we have not been able to tackle
105. The Minister agreed to lift the moratorium
on the conversion of Crown offices and referred to some proposals
put forward by yourself for retaining the core. Can you tell us
what effect lifting the moratorium is going to have and what this
core represents both in terms of numbers of offices and percentage
of your business?
(Mr Roberts) We have currently got about 600 Crown
offices within the network of 19,000 with the others being a mixture
of old style sub-post offices and franchise offices which have
been the converted Crown offices. That handles about 20 per cent
of current volume, those 600 offices. What we have suggested is
that we ought to work towards a target of reducing that 20 per
cent to about 15 per cent, which would probably mean in terms
of numbers of offices transferring roughly a further hundred from
Crown offices into franchise offices. Can I be absolutely clear:
we are not talking about reducing the number of post offices at
all. We are talking about converting, transferring, maybe around
a hundred from what are currently Crown offices into franchise
106. What is it that determines that hundred
out of the 600?
(Mr Roberts) It is a combination of factors. Location:
can we get a better location for an office by making a change?
Cost reduction: it is cheaper for us to be able to transfer a
Crown office into a franchise office. What is the quality that
the agent or partner or franchisee would be able to give because
in certain cases we will not make that kind of decision because
we do not think the quality will be maintained. The Chairman may
remember that at the last hearing we had here you asked us to
put in the research evidence we had that where we did make these
changes customers felt overall that they were getting a better
deal at the end of it and we submitted that to the Committee last
time. It is a combination of those things, which is why I am saying
roughly a hundred, and it will depend a little bit, given the
volume connection, on whether we are doing rather larger offices
or rather smaller offices. We are trying to set some parameters
around what I know the union have seen for many years as a sort
of totally open ended approach to conversions. I can remember
being asked, does this mean nil Crown offices? Therefore what
we have tried to do here is to say, look, this is our planning
at the moment and, given all the circumstances in Post Office
Counters, this is what we think would probably be sensible over
the next few years. I know, because I have just had a copy of
the letter, that Mr McCartney, the Minister at DTI, has written
to both me and the unions saying that he feels that that is a
sensible way forward and that is why they were lifting the moratorium
in the statement.
107. When you were with us before we asked
you about your relationship with POUNC and your employees. I think
you said that things had been not very good and you said, "Ask
us in 12 months how things have gone". Well?
(Mr Roberts) You are going to ask me. I do not know,
but I suppose you asked the union the same question, so I will
give you my view. I think the last 12 months have shown a marked
improvement. I think we have been helped by the fact that the
elections in the CWU which were around at the time when we last
spoke have been completed. Mr Hodgson and Mr Keggie, the Deputy
General Secretary, are there and we know they are there for some
time. We have tried on both sides to set up a very constructive
dialogue starting at the strategic level and then working through
a number of areas. During the course of the year we have managed
to conclude, I think, some tough and acceptable deals on both
sides starting with code of conduct which clarified a lot of the
aggravation that we had had in the past through an agreement about
the way we handle deliveries, which was another source of concern
for the union, and we are now, as I said, in the middle of this
productivity discussion. We have also on the way dealt with the
new European legislation, the working time directive, and we can
both jointly see a way forward on that. I think it is measurable
by the fact that the number of days we have lost this year so
far compared to the last year and certainly the year before that
are absolutely minute. We are less than 0.00-something of a per
cent of days lost this year, which I think is at least one indicator
of the atmosphere within the organisation in the IR sense.
108. How about relationships with POUNC?
(Mr Roberts) Relationships with POUNC are I think
very constructive. We have had during the course of the year discussions
I suppose above all around the level of quality that we have been
producing on first class mail. It is currently at around 91.5
per cent and I know that the POUNC view is that it should be higher
than that, round about 92. We do not disagree with that, but from
my point of view it has been trying to move a number of these
things at the same time. We have been hitting on a weekly basis
at times 93 per cent for first class mail. It is now getting the
consistency into that. If we are able to do that I think that
that will remove a major bone of concern for POUNC and one that
we fully accept.
109. Could you tell us where you think we
are with Horizon, the ICL Pathway project? It has not been without
its teething problems. Are you still committed to it? Are we going
to get a result soon?
