Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 40 - 59)



Mr Hoyle

  40. Can I just take you on to Parcelforce. Everybody is aware of the losses year-on-year, we cannot get away from that, but what is the future for Parcelforce?
  (Mr Roberts) We think that there is a future for Parcelforce, particularly in the express parcels business. What makes the money for most parcel companies throughout the world is express parcels, it is the time sensitive parcels, guaranteed delivery by next day or whenever. What we are looking at is the way in which we handle what we call the standard parcels, whether that should still remain within Parcelforce, whether it should be part of the USO within Royal Mail, and the USO must be maintained, we are very clear about that.


  41. That is the Universal Service Obligation.
  (Mr Roberts) I beg your pardon, that is the Universal Service Obligation. We are also looking at ways in which we can better use the staff more flexibly in the way I talked about, what we call mixed resourcing, some full-time staff, staff who are employed much more flexibly, on delivery routes. The major cost of running a parcels service is when you are making single parcel deliveries to individual houses. You make money on parcels, and we do it in Europe, when you have business to business parcels and there are a number of parcels that you deliver to one address, that is where it becomes much more economic.

Mr Hoyle

  42. I suppose you are aware of the press reports that suggested ministers were considering a plan to merge Royal Mail and Parcelforce into one again. Is that on the cards?
  (Mr Roberts) No. I am not aware of ministers thinking about that certainly. I think these days they would probably think that was for us. What may have come about is the point I was just making, that it may be easier for us to deliver the Universal Service Obligation on parcels, the single parcels, through some of the mail routes—we do a bit of that already—I think that is possibly what might be behind those press reports.

  43. Obviously there is the proposal by PricewaterhouseCoopers to franchise Parcelforce's work to contractors, which you have just touched on. Can you tell us more about the PricewaterhouseCoopers' proposals? I know you have mentioned some of the plans but I would like to hear a little bit more and then come back on that.
  (Mr Roberts) Let me make it clear that they were not PricewaterhouseCoopers' proposals. We used two consultants from PricewaterhouseCoopers to help us do the study that we did. This emerged out of the ministerial consideration of the last strategic plan. In discussion with us we both agreed that we ought to have a fairly wide ranging study of Parcelforce to see what we could do to really get it back into profitability, or on track for profitability. That was when we looked at whether we could go further in terms of getting flexibility into labour, we looked at whether it was sensible to get out of the business altogether, and we have concluded at the moment that is not the right way to go. We have looked at a lot of contracts, individual contracts, where we are not making the right kind of returns for those. We have looked at the nature of the network and whether we need all the depots and delivery offices that we have got. It is a kind of fundamental structural look at the business as a whole and that is what we have started to consult the unions about within the last few weeks.

  44. You mentioned about owner-drivers and things like that. As you have already got the vehicles, you have already got drivers, would the preference be to give the opportunities to staff who are already employed or will you fall into the old trap that the breweries fell into that instead of giving it to the individual pubs they said "no, we will get rid of a job lot" and you leave the poor workers high and dry?
  (Mr Roberts) Our intention is always to give our own staff the first opportunity to opt for those jobs which become that kind of flexible approach. If we cannot fill it with our own people that is when we would go outside. We have got a mixture of both at the moment, a small mixture as it has just started.

  45. Do you give them the option to buy the vehicle from you or use that vehicle?
  (Mr Roberts) Yes. We have got a system which we are developing now which would help the individual purchase the vehicle, or purchase a vehicle. Some of our vehicles are leased already. The intention is to try to make it easy for somebody to do this, not make it hard for them to do that.

  46. So they would have not only the wish of the company but there will be financial help as well to make sure that progresses?
  (Mr Roberts) Yes.

  47. And is that working well and are the unions welcoming that?
  (Mr Roberts) It is too soon to say whether it is working well. We have got about 25 per cent of the routes, about 1,500 routes, at the moment affected by this. The Communication Workers' Union recently reached an agreement with us over their members actually taking on these kinds of roles, that was probably within the last couple of months, and as a result I think it is a bit too early to say. The union's major concern is about the longer term future of Parcelforce, where you started.

  48. Are you pleased with how it is going yourself?
  (Mr Roberts) I think so far it is showing that we can work it. In some of the depots where we have piloted it, and I have seen it in Milton Keynes which is one of the depots where we have been doing it, it seems to work very well for two reasons. One, it does give us the kind of cost variability we want but, secondly, it seems to work well with both those hauliers, if I can call them that, who have come in from outside and with our own staff and the two seem to be working well together.


  49. But the test will be London, Liverpool, Edinburgh.
  (Mr Roberts) As ever, yes.

  50. Just on a final point on Parcelforce. How many studies have you had on Parcelforce in the last five years?
  (Mr Roberts) In the last five years?

  51. I think it is about that length of time that you have been coming to the Committee when I have been chairing it and there seems to have been at least one a year.
  (Mr Roberts) No, I think you are—

  52. Am I being unkind?
  (Mr Roberts) I do not think it is as many as that. Maybe a couple.

  Chairman: Maybe they took a long time.

Sir Robert Smith

  53. You said that the individual deliveries were not worth doing, or were not profitable, but why are rival companies interested in doing those individual parcel deliveries?
  (Mr Roberts) They are not.

