Examination of Witness (Question Numbers
71-111)
Peter Hunt
14 December 2010
Q71 Chair: Peter, thank you very
much for coming to see us on behalf of Mutuo. We have you here
for half an hour, I think. We are interested in hearing from you
how there could be a mutual solution to the issues that are being
presented in the Postal Services Bill. It would be helpful if
you gave us a brief outline of what it is that Mutuo is proposing.
Cathy in particular wants to pursue some points to get them on
the record, and then we will discuss with you some of the detail.
The floor is yours.
Peter Hunt: Thank you, Mr Davidson.
Thank you for inviting me. I am very glad to be here. It is not
that I didn't want to go to Glasgow, but this is easier to get
to.
Over the past few weeks, we have been talking
to the Department for Business, Innovation and Skills about the
Bill, and I have given evidence to the Bill Committee as well.
We have produced a publication, which you have hopefully had a
chance to glance at, that looks at the question of potential mutual
ownership for Post Office Ltd. Rather than torture everyone with
the detail of that at the beginning, there are two basic points
to be made. The first is that we are saying in this document that
we think that mutual ownership is a valid form of public ownership,
and a valid way of maintaining public interest in public services
and of holding public assets. Secondly, we think that the type
of business Post Office Ltd is is ideally suited to a mutual structure.
There's an awful lot of loose talk in the press
and among the commentariat about mutuals, and I hope that I will
at least be able to leave you today with where my organisation
stands on all this. We're not talking about a John Lewis model;
we're not talking about any particular group of individuals who
are currently involved in Post Office Ltd taking it over and running
it for their own benefit. What we're talking about is a way of
safeguarding it for the public interest—to provide a public
service—but to build into the structure a role for all the
different stakeholders, be they Crown employees through post office
branches, sub-postmasters who are their own business people, or
multiple operators who might operate large numbers of post offices
through their retail outlets. There is an additional group of
people who, in most of the comments I've seen, have been excluded
from all this: the general public.
I'd like to make the point up front right here
that we envisage that any kind of mutual structure for the Post
Office would also leave a place in that structure for members
of the general public. That means that you are trying to bring
together a range of varied stakeholders with different interests
and desires, and the only corporate structure that works to achieve
that successfully is a co-operative one. All the evidence of the
past 150 years, particularly of the past two or three, would point
towards that, too. But, ultimately, we're trying to envisage an
organisation that would guarantee that Post Office Ltd would be
maintained as a public service in the public interest, with no
individual group being able to maintain a whip-hand or a dominant
role. I can go into the detail of that through the questioning.
Q72 Chair: Can I just clarify
what in particular you think might be the benefits for an area
like Scotland from this; because we've been quite clear that we
didn't want to be focusing mainly on issues relating to ownership
of Royal Mail? Nor did we want particularly to focus on things
like pensions. We wanted to focus on the Scottish aspect—in
particular, as it were, the outputs and outcomes, where we want
to see the provision of a universal service and the maintenance
of a network of post office services. Given that we are a predominantly
rural country, how would the mutual model be advantageous as compared
to anything else?
Peter Hunt: You've probably half
answered your own question in that full question, because you
really need to look at what the alternative structures might present
to Scotland. Clearly, with the predominantly rural nature of
the country and the significant reliance you're going to find
in those communities on post office services, the maintenance
of a universal service is absolutely critical, and much more,
I would have thought, at the front of your minds than it would
be for colleagues in England. For a mutual structure you are permitting
rational decisions to be taken in the interest of the overall
service users, rather than simply on a straightforward, straight
line business case.
To look at the alternatives, if you for example
turned it into a private company, decisions would be taken for
the future on which post offices the Crown should support, and
which ones to keep open on a purely straightforward economic,
rational basis. That, of course, doesn't necessarily serve the
universal requirement of providing services to a disparate community.
If you have a mutual structure—I'll give you an example
in a second—there is an opportunity to hear the argument
for different types of service provision in different areas, and
to make sure that the business overall reflects that need, rather
than simply having a one-size-fits-all approach.
