Royal Mail; EC investigates plans to privatise

The Mail Competition Forum, representing private sector operators such as TNT, UK Mail, DHL and DX, has said it will make clear to Brussels its “serious reservations” over the planned bail-out and demand that conditions be attached to any write-off.

When you look at the real reason why profits are down it has virtually nothing to do with Facebook. It has everything to do with the Royal Mail spending vast amounts of money on a so-called modernisation programme that simply doesn't work. £400m was spent on new machinery that actually slows down delivery.

We have two mail deliveries these days, instead of one. One is first thing in the morning, the way it used to be. The second is at about 9.20am in our office, which means full-time workers are now forced to take a break to wait for the lorry. So how is this "modernisation" exactly? By what process is it decided that a new machine which is slower than an old machine is actually more modern, just because you bought it more recently, or that having workers sitting around eating sandwiches is more efficient than having them delivering mail?

Millions more have been spent on a fleet of new vans to replace the bikes the Royal Mail intends to scrap. How crazy is that? To replace the world's most energy-efficient machine, bar none with the polluting, inefficient internal combustion engine dependent on oil from the war-torn Middle East. To replace a tried and tested method of delivery in use for over 100 years, with an untried and untested method, that, everywhere it has been brought in, has been disastrous, as I'm sure people in a number of towns will testify.

Something very strange is happening here. It takes a radical redefinition of the English language to describe any of this as "modernisation".

Also we have brand new uniforms. Who on Earth thought of that? Every single postal worker in the UK is being issued with a brand new set of clothes.

Finally, it is closing down hundreds of local delivery offices all over the country and relocating them to major city centre sites.

All of this is being done in the name of savings. It will cost less to maintain a single centralised office than a number of smaller offices. That's the theory at least. But is it actually true? I've had my calculator out again and I've been working it out.

There are 50 workers each in the two offices in our area that are due to close – 100 altogether. It will take about half an hour each way to drive to and from the city. All of this has to be done in work time of course. We're not counting the journeys each postal worker has to make to get to work and back. So that's an hour of Royal Mail time spent getting us to and from the start of our rounds. We earn £8.86 an hour, so it will cost the company £886 a day, which is £5,316 a week, or £276,432 a year. Knock off days off and holidays, and the figure still comes in at around £250,000 a year. That's a quarter of a million pounds spent on just getting the workforce to the start of the round every day.

How is that a "saving" exactly?

What kind of accountant adds a quarter of a million pounds to your wages bill and then describes it as a saving?

This is not to speak of the extra pollution of having hundreds of vans spluttering about during the rush hour or the cost in maintenance, petrol, tax and insurance, of running a fleet of vans. It's not to speak of the traffic chaos in the city or parking problems around the new joint delivery office. It's not to speak of the inconvenience for customers of having to travel eight miles to pick up their undelivered mail. According to the Royal Mail's own figures this will be in the region of 100 a day in each of the two offices. I will leave it up to you to work out the figures on that.

All of this can only lead to one of two conclusions: either Royal Mail management is grossly incompetent, or it is running down the company on purpose, for some end that the rest of us have yet to be informed about.

She argues that successive governments, in their effort to introduce competition into the delivery market, tied the Royal Mail’s hands behind its back.

The result has been a paralysis while rivals have picked away at the most lucrative parts of the commercial delivery market and the advance of online technology has taken its toll. She blames the just reported loss of £160m on these restrictions.

‘If I had been able to negotiate commercial terms I probably would have broken even in the core mails business even though revenues are structurally declining,’ she asserts.

Its annual results for 2010/11 stated that the decrease in the accounting pension scheme deficit was driven by an actuarial gain of £3.4 billion.

Operating profit was £39m in its last financial year, down from £180m in 2009/10.

It carried 4% fewer items in its core UK letters and parcels business which lost £120m - equivalent to 2.5p for every item delivered.

The company has cited the "punitive and wrong-headed" approach of the outgoing postal regulator Postcomm and asked its successor, Ofcom, to allow it to set its own prices.

Chief Executive Moya Greene said that Postcomm "never came close" to helping the company deliver a reasonable profit and forced Royal Mail to deliver £1bn worth of mail for private sector competitors at a loss.

Lord Mandelson bought hook, line and sinker Richard Hooper's report, which failed to realise that Royal Mail’s problems have been of the regulator’s making. The idea of selling off 30 per cent of Royal Mail’s shares to the Dutch postal service TNT Post at fire-sale prices is absurd.

The Dutch employ two and a half people to regulate their postal service. By contrast Postcomm employs at least 40 functionaries and spends millions more on consultants whose prime job is to generate fees for themselves, rather than tell Postcomm to get off Royal Mail’s back.

Royal Mail is to reduce the number of its full-time employees by at least 30,000, according to a strategic plan that it has submitted to Postcomm, the mail regulator.

The disclosure will come as a shock to employees, still adjusting to a massive reduction in headcount from 218,000 to 165,000 since 2000/01. It puts into context the recent warning made by Allan Leighton, Royal Mail's chairman, that planned new price controls would lead to 40,000 job losses.

Following the Government-commissioned review of competition in the postal market - focusing on the future of the universal service - the workers’ union has blamed Postcomm for stifling Royal Mail and creating a financial crisis for the UK’s biggest mail carrier.

CWU general secretary Billy Hayes says: “CWU is concerned that unfair competition rules and the draconian pricing and access regime brought in by Postcomm are undermining Royal Mail’s ability to deliver the universal service, by allowing competitors to cherry-pick profitable bulk mail contracts.”

He adds: “Postcomm has proved itself incompetent by bringing about a reduction in service provision and undermining the universal service through the way it implemented competition.