If private companies can pick the best bits of the network, the obligation to deliver to all is undermined. That’s why we’re considering action.
From the Guardian, Comment is free, Thursday 6 December 2012 15.05 GMT
According to a headline in Wednesday’s Daily Mail, postal workers are threatening “to ditch half of their deliveries in bid to protect Royal Mail from ‘unfair’ competition“.
The Mail makes it clear with those quotation marks exactly where it stands on plans by the Communication Workers’ Union (CWU) to ballot its members on whether to boycott letters handled by rival companies.
As the article says: “Royal Mail has lost business to the likes of TNT Post and UK Mail over the past seven years. Currently, half of all letters are handled by a rival company, with Royal Mail responsible for only the final mile of the delivery.” Again, it’s that little word “only” which betrays its prejudice. In case you’ve forgotten, the business of a postal delivery service is to deliver the post.
The Royal Mail doesn’t “only” deliver the final mile. The final mile is the actual work. All the rival companies do is collect the mail from the bulk mail contractors (such as banks and utility companies) and then drive it to one of the Royal Mail’s delivery hubs for distribution around the country. We do all the rest.
It is Royal Mail postal workers like me who walk along your street and up and down your garden path, six days a week, in order to get the mail to you. The technical term is downstream access. Private mail companies have access to the Royal Mail’s distribution system. The Royal Mail has to apply something known as “headroom” in fixing its price for this service. Headroom is the difference between what the Royal Mail is allowed to charge for its bulk mail contracts and what it can charge its rivals for access to the network. It has to allow rival companies headroom to make a profit.
The whole system is administered by Ofcom, the postal regulator. In other words, the Royal Mail is heavily regulated to achieve what is sometimes called “deregulation”, ie access of private companies to the postal market.
This is what the CWU is talking about to when it refers to “unfair competition”. As the union says: “CWU is concerned that unfair competition is undermining the sustainability of the universal service … Private postal company mail makes up 45% of letter volumes delivered by Royal Mail, a figure which has consistently grown under competition arrangements. New end-to-end competition is a worrying expansion, further undermining the USO [universal service obligation].”
Guardian readers will not be surprised by this statement, as I’ve been banging on about the issue for the last three years at least. What is new is the introduction of so-called end-to-end competition into the postal market. Currently only one company, TNT, is doing this, with around 300 delivery staff delivering mail to about 350,000 households in west and central London.
What this means is that TNT continues to use the Royal Mail’s downstream access service in all but those 350,000 households, although in a recent press release it said it planned to increase the number of its postal employees to 20,000 in the next five years.
There is no obligation on TNT to deliver the universal service, therefore it is able to cherry-pick those parts of the network that are the most profitable. Nor is there any obligation to match the Royal Mail’s pay and conditions.
In other words, what this amounts to is an attack upon our jobs. If TNT and other private mail companies are able to pick the best bits of the network with no obligation to deliver to the rest of the country and, at the same time, are able to pay reduced wages, then this is clearly a threat – not only to our pay and conditions, but also to the universal service. Personally, I will be voting yes when my ballot paper arrives.
Read more here.
Royal Mail may be viewed with a high level of affection by the public now, but will that still be the case after it’s privatised?
From the Guardian Comment is free
The inevitable has happened. The government has announced its schedule for the privatisation of the Royal Mail, due to begin in 2013.
It’s not clear yet whether it will be full privatisation or part-privatisation, whether it will be sold off to another mail company or to a private equity firm, or whether it will be floated on the stock market as an IPO (initial public offering) and advertised to the public in the manner of the “Tell Sid” campaign for the sale of British Gas way back in 1986. “We see no reason why this company should not be IPO-able,” said one senior figure. “Royal Mail is viewed with a high level of affection by the public.”
The reasons given for the privatisation were outlined in the Hooper report in 2010.
They are as follows:
1) Falling volumes of mail due to competition from electronic media such as email and texts.
2) The inefficiency of the Royal Mail compared with its competitors.
3) The need for modernisation and the private investment to complete this.
Hooper consulted widely throughout the industry. However, he has never, as far as I know, spoken to any postal workers.
