Examination of Witnesses (Questions 540
- 559)
MONDAY 25 MARCH 2002
MR JOHN
ROBERTS CBE, MARISA
CASSONI AND
MR STUART
SWEETMAN
540. In saying how you are dealing with your
staff, I was surprised to see there is a suggestion that the 900
staff or so would become owner-drivers. That sounds to me like
franchising out something and really it is a bit like the construction
industry where you have full self-employment. Can you describe
to me whether or not that is the action of a responsible caring
employer? What is the argument for owner-drivers as distinct from
employees?
(Mr Roberts) Most of our competitors run on that model
and the rates of productivity and the way in which it operates
seem to be far higher than ours. In discussion with the unions,
and this has all been discussed with the unions, we said that
we would like to try as part of this change having a number of
owner-drivers. At the moment that is about 25 per cent, the other
75 per cent are employees. We have negotiated with the union that
we would ask for volunteers and then we would help them get started.
We are really looking to see whether this model will actually
give us and them both better employment, better money, and overall
give us a more viable business in Parcelforce.
541. It is a bit of a fiddle though, is it not,
in the sense that they are employed to work for you?
(Mr Roberts) They are at the moment, yes. The issue
longer term will be whether they are free both to work for us
and for somebody else. One of the things is getting them through
the first stage.
542. Can I just clarify how much you think that
the disruption on the railways has cost you during the last year?
(Mr Roberts) In terms of money?
543. Yes.
(Mr Roberts) Some double figure millions of pounds.
Again, I would prefer not to quote because we are in the middle
of a negotiation with EWS Railways. Certainly a substantial figure
which under the terms of the contract we are able to claim back,
and obviously we are in negotiations about it.
544. Competition has been quite unhelpful in
the railways, has it not?
(Mr Roberts) In the sense that whatever the reasons
for the performance, we have had very poor performance and that
has cost us money and it has cost us service.
545. As I understand it, reading through what
you are proposing, you will be switching quite a lot of traffic
from rail on to road.
(Mr Roberts) Funnily enough, we are actually going
to put more traffic on rail and take it off road. What we are
doing is we are taking the overnight mail, the fast mail, where
the service is really deadlined, and putting that on road where
we are getting greater reliability and the slower mail that we
can deliver over two days, and the bulk mail, will go on to rail.
So that extra four per cent will go on rail.
546. Will the railways lose money as a result
of that?
(Mr Roberts) We have got to negotiate all of that.
In theory they will be getting more volume and we will be looking,
particularly in the light of our experience, for tighter prices.
Where that will end up I do not yet know.
547. Can I just go back to the point that some
of my colleagues made about the name Consignia which cost you
half a million. It would be helpful if you told us who it was
who managed to sell you the Consignia name for half a million?
(Mr Roberts) It was a company called Dragon Consultants.
548. I wonder if I could ask the Treasury whether
or not they do any other work for the Government?
(Mr Glicksman) I am afraid I would have to look into
that. I am afraid I do not know the answer.
549. I think that would be helpful if you could
just clarify that because my understanding was that the consultation,
despite the fact that some of my colleagues mentioned that you
could commission a fair few opinion polls for that, was mainly
with large businesses and only a relatively small amount of public
prior to the change. Is that correct?
(Mr Roberts) I do not think from memory that is correct
because we asked them to look at wide ranges of groups which included
business and opinion formers but certainly did the normal kind
of advertising groups with—[7]
550. I think it would be helpful if we could
have some indication of how this consultation exercise was done
because apart from yourself I have not met another living being
who thinks that Consignia was a useful and constructive change.
I am not quite clear how they managed to reach that conclusion.
Could I pick up the question of the USO. I disagree, I must confess,
with my colleague about the question of subsidy to rural areas.
