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Select Committee on Public Accounts Thirty-First Report



34 One of Postcomm's main statutory duties is to further the interests of users of postal services. The Comptroller and Auditor General's Report showed that it was also important that Postcomm understood what users wanted from postal services, in particular the trade-off between price and quality that users of postal services were prepared to accept.[51]

35 The service which Consignia has to provide is defined more tightly in Consignia's licence and Consignia's own service specification than in legislation. The requirements under the Postal Services Act are for daily collection of postal packets up to 20 kilograms from every posting facility and for daily delivery to every home and premises, with no maximum time period between posting and delivery. The relevant EU legislation, however, specifies a maximum of five days. The licence issued by Postcomm to Consignia specifies delivery targets for many of Consignia's products, notably the percentage of 1st Class mail to be delivered the next day (set to 92.5 per cent by the end of the 2002-03 financial year). Consignia's service specification goes further by including a second daily delivery to many urban addresses and a target time to deliver before 9.30 AM in many urban areas.[52] Postcomm themselves have not set out formally what they understand by universal service, and Consignia told us that Postcomm should complete its review of the nature, size and scope of universal service in advance of further introduction of competition.[53]

36 Consignia has recently been exploring ways in which it can alter its delivery specification in order to better meet the needs of customers. The company has recently announced a pilot scheme, carried out in consultation with Postwatch, to assess whether it could deliver domestic mail later in the day, business mail earlier in the day, and so cut costs and increase reliability. These changes could only be implemented nationally with the agreement of both Postcomm and Postwatch. Postcomm told us that these changes could result in Consignia using its resources more effectively. We asked whether there was a potential risk that these changes might have a serious impact on people who ran small businesses from home. Although Postcomm were not sure of the percentage of people for whom the 9.30 AM delivery was unimportant,[54] Consignia told us that it did not think that receiving mail an hour and a half later would make that much difference, and pointed out that the system of delivering domestic mail later in the day was one which appeared to work throughout the rest of Europe.[55]

37 Consignia has not met its own target for 92.5 per cent next day delivery in any of the last five years (Figure 4). Performance since the end of the financial year 2000-01 fell further, with next day deliveries standing at only 86.5 per cent in the period April to June 2001. Postcomm said that performance has improved recently to 90.7 per cent, and Consignia reported further improvements to 91.6 per cent.[56] Postcomm said that the licence they issued to Consignia imposed a requirement to reach 92.5 per cent by the end of 2002-03, and this, in their view, was about right.[57] Even if Consignia met this target, it would not necessarily represent an acceptable level of service as, on the basis of 80 million items of mail per day, at least 6 millions of items of mail would not reach their destination the day after posting.[58] Some overseas postal services achieve much higher levels of next day delivery, with Sweden Post, for example, delivering 95.5 per cent of post the next day.[59]

Figure 4: Percentage of 1st Class mail delivered next day

National Audit Office, Opening the Post: Postcomm and postal service - the risks and opportunities (HC 521, Session 2001-02), Figure 1

38 The Comptroller and Auditor General's Report showed that performance has varied substantially across the country with some areas having a consistently good level of service, but others experiencing difficulties, particularly in the London area.[60] Consignia said these problems reflected the fact that industrial relations in big cities had always been one of the most difficult areas for the company, and in London in particular low pay and travel to work patterns combined to create a high level of staff turnover. Consignia said that many of these problems were being addressed by improved industrial relations in the wake of the report commissioned from Lord Sawyer by the company and the Communication Workers Union.[61]

39 Imposing penalties on Consignia if they fail to meet service targets may not be an effective solution. Postcomm acknowledged that, although they had the power to impose penalties of up to 10 per cent of turnover, such payments would simply represent a transfer from one public sector body to another.[62] Postcomm said that they were working with Postwatch on a compensation scheme, which had recently gone out to consultation. This compensation scheme would penalise Consignia for poor performance and recompense the customer for poor service quality. Its merit was that money would leave Consignia and reach those who had suffered the consequences of poor quality of service.[63] Consignia's licence required the company and Postwatch to agree a compensation scheme within six months of the issue of the licence (so that a scheme should have been in place by September 2001). In the event that Postwatch and Consignia were unable to agree a scheme by this date, the licence allowed Postcomm to introduce a scheme by determination.[64] At the time of our hearing, a further six months after the date stipulated in the licence, this compensation scheme has not yet been finalised.

51   C&AG's Report, para 3.15 Back

52   ibid, Figures 5 and 22, para 1.8 Back

53   Q248 Back

54   Qs 13, 140-143 Back

55   Qs 508-509 Back

56   Qs 10, 188 Back

57   Q10 Back

58   Indeed, even this is likely to be an underestimate, since it assumes that all of the 80 million items are posted 1st Class. In practice, a proportion of the 80 million items will be posted 2nd Class, for which the delivery target is three days after posting. Back

59   C&AG's Report, Appendix 7, para 7 Back

60   ibid, para 1.12 Back

61   Qs 439, 563, 464 Back

62   C&AG's Report, para 3.25 Back

63   Q11 Back

64   C&AG's Report, para 3.24-3.25 Back

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