What we would have told him is that while it may be true that mail volumes have fallen, staff numbers have been falling at a faster rate. Up to 50,000 job losses since 2002.
In other words, the weight of mail for the average postal worker has been increasing. We are carrying more mail, to greater numbers of people, on larger rounds than ever. Our sacks are heavier. We work longer hours, and we’ve taken an effective pay cut since the postal agreement of 2010 in which door-to-door (junk mail) – which we were previously paid for separately – has now been incorporated into our workload. In other words, falling mail volumes have been more than compensated for by staff efficiencies.
We would also have told him that the so-called inefficiency of the Royal Mail is due as much to market liberalisation as it is to anything inherent in the company.
Private mail companies have access to the Royal Mail network through a mechanism known as downstream access. They bid for the most lucrative contracts from corporate customers, but have no obligation to deliver the letters. They leave that up to the Royal Mail, dropping it off on our doorstep for final-mile delivery. In other words, our so-called competitors have a peculiar market advantage. They take a cut of the profits, while we do the actual work.
As for modernisation, that is being subsidised by the taxpayer. The government has already loaned the company £1.7bn and is proposing to write off £1bn of that.
Which brings us to the pension deficit, which has already been taken into government hands. Even then it was never as great a problem as has been made out. The deficit currently stands at £9bn but the assets stand at £28bn. That’s three times as much. The deficit only becomes a problem if all Royal Mail workers cash in their pensions immediately, something that is not going to happen.
These are just some of the ways in which the argument for privatisation has been skewed.
Meanwhile, in preparation for the event, the new regulator, Ofcom, has announced a lifting of the cap on how much the company can charge for first-class mail. The public are hardly likely to enjoy that. Nor is this going to increase public affection for the company.
However, here’s the problem. The cost of mail delivery has been way too cheap for way too long. Sixty pence to deliver a first-class letter from the Outer Hebrides to the Scilly Isles: it’s still a bargain by anyone’s reckoning.
Traditionally the profitable parts of the company were used to supplement the unprofitable parts. This is the means by which the Royal Mail has been able to deliver the universal service obligation (USO).
It is the breaking up of the company that has lead to the threat to the USO, one of the reasons Hooper gives for the need for privatisation. (Indeed, his report is called “Saving the Royal Mail’s universal postal service in the digital age”.) The irony here is that the USO might be dropped in order to sweeten any future deal.
Anyone who wants to know what privatisation means for staff only needs to look at the Dutch model, where postal rounds have been franchised out to home workers in a system known as “sort and deliver”. Boxes of mail are dropped on a home-worker’s doorstep, who then has to sort the mail and deliver it on an agreed day. The worker is paid per item, not by the hour.
The trick here is that there is often a gross underestimation of the time it takes to do the work. Casual workers get no sick pay, no holiday pay, no health insurance, no pension and – depending on how long the round takes – often end up being paid below the minimum wage.
All of which is likely to erode that “high level of affection” felt by the public for the Royal Mail.
Read more here.
Royal Mail has a new regulator, but its proposals fail to protect the service from privatisation and unfair competition
From the Guardian, Comment is free
Friday 28 October 2011 08.00 BST
The Royal Mail now has a new regulator, Ofcom, which took over the role from Postcomm on 1 October. Ofcom has already issued a report in which a number of changes are proposed. There is a public consultation under way, which closes on 5 January 2012.
The most contentious of the proposals is the one to lift the cap on what the Royal Mail can charge for its principal service. According to some reports this could mean the price of a first-class stamp going up to £1. Less well recognised, but equally important, is the proposal to lift the cap on the price of bulk mail and business mail, which could also have an impact on customers further down the line.
The move to Ofcom follows on from proposals made in the Hooper report, which has been the basis of policy for successive governments since it was first published in 2008. It was updated at the request of the current government in 2010.
Hooper makes a number of recommendations, of which the change of regulators is just one. Other recommendations include the introduction of private capital through a “strategic partnership with a company with corporate experience of modernisation” – privatisation – and the removal of the pension deficit to the public purse, thus lifting the burden from any future buyer. In March 2010 the deficit stood at £8bn. Hooper states that his proposals must be taken as a package, which implies that privatisation is not far off.
