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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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Presentation to National Briefing

Jeremy Baugh, Head of Research

Thursday 15 January 2009


Hooper s final report


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

Initial response


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

The issues 1


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)


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

Profits and efficiency 1


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

Profits and efficiency 2


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

Pay and pension comparisons


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

The choice


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

The solutions 1


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

The solutions 2


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


“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


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

Problems of privatisation 2
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.


  • 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


  • 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
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
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