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¢ [If pressed on delay] No delay. The interdepartmental review team continues to
work hard towards its report, and we aim to announce our proposals in the Autumn.
e [if pressed on alleged “privatisation”] The terms of reference are unequivocal:
the Post Office will remain in the public sector and will continue to provide a
universal postal service at a uniform tariff and a nation-wide network of post offices.
e [if pressed on future of individual post offices or on size of network] Neither
the Government or the Post Office can guarantee the future of individual post
offices, the vast majority of which are privately owned. But the Government is fully
committed to the maintenance of a nation-wide network of post offices. Part of the
strength of the Post Office lies in its ability to reach customers in all corners of the
UK. Review considering ways in which the Government can help the Post Office to
sustain a nationwide network.
e [if pressed on Crown conversions] Policy on conversion of Crown post offices is
being considered in the context of the Review. Hope that, as suggested by lan
McCartney, the Union is discussing with Post Office Management the possibility of a
common approach to the conversion issue.
e Fully understand the importance to Post Office Counters of acquiring a modern
automated on-line computer platform.
¢ Current plans still provide for all post offices to be automated by the end of 2000.
© Therefore very much hope that the project can be implemented successfully. Not
surprising that the project, which is a major PFI project, has been reviewed by
departments given its size and importance and the delays which have occurred.
e The Government remains committed to maintenance of a nationwide network of post
offices.
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SECRETARY OF STATE’S MEETING WITH COMMUNICATION WORKERS UNION
(3 SEPTEMBER 1998)
LINES TO TAKE
Post Office review
e Pleased that CWU are playing an active part in the review - grateful for their input.
Have noted your latest summary [attached - annex Al’ of the issues that you have
sent to me and (many) others.
e Work very much still in progress. Decisions will not be taken until later this year.
Indeed, we (Ministers) are not due to see the completed work of the Review until
next month.
© Open minded about options. But we must find the best public sector option for
meeting the needs of the Post Office for greater commercial freedom to meet the
challenges of the future, and to enable the Post Office to meet the needs of all
users. Cannot reach conclusions before seeing the report. This is not a matter of
dogma. We need to consider all the options carefully so as to establish the best
possible future for an innovative, competitive and successful Post Office in the public
sector, to the benefit of its customers and the UK.
e Itremains our objective to make announcements in the Autumn. Conscious of the
need to minimise uncertainty but must also ensure that we are not rushed to reach
conclusions on these vitally important issues.
e Vital that the process is not derailed. Speculative public debate now would be
counter productive.
There is a factual error in the document - the level of the monopoly will reduce early next year to
350 grams (92p under the current tariff) not the 88p mention by the CWU - we have pointed this
out to the CWU, and there is no need to mention it.
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BACKGROUND
POST OFFICE REVIEW
1. On 16 May 1997 the Government announced a review of the options for
implementing the manifesto commitment to grant the Post Office greater commercial
freedom. The announcement also implemented the public commitment in opposition to
suspend the programme of Crown Office conversions pending an open review of the
policy. The first phase of the Review consisted of full and open consultation with
interested parties followed by analysis and identification of the key issues. This led to
discussion with the Prime Minister and Chancellor in February and March this year, and
agreement to the Post Office remaining in the public sector and to the terms of
reference for the second phase of the review. These were announced to Parliament on
6 April by Mrs Beckett [attached - annex BJ.
2. Four working groups are working in parallel to cover the necessary ground to a
tight timetable, feeding in to an interdepartmental review Steering Group, chaired by
the DTI (Martyn Baker) with Treasury and No 10 Policy Unit (Geoffrey Norris) as well as
DTI membership, which will report to Ministers at end-September. All working groups
have senior Post Office representation, as well as members from interested OGDs.
They have heard the views of the unions, POUNC (the Post Office Users National
Council) and the National Federation of Sub-Postmasters. Other interested parties
have submitted further comments in this second phase of the review.
Union involvement in the review
3. Mr McCartney saw the unions (CWU, CMA) on 6 April to give notice of the
announcement, and let them know of the public sector structural options that were to
be considered. He undertook that the unions would be consulted during the work on
the review. Since then the CWU, which has taken the lead on the unions’ behalf, has
been involved in the review process. They have put in a paper adding to earlier
contributions on how an independent publicly owned company/corporation might work.
They have made presentations to the Review Working Group on Post Office Counters
and to the combined Structures and Regulatory Working Groups (Geoffrey Norris from
No 10 Policy Unit attending).
4. Both the CWU and the CMA met the consultants (KPMG and Dresdner
Kleinwort Benson) on 2 July to discuss their emerging conclusions on how the four
public sector options might work. Derek Hodgson met Mrs Beckett and lan McCartney
during July.
5. The unions are particularly concemed about the possible future structure of the
Post Office (especially that there should be no sale of shares) and the future of the
counters network.
6. On structures, their discussion with the review team show that the CWU:
agree with the need for greater commercial freedom, including no “second
guessing” by Ministers/civil servants
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e advocate an 100% Government owned Independent Publicly Owned
Company (IPOC) with a Parliamentary charter (an approach endorsed by
TISC and others).
e want a proper dividend policy, not an investment-stifling external financing
limit (EFL), and for the Post Office to be able to borrow outside PSBR
constraints;
e want freedom for the Post Office to negotiate pay deals with no public sector
pay constraints applying.
© oppose the trust and minority share sale options - expressing surprise that the
review is examining the options when there is a good deal of consensus
around a fairly detailed IPOC model.
© oppose liberalisation of the Post Office monopoly.
7. In relation to Post Office Counters, the CWU
e support the maintenance of Crown Offices (and opposed further conversions,
but have accepted Mr McCartney's advice to discuss with Post Office
management a possible acceptable mix of Crown and franchised Post
Offices);
_ © want an increasing role for the counters’ network - looking for new products
and services; and
e strongly support increased automation.
HORIZON PROJECT
Union concern
8. Derek Hodgson has had frank discussions with Margaret Beckett and lan
McCartney about the project. He is aware of the concerns of the DSS who are
suffering financial losses as a result of delays to the project and who would now prefer
to migrate benefit payments as quickly as possible to automated credit transfer (ACT)
directly into bank accounts. This would have substantial adverse implications for Post
Office Counters’ income (more than one third of which comes from the Benefits
Agency) and therefore for the viability of the network of post offices. Hence Mr
Hodgson’s concern about the project's future.
History
9. The Post Office automation project is a flagship PFI project being jointly led by
Post Office Counters Ltd and DSS/Benefits Agency (BA). It involves the automation of
benefits payments at post offices. The project which is worth in excess of £1 billion has
two principal aims:
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