BBC On The Record - Broadcast: 28.04.02

Film: Paul Wilenius reports on the problem the Government faces over the mail service run by the Post Office and Royal Mail.

PAUL WILENIUS: Everyone loves receiving a real letter. It's the Royal Mail that delivers them and the Post Office that starts them on their journey. This is the oldest Post Office building in the country, in the picture postcard village of Painswick in Gloucestershire. Sue Casey the local postwoman is out on her rounds delivering a little bit of morning sunshine. ACTUALITY WILENIUS: The Post Office and the Royal Mail are part of our national heritage. They're also part of Consignia and both are state owned. But now they're losing money and face a major threat to their survival. The fate of that much loved British public service - the Royal Mail - is turning into one of the most intractable problems for this Labour Government. Indeed, the latest proposals from the independent regulator Postcomm to fully open the postal market to private competition over the next few years, has sparked off widespread alarm. So much so that Ministers are now coming under intense pressure from unions and many Labour MPs to intervene openly and to either water down or delay those proposals. BILLY HAYES; It's a great irony that under a Labour Government you know we might see the destruction of the British Post Office. LINDSAY HOPYLE: The danger is that Postcomm could smash that brand and I think that's the real danger for the future of the Post Office, will it exist, will it be the love brand that we know and where does it all end? WILENIUS: Symbols are important to the British, no matter where they are in the kingdom. The Royal Mail is not just a symbol. Over many years a steady stream of profits were handed over to the government, amounting in total to billions of pounds. But in recent years profits have disappeared, to be replaced by mounting losses. JOHN WITTINGDALE: It is extraordinary. This is a business which only a few years ago was hugely profitable and in a short space of time its performance has deteriorated, it is now losing huge amounts of money, one and a half million pounds a day, at the same time that is has a monopoly and the amount of business that it is doing, the volume of mail has been increasing. It is extraordinary that any business can have performed so badly in such a short space of time. WILENIUS: The Post Office is now part of Consignia. It accepts that the position is perilous. It's trying to cut costs urgently. But at the moment the mail service is relying on handouts from the government, which are worth hundreds of millions of pounds a year. PETER CARR: The most important thing is to bring the expenses down. Last year expenses grew at 13%, whereas revenues only grew at 2.7% and clearly that is formula for loss and it's a formula for disaster. WILENIUS: The postal services regulator now wants thirty per cent of the market in bulk letter deliveries opened up within months. That's the recommendation of Postcomm Chairman Graham Corbett. But he also wants sixty per cent opened up in two years and a hundred per cent within four years, that's by 2006. This is Allan Leighton the Chairman of Consignia. He's been brought in from Asda to try to bear down on soaring costs. Although he's ready to face up to competition from private companies, he wants it to be at the same pace as the rest of Europe. He's concerned that the British regulator wants to push ahead with total liberalisation well before our European competitors. ALLAN LEIGHTON: The Postcomm pace for us is very difficult because, I mean it accelerates competition, it's competition which is faster than the rest of Europe and we just think that's basically unfair and you know, so we're holding our hands up saying you know, can we go at the same pace as everybody else, why do we need to go faster. CARR: What we've got now is an opportunity to bring in competition, almost immediately and what's most important, is that we know that by the end of 2006, we will have a fully liberalised market and that's what this industry needs. It needs certainty, it needs to know when things are going to happen and in order to do that, you must have an end date. WILENIUS: If the market is opened up it's private companies like DHL, owned by Deutsche Post, which want a large slice of Consignia's business. But others threatening the Royal Mail, including TNT and Business Post. But the Opposition feels competition will make letter delivery more efficient. WHITTINGDALE: If you look at the record in other utilities where competition has been introduced, the benefits to the consumer have been enormous and certainly I think that competition will act as a driver to improve efficiency and will result in a better standard of service for the consumer. WILENIUS: But lifting the Post Office's letter monopoly could mean the end for parts of Consignia. Already private companies like Hays, an express delivery expert, are making profits handling some mail for a hundred large firms. Now they want more access to some of the highly profitable bulk letter business. HOYLE: I think the private companies that want to enter into the market will have the ability to cherry pick because what we're not seeing is the service being opened up to fair competition, because I think that's important. People recognise and Europe says that we ought to have competition, but what we're not seeing is fair competition within the postal service. WILENIUS: Without the protection of the traditional letter monopoly enjoyed by the Royal Mail and the Post Office, Consignia would inevitably lose parts of its business to private companies. Indeed this could jeopardise the universal service it now provides. At the moment often uneconomic and expensive rural services are subsidised by the more profitable business generated by the big users. HOYLE: The one thing that people appreciate is wherever you live, it costs the same price to send a letter and to receive that letter. We know that the service is equal across the country and that's important. The moment that you begin to alter that and it' no use the Postcomm saying well, we have a universal agreement. The universal agreement is with the Post Office and Royal Mail only and unfortunately the same rules do not apply to those that will cherry pick the market and unfortunately, if you're losing money, that service cannot continue and something has to give. WILENIUS: It's not just rural services which could be at risk. This area of Gloucester depends on its local Post Office for access to services ranging from pensions and benefits to basic banking. But there are fears these sort of services across the country could be under threat from