Examination of Witnesses (Questions 40-59)|
22 OCTOBER 2007
Q40 Chairman: Secretary of State,
I will share with you the letter of March 2007 from the Royal
Mail Pension Plan Chair of the Trustee, Jane Newell, which does
include a caveat which says, "The Trustee will write later
this year in connection with the recently announced Royal Mail
consultation on pensions". To be fair, it does say that,
but the tone of the letter is overwhelmingly reassuring.
Mr Hutton: From the Chair of the
Q41 Chairman: Yes. I will share this
letter with you. I would take it as meaning, "Your pensions
are not going to change much".
Mr Hutton: Again, I think it might
be important to be clear what we are talking about. It may well
have been the case, and I need to check this too, that the Chair
of the Trustee of the pension scheme was talking about whether
there would be any need for scheme regulations as a result of
any changes to the fundamental package of the pension offer that
the Royal Mail were providing to their staff. I have met the Chair
of the Trustee and she said to me that she still was not clear
whether, even taking into account the changes that were being
proposed, that would necessitate a change in the scheme regulations.
This is a matter for the Trustee to reflect on and I do not have
that letter in front of me so I do not want to argue the toss
about that; I am not in a position to do that. I do not think
it is a matter of dispute, Chairman, that on 8 February the Royal
Mail management themselves said that they were looking at pension
reform and would be bringing forward proposals in that regard.
I really do not think that is a matter of dispute and I can set
out the details of the 8 February announcement, if you like, in
due course. The second point that Roger made, and I think this
is more fundamental, with respect, is this question about trust.
The organisation is facing some very aggressive competition, I
should welcome that competition; it is the best way to drive up
innovation and service improvement. I welcome that and I think
the Royal Mail does too; it should do, but if it is going to really
thrive in this more competitive market place a fundamental pre-condition
for that will be that everyone in the organisation shares the
challenge and they trust each other to deliver it. Of course,
it is going to be much harder to make these changes if there is
an absence of trust in the organisation. Trust might well have
been affected by all of these debates and problems in the last
few months and the industrial action; it is fairly clear it probably
has, but the focus now, I would respectfully suggest, now I think
we are closer to getting this agreement ratified, is to try if
we can to put that behind us and focus on the challenge ahead
because it is a big challenge. If we go on raking over the coals
then I do not think the organisation is going to be best placed
to rise to the challenge it faces from its competitors.
Q42 Roger Berry: Yes, everyone, I
think, hopes the matter is now resolved. The sad thing about select
committees is that we exist to rake over the coals. My points
about perceptions and management style and so forth have been
made; they are on the record. They are issues that clearly do
need to be addressed, as you rightly say, because at the end of
the day an organisation will only thrive if there is trust between
management and the workforce and that is critical.
Mr Hutton: Very quickly, Chairman,
before you move on to something else, there is the opportunity
in the agreement for people to build, hopefully, a stronger basis
of trust going forward. One of the working groups that will be
set up post the agreement, if it is ratified, will be to look
at future industrial relations within the Royal Mail. Clearly
that needs to be done and I think that is going to be very welcome.
Q43 Mr Weir: I am very glad to hear
that because one of the things that seemed to happen during the
dispute was that some of the statements from management were almost
throwing petrol on the flames; it appeared like that to outsiders.
Do you believe the tone adopted by Royal Mail management was helpful
during the dispute? You have just said that there will be a working
group looking at this. Do you think that Royal Mail management
have to perhaps look more closely at what they are saying to their
workforce when they are in negotiation or dispute, given what
has happened here?
Mr Hutton: Do you have any specific
examples for me to consider about throwing petrol on the fire?
Mr Weir: I remember the case when Adam
Crozier made a statement about workmen, and I cannot remember
the exact words, which I believe led to some wildcat strikes.
Chairman: Can I just come in? There was
a sense for me, and perhaps it was just my impression and I formed
it wrongly, that in some sense management was trying to demonise
the union for practices that had been freely offered by management
a few years earlier, or in some cases even insisted upon, for
example, flexibility in sorting centres. The basic jobs of sorting,
delivering and driving, they used to enjoy mixing and matching
them. In the early nineties the then management took that away
and said, "We insist you are one or the other", and
then there was a sense that they were being blamed by current
management for saying, "But that's what you said we had to
do 15 years ago". It is that sense of workers being demonised
for practices management either freely offered or insisted on
in the past.
Q44 Mr Weir: And referring to the
Spanish practices, I think, that there were at the time and being
unable to come up with a list of the 92 that they claimed went
on in the Royal Mail.
Mr Hutton: I have not seen any
statement made by Royal Mail management that demonises the staff
at the Royal Mail. If you feel that there are statements that
demonise staff at the Royal Mail I would very much like to see
them. I think what management was trying to do was point out the
need for change in the union position.
