Royal Mail 'not in financial good health'

[POSTMAN]

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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.

[Lounge Lizard]

"Privatisation must occur, he argued, adding that there is no money in the public sector to deal with the Royal Mail's plight." - and that's what we're told on a daily basis, but anyone investing will be sure to get more money out than they put in so why won't the government do that ?

[fishtank]

"Privatisation must occur, he argued, adding that there is no money in the public sector to deal with the Royal Mail's plight." - and that's what we're told on a daily basis, but anyone investing will be sure to get more money out than they put in so why won't the government do that ?

I have never really got my head around this LL.
They keep saying that private investment is vital to deal with Royal Mail's plight but i've never heard anybody say exactly what they plan to do with this money...more machines?...is that the best they can come up with.

And if this quote is from Dave Ward....

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.

He needs to think more before he opens his mouth....machines don't pay subs...manual labour does.

[dvbuk55]

"Privatisation must occur, he argued, adding that there is no money in the public sector to deal with the Royal Mail's plight." - and that's what we're told on a daily basis, but anyone investing will be sure to get more money out than they put in so why won't the government do that ?

I have never really got my head around this LL.
They keep saying that private investment is vital to deal with Royal Mail's plight but i've never heard anybody say exactly what they plan to do with this money...more machines?...is that the best they can come up with.

And if this quote is from Dave Ward....

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.

He needs to think more before he opens his mouth....machines don't pay subs...manual labour does.

Well, that may well be the part of the agreement that isn't too well publicised - you control the workforce Dave and we'll offset the deficiency in subs. Not that would be publicised of course

[DirtyHarry]

It stinks to high heaven. CWU involvement regarding RM's plans for us, just isn't right, not right at all.
If someone had told me fifteen years ago that I would be calling CWU officials a contemptible shower of shyte today, I would have laughed in their face.
My, how times change, eh?

[MinisterofCucumber]

The union's tactic to avoid privatisation seems to be to show the government that the union is the only organisation that can control us and deliver modernisation by persuading us to accept poorer terms and conditions. This is a dangerous game to play. The main thing that puts off potential buyers is that they do not want to inherit a 'militant' workforce. If the union drives down our terms and conditions too much, they will make us much more attractive to these potential buyers.

Some influential commentators still think we are unruly. Steve Lawson, editor of "hellmail" wrote "Royal Mail is a largely militant workforce and the 'them & us' culture is endemic." The truth is that everyone I work with has been working a lot harder these past years and we all take pride in our work because we believe in providing a public service. If we had wanted to work in the private sector, we would have chosen to. The blame for the 'them & us' culture lies with the decision to introduce a bullying style of management culture. It's time this culture was changed and it's time some of our union officials stopped conniving with management to deceive our members.

[subbie]

Where did the Minister get the impression that Post Offices are restricted from opening longer hours? We are not, it just does not pay us to open longer hours, in fact with no pay increase shorter hours might be the answer.

Subbie

[G O Root]

Dear British Media
When you constantly point out that the pension scheme is in dire straights and 'the taxpayer' is going to have to spend loads to prop it up. Could you please add some comments as to why?. i.e previous greedy governments, and pensions holidays. That way the public may see that we aren't grabbing posties, but just want what is rightfully ours.
Thanks

[POSTMAN]

Dear British Media
When you constantly point out that the pension scheme is in dire straights and 'the taxpayer' is going to have to spend loads to prop it up. Could you please add some comments as to why?. i.e previous greedy governments, and pensions holidays. That way the public may see that we aren't grabbing posties, but just want what is rightfully ours.
Thanks

I think that would be returned to sender.

[chewi]

Dear British Media
When you constantly point out that the pension scheme is in dire straights and 'the taxpayer' is going to have to spend loads to prop it up. Could you please add some comments as to why?. i.e previous greedy governments, and pensions holidays. That way the public may see that we aren't grabbing posties, but just want what is rightfully ours.
Thanks

The 'deficit' is just an accounting trick. The rules are that the fund must be able to pay everyone if we all want our pension at the same time. Not likely to happen in reality. Also if you read the letter with your pension statement you will see that the amount of this so called deficit has reduced by 20% in one year.

That's by one fifth.

Maybe, instead of looking at this fictional amount 'owing' look instead at the value of the assets that the Government get their hands on. Something like 27 billion. (Treasury Bananas)

[fishtank]

Dear British Media
When you constantly point out that the pension scheme is in dire straights and 'the taxpayer' is going to have to spend loads to prop it up. Could you please add some comments as to why?. i.e previous greedy governments, and pensions holidays. That way the public may see that we aren't grabbing posties, but just want what is rightfully ours.
Thanks

The 'deficit' is just an accounting trick. The rules are that the fund must be able to pay everyone if we all want our pension at the same time. Not likely to happen in reality. Also if you read the letter with your pension statement you will see that the amount of this so called deficit has reduced by 20% in one year.

That's by one fifth.

Maybe, instead of looking at this fictional amount 'owing' look instead at the value of the assets that the Government get their hands on. Something like 27 billion. (Treasury Bananas)

The pension deficit can become a real problem if your income(from working members and investments) is consistently exceeded by your expenditure(retired members) this IS a real problem especially with 24,000 jobs going.
The smaller Royal Mail's workforce becomes the more of a problem it becomes in the short term until the whole thing hopefully balances itself out (retired members against working members).
If the pension itself goes tits up the scheme would be absorbed by the PPF(Pension Protection Fund) which would provide members who have not yet got to retirement with a pension of 90% of their entitlement earned up to the time the scheme stopped. That 90% is subject to a limit, which is currently £30,856 per year.