The example I give you is the Co-op. The Co-op
in Scotland is a very good example of a business that operates
and maintains outlets that other retailers would simply not bother
to keep open. They're not as financially viable; they're much
more difficult to service—particularly in the islands.
Yet they choose, because of their structure, to keep them open,
and they choose to continue to keep this broader service available.
They can do that because they're not focused solely on one line
of profit—they're focused on a whole range of different
issues. Ultimately this comes back to the original purpose of
the business. The original purpose of the business of a co-operative
is to provide a service. It's not to serve the individuals within
it, but to provide a service to the people it is for. The experience
of remote communities is that often, the only outlet left is the
co-operative or mutual business.
The additional point I would make is that there
is an opportunity in many areas, as is already starting to happen,
for local people to participate in the running of services, through
other groups that they might have already. That's something that
I think can be explored much more easily when you have this more
open and co-operative organisational style.
Q73 Chair: Just to be clear before
I pass on to Cathy, you're saying that essentially the whole of
the Post Office structure would be some form of mutual, but within
that there could quite easily be mutuals operating particular
outlets, and that it would not necessarily be a giant mutual which
just ran everything as branch offices.
Peter Hunt: That's right. I think
you would seek to avoid that. You would want to run it by maintaining
what's good about what you've already got and expanding that by
bringing in different stakeholder groups. So you would still have
owner-occupier sub-postmasters; you would still have employees
of the Crown; and then you would still have multiple operators.
And on top of that you would have other community groups as well.
The point about it being a co-operative is that each of those
different groups has a place within the business structure.
Q74 Cathy Jamieson: I should probably
declare an interest as a member of the Co-operative party and
as a member of a number of different co-operative organisations.
Thank you very much, Peter, for outlining how you see things moving
forward. I have had an opportunity to read the document. You mentioned
that there seemed to be a lot of loose talk around mutuality,
and that was one of the things that concerned me. So far, what
I have heard from Ministers does not seem to describe a mutual
business model. How far do you feel the Government are coming
towards what is a genuine mutual? Are they still looking at some
kind of untested hybrid?
Peter Hunt: Over the past few
months, there have been a lot of ministerial statements and a
lot of discussion from the Government about different types of
mutuals providing public services. The truth is that it really
depends on which public services you are talking about and what
the specific proposals are. In most of the hubbub around this
so far, the term "mutual" has been used as shorthand
for employee ownership. Actually, that is only one type and a
pretty small example as a proportion of the total number of mutuals
in this country. There is £100 billion of turnover within
the mutual sector in the UK currently. Over 1 million people are
employed in mutuals. As a best estimate, about a quarter of those
are in the employee-owned sector. The largest proportion of the
mutual sector is the consumer-owned sector, and it is likely to
remain so for some time.
In terms of public sector reform, there are
some pretty complicated questions to be answered around the involvement
of mutuals in providing those services. I do not necessarily see
anything wrong with groups of employees providing services on
a contracted basis, but the proposal in the Bill is different
from a lot of what has been discussed so far. The principal difference
is that—we have argued for this from the start, and we are
happy to see it in the Bill—there is a commitment to the
public purpose of the Post Office going forward. That is absolutely
critical. It may seem a small point, but for the organisation
to stick to its knitting going forward and to stick to its primary
purpose, it is critical that that is clearly stated within the
Bill. I have not seen that in the rest of the discussions on public
sector reform, and it is something that I would argue for in the
health service, in education and in other areas too. We do see
it here, so this is probably a more sophisticated take on the
discussion than we have seen elsewhere.
Q75 Cathy Jamieson: We have heard
a lot about how much investment is needed to bring equipment,
machinery and all sorts of things up to date, but—this needs
to be on the record as far as Scotland is concerned—how
would the mutual business model attract that sort of investment,
and would you be confident that it could do that?
