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Research

THE HOOPER REVIEW Presentation to National Briefing Jeremy Baugh, Head of Research Thursday 15 January 2009. Research. Research. Hooper’s Final Report. The issues - USO - changing postal market - RM efficiency

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Research

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  1. THE HOOPER REVIEW Presentation to National Briefing Jeremy Baugh, Head of Research Thursday 15 January 2009 Research

  2. Research Hooper’s Final Report • The issues - USO - changing postal market - RM efficiency - pensions - regulation - labour relations • The choice - modernise or decline • The solutions - part privatisation - Government takeover pension deficit - abolition of Postcomm (transfer to Ofcom) - pay and IR

  3. Research Initial response • Raises major questions for CWU • Agree about many of key issues (need for change, maintaining USO, investment, pensions, regulation) • Overall solution fundamentally flawed • Report & evidence presented to justify privatisation • Lacks positive vision - prescription for managed decline • Based on failed neo-liberal ideology • Inconsistent with Government’s wider economic strategy • Privatisation threatens future services and CWU members

  4. Research The issues (1) • USO plays vital economic and social role • RM only company capable of providing USO • Underestimates costs of liberalisation • Contrast between Final and Interim Reports • USO under threat from market changes (e-substitution, LT mail volume decline)

  5. Research The issues (2) • Contrasts £500m lost from market changes with £100m lost from competition • But figures questionable:- £100m based on RM estimate - RM have interest to keep figure low - lack ofindependently verifiable data- ignores cost to members, SME’s and domestic customers

  6. Research Profits and efficiency (1) • RM least profitable / least efficient European operator • 13.5% operating profit (TNT & Deutsche Post) v 0% (RM) • Inefficiency due to: - oversized network- lack of automation - higher pay and pensions in RM • Not like for like comparisons

  7. Research Profits and efficiency (2) • Hooper ignores : - investment from Commercial Agreement - £2.6bn lost from Postcomm’s volume forecasts - greater levels of investment overseas- higher prices charged by rival operators- profit comparisons cover period when TNT & Deutsche Post didn’t face full competition- only UK operates DSA- minimum postal wage in Germany- impact of removal of pension contributions- 3p tariff increase- any change to access pricing

  8. Research Pay and pension comparisons • RM employees paid “above average market rates” • Proposes ‘race to the bottom’ on pay & conditions • Comparisons don’t bear close inspection • RM pay is market pay • What and where are “comparable job roles”? • Ignores huge differences in pensions across EU • Compares public sector (final salary) to private sector (defined benefit) • Unionisation delivers better pay & pensions

  9. Research The choice • Modernise or decline • Real question is how modernisation is delivered • Hooper argues:- modernisation is top priority- too much resistance to change- RM must change culture and improve efficiency - need radical reduction in network. • International comparisons flawed:- not evidence-based;- ignores differences in geography, population spread and delivery infrastructures • Overstates risk of forced restructuring:- outdated argument/ ignores new economic realities

  10. Research The solutions (1) • CWU accept:- need for change in RM- need to improve IR- need to maintain USO- need Government support for pensions • Overall package of solutions falls short • Lacks positive vision for vital public service • Prescription for managed decline • No reduction in USO “at this time” • Rejects call for US support fund

  11. Research The solutions (2) • 4 key recommendations:- part sell off of RM- Government take over pensions deficit- changes to regulatory regime- improve labour relations • Strategic partnership for RM:- discounts public sector solution - breach of manifesto- Government facing both ways - state intervention v privatisation - European trends - perverse timing

  12. Quote “Just as the free market model that spawned a spate of failed and exorbitant privatisations is imploding all over the world, the Government has seized on the idea of handing over a slice of a vital national institution to a private competitor” Seamus Milne, Guardian 18/12/08

  13. Research Problems of privatisation (1) • Proposal ignores:- lessons of credit crunch - failings of postal competition- experience of failed privatisations (PFI, contracting out) - errors made by private companies like TNT • Focus on cutting costs & delivering private profits • Internal, organisational upheaval for RM • Short on crucial detail:- how much to be sold off?- what price?- what return for investor? - what partner? • Makes mockery of arguments on competition and monopoly • TNT pays “above market rates in Holland” but undercuts wages overseas • TNT responsible for loss of 8m child benefit records • question TNT’s desire and capability to offer national service

  14. Problems of privatisation (2) • Hooper says sell off will deliver:- commercial confidence in RM- access to capital- access to corporate experience • But none of these require privatisation • CWU want more political accountability not less • Modernising IR part of CWU agenda:- honour existing agreements- work in partnership with CWU • No specific proposals on how to improve IR • Arguments on capital ring hollow given level of Government spending in other industries • UK has expertise - need people regulating industry & running RM with experience of public service provision.

  15. Pensions • Welcome Government support for deficit • Question motives - make RM more attractive to investors • Public subsidy to corporate profiteering • Not matter of money but political will • Short on important detail • Let RM use £280m for investment

  16. Regulation • Abolition of Postcomm • Transfer of regulatory functions to Ofcom • Unclear what benefits it will bring • Risk of less focus and more competition • No changes to Ofcom’s primary duty • No change to access pricing • No to US support fund

  17. Post Office • Report faces both ways on PO • PO provides access to USO but falls outside Report • Represents missed opportunity • No reference to potential role for revitalised PO network & People’s Bank • PO & RM are interdependent • Oppose split off from RM Group

  18. CWU alternative • No to managed decline • Positive vision linked to new economic climate- jointly agree modernisation- tackle pensions deficit & cuts to pensions provision- give RM extra £280m pa/ change access - PS Act (support SME’s, delivery spec) - product and service innovation - revitalise PO network

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