(Mr Roberts) We are still committed to it. The automation
of Post Office Counters is absolutely central to our strategy
for the future of that part of the Post Office. We are committed
to it as long as it continues to provide a sensible commercial
return for us, which is what it does at the moment. You quite
rightly say that it has had its teething troubles. As you know,
it is not just us and ICL Pathway but the DSS and therefore the
Treasury who have a role in this, and there is a review going
on which is being run by the Treasury. I hope that that review
is going to report very soon because then that will take the cloud
away from the projectI hope. I cannot guarantee what the
result of that will be, but I am very clear that from our point
of view in the Post Office, as long as it is giving us the right
commercial return, which it is, we would want to see it go ahead.
110. Do you have any reservations about
the EU directive on the postal service due to be implemented next
year, 1999, and also are you confident that in the next round
of postal liberalisation the Post Office will be in a position
to take advantage of the opening up of the markets?
(Mr Roberts) I do not think we have any reservations
about what is due to be implemented in February. I think we have
been through that and we see that as a sensible next step. I am
more concerned about what might come after that because certainly
the view of the Commission at the moment appears to be that the
next stage in 2003 should be the liberalisation of direct mail
and inward cross-border mail. Our view has always been and still
is that it is not the right way to go to liberalise classes of
mail, and certainly with direct mail we just do not think it is
policeable. What is inside a piece of so-called direct mail? We
have always favoured liberalisation by either reducing the price
or weight limit in the way that will happen next year. I have
my concerns there. Will we be in a position to take advantage
of this? It is absolutely central to what we are trying to do
and why we welcome the statement this week, that we have the period
between now and 2003 to really get our act together and make the
most of the freedoms. If I could just make one other point about
regulation, it is very important to us that any regulation brought
forward as a result of the statement on Monday is coherent with
whatever is coming out of the European Commission. What I would
hate to have is one set of regulations being produced by the Government
in this country and another set being produced by Brussels and
finding that the two things do not join up.
111. Can you tell us why the customer stamp
to Europe has gone up?
(Mr Roberts) The international mail has always been
settled by a very complicated system called "terminal dues".
This is because we are basically in this country a net exporter
of mail, so we send out more to be delivered in country X than
country X sends in to us. There therefore has to be a settlement
about the amount of work they do to deliver the mail they receive
from us compared to the amount of work we do to deal with the
mail that comes in. The Commission a couple of years ago said
that the old system for doing this was not competitive and as
a result of that all European postal administrations had to sit
down and try and negotiate a new system which was called "cost
based terminal dues". It is very complicated. If the Committee
is really interested I would be very happy to give you a long
and complicated paper on it but basically, as a result of that
negotiation, because we are relatively efficient and low priced
in this country, over a period of time in order to get the sort
of balance across Europe of pricing related to cost some of our
prices will have to go up and that is why there has been an increase
in price earlier this year.
112. So there is not the possibility then
that the volume of mail going from this country to Europe is dropping?
(Mr Roberts) It will fluctuate between countries but
at the moment we are seeing still growth in international mail
and fortunately many of the global companies are locating in the
UK and then want to send their mail abroad. I have to make the
point, and it relates back to the key thing again about the statement,
that unless we can provide them with the kind of service they
expect they will just go and relocate somewhere else. At the moment
mail to Europe from the UK is still growing.
113. Do you think the euro will make any
difference if we had euro stamps?
(Mr Roberts) We will start in some cases to make settlements
in euros when the euro comes in, obviously. From our point of
view we are very keen, Chairman, as you know, on British stamps
and everything that has gone into them. We would like to feel
that whatever happens with the euro we will be allowed to continue
developing stamps in the way we always have.
Chairman: On that happy nationalistic note,
thank you very much. As I say, we will be producing our report
as soon as we can and we would like to think that we will get
it out but perhaps not before the 1 January, but certainly very
soon and we hope that it will be out to help inform the Government
in the final writing of the White Paper. We are very grateful,
as always, for the time and the trouble you have taken this morning
to come and give evidence, especially given that this is rather
a busy week for you. I am sure that these are problems of work
that you are quite happy to have to address after so long a wait.