Peter Hunt: Maybe I should have
said this at the beginning, because there is a big caveat with
all of this, which is that there is no point in considering a
different corporate structure of any kind unless this is a viable
business. At the moment it is not a viable business—it could
not operate without subsidy. What we have said to Ministers, and
to anybody, is that until that is a reality, don't even think
about changing the corporate structure. All that is predicated
on the fact that, within the next three years, through the additional
subsidy and investment, which they have announced, it would be
possible to have a viable Post Office business.
A mutual is not a way of saving money or of
doing things on the cheap. It is a way of doing things more effectively.
The reality is that it would need to be a viable business anyway.
In terms of future investment, the ways that mutuals find capital
to invest is by borrowing against future income streams and from
retained surpluses. That is even more reason why a mutual structure
can only work if you have a viable business with a profitable
bottom line going forward.
Q76 Cathy Jamieson: Can I ask
just one small final question? If there was a move to a mutualised
structure, would that potentially stop any further privatisation?
Could that be built into a Bill?
Peter Hunt: As I understand it—I
am not a parliamentary lawyer—it would require a second
Bill to overturn the public purpose, which is already enshrined
in this Bill. Of course Parliament could choose at a future date
to change it again, but the reality is that once membership has
been offered and taken up, and once different groups of people
have had a say, removing that would be very difficult.
In addition to that, there would be little reason
to want to do it. I think that for all concerned, were it possible
to pull off something like this, chances are people would not
want to revert to where they were in the beginning of the process.
Q77 Chair: Before I ask David
to come in, could I just follow up a couple of points? You talked
about making sure it is a viable business. Could I explore that?
As I understand it, there are a number of post offices up for
sale at the moment—approximately 900, I think. I am not
sure how many of those are in Scotland. A number are also temporarily
closed. As I understand it, they are in indeterminate closure;
I cannot quite remember exactly what the phrase is. Quite clearly,
some of those are not viable. Would it be the intention of a mutual
to support the non-viable ones? Would it be frozen in aspic, as
it were, or would there be some way in which the organisation
could still adapt and amend itself, even if it was a mutual?
Peter Hunt: It would not be frozen
in aspic. The only thing that is maintained would be the purpose
of the organisation. It would seek to do its best to serve the
public in post office services. If that meant that over time,
those services need to change, as inevitably they would, they
would change as in any other business. But the decision-making
process behind those changes would be transparent, and would involve
all the different stakeholders. That is really what is different
about this kind of mutual structure: difficult decisions are shared
among the people who are involved in those decisions. You could
end up with a variable relationship between the core business
and its franchisees or its own offices. Of course there will be
different relationships in different places. You have more chance
of achieving that if you have all the different stakeholders involved
in that decision-making process.
Q78 Chair: I just want to be clear,
though. A mutual does not guarantee that all existing post offices
would remain open.
Peter Hunt: No.
Q79 Chair: Following on the issue
about financial viability, as I understand it there is cross-subsidy
at the moment from Royal Mail, in terms of common service. Would
that continue under a mutual, and is your bid, so to speak, predicated
on that subsidy continuing? What would happen if, say, a privatised
Royal Mail decided that it was not going to subsidise the Post
Office Network? Have you thought through those sorts of scenarios?
Peter Hunt: Yes. When we talk
about a viable business, we are not actually saying what it should
look like. We are saying that it needs to be a business that can
make a profit on its own without subsidy. If that means that the
only way of achieving that is for different business streams to
be established in the next three years—as we understand,
that is a likely run-up—that is what has to happen, and
it has to happen before any transfer takes place. I don't think
it is possible for us to say which aspects of the business that
currently pertain need to continue, other than that the overall
bottom line needs to be profitable.
Q80 Chair: So in terms of the
business agreement between Royal Mail and the post offices, are
you saying that that would have to continue for your scheme to
be viable, or could you operate without that?
Peter Hunt: There are a whole
lot of other variables that need to be brought into it. That is
clearly a massive part of the equation. None of us knows what
is going to happen with those decisions. What I am saying is that
whatever the decisions are, the outcome needs to be that there
is the potential to make profit in the Post Office as a stand-alone
business, whether it is through a contractual arrangement with
Royal Mail, with Government Departments or with other sources.
