Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 100 - 119)



100.  How many jobs were lost?

  (Mr Stanley) I cannot remember the number but it was about a quarter of the workforce.


101.  All along you say, "Have no fear because these large volume producers are going to have to deliver to remote farm houses in rural areas." How do you meet the point that ten per cent of this market is business to business, so those arguments do not apply to that because there are not many businesses in remote farm houses? How do you reply to the point that quite a lot of these businesses—you mentioned one, Lambeth Council, for instance—and these new entrants will want to insist on striking up a deal to Consignia to ensure that Consignia is given the arduous task of delivering the last mile up a long drive? Presumably, you would say it is up to Consignia but it is not because there will be a dispute between Consignia and the competitor. You will be the arbitrator of that dispute so that it is a double whammy against Consignia, both in that initial commercial pressure and again in you regulating the final mile.

  (Mr Corbett) It is only a double whammy if you assume that we will exercise our judgment on the access price in a way which is unfair to Consignia. I would emphasise again that what we are looking for is the creation of a virile postal industry. We see no way in which we can have a virile postal industry without a virile Consignia at the centre of it. For us to exercise our judgment on access pricing in a way which cripples Consignia would be absolute madness and we will not do it.

102.  We may come back to that at the end of the meeting but you still have not answered the point about business to business.

  (Mr Stanley) Consignia will lose some business as a result of competition. How much depends on how inefficient they are, how slow they are to react and so on, undoubtedly, just like a supermarket loses business to small shops nearby that offer specialist or better service. It cannot be stressed too strongly that the bulk of business is huge volumes going everywhere. Even Lambeth Council. I would not want to deliver throughout Lambeth. It is not an easy, cheap place to deliver. The cherries are not that many that the picking of them can seriously damage Consignia.

Mr Jenkins

103.  Looking at some of the answers to some of the previous questions, I notice you spent two years and no doubt many millions of pounds on consultancy fees and the outcome is not one which has filled me with confidence with regard to some of the answers you have given. In the report it says that not many of your staff have direct experience of the postal business. Do you yourself, apart from going out with the odd postman, have any experience of the postal business?

  (Mr Stanley) Before this job, I had not worked in the postal service.

104.  You are not fully aware of what type of business you are dealing with?

  (Mr Stanley) I have spent a huge proportion of the last two years getting to know Consignia myself. I have done a lot of visits, met a lot of union members, managers and so on. Given the handicap of not having worked in the business before, I have a pretty good knowledge of the business and so have most of my staff.

105.  You will have a pretty good knowledge of the problems the business faces then?

  (Mr Stanley) I would say so.

106.  Do you not feel that the money spent on consultants would have been better spent on the postal service, on its managers and its workforce, directing them to a new method of efficiency?

  (Mr Stanley) No, because its problems are fundamental cultural: lack of investment and so on. In the view of Parliament it said, "Let there be competition" and in our view too they need competition to sort them out. If two years ago we could have come into this room and said, "We think we ought to introduce competition. It seems pretty obvious to us", and you had all said, "Fine, okay", we would not have needed to spend a lot of time and employ consultants to check every aspect of this issue. We would not have got away with it. That is why we had to do this work in such detail and look at it through so many different eyes to make sure that we got the right answer.

107.  You said that management will only change if it faces competition. That is a lovely statement. It presumes that management can change. It has the knowledge, the experience and the base for change. What evidence do you have that this management could change?

  (Mr Stanley) There are some fantastic managers in the Royal Mail at all levels. There are some who will not be able to change, I admit, but most that I have come across know what the problems are. There is something about the organisation that finds it difficult to change.

108.  If I can quote, "In recent years it has lost its way". These are the fantastic managers?

  (Mr Stanley) They spend a lot of time talking and arguing amongst themselves about the best way to do it instead of getting on and doing it.

109.  That fills us with confidence. Your remedy for this is to place them under competition and then they will sort themselves out.

  (Mr Stanley) I think they will, yes.

110.  They will change the culture?

  (Mr Stanley) Yes.
  (Mr Corbett) I think it is reasonable to look at some of the international comparisons and some comparisons with other industries that have been liberalised. In case after case after case, you see examples of significant improvements in efficiency and significant benefits in terms of lower prices and better services flowing back to the users.

111.  You can see that discipline is brought upon the workforce by competition?

  (Mr Corbett) And on management.

112.  A management that does not see e-mails as a threat.

  (Mr Stanley) And on the shareholder too because the company ought to be investing more.

113.  Another answer you gave was that, although the expenditure rose by 12 per cent, it is hard to get to the bottom of that. I should have thought it was your job to get to the bottom of that. How can you come before the Committee and say, "Although the expenditure rose by over 12 per cent, it is hard to get to the bottom of that"?

  (Mr Stanley) Because a large part of the problem arises outside the mail's business. The information systems in the company are not geared to give the management the information they need. The finance director and others will say that, but they are getting much better.

114.  That is a good and obvious answer. You are not in a position to regulate this business because you cannot and they cannot quantify the costs or the expenditure or where they are losing money or where they are doing well. How are you going to regulate it then?

  (Mr Stanley) The systems are getting better all the time. We have a company called WS Atkins working with Consignia to extract the information. We are getting there but it is hard work.

115.  It is obviously hard work. It must be like trying to nail a jelly to the wall. You do not know where the costs are; you do not know where the costs arose; you do not know where the management efficiency is but, you say, "We will create a fantastic company in a few years." Can you tell me what you consider to be fantastic?

  (Mr Stanley) I would love to see the Royal Mail go back to where it was eight or ten years ago. It was then a really well run organisation, well managed, with a dedicated workforce and it provided one of the best postal services within Europe, if not in the world.

116.  What went wrong?

  (Mr Stanley) It is hard to put a finger on it but I think the customers are now more demanding. Industrial relations have clearly got worse. The company has been distracted by political changes which you will be familiar with, and there has been a lack of investment. All sorts of things have gone wrong.

117.  It has lost its way?

  (Mr Stanley) It has lost its way.

118.  Did the management have a clear objective, strategy, purpose, mission? It did not engender in the workforce that spirit de corps where you knew you had a first class service and pride in the job. It lost workforces because it did not pay the right rates. We could all write the book and we did not need two years and many millions of pounds on consultants.

  (Mr Stanley) If you had agreed with us two years ago, we would not have needed to.

119.  How many years is it going to take to get it back?

  (Mr Stanley) It is hard to say but two to three years will see a company which is significantly better than it is now.
  (Mr Corbett) Do we not need to hold on to a fundamental distinction between the role of the regulator and the role of the management of the company? I do not believe that any of you would wish to see a regulatory body getting involved in the management of the company. You ought not to, I would suggest. For good reasons or bad reasons, we were set up to do the regulator's job. It is not our job to manage Consignia.

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