Q45 Chairman: But they got it wrong
in the past. They should have said, "We should not have offered
you that and we need to change it", not, "It is your
fault for doing it". It should have been, "Sorry".
Mr Hutton: I personally have a
lot of sympathy with that particular point of view.
Chairman: There is a letter I have got
here from July 2003. I do not see many letters from Mr Leighton
to his staff, but Roger rather kindly referred to it as his inimical
style, and it almost literally begins, "I got into trouble
last time for writing to you direct ... telling it straight. Well
tough, that's how we do things around here now". I just do
not think that is the way a grown-up writes to a workforce, frankly.
That is four years ago, to be fair.
Q46 Roger Berry: Not unless it has
had the desired effect.
Mr Hutton: Chairman, Allan Leighton
is the Chairman of Royal Mail. He is clearly free to write to
staff in whatever terms he wants to, but, of course, there are
consequences if the style and tone misfire. I do not personally
feel that if that is the limit of the quotation that can reasonably
be described as demonising Royal Mail staff, with great respect.
Q47 Chairman: It just all adds up
to a picture that is slowly emerging of the attitude to the way
industrial relations are conducted.
Mr Hutton: Look: he has to put
the argument in the way he thinks is best. That is his job as
Q48 Chairman: It clearly was not
best. They had a big dispute.
Mr Hutton: Yes, but I doubt personally
whether the dispute really was down to those two sentences in
a letter of July 2003.
Chairman: No. To be fair, I do not think
that is right as well.
Q49 Mr Wright: What I want to say
on this particular point is that where we were talking about pouring
petrol on the flames was when Royal Mail provided the Daily
Telegraph with a list of 12 of the 92 Spanish practices in
the middle of a dispute. To supply the newspaper in the middle
of negotiations with some of the details of the negotiations that
were going on I think was certainly unhelpful at that particular
time. I just think that sort of thing would not be helpful in
any dispute, however long it had gone on, and would certainly
be saying, "These are the outdated customs and practices",
albeit they were customs and practices that no doubt were negotiated
and were given freely at that particular time. I believe that
if they want to make these changes it should be through negotiations
on a one-to-one basis and not through a third party, especially
through the media. In that particular case it did not help them
out, and okay, it was probably at the beginning of October, but
I think at that particular time it was more sensitive than anything.
Obviously, I am very pleased that the matter has been resolved
now but I really do not think what we should be party to is using
the power of the media, if you like, to say, if we want to demonise
or put it clearly, "These are the working practices".
To be perfectly honest, these should have been negotiations behind
closed doors between the union and the management to say, "These
are the issues that we need to address", and not put the
details out to the general public and say, "Look: this is
Royal Mail. This is what we are defending here". That was
not the way to do it.
Mr Hutton: You might be right,
but maybe it was not just the Royal Mail that was trying to get
out into the public consciousness what the dispute was about.
I do not think you can say it was just the Royal Mail management
that were trying to communicate to the public about what this
dispute was about. The Communication Workers' Union were doing
so as well and I have to say from my perspective I did not feel
that it was inappropriate for the Royal Mail to make those comments.
I do not feel it was inappropriate for the Communication Workers'
Union to stand up and say, "Look: this is what we think the
dispute is about and this is what we are fighting for". I
think it is very unlikely that a dispute that has gone for as
long as this, and for several months involving quite extensive
industrial action, was ever going to remain an entirely secret
process which the public were going to be excluded from. The public
had every right to know, if I am being honest, what this dispute
was about. Of course, you can argue about the impact on the negotiations
and so on, but I think if you were to look at the events, when
did things actually start to come together and reach an agreement?
It was from the early part of October when you are describing
the Royal Mail's intervention as being profoundly unhelpful. I
would just respectfully say that it was not just one side that
was trying to get its point across to the public.
Chairman: I want to move on to the future,
which is also very important.
Q50 Mr Bone: I am glad, Chairman,
we have got to the bottom of this matter. It is obviously all
the fault of the European Union because it is Spanish practices.
Seriously, you have heard the criticisms from Mr Berry, Mr Weir
and Mr Wright about the management. When the dispute is finally
signed and sealed are you going to call the management in and
say, "You landed me with a complete disaster. You embarrassed
the Government. You made us look incompetent, you made us look
as if we could not run our own postal service. You have got to
do a lot better or you are fired"? Are you going to say that
to them or are you going to just do nothing?
Mr Hutton: The business has got
to do much better and that is the responsibility ultimately of
management. Of course, there will be consequences for the management
team if the business does not improve. We have made significant
amounts of investment available on commercial terms, predicated
on the assumption that there is a proper return, and management
ultimately holds the buck. If the taxpayer is not getting a proper
deal then, of course, there will be a need for change in the Royal
Mail, but I am not going to sit here today, Chairman, and negotiate
over senior management's jobs in the Royal Mail. I am not going
to get involved in personalities or in anything specific because
I think would be quite improper at this point.