It is not an easy thing to do.
Q81 Chair: Just to be clear though,
it is possible to have a profitable business by reducing the number
of post offices to one. That would meet the criteria of a profitable
business. I am not clear whether you have a perspective as to
how you would want to relate to the business agreement, to the
cross-subsidy, to the maintenance of the number of post offices
before we express a view on the merits of your proposal.
Peter Hunt: I am not McKinsey,
but what I have heard is that the Government do not intend for
there to be any more closures. They also intend to make investments.
You would then presume from those statements that the business
they would, at the end of the process, be considering mutualising
would involve some of those characteristics. But you would have
to ask the Ministers that.
Q82 David Mowat: I have read your
document quite carefully and listened to you. You don't propose
an indicative ownership structure—or do you have in mind
what it might be?
Peter Hunt: There is a process
that has just about started now to talk to the different stakeholder
groups. The reality is that when you are trying to bring together
people to form a new mutual, the best way to get something established
that will stand the test of time is to involve those people in
its design. I have an idea of what it might look like, but it
depends on what other groups think. I talk about a co-operative
structure because that is the closest cousin, if you like, in
current existence to the type of structure that might work. I
can't see any likelihood of a structure with any one of the stakeholder
groups—sub-postmasters, employees or multiples—dominating.
But I can see lots of benefits in having a governance structure,
which should be a proper business—
Q83 David Mowat: Sorry to interrupt
you, but there is a big difference here. Your remarks seem to
confuse what a governance structure and what an ownership structure
might be. I wanted to talk first about an ownership structure.
Would you see it as something that was owned by the public and
some of the postmasters—groups of stakeholders—in
that way?
Peter Hunt: You are quite right.
The governance flows from the ownership. But the ownership structure
that I would imagine would be one that permitted ownership, with
the sub-postmasters as members, the multiple operators as members
and the general public as members. The question of the governance
arrangements is really where the negotiations are required, and
discussion between the different groups to find out who gets what
say in the organisation and who effectively drives the decision-making
process.
Q84 David Mowat: And it would
be a company limited by guarantee, would it, in terms of organisation?
Peter Hunt: It could be a company
limited by guarantee, a community interest company or a co-operative.
There is no reason why you would need to invent anything new.
Co-operatives have been working for many years, so some kind of
industrial and provident society would make a lot of sense.
Q85 David Mowat: Okay. One final
point. You talk about the transparency of decision making as being
important. That is not necessarily the case with existing mutuals
all the time, is it? Either John Lewis or the Co-operative itself
makes decisions that are not necessarily in the public domain.
They manage it like an organisation.
Peter Hunt: If we had longer we
could probably go into each of those examples. They are all different.
The point is that they are transparent to the people who are affected
by it. John Lewis would argue that its structure is transparent
to the people who own it, who are the employees. Of course, you
still have management. You still have management decisions taken
and you have people's contracts, and you've got all those relationships
to manage. But at the end of the day, the overall performance
of the business is decided in accordance with the desire of the
owners. The same is true of co-operatives.
Q86 David Mowat: I am not sure
that John Lewis's owners, who are the employees, are any more
cognisant of the decision making than the shareholders in a private
company. I am not sure you necessarily get transparency from this
arrangement.
Peter Hunt: I didn't really want
to talk about John Lewis.
Q87 David Mowat: But you talked
about transparency.
Peter Hunt: Yes, I would argue
that they are more aware of decision-making processes and information.
John Lewis would tell you that its employees receive information
that shareholders in limited listed companies simply do not receive
on a regular basis. They get weekly sales reports and all sorts
of stuff like that. In a co-operative you find that the members
are actively involved in the governance structure. They are not
merely bystanders. They are participants and the current chairman
of the co-operative group is an elected customer who has been
elected to the area, the regional and the national boards. So
there is a difference.