The stated aim of both the Hooper report and the Ofcom proposals is the protection of the Universal Service Obligation (USO) by which the Royal Mail is required to collect and deliver letters six days a week at an affordable and uniform price across the UK. None of the other mail companies has this obligation. It is interesting to note that these proposals come on the eve of privatisation. They allow any future buyer the freedom, not allowed to the Royal Mail for the past few years, to set a price in line with actual costs.
Meanwhile Ofcom also offers safeguards to protect vulnerable consumers from onerous price rises by placing a cap on the price of second-class stamps of between 45-55p. It also, very significantly, promises “to require Royal Mail to continue to provide competitors with access to its delivery network”.
It’s at this point that we enter the bizarre world of “downstream access”. Hooper explains the term in his report, in a footnote on page 12:
“Royal Mail delivers 99% of all letters downstream. Royal Mail is required by the regulator … under the terms of its licence to deliver letters for competitors who collect and sort upstream in competition with Royal Mail. This is called the access regime or downstream access regime. Competition in physical mail happens upstream whereas downstream delivery of physical mail has the characteristics of a monopoly.”
Do you get that folks? “Competition in physical mail” – that is competition for profits – “happens upstream”, while “downstream delivery of physical mail” – that is, the actual work – “has the characteristics of a monopoly”. Royal Mail has a monopoly of the work, while the other companies get a share of the profits. And you wonder why the USO is under threat?
The Ofcom proposals continue: “Royal Mail would have the freedom to set the ‘wholesale price’ for access to its network but would be subject to rules regarding the allowed margin between the wholesale and retail prices. This would help ensure that efficient competitors can compete effectively with Royal Mail.” This is known in the business as “headroom”. It is the difference between what the Royal Mail is allowed to charge, and what the “competitors” – who don’t, in any recognisable sense of the word, actually compete – require in order to continue to generate profits for themselves.
Ofcom makes a sort of nod of recognition to the absurdity of the situation when it promises, in the next sentence, “to assess on a case-by-case basis any interest in providing so-called ‘end-to-end competition’ in the UK, where a postal operator receives the letter and delivers to an address without using Royal Mail’s network.” It is interesting to speculate what this might mean. Are we going to see rival pillar boxes on our street corners, and rival posties with different coloured uniforms vying with each other to get to the letter box first? Will there be a kind of postal workers’ turf-war going on, in which I meet my rival at the gate and have to fight him off for access to your letter box?
Of course not. The rival companies will only consider an end-to-end service if there is profit to be made, which means they won’t be in the slightest bit interested in the USO. If such a thing happens at all it will be delivery within one city, or between cities, no more. Rural and remote areas of Britain will never be graced by any but the Royal Mail’s characteristic uniform. Whatever else happens, the Universal Service Obligation will remain the obligation of one company alone. Which is the reason why the Royal Mail will always remain a special case.
Read more here
The Royal Mail’s decision to leave undelivered mail with neighbours fits in with its policy of closing delivery offices
From the Guardian, Comment is free
Monday 3 October 2011 10.09 BST
How well do you know your neighbour? Well enough to trust him with your valuables, for instance, with confidential information, with your cup-final tickets or your passport? Well enough to allow him to receive your latest bargains from eBay or your brand new iPhone?
Currently the Royal Mail is the only postal company not allowed to leave undelivered mail with your neighbours. Instead a 739 (“Sorry you were out”) card is left and the items returned to the local delivery office for collection.
In future, if you are not in, the postal worker will be expected to try delivering to a neighbour instead. A neighbour is defined as someone who “lives within close proximity”. It’s up to the postal worker to decide who this might be. If the neighbour accepts the item, then a 739 card will be delivered to your door detailing the address where the mail is left. If the item requires a signature, then the neighbour’s signature will be taken. If the neighbour is not at home, or refuses to accept the item, then the postal worker will return it to the delivery office in the usual way. The Royal Mail will not accept liability for loss, damage, or delay once it is in the neighbour’s hands.
