Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 94-99)




  94. Mr Carr, can I welcome you to the Committee. Would you please introduce yourselves?

  (Mr Carr) Good afternoon, Chairman. I have with me Greg McGregor, the chief executive of Postwatch, and Dr Ian Leigh, the director of policy and research at Postwatch.

  95. The last time we saw you was in December and at that time we were still awaiting the fruits of the labours of the regulator. We have now had them. You were in favour of competition then. Do you think that the proposals of Postcomm are really what is required here?
  (Mr Carr) Yes, indeed. I think there is very little that we should criticise. We have made our formal response to Postcomm but this we believe is one of the best pieces of work that has come from the commission and I think it is true to say that even we were a little bit surprised at the extent of its pace and also the detail, but very much applauded the methodology and the approach to release parts of the market through volume and weight rather than through the European method, which has already been detected on this side of the House this morning—that it releases very little by way of volume through the European route. So we are very much in favour. It is a very good piece of work.

Mrs Lawrence

  96. Studies by the National Audit Office and others have indicated that the vast majority of ordinary customers are quite satisfied with postal services and that the cost of a stamp is quite low. What benefit would domestic customers get from liberalisation of competition, or is it all intended for 86 per cent of business?
  (Mr Carr) If you follow the economic process, clearly the domestic consumer carries the cost that businesses carry and that is because it indirectly affects the price of the services that they buy as a consequence. So it is an add-on cost to any organisation and some 85 per cent of each day's mail, 68 million items, are sent by businesses and, of that, 70 per cent are sent to residential addresses so they are affected in that way. Price in itself, at the consumer level as opposed to the business level, is much less of an issue because on average each citizen sends only 100 items of mail per annum and, therefore, to increase the price by 1p means an extra pound a year which is of very little consequence. It clearly has a lot more impact on the business community but price is not such a key issue. The important thing is that competition produces a lot more than benefits to price. It does improve services; it creates greater efficiencies; and it acts as the spur for an organisation to drive itself forward, and benefits its employees and customers. We have seen this in other industries which have been demonopolised.

  97. Looking through the documentation that you sent us, I stopped counting at ten references to management failures. Do you see this process forcing management to become more efficient and address those failures?
  (Mr Carr) I think we also make a reference to the fact that this process of improvement has already begun. We have seen it beginning with the appointment of Allan Leighton, and I am surprised there are only ten references in there—

  98. I stopped counting at ten.
  (Mr Carr) I have been coming to this Committee now for quite some time and not only here but in other places we have been drawing attention to the failures of the leadership because this has been the cause of the failures of service to the consumer, and fortunately that is now being addressed and we are beginning to see some action. It has certainly been announced anyway and, if you remember, the savings of £1.2 billion were announced on October 5. We are only just getting the details some seven to eight months later, and those savings have to be produced within a year, whereas originally they had 18 months to do it. So it is absolutely crucial that these savings are made—and made very quickly.


  99. You said you were happy about the proposals and you made the point that there is a trickle down effect. Have you done any work on how effective the trickle down effect has been in Sweden where there was a 70 per cent increase in the charge for domestic mail, and a 20 per cent drop in the charge for commercial mail as a consequence of competition? Have you done any work on, as it were, the below-the-line situation in Sweden?
  (Mr Carr) I think I have to answer that directly by saying "No", but can I make one point: one of the major factors in price increase in Sweden was that the Government decided to charge VAT on postal services—

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