Q88 Dr Whiteford: I should also
declare an interest. I am a member of a co-operative and of a
credit union. I want to ask a fairly simple question: do you think
that the Post Office can deliver a universal service across Scotland
without some level of public subsidy?
Peter Hunt: I don't know.
Chair: That is a bit of clarity.
Q89 Dr Whiteford: My other question
follows on from the big caveat you made about the need for the
business to be in a fundamentally viable state before mutualisation.
From your perspective, are there other pitfalls of mutual models
that we should seek to avoid if we go down a mutualisation route?
Are there particular things—strengths and weaknesses of
the model—that we should be looking out for?
Peter Hunt: There are lots of
things to look out for. The first and most fundamental—I
have already alluded to this—is that, when you are designing
the structure, it makes a lot of sense to involve the people who
will be in that structure and making it work, so that they will
feel that they have played a part in designing it. Our experience
is that that gives a great deal of strength to any structure that
you might come up with.
Clearly, access to capital over a long term
is a difficulty for mutuals. You can see this across the entire
mutual sector at the moment. It is possible to borrow and retain
surpluses, but to do that you have to have a decent business.
You can see examples of co-operatives doing extremely well and,
indeed, acquiring. Last year, the Somerfield business was acquired
by the Co-operative group from a private equity owner, so you
can see examples of where this can be achieved. But again, I come
back to the same point that you need a viable business to start
with.
There are a lot of fairly lazy comments about
the pitfalls of governance in involving the public in decision
making, which I reject. I don't think there are any examples that
show that involving the public is to the detriment of organisations.
I think that, certainly if it is an organisation that serves their
interests, it needs to engage and conduct its business on an open
basis. You probably need to ask somebody else for a list of pitfalls.
Q90 Mr Reid: Thanks, Peter, for
coming along. If we had the model that you have described, what
safeguards would be in it for small, remote, rural post offices
where the business may be profitable to the franchisee because
of the payments they get, but may not be profitable to the business
as a whole? What safeguards would there be for small, remote,
unprofitable post offices to survive?
Peter Hunt: One of the benefits
of this kind of structure is that each of the different categories
of player within the business has, as I say, an opportunity to
make their case within the business. Given that the starting point
is that we are seeking to achieve something that involves all
the different groups—it involves the bigger operators alongside
the smaller operators—the contrast at the moment is Post
Office Ltd, which is effectively run by business people appointed
by the state. It is not run with the co-operation and assistance
of the people you describe, so the chances of involving them are
much greater and you can establish in the governance structure
different sections to represent the different interest groups,
because clearly there are huge differences between city centre
and rural community operations. The mutual structure permits those
different variations to be supported. As I said, if you are involving
those people in the design of the structure to begin with, you
have a real chance of building codes of practice between the different
stakeholders that will respect the different interests.
Q91 Mr Reid: Let us say, for example,
that 90% of the post offices were profitable to the main business
and 10% were not. What safeguards would there be to stop the 90%
ganging up on the 10% and closing them down?
Peter Hunt: I come back to the
purpose, primarily, which is to guarantee the service and to guarantee
that the Post Office operates as a public service, which, by inference,
means for everybody. You could actually make that explicit within
the governance documents between the different members.
Secondly, you need to ensure there isn't any
group that can get a 90% majority and gang up on any other of
the groups. That is what the governance arrangements are all about.
They are about ensuring that you allow the representation of all
the different groups without hindrance.
Q92 Mr Reid: But how do you distinguish
different types of sub-postmasters? How do you categorise them
into different groups?
Peter Hunt: That is a good thing
to ask them. They would probably be the best at describing themselves.
You could do it on a regional basis, you could do it on a size
basis, or you could do it on the basis of the types of business
they do. Those are all on the table and available for discussion,
so there is no reason why you can't have a discussion with them
to work out what the best way of categorising them would be.
