POSTCOMM: OPENING THE POST
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.
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.
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.
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,
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.
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.
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.
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.
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.
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.
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
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.
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.
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.
At the time of our hearing, a further six months after the date
stipulated in the licence, this compensation scheme has not yet
51 C&AG's Report, para 3.15 Back
ibid, Figures 5 and 22, para 1.8 Back
Qs 13, 140-143 Back
Qs 508-509 Back
Qs 10, 188 Back
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
C&AG's Report, Appendix 7, para 7 Back
ibid, para 1.12 Back
Qs 439, 563, 464 Back
C&AG's Report, para 3.25 Back
C&AG's Report, para 3.24-3.25 Back