BEIS0000162 - Briefing paper re: Post Office Review

Evidence on official site

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BRIEFING FOR PRESS OFFICE: ANNOUNCEMENT OF SECOND
STAGE OF POST OFFICE REVIEW

Timescale/Outcomes

WHY IS IT TAKING SO LONG?

© Consultations with the main interested parties have been completed.
Conscious of the need to minimise uncertainty for the Post Office but

must also ensure that we are not rushed to reach conclusions on these
vitally important issues.

ARE THE GOVERNMENT GOING TO PUBLISH THE FINDINGS
OF THE CONSULTATION EXERCISE?

e No. Views were given to us in confidence. But the points made were
summed up by Mr McCartney in his evidence to TISC.

WHAT IS THE TIMETABLE FOR THE NEXT STAGE OF THE
REVIEW?

© Ministers intend to announce the outcome of the Review in the
Autumn.

ARE YOU CONSIDERING NEW LEGISLATION?

e It is too early to say. Whether we need to propose new legislation
depends on the outcome of the Review.

WILL THIS REVIEW TAKE ACCOUNT OF THE UTILITIES
REVIEW?

¢ Yes. The Review will take into account the wider review of utility
regulation.

WHAT IS IN ALL THIS FOR THE CONSUMER?

e Customer needs will be an essential issue for the Review. The
Government is committed to the maintenance of a universal postal
service at a uniform tariff and a nationwide network of post offices; and
to ensuring an effective voice for consumers within any new regulatory
framework.

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Privatisati
IS THE GOVERNMENT CONSIDERING PRIVATISATION?

No. 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 nationwide network of post
offices.

IS THE GOVERNMENT’S REAL INTENTION A MINORITY
SHARE SALE AND IS THAT NOT THE THIN END OF THE
WEDGE FOR FULL PRIVATISATION?

No. The Government has an open mind about a wide range of public
sector options. A minority share sale is one of those options - which
also include joint ventures, increased scope to raise external finance,
direct investment in private sector companies by the Post Office, the
creation of a public sector trust and an independent publicly owned
corporation.

ARE THE PROPOSALS FOR LONDON UNDERGROUND A
PRECEDENT?

The challenges for the Post Office are quite different to those facing the
London Underground so it is likely that a different approach will be
more appropriate. The Government’s concern is not with the doctrine
of public or private sector ownership but with the needs of the Post
Office for greater commercial freedom to meet the challenges of the
future.

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Post office network

IS THE GOVERNMENT THINKING OF LIFTING THE BAN ON
THE CONVERSION OF CROWN POST OFFICES ?

The Post Office were asked last May to suspend their Crown post office
conversion programme in view of widespread public concern about the
policy. The issue will be considered in the context of the Review.

THE NUMBER OF POST OFFICES IN LONG TERM DECLINE.
WHAT DO GOVERNMENT INTEND TO DO ABOUT IT AND
WHAT NUMBER DO THEY SEE AS A MINIMUM TO PROVIDE A.
NATIONWIDE 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 nationwide
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; and as a matter of
priority the Review will seek to identify ways in which the Government
can help the Post Office to sustain a nationwide network, such as the
scope for allowing greater freedom for post offices to enter into new
product areas.

Commercial Freedom
WHAT DOES GREATER COMMERCIAL FREEDOM MEAN?

e It means the freedom for the Post Office to develop its full potential to
provide wider and better services to customers and to meet the
challenges and opportunities presented by the marketplace where its
international competitors are gaining ground.
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WHAT OTHER OPTIONS FOR PARTNERSHIP WITH THE
PRIVATE SECTOR ARE BEING CONSIDERED AS WELL AS
JOINT VENTURES?

¢ Open mind about options. The Government’s concern is with the needs
of the Post Office for greater commercial freedom to meet the
challenges of the future.

¢ Other options for partnership with the private sector include the
possibility of increased scope to raise external finance, direct
investment in private sector companies by the Post Office, the creation
of a public sector trust, an independent publicly owned corporation or a
minority share sale. Also looking at new products for Post Office
Counters.

DOES THE GOVERNMENT INTEND TO ESTABLISH JOINT
VENTURE ARRANGEMENTS SIMILAR TO THOSE
ANNOUNCED FOR QUADRANT ACROSS THE POST OFFICE?

¢ Government welcomes the announcement of the joint venture which is
an example of how the public and private sectors can work together to
the benefit of all involved.

e The joint venture arrangements announced on 31 March for Quadrant,
the catering arm of the Post Office, are not a model for future
ownership arrangements for the core businesses.

© The joint venture arrangements for Quadrant do not constitute
privatisation - the Post Office retains a 51% stake.

