Member News
By Joe Chapman - 20th September 2010
The Royal Mail is "not in financial good health", Ed Davey told a Liberal Democrat fringe event in Liverpool today.
He said that "the scale of the financial problem is massive" for the organisation and cannot be resolved either by existing government loans or reconciliation of its pensions deficit problem.
With letter flows down by 7.3 per cent on last year, Davey commented that a sustained loss in core revenue means the Royal Mail cannot continue to finance itself along present lines.
Privatisation must occur, he argued, adding that there is no money in the public sector to deal with the Royal Mail's plight.
And though Davey was not in a position to comment extensively on the nature of the new bill set to be presented in the autumn, he assured the panel that the proposals being put forward were very good.
The Bill, he said, would put forward plans for a separation of the Post Office and Royal Mail, whilst ensuring that key commitments such as the universal service obligation remain in place to provide communities with a vital service.
Davey also discussed the problem of the pension deficit, announcing that the taxpayer is set to take on huge liabilities, and defended current plans for employees to be able to take out shares in the Royal Mail.
The business minister then went on to discuss other service areas in which the Royal Mail could look to make money, and modernise, saying that he was in talks with various banks about the prospect of a Post Bank. The prospect of post offices being eligible to open for longer hours, was also discussed, under coalition plans.
Speaking for the CWU, Dave Ward insisted that the union wanted a "meaningful dialogue" with the coalition over plans to reform the Royal Mail but that the organisation's two core problems, unfair competition and the pensions deficit, could be rectified without privatisation.
The deputy secretary said that "in a culture of profit before service" the universal service obligation simply couldn't be sustained.
No private investor would be willing to pay the "labour intensive costs" of physical delivery attributable to postal workers, he added.
Ward also rejected the latest Hooper Report which he said had a presumption in favour of the coalition's plans to privatise the Royal Mail, and which failed to present compelling figures on the need to privatise, he said.
Numerous developments had already occurred between the CWU and Royal Mail over the organisation's modernisation, he added, which the report had failed to make reference to. These included fresh plans to mechanise the organisation, and to make sorting operations less dependent on manual labour.
In rejection to the coalition's plans, he also said that more was required than simply to offer postal workers shares in the Royal Mail: adding that, instead, a fundamental reform of industrial relations was needed in this sector.
A profit-share system which was linked directly to the delivery of quality of service might be more apprproriate, he noted.
On the subject of finance, Ward and Davey clashed over whether or not the existing guarantee of government loans provided a sufficient level of investment for the Royal Mail.
A sustained loss in core revenue, with a steady decline in the letters business, provided a structural problem, Davey said. The existing government loans were inadequate to dealing with the organisation's longer –term problems, he argued.
Offering an alternative perspective, Dr John Pugh (Lib Dem, Southport, North West) said that PostComm must be reformed. It was the present regulatory landscape which was causing the problem, he said - noting that no private company would invest in the regulatory environment as it presently stands.
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