Business, Skills and Innovation CommitteeWritten evidence submitted by John Thwaites

Royal Mail Privatisation and Sale of Shares

1. My name is John Thwaites and I have worked for royal mail for 35 years, both Aylesbury and Hemel Hempstead during this period, and I have covered every form of duty but bulk of these years have been on rural deliveries.

2. As a long serving member of both Royal Mail and the Communication Workers Union, I have been involved and prompted change and improvements which supports both customer service, and equality within the company.

3. I am pleased to respond to the select committee on sale of shares in Royal Mail. But must express my disappointment in the governments failure to investigate other methods of financing growth in royal mail without the need to privatise the company.

4. My submission will focus mainly on the Sale of Royal Mail introduction by the Secretary of State of and the impact of services by the privatisation of Royal Mail, and its impact on both customers and staff. I will be using the previous statements and laws to question the statement.

The Share Issue and Impact on USO

The role of Royal Mail in Rural areas is unique to the UK, and is a cherished, vital and historic service that has provided communications to isolated communities for over 500 years:

The Royal Mail cost of operations for the Universal Service was £5.65bn in 2005–6. People costs represented 68.6% of this figure. (Source Royal Mail Group Regulatory Financial Statements 2005–06)

5. The Royal Mail sale for shares presented to parliament July 2013, states the one price 6 day service would in fact be safeguarded after the proposed privatisation however as indicated that the single price element makes up for only 13% of the daily delivery. Therefore the bulk of the rest of the mail is made up from other types of mail, which Royal Mail label as PPI, Clean Mail and Downstream Access (DSA), which is not covered under the USO as, laid down in the document the Building Blocks for Sustainable Postal Services (August 2011), which decision to remove bulk posting as listed above from the universal service, and is central to the regulatory framework put in place by Ofcom.

6. I have concerns that the increased economic pressure by the competitors introducing deliveries in high value urban areas. I believe be increased economic pressure on Royal Mail, after privatisation. Would impact greatly on the uneconomic rural areas and as with 2^nd deliveries and 2 collections minimum became uneconomic they were removed.

7. With the reduction in service or the increases in prices to compensate, would impact upon not only the share price, but also the service:

7.1One of the founding principles in the introduction of all staff when first joining Royal Mail is that the company remains a social network for isolated communities. By the inevitable introduction of economic value placed on these communities they would become even more isolated and due to the fact nationwide broadband is falling behind schedule we will see the elderly in particular cut off from family and friends.

7.2 This has been highlighted in reports from Charities representing the elderly in the UK. Many of the postal staff that is on rural deliveries have been on that delivery for a number of years, and become friends of their customers?

7.3If there is no impact on the USO by the privatisation, how is it possible for the competitors (TNT) to deliver within central London only every other day per household? With their staff employed on zero hour contracts and minimum wage?

7.4If the Royal Mail were privatised would the VAT exception on items such as PPI be removed?

7.5As Postcomm and now Ofcom are unable to make a decision whether or not the Business Collection, be part of the USO, would privatisation impact greater on rural business?

End to end competition in the postal sector Ofcom (as referred to by the Secretary of State).

The Ofcom’s statutory duty reproduced below has limited protection for the USO.

Ofcom’s statutory duty, under section 29 of the Act, is to secure the provision of a universal service (see section 29(2)). In carrying out this duty, Ofcom must have regard to: The need for the provision of a universal service to be financially sustainable. This expressly includes the need for the universal service provider to make a reasonable commercial rate of return on expenditure incurred for the purpose of, or in connection with, the provision of the universal service (see s29 (4)); and The need for the provision of a universal service to be efficient before the end of a reasonable period and for its provision to continue to be efficient at all subsequent times. 3.5 Any regulatory conditions imposed by Ofcom must take account of these duties.

Therefore if the need for financially sustainable would the impact be greater on rural areas, where even Royal Mail have admitted are loss making and subsidized by urban areas so the withdrawal of services on a daily basis is not in fact guaranteed.