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DOES THE GOVERNMENT INTEND TO ESTABLISH JOINT
VENTURE ARRANGEMENTS SIMILAR TO THOSE
ANNOUNCED BY THE POST OFFICE FOR THE RELAYONE
SERVICE TO INTERNET USERS

© The Relayone service launched by the Post Office on 2 April in
conjunction with Microsoft is an example of the how the Post Office is
developing its services to meet the challenges of an ever more dynamic
market in partnershp with the private sector.

¢ The service extends the hybrid/electronic mail services which Royal Mail
have been offering for some time to small business and private users who
have a computer and Internet access.

© The service is structured around a commercial and marketing agreement
with Microsoft. It is not a joint venture.

THE COMMERCIAL FREEDOMS ANNOUNCED FOR THE POST
OFFICE TO ENTER INTO DOMESTIC JOINT VENTURES ARE
INADEQUATE?

e The commercial freedoms announced by the Government will enable the
Post Office to pursue new opportunities in the UK in partnership with the
private sector.

e These are interim arrangements. The next stage of the Review will

consider the options and scope for granting greater commercial freedom to
the Post Office

Structure

IS THE COMMITTED TO A UNIFIED 44
OFFICE WITHIN THE PUBLIC SECTOR?

© The Post Office will remain in the public sector. The Review will
consider structural options against this background.

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WHAT IS THE POSITION OF PARCELFORCE

¢ The Trade and Industry Select Committee explicitly sought an
assurance that Parcelforce will be considered in the Review. The
Government is happy to give it.

GOVERNMENT’S VIEW ON TISC’s REAFFIRMATION OF ITS
VIEWS ON THE ESTABLISHMENT OF AN INDEPENDENT
PUBLICLY OWNED CORPORATION?

¢ Interesting that TISC has re-affirmed its previous conclusions. One of
the structural options for consideration in the next stage of the Review.

External Financing Limit/PSBR

WILL THE GOVERNMENT RELAX THE EFL TO ENABLE THE
POST OFFICE TO INVEST IN DEVELOPING NEW BUSINESS
OPPORTUNITIES?

e The Government is committed to living within the expenditure totals set
for this financial year by its predecessors. There is thus no scope for
an immediate relaxation in the EFLs previously set. We will however
be looking closely at options for the future financial regime in the
context of the Review.

WILL THE GOVERNMENT CONVERT THE POST OFFICE TO A
PLC AND FREE IT FROM THE PSBR?

Plc status does not in itself result in classification outside the PSBR.
The Post Office will remain in the public sector and therefore remain
within the PSBR. This does not, however, rule out greater commercial
freedom.

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E liberalisati U ive

DOES THE EU DIRECTIVE HAVE MAJOR IMPLICATIONS FOR
THE POST OFFICE AND IN PARTICULAR THE UNIVERSAL
SERVICE?

e The UK postal market is arguably already one of the most liberal in
Europe.

¢ The Directive was formally adopted on 18 December and must be
implemented within one year by Member States . It requires no major
changes in the UK. The reserved area will need to change from £1 to
approximately 92p but there is no threat to the ability of the Post Office
to provide a universal service.

¢ Await with interest whatever proposals the European Commission bring
forward towards the end of this year for the next stage of postal
liberalisation.

IS THE BRITISH POST OFFICE FALLING BEHIND OTHER
EUROPEAN POST OFFICES?

¢ Our Post Office is one of the most efficient and profitable but its lack
of commercial freedoms is a disadvantage in a dynamic market. A
number of Member States have taken legislative steps to equip their
own post offices to face the challenges of an increasingly competitive
market.

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In ial Relatio

IMPOSSIBLE FOR POST OFFICE TO COMPETE EFFECTIVELY
WITH SUCH POOR INDUSTRIAL RELATIONS?

e Industrial relations are clearly primarily a matter for Post Office
management and the unions. However, if we can help to facilitate an
improvement in the climate we will do so.

¢ The Review will consider whether the existing structures militate
against a greater sense of partnership between management and the
workforce.

e The Review will consider ways to improve employee motivation,
including ways of ensuring a greater sense of ownership of the Post Office
by its employees. For example any minority share sale would include a
substantial proportion of shares going to employees.

Horizon

IS THE GOVERNMENT PLANNING TO CANCEL THE
CONTRACT TO AUTOMATE POST OFFICES AND BENEFIT
PAYMENTS? IF SO, WHAT WILL THIS MEAN FOR THE
FUTURE OF THE NATIONAL NETWORK OF POST OFFICES?

e The Government is committed to providing a secure, convenient and
cost effective means of paying benefits to customers. That is what the
Payment Card was designed to do and what we continue to work
towards.

e The Benefits Agency and Post Office Counters Limited continue to
work closely with the supplier, ICL Pathway. We are also monitoring
progress to ensure that the programme remains on course to deliver the
benefits of a more convenient and secure method of payment.

¢ The Government is committed to maintenance of a nationwide network
of post offices.

Post Office Review Draft 1 April 1998

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