Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 520 - 539)



  520. They are on bad enough incomes as it is, it would be a diminishing scale. What percentage of costs are labour costs?
  (Mr Roberts) About 70 per cent.

  521. Seventy per cent of your costs are increasing in accordance with the RPI minimum and probably one would hope slightly above and yet you have not been allowed to increase your prices in line with RPI. I am not suggesting this goes anywhere near explaining a £1.5 billion shortfall but it does suggest that your position could be significantly better if even RPI were accorded?
  (Mr Roberts) Yes. If we had been able over the past five years to keep prices in line with RPI we believe that we would be between £400 and £500 million per annum better off now than we are.

  522. Yes, that is what I was going to ask. I picked up the £400 million you mentioned possibly to Geraint. That is £400 million a year for how many years?
  (Mr Roberts) I guess we would have built up year by year. If we took it from now it is sort of in perpetuity.

  523. Yes.
  (Mr Roberts) We would have a higher revenue base by £400 million per annum from price increases in line with RPI.

  524. Yes. For how many years?
  (Mr Roberts) Five years.

  525. Even if we assume, therefore, that it grew on a steady path, that means you would be about a billion pounds better off now than you are?
  (Mr Roberts) Yes.

  526. That would be nice, would it not?
  (Mr Roberts) Yes, it would indeed.

  527. It would have altered your position a little?
  (Mr Roberts) Yes.

  528. I assume the Treasury answer would be it was a policy decision, is that right?
  (Mr Glicksman) Decisions on prices were transferred to the regulator.

  529. To the regulator?
  (Mr Glicksman) Yes, when Postcomm was set up.

  530. You mean the regulator, knowing that you had 70 per cent of your costs increasing at beyond the rate of RPI, did not even allow you RPI rates of increase?
  (Mr Roberts) That is quite correct.

  531. What world does he live in? That I find astonishing. I was staggered when Mr Steinberg got the figure from you of the amounts you are paying. The average salary I think you said was £12,500 in London?
  (Mr Roberts) Yes.

  532. That is £10,000 less than the national average earnings and not making allowance for the London Allowance which most other employees have?
  (Mr Roberts) Yes.

  533. That is abysmal, is it not?
  (Mr Roberts) It is. Postmen's pay in real terms has probably gone down slightly over the last few years, in real earnings it has probably gone down slightly. We went through a period, as I said to Mr Steinberg, when we probably had the money to be able to do it but public sector pay policy caught the Post Office as it then was, we were not able to put rates up. We have just agreed with the union, they have got an aspiration to get to a £300 a week postman, that is over the next couple of years. We have agreed with them that we ought between us to try and get to that point. We would like to try and have better paid postmen because apart from anything else you get more stable staffing and that will knock on into service and all the other things.

  534. Whatever happens it was a time bomb situation, was it not? I am not arguing the rights and wrongs of the individual issues on which strikes may have been called. I am not pretending I know the details nor do I want to. One thing seems certain, that if you are locked in that sort of financial discipline it is inevitable, particularly in a time of increasingly full employment, either you are not going to have staff or you are going to keep having a high turnover of staff and what staff you have are going to be deeply discontented with their lot.
  (Mr Roberts) Yes. I think that was one of the factors which contributed to some of the industrial relations problems we had 12 months or so ago when we did have a year when we lost a large number of days. It is something that we are trying to address jointly with the union now.

  535. Mr Steinberg said to you that from the report a major element in the loss of days through strikes were in the London area and perhaps now one begins to understand a little more what it is all about. Let us assume if we can, and it is maybe an impossible question to ask you, if you had been able to keep the lost time in London to the same level as prevails in the rest of the country, what difference would it have made to your ten year target? Are you able to say one per cent, for example, was the result of the trouble with the rail industry which we understand? Have you any idea? London is such an enormous market for you.
  (Mr Roberts) I think in the year that we lost the 60,000 days it was a combination of London and a number of other big city centres. If we had put the whole lot together, we estimated that in that year it could have cost us about half a per cent in terms of service. I would just like to make one point. The industrial relations problems were very focussed in the sense of very much a limited number of centres, even though there were a lot of days lost. That is why we can get a broad calculation of the impact on the service.

  536. I understand that. With the rail impact of one per cent and with the half per cent you are saying, your shortfall was about three per cent, was it?
  (Mr Roberts) No. On first class service, in the year we had all the strikes it was two and a half per cent. Yes, you are correct, in the year of the strikes it was two and a half per cent. We are now short by about half a percent. The other issue that we have had to tackle this year has been anthrax where we have had something like 400 anthrax hoaxes in some of our biggest centres. For example, the whole of Liverpool was out for a day because of one of the early hoaxes and again that has an impact on service. Of course you have to treat every one as serious, or we did have to.

  537. What comes over to one as a consumer is that in a way I as a consumer, like business as a consumer, have been rather lucky because I have not been paying what really is the full cost of an operation because of an artificial constraint on the pay which is a major element in your costs?
  (Mr Roberts) Yes, I think that is right. Again, going back to low price, it is why we have got low price, low wage in the industry, both of which are probably slightly wrong.

  Mr Williams: I promised the Chairman I would not take my quota. He now tells me I have had over 13 minutes already so I will at least keep my promise and stop now.

  Chairman: Thank you, Mr Williams, very helpful. Your last questioner tonight, Mr Davidson.

Mr Davidson

  538. Can I start off by saying that I am even nicer than Mr Steinberg here.
  (Mr Roberts) At this time of night, Mr Davidson, I need it.

  539. Can I start off just by mentioning that I did notice that you had given up the opportunity of a ten per cent salary increase given the present circumstances and I think that is laudable. It is unfortunate that none of the press are here to hear that. We find that they have relatively short attention spans and therefore later on in the evening they have gone. I wonder if I could start off by picking up the issue of industrial relations. I very much have the impression from people in the union that the industrial relations are seen as being old fashioned, top down. Would things have improved, as you are indicating they are improving, had it not been for the external threat?
  (Mr Roberts) I think it would have had. I think we reached a point in the year before last where both the then General Secretary of the union and I were saying we cannot go on like this, we are letting customers down, and I do not think for a moment that staff enjoyed taking the amount of industrial action that they did. There was a combination of factors. In some cases it was the unions, in some cases it was managers. That is why we had the study which Lord Sawyer led, which has helped us to get this on to a different basis.

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