  54. My mother keeps getting mail order stuff.
  (Mr Roberts) What they will do is they will probably charge a much higher rate. The main competitors, TNT, DHL, the others, basically are not interested in domestic parcel delivery. Where domestic parcel delivery is taking place you will often find it is by own fleets from some of the major mail order people like Gus or whoever, who own their own fleets, White Arrow, for example. For most of the big parcel deliveries they are making their money on business to business contract type arrangements.

Mr Djanogly

  55. I would like to move on to industrial relations, if I may, but before I do I would just go back to the Chairman's point about job cuts. In July you announced I think 2,100 cuts at that time and, as reported in the FT, then you said they were all to be at a managerial level and that you would not be affecting front line staff because they were needed to—and I quote what was put in the papers—"keep the group competitive". That is clearly a very different picture from the one you have just described to the Committee. What has so fundamentally changed in the last five months that you now have a very different picture and could it be related to the management involved?
  (Mr Roberts) It is certainly related to the management position of the group. We knew at the time we were going to have to look harder at Parcelforce. I am trying to recollect the quote that you are speaking from, I think that was much more about Royal Mail rather than Parcelforce. The Parcelforce issue was already being studied at that time. No, the major issue, and I keep coming back to it, is that five months ago, which would have been very early in our financial year because we are an April to March financial year, we would not at that stage have been clear about the level of slow down in growth in Royal Mail. The second thing is that we reached a big agreement with the Communication Workers' Union about 12 months ago called The Way Forward which is about working practice change, and that has come in slower than we had expected. The combination, again, of not getting the costs as variable as we would like as fast as we would like, plus the increased slow down, is the fundamental change over the five or six months of this financial year so far.

  56. So moving on to things working slowly. In 2000-01 I understand that strike days have gone up to nearly 63,000.
  (Mr Roberts) Yes.

  57. Which I understand, also, is something more than half of all the strikes in Britain during the same period?
  (Mr Roberts) So I gather.

  58. What caused the tripling of days off through industrial action during that period and what steps are you taking to improve your industrial relations?
  (Mr Roberts) At the back end of the year 2000, we negotiated, after some considerable time of trying, a big agreement which changed the working practices in many of our mail centres where we do all the sorting and the delivery offices. The agreement was reached with the leadership of the Union. It went out to ballot and it was approved by roughly 52 per cent to 48 per cent. The agreement then has to be implemented up and down the country in a large number of offices, some thousands of offices. The process then started to implement it. I think it is fair to say that doubtless in the 48 per cent of offices that were not in favour of the agreement it has been much harder to implement it than in the 52 per cent that were. This led to a period of large numbers of unofficial strikes which both we and the Union tried very hard to get under control. Our view being that unofficial strikes were just as much a matter for the Union and its rule book and its membership as it was for us. It was being jointly handled between us and the previous General Secretary. We reached a point just before the last Election when there was a major set of disputes which originated in Watford and as a result of that, we—that is the General Secretary and I—agreed that we would jointly appoint an independent inquiry to look at industrial relations in a limited number of units. The bulk of those days lost was coming out of only nine per cent of the units that we run, so a very small percentage of units were accounting for those large numbers of days lost. We, therefore, asked Lord Sawyer to conduct an independent review. He was helped by Nicholas Underhill QC and Ian Borket of the TUC, one nominated by us and one nominated by the CWU. They produced an independent report looking at six areas out of the 81 areas which cover the whole of the country. Those six areas were Oxford, Cardiff, Liverpool, Glasgow and then Leicester and Tonbridge, which had a very good industrial relations record, and the intention was to compare what was happening in those offices with perhaps poorer industrial relations record and those with good ones. The result of that was a very critical report of the whole of Consignia. I am going to bring Jerry Cope in in a minute, if I may, to talk about what has happened since. It also produced a large number of recommendations which we and the union both accepted. We have, since then, been working jointly with Lord Sawyer still chairing the overall group which is looking after this to try and improve the relationship not only in those offices but throughout the whole of the business. One of the things which emerged from that was that we would have a moratorium on any kind of strike action from the union's perspective and any kind of executive action from ours, that is where we take action having gone through our normal industrial relations processes and say "Right, we are going to implement this whether the union agree or not". We have had now something like three or four of those strike free periods which takes us up to about the middle of January. For example, the days we have lost over the last three months are still not good enough but it is in the few hundreds out of something like 16 million working days a month. So, there has been a marked change since about the end of July, August of this year. I do not think it is any coincidence that in the same time the quality of service has improved. But there are a number of important project teams and work that are coming out of Lord Sawyer's study. If I may, could I just ask Mr Cope to tell you what those are.
  (Mr Cope) Yes. What we have done, following that report, which both parties have accepted, we have brought in, also, our Management Union, the CMA, into some joint working parties, some of them led by us, some of them led by the union, on things like communications, union structure, dispute resolution, the conduct code we have with the aim of producing a way forward that underpins a better industrial relations structure in this business. I think the most important one is dispute resolution because I think unions and management perhaps will often disagree on things, the issue then is how you bring that disagreement to a mutually acceptable conclusion. If those committees which are all underway and working reasonably well produce their outputs in January we then hope to put in place a new industrial relations structure in the first six months of next year.

  59. Are you confident that will happen?
  (Mr Cope) I do not think in industrial relations I am ever confident in the sense of betting my mortgage on it but there is a hope and will on everybody's part to do it because we know we cannot go on as we are at the moment.

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