Examination of Witnesses (Questions 220
- 239)
MONDAY 25 MARCH 2002
MR JOHN
ROBERTS CBE, MARISA
CASSONI AND
MR STUART
SWEETMAN
220. The Post Office has only been around since
1840?
(Mr Roberts) No, you can go back to Charles I.
221. I am very surprised if you are claiming
the whole post office for 300 years has been inefficient. Do you
not think this is something from the last 20 to 30 years?
(Mr Roberts) No, I do not think it is. I think that
over the period of time—if you go back pre-war—nobody
really knew, nobody looked at what efficiency was, hence my original
question to you. We have got a lot better, I think, over the last
20 years with industrial engineers and other things at looking
at how you define efficiency, work rates and everything else.
That starts to give you a much better picture of whether you are
efficient or not.
222. You have been on the board since when?
(Mr Roberts) I have been on the board since 1985.
223. When did you become managing director?
(Mr Roberts) I became managing director— Do
you mean Chief Executive?
224. Chief Executive.
(Mr Roberts) Chief Executive, seven years ago.
225. Why did you not do anything about it then?
(Mr Roberts) Well, we were doing things about it then.
226. You were not over-manned seven years ago.
(Mr Roberts) No, I think we were over-manned probably.
227. So why did you not do something about it
then?
(Mr Roberts) We were doing something about it then.
The Conservative Government of the day set us efficiency targets.
They set them in terms of real unit cost reduction and we were
hitting those targets. Now at that time that was the measure of
efficiency.
228. In 1993 when you were managing director
and in 1985 when you were on the board, you think the company
did not need the cuts you have announced today? You did not think
those kind of inefficiencies needed to be sorted out?
(Mr Roberts) I think they were being sorted out at
the time.
229. How can they have been sorted out at the
time when today you are announcing—
(Mr Roberts) If you give me 30 seconds I will answer
your question.
Mr Gibb: Right. I am not sure you are going
to.
(Mr Roberts) If you give me time I will. If, in fact,
you go back then at that time we were being set efficiency targets
in terms of reducing our costs.
230. Do you only go up to the targets, do you
not go beyond that and say "I am running a business here
should I not be as efficient as possible"?
Chairman: One at a time, please. Let Mr Roberts
answer the question.
(Mr Roberts) At the time, because of the model we
were using, the Government was using as a nationalised industry,
the targets were set by them as what we would now call the shareholder.
They were the targets that the Government presumed were the targets
that we should meet to be deemed to be efficient. They were a
combination of profit and real unit cost reduction. Those targets
most of the time were being met in that period. What has happened
I think in the later years is that we have seen the market change.
In those days there was no such thing as a privatised post office
anywhere else in the world. We have got two of them now. We have
seen liberalisation affecting the market at different timescales
in Europe. We can look in a much different way at how you measure
efficiency. Those two companies now measure it in a way that any
private company would and what we are trying to do is to match
them. So the rate of efficiency change I think has speeded up
over at least the last ten years.
Mr Gibb
231. Do you think Patricia Hewitt is wrong when
she says the problems with Consignia lie in poor management?
(Mr Roberts) Yes, I do think that. There is no doubt
that like any big company with an eight billion turnover and the
size we are there will be poor management in the same way as there
are industrial relations problems for us and there will be all
sorts of other problems.
232. She is right there is poor management or
there is not?
(Mr Roberts) I think in any company, Mr Gibb, of that
size you will find—
233. I do not mean junior management, I mean
senior management at the top.
(Mr Roberts) You will find in any company, probably
at every level, managers who are less good than others. That is
why you find that managers leave. That is exactly the same with
us.
234. Were you a good manager from 1993 onwards?
(Mr Roberts) I have no way of measuring that.
235. Loss is quite a good indication.
(Mr Roberts) If you want to put it that way, in the
seven years I have been Chief Executive we have made a loss in
one of them.
236. Would you have put these proposals forward
today had you not been facing open competition in the years ahead?
(Mr Roberts) Certainly we would have put proposals
forward, whether we would have put them forward at this level
I think is a moot point. The reason we have put them forward at
this level is because we have benchmarked ourselves against those
people who are working a free market, particularly the Dutch and
the Germans, and that gave us the indication of the scale of efficiency
we needed to get to if we were going to compete because they are
the competitors now.
237. Do you accept that the cost of the universal
service, of maintaining it, is about £81 million a year as
set out in the NAO Report?
(Mr Roberts) We get into discussion then of the two
types of models. One model says it is about £80 million,
the model that we have used—the entry pricing model—shows
that it could be as much as £500 million. I think the difference
between the two, one is modelling a steady state before liberalisation
and the other is modelling what in our view is the right way to
do it which is looking at it after liberalisation has occurred
because that is what is going to affect the cost of the USO.
238. That is the £81 million figure?
(Mr Roberts) No, £81 million is the first one.
On the entry pricing model we think it could be as high as £500
million. It is somewhere between that very wide range.
239. Which is the one after liberalisation?
(Mr Roberts) That is the entry pricing model.
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