Q93 Chair: Before I move on to
Lindsay, can I just pursue one point with you? Alan is quite vexed,
as are the rest of us, by this issue of the 10% that are not profitable
being dumped on, as it were, by the other 90%, and you seem to
indicate that you thought it could be made explicit within the
governance documents. Surely another way of doing that would be
to make something explicit within the rules under which the new
mutual had the contract from Government, so that Government could
decide that the contract they had was not just simply to do as
they saw fit. There could be a list of specifications that the
service must provide, and that could be contained with that contract.
Would that not be a better way of dealing with it, because otherwise
you always run the risk of a majority ganging up on an unprofitable
minority in order to boost their own financial position?
Peter Hunt: I hesitate to say
that that sounds like a needlessly cynical view.
Q94 Chair: I ought to say that
I am also a member of the Co-op.
Peter Hunt: At the end of the
day, what you are looking at here is trying to create a business
that matches the interests of all of the different players within
it, that gives them a reason to be part of it, that gives sub-postmasters
a profit out of it, that gives the multiples a reason to carry
on doing it and that gives the public the service that they need.
None of those things are going to be easily achieved, but they
can be achieved if you have a process that allows different groups
to have a say and to be part of the decision-making process.
It is possible that some people might think
that you could better trust the mutual to do that than Government.
It is not necessarily the relationship or the contractual relationship
between Government and the organisation or the purchaser of services
in the organisation, but it is actually what the organisation
explicitly says it is there for in its own rules, memorandum and
articles. There are lots of examples of organisations that hard-wire
these things, and I could write to you separately with examples
of bodies that have fixed their constitutions so that certain
things just cannot happen.
Chair: You can understand why we're anxious
about having promises slide away and why we want them hard-wired
in some way or other.
Q95 Lindsay Roy: Good ideas are
relatively easy to formulate. You've mentioned that we're, obviously,
looking for effective practice and to engage with stakeholders,
but you've also used words like diversity and complexity, so what
kind of support is there for mutuals? Are there working models
of effective practice that can be shared with other people?
Peter Hunt: There are huge numbers
of mutuals in this country. I think there are about 18,000 different
businesses that operate, in one form or another, as mutual businesses,
and one in three of the population are members of mutuals. There
is a lot of experience of being involved in different types of
mutual bodies, and standing alongside this idea is the established
mutual sector, which I am effectively here to represent. We think
that this is worth looking at. The organisation that I work with
is prepared to help and to offer its expertise in dealing with
difficult decisions and conflict resolution, which will come along
from time to time. The short answer is yes.
Q96 Lindsay Roy: There is a support
framework here for the development of mutuals in relation to post
offices. Is that what you are saying?
Peter Hunt: In relation to post
offices and the business, yes.
Jim McGovern: Thanks for coming along,
Peter. Everyone seems to be declaring an interest of some sort
or another, so I had better say that I am a shareholder in Celtic
FC. I don't know if that makes me part of a mutual.
Chair: Next!
Q97 Jim McGovern: Prior to this
job, I was actually a glazier and words like "franchisees",
"business streams", "stakeholders" and "mutualisation"
would have been totally foreign to me. We should bear in mind
that what we say here we make public, and a large majority of
the people whom I represent—and no disrespect to them—would
probably be puzzled by such terminology. I should appreciate
it if we could keep it fairly understandable.
When you say "stakeholders", I take
it that you mean private sector investors.
Peter Hunt: No, I mean the current
people. If you look at the current Post Office Ltd business and
put the Government aside, the stakeholders are the employees of
Post Office Ltd. They are the sub-postmasters who run post offices.
They are the retail outfits, such as Sainsbury's, Tesco, Asda
and the Co-op, which run post offices within their shops, and
people with franchises, who might run two or three together.
Those are the definable stakeholders.
Q98 Jim McGovern: Currently?
Peter Hunt: Currently, yes.
Q99 Jim McGovern: What would your
proposal mean?
