Examination of Witnesses (Questions 520
- 539)
MONDAY 25 MARCH 2002
MR JOHN
ROBERTS CBE, MARISA
CASSONI AND
MR STUART
SWEETMAN
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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