The condition does not give Ofcom the power to accept or reject an operator’s proposals. It is not akin to an authorisation process but simply a system of advanced notification. Ofcom has the power5 to impose general universal service conditions (“GUSCs”) on operators providing a service within the scope of the universal service. Services within the scope of the universal service are defined in section 40 of the Act. General universal service conditions are generally applicable and are not specifically attached to an individual operator.

7.6As the USO is already at a minimum, and allows Royal Mail competitors to give a minimum service, with the limits place on Ofcom would not the ideal method for the future Royal Mail be to follow TNT’s method and limiting the delivery to every other day over a 6-day period.

7.7Is the protection of the USO, stated by the Secretary of State, limited and open to abuse?

7.8With the removal of licensees and the sale of Royal Mail I feel the privatisation will impact on an increasing unmanageable postal market with a increased drive to the bottom, in both profits and services, as reflected in the Dutch postal system?

7.9I believe the Secretary of State has misunderstood the relationship between customers, delivery staff and the history behind centuries of the service given by generations of postal employees.

Share Issue and Impact on Staff

I also have concerns that if the staff accepts the offered shares would they issued under the Growth and infrastructure Act 2013 Para 31, Employee shareholder where there is removal of basic rights such as redundancy payments, the right to claim unfair dismissal and impact on maternity rules.

8. How can the government insist that by issuing the 10% shares this will enable the staff to have a stake in the company, when any individual member of the staff, will have very limited input in the salaries of executives or bonuses?

9. The government is unclear in its intentions on the subject of unsold shares.

10. Before the statement by the Secretary of State, the Communication Workers Union, held a consultative ballot which 74% of the membership voted, and on the question “do you oppose privatisation’ 96% voted yes. Is this not reflective of the proposed stake in the company as expressed by the Secretary of State?

11. With the Managers Union (Unite CMA) now taking a similar ballot, does that not prove to the Secretary of State that the majority of staff in Royal Mail is in fact against privatisation?

12. Since the issue of the internal colleague shares a number of years ago, where the final payout was withdrawn, due to no money in the scheme why should postal staff trust the 10% shares offered by the Government, with the 3-year retention requirement.

13. If an investor such as CVC takes over a majority share in the company, would the staff transfer come under Article 16 of the Charter of Fundamental Rights of the European Union, an employer must have the right to conduct a business and assert its interests effectively in a contractual process to which it is party. This allows it to negotiate the process of determining changes in the working conditions of its employees with a view to its future economic activity. Therefore the removal of TUPE and protection of transfer of terms and conditions.

14. Would General Logistics Systems (GLS) still be a part of Royal Mail?

15. Would Parcelforce still be part of Royal Mail?

Commercial Relationship between Royal Mail and Post Office Limited

16. Under the agreement are POL allowed to take Royal Mail competitors mail across their counters.

17. Is the crown office closure plans against the principles as laid out in the Hooper report? Is the threat of crown office closure just another way of privatizing the POL network by individually selling off crown office to sub postmasters or companies such as W H Smiths?

Executive Summary:

The Secretary of State statement fails to recognize the progress that Royal Mail, CWU and members of staff have made since the Hooper Report. This progress has been seen in both the modernization of the business and increases in profits since the pension bailout.

My greatest concern is as indicated the USO is set as a minimum and fails to protect the bulk of the mail that staff deliver on a daily basis 6 days a week. If Royal Mail’s competitors are not faced the same restrictions, they will increase in the number of deliveries in urban areas, which will increase the economic pressure on Royal Mail to cut back on uneconomic deliveries and collections.

The Secretary of State fails to take on the concerns of the staff, of all grades within Royal Mail, with the consultative ballots results showing the bulk of staff against privatisation.

If privatised my concerns is that we will follow the Dutch Post route of zero hour contracts, having the mail dropped off and delivering from their homes.

28 July 2013