According to the latest research by GfK NOP market research carried out on behalf of Consumer Focus, customers are generally suspicious of the proposals. Four out of five of those questioned said that they should be allowed to opt-out of the scheme if they wished, while nearly half (49%) said that neighbours shouldn’t be allowed to sign for recorded post. One in five people said they were unhappy for any neighbour to be given any post.
The Royal Mail states that the reason for the change in procedure is to “bring its service into line with other providers”.
That’s “modernisation” for you. Because other mail companies provide a lesser service, the Royal Mail feels obliged to reduce the quality of its service too. I always thought the idea of competition was that it would improve the service. Not so, it seems …
Actually, I think the company is being disingenuous here. I think it has little to do with saving money or with competition. Something else is going on, something you will know about if it is happening in your area, but which you will not have heard of otherwise: the large-scale but mostly hidden closure of delivery offices up and down the country.
Just to give you some idea of the scale of these closures: in the last month I’ve had notification of the impending closure of more than 10 delivery offices in the UK. This includes the closure of a number of delivery offices in the RG7 postcode area around Tadley, Hook and Thatcham and their removal to Reading, about 11 miles away. The Reading delivery office is also due to close, and the whole lot moved into an industrial estate outside the town. Also planned for closure are offices in Dundee, Hull, Holbeach, Fishguard, Droitwich, Guisborough, Malmesbury, Whitstable and Herne Bay.
The most high-profile closure is that of the central London delivery office in Rathbone Place, which serves W1, WC1 and WC2, which Great Portland Estates has just bought for £120m. I have to say that sounds like a bit of a bargain for a 2.3 acre site, just off the eastern end of Oxford Street, in the heart of the London’s fashionable West End. The Royal Mail operation will be moved to the Mount Pleasant office in Phoenix Place, Islington, a significant bus or tube journey away.
These are only the ones I’ve heard about in the last month. According to the Royal Mail annual report 2010-2011, 19 delivery offices closed last year. This should give you some idea of the on-going scale of the programme.
The reason news of the closures remains hidden is that the story always appears in the local paper and as yet there has been no notification in the national press. There are small-scale protests happening throughout the country, as local people are beginning to recognise the implications of the closure of their particular delivery office, but no recognition of the sheer scale of the closure programme, nor what this will cost in terms of extra journeys to and from distant offices for the nation as a whole.
Just to give you one example of this, if the Herne Bay and Whitstable delivery offices close and their operations move to Canterbury, some eight miles away, then this could mean in the region of 1.5m extra miles of road journeys per year for staff going to and from work and for customers forced to pick up their undelivered mail.
Hence the need to change procedures. While staff will have to undertake the journey regardless, customers might well prefer to risk having their mail dropped off with a neighbour rather than having to drive to some out-of-the-way office on an out-of-town industrial estate to pick it up.
Royal Mail is supposed to be a low-carbon company. As it says on the website: “We want to make sure our services have a positive impact on society and a minimal impact on the environment – and we’re working with you and our partners to make it happen. For us, sustainability affects every part of our business, every day, and we can all make a contribution.”
Meanwhile the Royal Mail are raking in vast amounts of cash for the sale of prime real estate in the heart of our towns and cities. Where will all the money go I wonder?
Read more here.
A Panorama programme on postal junk was compelling, but didn’t mention that the market is skewed against Royal Mail
Junk mail. We all hate it don’t we?
Postal workers probably hate it more than anyone else, as we see more of it than anyone else. You only have a few items a week to deal with, we have hundreds of items a day. Sometimes we have as many as six separate items per household to load into our frames. That could be well in excess of 3,000 items a week. You can’t imagine how tedious this is.
And whereas in the past we were paid separately for it, as a supplement to our wages (which compensated us for it somewhat) these days it is part of our workload; and whereas the general estimate for the number of houses we cover on a daily basis is about 85%, for junk mail it is 100%, meaning it takes longer to deliver than ordinary mail.
Now a Panorama programme has been aired all about junk mail. It seems as if the Royal Mail is addicted to it – at least if you believe Richard Hooper, author of the Hooper report into the future of our postal services.