Peter Hunt: My proposal would
mean an additional stakeholder group called the public. I hate
the language, too, but I cannot think of better words. You let
the customers of the post office become members of the Post Office
and play a part in its decision-making process, too. It keeps
the thing honest. It keeps it true to its original intentions
and, of course, the provision of services is the shared objective
of all the different groups. They may not spend a lot of time
with each other otherwise, but they are all interested in the
same business outcomes.
Q100 Jim McGovern: Some hon. Members
have raised the same concerns. Ironically, I raised it before
you came to speak to us. For example, in Dundee the buses used
to be run by Dundee Corporation, but they were privatised and
promises were made that the same route would be kept going all
the time, but now they are saying that that route is not profitable
any more, that it is not viable, so they are stopping it. Last
night when the Scottish Affairs Committee was coming from Glasgow
back to London, the front page of the newspapers at the airport
said that Glasgow would not be running buses on Christmas day
or new year's day because it was not profitable. What guarantees
would we have that the non-profitable areas for post would still
be maintained?
Peter Hunt: First, there are no
guarantees with the current system. Post offices have been closing
hand over fist for the past decade. The current system has not
protected services. There are no guarantees in any structure
in the future. There is no guarantee for anything.
Q101 Jim McGovern: If it were
totally publicly owned and the Government were giving a guarantee
that would be a more solid guarantee than a private sector guarantee,
a profit-driven guarantee—
Peter Hunt: It has not happened,
and it probably wouldn't happen. We are talking about looking
for the most likely structure to deliver what most people want,
which is as many post offices in as many places as possible providing
as many services as possible. You are looking for a structure
that can do that. The most likely structure to be able to deliver
that, given the caveat that you need to have viable business streams
and sufficient money flowing into the system, is a mutual structure.
That will defend the different interest groups within the structure.
It will provide them with a voice and provide them with an opportunity
to play a part in the decision making, which currently they are
not part of.
Q102 Jim McGovern: Thanks, Peter.
I have one other point. Early in your contribution you said that
the only alternative is privatisation, unless I misunderstood
you, but that is how it came across to me.
Peter Hunt: No. I didn't mean
that. I used that as a contrast.
Q103 Jim McGovern: As an alternative
to a public ownership.
Peter Hunt: I didn't write the
Bill, and I didn't write the rules. It is a Bill with the realities
as they are presented. It's up to Parliament to decide what happens
to all the different services. However, if you look at what's
happened over the last 20 or 30 years, the choices have been pretty
stark for public services. They have either been privatised, or
kept within the state. There are examples in the last few years
of services that have been separated from the state, but kept
in mutual ownership, that continue to provide the services that
people want to use. That is my preferred option, but at the end
of the day I don't get to choose; you guys get to choose what
happens to the service.
Q104Fiona O'Donnell:
You have more or less answered one of my questions. I want to
ask about sustainability. You said that it is clear that there
must be sustainability. In the evidence we took from the National
Federation of SubPostmasters it was clear that business needs
two things to be sustainable. One is new work from Government;
the other is a long-term business agreement with Royal Mail, because
that is the only organisation to do business with. Do you think
a five-year deal for that business agreement between post offices
and Royal Mail would meet the criteria for sustainability?
Peter Hunt: They are much better
qualified to talk about that than I am. I wouldn't want to comment
on that, because those may be the only two options, or there may
a third, a fourth or a fifth. I don't know. I can only come back
to the same point, which is that whatever structure is put in
place, it can move forward only when there is a viable business.
That means a long-term future for post office services. Whether
it is on those terms or not is up to other people to judge.
Q105 Fiona O'Donnell: Who makes
the decision on whether there is a viable future? If sub-postmasters
say that it is not viable, and it turns out to be a five-year
deal and if there is not enough new work coming from Government,
where are they?
Peter Hunt: The legal answer is
that the Secretary of State decides, but the reality would be
that if no one agrees with them, they've got a problem.
Q106 Fiona O'Donnell: I should
also declare that I am a member of the Co-operative party. Would
you see the model as one with regional co-operative or mutual
organisations, as with the Co-op store? Would that be a model?
