THE HOOPER REVIEW Presentation to National Briefing Jeremy

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

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

Initial response q q q q 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 Research

The issues (1) q q q 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 (esubstitution, LT mail volume decline) Research

The issues (2) q q Contrasts £ 500 m lost from market changes with £ 100 m lost from competition But figures questionable: - £ 100 m 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 Research

Profits and efficiency (1) q q 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 Research

Profits and efficiency (2) q Hooper ignores : - investment from Commercial Agreement - £ 2. 6 bn 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 - 3 p tariff increase - any change to access pricing Research

Pay and pension comparisons q q q q 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 Research

The choice q q q 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 Research

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

The solutions (2) q q 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 Research

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) q q q q 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 8 m child benefit records question TNT’s desire and capability to offer national service Research

Problems of privatisation (2) q q q q 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 q Welcome Government support for deficit q Question motives - make RM more attractive to investors q Public subsidy to corporate profiteering q Not matter of money but political will q Short on important detail q Let RM use £ 280 m for investment

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

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