As he said in the programme: “There is absolutely no question that advertising mail, which the critics describe as junk mail, is central to the viability of the Royal Mail in the 21st century.” As proof of this he gave us some fairly compelling figures: about a quarter of the total letters market, of around £5.4bn, is advertising mail. Or as Tom Heap, the reporter, summarised it: “On the face of it, it seems the best way of ensuring the survival of our beloved postal system is to sign up to as much junk mail as you possibly can.”
Unfortunately, as the programme also pointed out, there are some pretty serious consequences to this, not least in the cost of disposing of the stuff once it comes through our doors, and – almost immediately – is chucked into the bin. Millions of pounds a year is spent by councils around the country, either in recycling the material, or in shovelling it into landfill sites.
It seems we are stuck with junk mail. Or are we?
The problem is that we were not given all the facts. There are a number of issues that Hooper – the acknowledged expert in the field – omitted to inform you about.
Central to this is something known as downstream access (DSA). This is the means by which rival companies are allowed access to the Royal Mail’s delivery network, at a loss to the Royal Mail. According to Royal Mail’s chief executive Moya Greene in December last year, this is in the region of 2.5p for every item of DSA mail we deliver. Some price changes have since been introduced by the regulator and the extent of subsidy and loss since the changes is as yet unclear [see footnote].
Yes, that’s right: we deliver our own rivals’ mail for them, and then we take a loss on it. By law. Or, to put it another way: we postal workers, and you members of the public, are made to pay so that rival companies to the Royal Mail can make a nice profit. This is what Hooper refers to as “modernisation”. It is the real drain on the Royal Mail’s revenues, and the reason why it is now so dependent on junk mail to survive. Sometimes we are made to deliver our own competitors’ junk mail.
It is achieved through a process known as headroom. What this means is that the price the Royal Mail is allowed to charge for bulk mail delivery – the bills and statements sent out by banks and utility companies, which is the prime source of all revenue in the letters market – always has to allow headroom for its rivals to make a profit.
Without this artificial skewing of the market – in the name of the so-called “free market” – the company would not be anywhere near as dependent on junk mail for its future survival.
Actually, the Panorama programme was effectively two stories in one. Only the first part was about junk mail, the second part was about scam mail. What the programme failed to come up with was a solution to this particular problem, but I can provide that: allow postal workers to identify scam mail and to report it, and then allow the Royal Mail the legal means to stop it at its source.
There’s one old lady on my round who has been receiving scam mail. Day after day she gets a pile of letters from someone who is described on the envelope as “the world’s most trusted psychic”. The envelopes are always the same, but the return addresses are from all over the world. Sometimes I’m delivering 10 or 15 of these letters a day. I reported it to my manager and asked if we could stop delivering them, but he told me we couldn’t. It is paid-for mail and we are obliged to deliver it.
This is a perfect example of what I have been suggesting over and over again: the company should learn to trust its own workers. Because unlike the high-tech machines which are being introduced in the much heralded modernisation programme, us postal workers actually know our customers. We can tell the difference between scam mail and real mail. We know who is vulnerable and who is not, and we can alert our managers when a vulnerable person is being targeted.
I’m certain that every postal worker would recognise this material. If there was a system by which we could report it, and a legal means of stopping it, we could get rid of it overnight.
• This footnote was appended on 7 July 2011. TNT contacted the Guardian after publication of the piece to say the reference to the DSA agreement is not applicable in the context mentioned. “In fact there has been a 22 percent price increase in charges by Royal Mail this year alone which renders this argument obsolete”, a company representative said.
From the Guardian Comment is free
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The thought of striking managers caused hilarity in the posties’ smoking shed this morning. The thought of privatisation didn’t.
From the Guardian, Comment is free.
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It’s been a bad few weeks at our delivery office. First of all Vince Cable announced that the Royal Mail was going to be privatised. Then, at one of our weekly ‘Work Time Listening and Learning’ meetings, the line manager announced that our delivery office is going to close.
From the LRB blog.
Read more here.