It seems to me presumably if you were free to price as you wished
you would have a price which reflected both where it was being
posted from and where it was being posted to. It would be like
me sending my Christmas cards to Australia costing more than sending
a Christmas card next door. Therefore, if I wanted to post to
a tenement in Glasgow from Glasgow it would cost me less than
posting to my mother-in-law on the Western Isles. You are nodding
your head and I am not sure the stenographer can take a nod.
(Mr Roberts) Yes.
Chairman: How often do you send her a letter?
Mr Davidson
551. If this changes I will send her a great
deal fewer being a Presbyterian. In those circumstances then presumably
tenements in my constituency where you have eight in a tenement
and then you have eight houses just next door should really be
getting cheaper mail than Lord Muck with an 800 yard drive and
two miles to get to it. Am I correct in thinking then that really
the way in which this is structured is yet another way in which
the poor urban dweller subsidises the wealthy farmers?
(Mr Roberts) I think the issue in virtually every
country that I know of, apart from Sweden after its liberalisation,
is that people have always had a standard rate to go through for
parts of the country or, in the case of the UK, the whole country.
If you actually went, and this is what some of the modelling tries
to do, to look at the cost of a route from, I do not know, Penzance
to Wick or whatever, then obviously that will cost more than just
across the road posting and delivery.
552. There is no moral reason particularly why
the rural areas should be subsidised by the urban, is there?
(Mr Roberts) No. I think the issue goes back to a
time when people thought that the mail was such a central part
of communicating throughout the whole country that you had a standard
rate for it.
553. That will be around about the time when
small boys were put up chimneys.
(Mr Roberts) That probably would be.
554. I have satisfied myself on that one. Can
I clarify whether or not there has been any other explanation
of ways the subsidy could be handled? It is parallel with the
bus system where particular routes and particular areas are given
a particular subsidy and you could have competition between delivery.
Take the Western Isles, everything in the Western Isles is "We
will do that if you give us X" and that involves an assessment
of the market. Thinking in terms of how we tackle the issue of
competition on the one hand, service provision on the other, a
direct subsidy from Government could handle these sort of issues.
(Mr Roberts) Yes. I think the only one I have ever
come across was not a direct subsidy from Government but it was
the idea that in a regulated industry competitors would pay into
some kind of compensation fund which would then cross subsidise
or cover the cost of the Universal Service Obligation. Although
that has often been talked about I think people have always said
"It is going to be very complicated, how do you handle it?
Is it on the amount of mail that you as a competitor handle? What
happens if a competitor decides to stop business?" That is
the only one I have come across.
555. Presumably when you are charging differently
for different areas then with all the technology that you have
now for monitoring delivery of parcels and so on it would be relatively
straight forward to charge rural areas or those sending to rural
areas what it really costs?
(Mr Roberts) You would almost be measuring every route
every day because the volume of mail going across the different
routes on different days could well alter. If you were talking
about a route you would need almost to do it route by route.
556. Surely then Glasgow to Australia is a set
charge and if I was sending from Glasgow to Stornaway it would
be a set charge.
(Mr Roberts) Then you get into zonal pricing which,
in fact, has happened in Sweden. You just divide the country up
into different routes, or you would have a rate card. I hesitate
to mention rail but it was a bit like that with rail tickets when
they were introduced. I think that was found by most people to
be very, very complicated. It could be done.
557. It is the logic really of competition,
is it not?
(Mr Roberts) It could well be. I am not sure that
is necessarily the best way to do it but it is certainly a way
in which it could be done.
558. What is your better way?
(Mr Roberts) The better way is if you stick with a
uniform price and that is maintained then I think that is still
the simplest, most effective and most understandable way.
559. It seems to me you could have that or you
could have competition but you cannot have both. You have spent
some time indicating if you have that universal provision, universal
price, then people come in and cream it off.
(Mr Roberts) Yes.
7 Note by witness: To the best of our knowledge,
the consultants who advised us on the selection of the name, do
not work for any Government Department or body. Ev, Appendix 2,
pp 52-53. Back
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