Research

THE HOOPER REVIEW

Presentation to National Briefing

Jeremy Baugh, Head of ResearchThursday 15 January 2009

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

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

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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)

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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 of independently verifiable data- ignores cost to members, SME’s and domestic customers

The issues (2)

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

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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

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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

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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

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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

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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

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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

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

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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.

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

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

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

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