Q51 Mr Bone: But you must be concerned.
As a government minister you cannot be happy with the Royal Mail
going on strike.
Mr Hutton: No, I am not.
Q52 Mr Bone: You must be concerned.
Something went wrong and you have got to
Mr Hutton: Of course.
Mr Binley: Just very quickly on this
point, I am sorry that you have been hammered, and I think you
have been hammered unfairly because it is not your fault, quite
Mr Bone: Oh, I do not know.
Mr Binley: No, I do not think it is.
The Secretary of State has only been in the job for a very short
time and the management have been there for quite a long time.
There is no doubt, talking to my postal workers, that they feel
that the way they have been spoken to over a lengthy period of
time is totally unacceptable. I am a businessman. I have been
around for a very long time in business. When a postal worker
said, "This is not a fair-minded businessman. It is a business
bully we are dealing with", I have to take some note. I recognise
you cannot negotiate in this meeting but at some stage somebody
has to tell the man that style is important in terms of industrial
relations and I wonder if you might think about doing that, and
I do not expect an answer, but for the good of our Post Office
you need to.
Q53 Chairman: You can take that as
rhetorical if you like. Secretary of State.
Mr Hutton: I think I do need to
respond to one point that Brian is making. I do not accept the
criticism that the Royal Mail has acted like a bully boy in this
case; I do not. I think they started negotiations in March and
negotiations lasted a very considerable period of time. The fact
that they did not reach an agreement I think cannot fairly or
exclusively be laid at the door of management. I just think that
is an unreasonable analysis. I think it is a flawed analysis and
I think it does not take into account the complexity of the package
of changes that the management were trying to get through the
business in a short period of time to meet the challenge of competition
as they see it. Yes, people can do things better. Are there lessons
to learn? I am sure there are, and that is why one of the things
that will be done jointly between management and union is looking
forward at how industrial relations should be done in the Royal
Mail. I welcome that. I think that is necessary. You cannot go
through this type of experience in a company and think that everything
is fine. Things are not fine in the Royal Mail, that is palpably
obvious, and I think what both union and management must do, because
there are two sides to this and the two of them have to work together,
is find a sensible way to put this behind them and get on with
the job. I do believe that there are grounds for optimism for
the Royal Mail but they are going to have to pull their finger
out, all of them, and try and respond to the challenge of a changing
market place if the taxpayer is going to be confident that it
is ever going to get a return on the huge investment that we have
put into this organisation.
Q54 Mr Hoyle: You have given us a
lot of reassurances. Can you give us another reassurance; that
we are going to retain the ownership of the Royal Mail?
Mr Hutton: We are not looking
at the issue of ownership.
Chairman: What I will do is interrupt
there and ask Tony Wright to ask his question. It may flow from
Q55 Mr Wright: In respect of the
dispute we know that it will do some damage. People will look
for other deliverers and the service that they provide. Have you
made any assessment of the damage to Royal Mail's reputation and
Mr Hutton: We have not made a
quantitative analysis of that. I think it would be quite difficult
to do there. There is no doubt at all that there has been economic
damage done to the Royal Mail. I think we will probably all only
understand the damage over the next few weeks and months. Will
it have lost some customers? I think pretty certainly it has done,
business customers in particular, and it is going to have to work
flat out to restore its reputation which has been pretty badly
tarnished by this whole sorry state of affairs.
Q56 Mr Wright: You mentioned earlier
setting up a working party to look at this. Will part of that
working party look at examining the plans for the future of the
Mr Hutton: The working party that
I referred to, we are not setting up. The Union and the Royal
Mail management are setting it up. This is something that has
been encompassed within the terms of this agreement that has recently
been ratified by the Executive. There is commitment in my party's
manifesto to do during this Parliament a review of the liberalisation
rules as they affect postal services and I think we will now need
to reflect on how quickly we can get that review under way now
that, hopefully, the industrial dispute is over. I think it would
be wrong to have done this during the dispute; I think it might
have created certain tensions which we could have done without,
but I think we should now consider very quickly how we can proceed
with this. Just going back to the point about Europe, because
I know Peter made it, I would have thought in this case and in
this sector you would be celebrating the contribution that the
European Union has made because it has been through pressure in
Europe that we have now got to a situation where across the European
Union we will have a proper liberalised market for postal services,
and it will be happening.
Q57 Mr Bone: I actually said that
there have been a number of colleagues appalled at liberalisation
Mr Hutton: There has been, yes,
but we have got agreement now, and I think you cannot possibly
Q58 Mr Hoyle: Why did we liberalise
in front of Europe?
Mr Hutton: Exactly.
Q59 Chairman: Can we come back to
Lindsay's question? Privatisation of the Royal Mailon or
off the agenda?
Mr Hutton: It is not on the agenda.
We are not looking at that at the moment.