We may have a Scottish co-operative or a highlands and islands
one that would negotiate itself.
Peter Hunt: You could do that.
That is one of the things that needs to be discussed with groups
in the next few months. Interestingly, that might answer some
people's concerns about representation of rural groups or different
types of groups. I don't want to say whether it should be regional
or geographic, or by type. By type there might be a different
way of looking at it, but those are the sort of questions that
people need to be thinking about now.
Q107 Fiona O'Donnell: Given the
special relationship between Royal Mail and Post Office Ltd, do
you think it would be a good idea for the mutual organisation
to be a share owner in Royal Mail when it is privatised?
Peter Hunt: Absolutely. Why not?
Q108 Fiona O'Donnell: Do you think
that is something that the Secretary of State should look at putting
into legislation, in the same way as employees' shareholding?
Peter Hunt: I'm not sure they
can, because the mutual organisation doesn't exist yet. There
is a bit of a chicken and egg there, although you could probably
come up with a clever amendment.
Q109 Fiona O'Donnell: The Government
in the meantime could perhaps hold in trust, say, 10% of the shares,
and then pass them on to the mutual when it is established.
Peter Hunt: These are good ideas.
From my perspective, this has been a useful session to hear many
more ideas than I got from the Public Bill Committee.
Q110 Chair:
Well, we are here to help. Since we have had two confessions already,
it is only fair that I mention that I am a Labour and Co-op Member.
I am a member of the Co-operative party and used to be a Co-op
message boy. My mother's divvy number was 1776 and, following
on from Jim, I am also a member of the Rangers Supporters Trust.
The fact that Alison had an outburst of coughing was nothing to
do with the fact that you declared that you were a member of the
Celtic Supporters Trust.
There is one thing that I would like to follow
up and which I think you might be able to help us with. We have
talked on a number of occasions about wanting to have a viable
business, but I am not clear, from what you have told us, whether
you have identified specific things that you think would be necessary
to have in place to ensure a viable business model of the size
that we have at the moment. People have mentioned the business
agreement and guarantees about the number of post offices, but
you have been delightfully vague, if I may say so, about your
view on some of those things.
I am not clear whether that is because you have
focused only on the principles, or whether you have thought through
answers on what would be necessary to allow that mutual organisation
to operate. If you have thought through some of those and think,
for example, that it would be necessary for the business agreement
to be available for twice as long as is currently proposed, or
something similar, it would be helpful if you told us, either
now or in writing. We are trying to formulate a list of items
that we believe will be necessary for the Government or Ofcom
to specify in order to keep the Universal Service Provision and
the Post Office Network at their present levels. I understand
that you want to run a profitable business, but as I said before
that could be run on the basis of one. It is not just profitability
that we are concerned about. Have you thought through what would
be necessary to maintain the service at roughly its present size
and scale?
Peter Hunt: That is too difficult
a question to answer, because there is a complex series of questions
and a range of issues that we are not party to.
Q111 Chair: Okay, but if you were
invited to work that up in a serious fashion, are there any preconditions
that you would want to put to the Government, saying, "Look,
we can only seriously look at making this work if you do such
and such", with regard to the business agreement, the network,
cross-subsidy, or anything else"? Have you not yet reached
that stage in your thinking?
Peter Hunt: I don't believe that
it is possible to do that through the legislation, if that is
an answer. I do not think that it is possible to legislate for
those types of things, because they move and change and are different
as time moves on. At the same time, we are not party to the private
business information of Post Office Ltd and, as I have said, we
are not McKinsey. You would probably have to pay quite a fat fee
to get that kind of an opinion from someone qualified in that.
We are talking about taking at face value the commitment that
the Government have made to invest in the service over the next
three years and, at the same time, not to continue to close post
offices. The reasonable point to reach with those two bits of
information is that they intend to make that viable within the
current estate.
Chair: Thanks very much for coming along.
If, upon reflection, you think of something that you wish to let
us know about, please write to us. We intend to make our recommendations
next Tuesday.
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