Consignia's plans to close 3,000 urban Post Offices in the near future. This Post Office has an important role to play in the community, as a social service as well as a postal service. Consignia says it needs to shed jobs and improve productivity to cut costs. But there are concerns that cutting the number of branches will undermine that valued social role. HAYES: The less outlets there are for any organisation whatever company, it means it's less of a recognised brand and so obviously the less postal outlets there are, the less likelihood is of people using that particular service and let's not forget also, urban post offices are also where pensioners, where you know disabled and the like people meet to collect their benefit, it's you know, something called society and that's what these branch offices are all about. WILENIUS: But perhaps the biggest problem of all for the government is Britain's love affair with the Royal Mail. The idea that the post will get through, even to the most far flung parts of the country, at the same price for all, is part of our heritage, part of our society. It's what millions of people have grown up to expect. ACTUALITY WILENIUS: It's the image immortalised in the 1930s documentary 'Nightmail'. Trade Unions and Labour MPs are now lining up with groups all over the country to oppose plans to introduce more competition into the post. There are signs that their campaign is having an effect on public opinion. A poll conducted by NOP for the Communication Workers Union officially released today, shows that most people are opposed to opening up the postal system to competition. When asked "Do you think the Royal Mail should have to compete with private firms for letter delivery, or not, seventy-five per cent said 'No' while twenty-five per cent said 'Yes.' And people in Scotland were even more concerned. There, eighty per cent said 'No' to competition. HAYES: Our polls show that seventy-five per cent of the people we polled believe the competition is not the solution to the problems the Post Office currently face. I think that's a commentary also on the idea of public services, it shows that people recognise the Post Office is a public service and competition is not the solution favoured by the vast majority of the British public. WILENIUS: But there's also mounting opposition on the Labour backbenches. More than one-hundred-and-fifty Labour MPs have signed up to a House of Commons motion calling on the government to protect postmen and rein back the regulator. An alliance of rural post users, unions and Labour MPs is mounting powerful opposition to his proposals. To say that Ministers are in a panic over the future of the Royal Mail is a bit of an understatement, because no matter what they do they'll have problems. If the Postcomm's proposals are watered down, they'll be attacked for buckling under union pressure. But if those plans go ahead unchanged, they'll stand accused of destroying one of the country's most cherished public institutions in Britain. KATE HOEY MP: I think it could be the ending of a great public service that has done this country proud for many, many, many years. I'm very worried indeed that the competition is going to be far too much of it, far too quickly. There is absolutely no reason why this country should be going ahead of the rest of Europe on competition and I just cannot understand how the regulator is being allowed to get away with what seems to me taking much more power than Parliament actually meant it to have. WILENIUS|: There could still be a deal. If so, it looks as though this will involve a delay in implementing the regulators' proposals and more financial help from the government to Consignia, as well as a rise in the cost of posting a letter. But any weakening of the Postcomm proposals would provoke allegations of government interference. CARR: We can see no argument for delay and we would be suspicious, that pressure that been applied, unfair pressure had been applied to the regulator, in making his judgements. He is an independent regulator and should not be subjected to political persuasion or pressure. WHITTINGDALE: Ministers have been interfering almost on a daily basis and the consequence is that the morale of the people who work in the Post Office has collapsed almost completely. They feel that they are being made to carry the can for the failures of ministers who have prevented them from taking the actions that are necessary. LEIGHTON: I don't think it's anything to do with the government Ministers, I mean this is the whole thing, I mean for us the most important thing is, we've got to do what we believe is commercially right for this organisation, and my role is to make sure that that is what happens. Now, I'm sure that we'll have a difference of opinion with elements of the government, with the regulator, with Postwatch and with everybody else who are involved here. The whole thing for me, which is the great thing about democracy, is you put your case and the people with the best case win the argument. WILENIUS: Ministers have been reluctant to go public with their views on the future of Consignia, although the government is the only shareholder. But senior Labour MPs are now urging the Trade and Industry Secretary to abandon this policy and put pressure on the regulator. HOEY: There's no point Patricia Hewitt continually passing the buck and saying this is now down to Postcomm. Ultimately, the government runs the Post Office, controls the Post Office and I think they have to now tackle this and actually go back to Postcomm and come back to Parliament if necessary to change the legislation, because we have gone too far on this and I'm afraid it is going to make us very, very unpopular, apart from it being actually wrong. HAYES: If you get it wrong on the Post Office people won't forget. People will remember the person that saved the Post Office, they'll never forget the person who destroyed the Post Office. If they backed the idea of a publicly owned Post Office they'll be rewarded at the ballot box at the next election. If the idea is that if it's the private sector alone can solve all the Post Office's problems then there will be a prize at the ballot box, but it will be a bitter fruit that they'll be picking up. WILENIUS: Like many governments before them, this Labour government wants to bring the Post Office and the Royal Mail into the frenetic hi-tech modern world. Postcomm's proposals have generated powerful opposition from unions and Labour MPs. But now the public has been shown to be against it, that might be decisive in persuading Ministers to protect the future of the public post.
NB. This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy.