The Future of the Royal Mail Group

[fishtank]

The Future of the Royal Mail Group

Date: 5th October 2012


Dear Colleague

The Future of the Royal Mail Group

In recent weeks the Postal Executive has agreed three very important documents that deal with the crucial issues arising from the Postal Services Act.
The content of the first two documents, covering our approach to Post Office Mutualisation and End to End competition, were communicated to Branches in LTB's 159/12 and 160/12.

The content of the third document entitled 'The Future of the Royal Mail Group' is covered in an attachment to this LTB and is set out as a CWU briefing paper to be shared with all Representatives and debated at Branch meetings.

The briefing paper provides an update on the government's privatisation plans and explains how the Union will take forward Annual Conference policy in the coming weeks and months.

It can be seen from the content of the briefing paper and the previous LTB's on Competition and Post Office Mutualisation that the Union is determined to address the issues arising from the Postal Services Act in a way that brings together our political and industrial positions.
Next week a briefing is being held with all Senior Field Officials and Regional Secretaries to discuss all three Postal Executive Council documents and consider the further work required to advance our position.
In the meantime, Branches should ensure that the briefing paper is distributed to all Representatives. Further information will be sent out in due course.
Any enquiries on the LTB/briefing paper should be addressed to the DGS (P) Department.
Yours sincerely

Dave Ward Billy Hayes
Deputy General Secretary (P) General Secretary



l BRIEFING PAPER




§ Privatisation - Update on the Government's current position


§ Taking forward CWU Policy


- An effective campaign of opposition to privatisation (General Conference Motion)


- An alternative to Privatisation - Developing a new Royal Mail Business Model (Postal Group Conference Motion 2)


- A CWU response to the Government's plans on Employee Ownership (Postal Group Conference Motion 2)


- Future negotiations with the employer


- Membership Engagement

Privatisation - An update on the Government's current position

The recent government reshuffle has meant a number of changes at the Department for Business Innovation and Skills (BIS). Ministerial responsibility for Post Offices and for regulation is now the responsibility of Jo Swinson MP (Lib Dem) while responsibility for Royal Mail has passed to Michael Fallon MP (Conservative).
The government remains committed to its policy of privatisation, but appears to be keeping its options open regarding the timing and form of any sale. From what we understand BIS is working towards a sale taking place towards the end of 2013 or early 2014. We also understand that the government and Royal Mail are likely to be commencing work soon with ratings agencies to prepare for a formal valuation of the business.


While no formal decision on the form of any sale appears to have been taken, it is clear that the government and Royal Mail are progressing their thinking in this area and significant work is underway on both sides to prepare for a sale. We understand BIS are looking at different options, including an IPO, a consortium of investors and a single investor. It appears their preference is for the IPO option, but this is dependent on the performance of equity and postal markets.


We do not expect BIS to announce a decision soon, but understand they will be looking to narrow down options by November this year. In making these decisions they will be considering: company performance; the outlook for the business including the current economic climate; and timing. However, there remains a risk that, in response to economic or political considerations, the government may seek to push through a quick sale. We are currently awaiting a meeting with the new Ministers and further information will be issued in due course.
Taking forward CWU policy

To take forward Annual Conference policy in an effective way the whole of the Union must come to terms with the fact that the circumstances surrounding the Royal Mail Group, the wider postal industry and the debate on privatisation, are vastly different today than any previous era:-
- There is structural decline in the traditional letters market. This will continue to threaten the economics and sustainability of the Universal Service.


- From a total monopoly, the Royal Mail Group now operates in a fully liberalised market and faces both growing and unfair competition. In particular, the threat of End to End competition cannot be overstated.


- Although the financial burden of the pension deficit has been lifted, Royal Mail will still need significant and ongoing capital investment to grow packets, parcels and develop innovative new products and services.
- Customer needs are changing. As well as capital investment, future growth and job security will also depend on the ability of the company and the workforce to adapt to new working methods and embrace the rapidly changing world of communications.


- The economic outlook is dire. It is difficult to envisage any government in the foreseeable future prioritising financial support for Royal Mail.
Against this background, current CWU Annual Conference policy calls upon the Union to continue to oppose privatisation through the 'Keep the Post Public' Campaign, whilst Motion 2 recognises that it is in the interests of our members to engage directly with government and deal with the industrial impact of government policy. It is important that all our Representatives understand that we do not view these policy positions as contradictory. Both are essential to influencing government policy. Both are necessary to protect the interests of CWU members. For ease of reference copies of the two Conference Motions are attached.
Recently, the Postal Executive has given further consideration to how we develop both these Annual Conference policies with stronger membership engagement, more clarity, a fresh approach to campaigning and a clearer focus on our alternative solutions.
In doing so, we cannot view the multi layered challenges facing the postal industry in isolation to each other. Neither can we face away from change. For us to secure sustainable jobs in the future and for the company to survive and prosper, the need for change will continue to evolve.
The approach we will be taking is driven by the need to integrate our political and industrial positions and is based on the points and rationale set out in 1 to 5 below.
1. An effective campaign of opposition to Privatisation

The debate has moved on - we are now dealing with an Act of Parliament and we must develop new campaign tactics - a simple re-run of the 'Keep the Post Public Campaign' will not succeed.

However, a campaign that taps into the difficult economic conditions surrounding a sale, exploits the growing tensions within the Coalition, whilst capitalising on the growing consensus against corporate greed, has a real chance of success.

To influence decision makers and key opinion formers we must provide an answer to how Royal Mail can access necessary capital without going down the privatisation route. This is now the critical debate. As such we must shift the balance of the campaign towards providing alternative solutions, not just state what we are against.

The campaign should demonstrate progressive and groundbreaking ideas for a more ethical and inclusive Business Model, whilst exposing the provisions of the Postal Services Act on what amounts to token Employee Ownership.

As well as committing the Labour Party to reverse privatisation, it should also commit them to a full review of regulation and competition. In the time remaining within this Parliament developing joint tactics with the Labour Party will be crucial to our objectives.

A further paper setting out the detail of a fresh campaign along the policy lines stated will be placed before the Executive in October 2012.





2. An alternative to Privatisation - Developing a new Royal Mail Business Model (Motion 2)

The Annual Conference policy called upon the Union to develop a new Royal Mail Business Model underpinned by a governance structure that really can give postal workers a say over their future. As we develop this model we were due to bring back a Special Report to a Policy Forum before the end of this year.

It is important that our Representatives understand that our position on a new Business Model is being developed as an alternative to privatisation, as well as protecting the interests of our members in dealing with the industrial impact of government policy. Building a credible alternative that focuses on the real arguments and answers the real problems will strengthen our campaign against privatisation.

The Executive has developed its thinking in this area and believe that the creation of a completely new Business Model should not in itself be dependant on a form of employee ownership. However, the Union's position must also be flexible enough to respond directly to the government on the question of employee ownership. This is dealt with in point number three.

We have now agreed that the following principles should underpin a new Royal Mail Business Model and form the basis of any report to a subsequent Policy Forum.
A New Royal Mail Business Model

- The Business Model must put forward a credible alternative to how the Royal Mail Group could access capital in the future without going down the privatisation route.


- There would be a new governance model that created the opportunity for the Union to be involved in developing key business policy before Board decisions are taken. A test for any new governance model would be the need to strengthen collective bargaining, maintain the independence of the Union and enhance CWU workplace organisation.


- The new governance model would support and help define a culture of mutual interest operating at all levels of the organisation.
- The new Business Model to include a company charter that confirms our social obligations in legislation along the lines of the BBC Charter.


- The legislative charter would ensure Royal Mail continues to be an integrated company with the ability to act as an end to end service provider.


- The legislative charter would include the public service provisions for maintaining the Universal Service.


- The legislative charter would ensure that the company operated on the basis of a not for profit model, similar to Network Rail. Profit would be reinvested back into the service and the workforce.




- The new Business Model would operate with single status benefits i.e. managers and employees would be treated equally in relation to bonuses and fringe benefits.


- The new Business Model would take full account of the recommendations of the High Pay Commission.


A more detailed policy paper building on the aforementioned principles will be placed before the Postal Executive in October. The paper will also set out the likely timing of any Policy Forum. In addition, the Union is currently undertaking a crucial piece of work in relation to looking at other ways of the company being able to access capital.


3. A CWU response to the Government's plans on Employee Ownership
It is likely that in the near future Royal Mail will be asked by government to seek the views of employees on the options for employee ownership. The Union must take a view on this issue to protect the interests of our members and this was a further requirement of Motion 2. The key question for the Union on employee ownership is not just the size of the stake, although this will be important, but the form and shape it takes. The reality is, what the government are likely to propose will not give employees any say over the direction of the company, rather it will seek to undermine and damage collective bargaining and the role of the Union within the business.
If privatisation is advanced the Union will defend the interests of our members on employee ownership by responding to the government as follows:-


- Any form of employee ownership should be set up as a collective trust with CWU acting on behalf of employees.


- The Union should seek to increase any employee stake beyond the 10% minimum set out in the Postal Services Act.
- There should be no internal or individual trading of shares.
- Rather than dividends/shares, the trust would provide options for employees to improve long term benefits such as pensions.
4. Future Negotiations with the Employer

All postal branches will be aware that the Union is embarking on a new set of major national talks that will focus on industrial relations, new governance structures and pay going forward.

These national talks are only at the earliest stage of scoping the agenda and there have been no detailed negotiations. The talks would be difficult in any normal situation, but given continuing operational difficulties, the destabilising plans for privatisation and the threat of End to End competition, these will be a particularly tough set of negotiations to conclude. The CWU has told Royal Mail that we cannot envisage a successful outcome in a short time frame.

The Union will ensure that future negotiations with the company will take full account of the developing political position. We will be placing a further policy paper before the Executive in October, setting out the Union's objectives for these negotiations.


5. Membership Engagement

We will now focus on engaging the membership directly in support of our Annual Conference policies. Membership engagement will be crucial to any fresh campaign against privatisation and will be necessary in tackling the threat posed by End to End competition.

To galvanise membership support we will be launching new communications and consideration is being given to both a survey of the membership and a full postal consultative ballot with independent scrutineers. Such a ballot would seek the membership's endorsement of our opposition to privatisation, their support for a new Royal Mail Business Model and the CWU view of the minimum requirements on employee ownership, should the government advance privatisation. The consultative ballot could also be used to gain membership support against the threat of End to End competition.

The approach to membership engagement is currently being developed and a more detailed paper will be placed before the Executive in October 2012.



2 CATEGORY A: This Conference recognises that the Postal Services Act 2011 will have a major impact on the future of the Royal Mail Group and UK postal services.
While the CWU retains its position in fundamental opposition to privatisation, it is now in the best interests of our members that the Union fully engages with the processes arising from the passing of the Postal Services Bill, so that we can deal with the industrial impact and maximise the outcome for our members.
The Postal Executive will bring a Special Report to a Policy Forum in autumn 2012 covering the following areas:-
A new model of employee ownership over and above the minimum outlined in the Postal Services Bill.
A new governance model that embeds the Union at all levels of the organisation and provides a real opportunity for postal workers to influence the direction and future decision making within the company.
A new company model which builds in principles of transparency, accountability and fair reward whilst positively transforming the working experiences of our members.
Postal Executive Council