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STRICTLY CONFIDENTIAL
FOR USE OF NATIONAL EXECUTIVE COUNCIL OFFICERS ONLY
NATIONAL FEDERATION OF SUB-POSTMASTERS
REPORT OF A JOINT MEETING
OF THE
NEGOTIATING COMMITTEE
AND
POST OFFICE COUNTERS LIMITED
held on
3rd JUNE 1997
_ at
THE GRAFTON HOTEL, LONDON
REPORT OF A JOINT MEETING OF
THE NEGOTIATING COMMITTEE
and
POST OFFICE COUNTERS LIMITED
held on 3rd JUNE 1997
at the GRAFTON HOTEL, LONDON
Present: Nesp: Mr. A. Burrows (Chairman of Negotiating Committee)
Mr. J. Burford
Mr. A. Butlin
Mrs. J. Kendall
Mr. J. Peberdy
Mr. C, Baker (General Secretary)
Mr. K. Davis (Assistant General Secretary)
PocL: Mr. J. Evans (Network Director)
Mr. M. Granville (Head of Agency Pay & Contracts)
MR. BURROWS welcomed Mr. Evans and Mr. Granville to the meeting.
THE GENERAL SECRETARY expiained the main purpose of the invitation
was to understand what the Counters Business was saying in regard to the
Government at the moment and their proposals. There were three main
areas on which information was sought:-
1. Finance and training, quality, security
2. Automation - roll out delays, payment for training, modifications, satellite
offices, any change of plans
3. Network plans - private business, image, conversions, rural network and
the size and shape of the network.
MR. EVANS: The Minister had written to the Chairman of the Post Office on
12th May. There had been some fo-ing and fro-ing between Officials before
then. The basic points were: new Government, manifesto to give Post Office
greater freedom, wants urgent high priority review and how that can be
achieved. The Minister wrote of concerns about conversions and asked for
them to be suspended. The Chairman agreed. Did flag up importance of
conversion programme and said we would want to explain to Government just
how significant it was and implications of stopping it. The Government said
that there would be some conversions which were unstoppable. We were
having to define what an irreversible commitment meant. Whereas Regions
had on 12th May probably 40 or 50 conversion cases in various stages of
maturity, that number now reduced to 6 cases which the DTI had agreed will
continue to proceed. All others to be on hold, effectively meaning it will be
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e a)
very difficult to wind them back up again quickly if temporary suspension is I
reviewed. I think it has meant conversion programme has stopped apart from I
those 6.
In our operational plan and budget for the year we are now in, we are a sixth
of the way through, Regions forecasting about 50/60 conversions. The I
biggest cost saving measure which underpinned the budget. Expected to
generate about £7 million in licence fees and to generate about £3 million
from the operational savings you make from replacing a Crown Office with a
Franchise Office. Looking at £10 million benefit with a flow through benefit
next year. That was £10 million closed off, do not know how long review will
take. Hard to say if conversions can be switched back or when that would be.
We have had to assume that we will not be doing any conversions other than
6 in this financial year. It is an assumption and may be wrong. It means we
will be £10 million light. Abated to a degree by £4 to £6 million because we
will not have to pay redundancy costs to people working in those offices. Net
effect is £10 million less £4-6 million. C
Other costs now realising to incur, Regions will have to start spending money
on those 50/60 Branch Offices they would have expected to have off the
books, could be talking about significant sums in either replacing Branch
Office or we will have to do Health and Safety improvements. Obligation to
customers if Branch Office tatty and run down, it will have to be refurbished.
Anticipate £2-3 million cost in this financial year. If no more conversions this
year it will take £6-8 million off the bottom line in a year when expecting to
make a profit of £30 million.
John Roberts and Chairman seeing the Minister tomorrow (4 June 1997) and
will be making thase points strongly.
MR. EVANS: Let me talk about the review, I think it is fair to say that from
the exchange of letters there has been and reading what the DTI said in their
press release, we are no wiser at all about how this review will be conducted.
Apart from knowing you and other unions being invited to talk to the Minister,
there has been no indication on timescales, external advisors,
THE GENERAL SECRETARY: As far as I can gauge it would be phased and
the first phase was a scoping of the problem. There will be further stages
and opportunities as he begins a problem solving process. Greater freedom -
going to look at its widest context. Also wants to make sure competition
aspects are well covered. Does the Minister have responsibility for
competition?
MR. EVANS: Not sure, he has responsibility for minimum wage.
THE GENERAL SECRETARY: The Minister wants to understand the
problem by the summer recess. Then wants to put a paper to his colleagues
and then look at the bits and pieces in detail. If his colleagues allow him to.
There is some doubt whether he will get a legislation slot. He has regulators
2 NC/POCL [NETWORK] - 3 JUNE 1997
in mind. The position he is coming from is Post Office wholly in the public
sector and together.
MR. EVANS: One of the impressions we have, which this backs up, is this is
almost a one-man review, which is interesting. John Roberts and the
Chairman putting a presentation to the Minister of what commercial freedom
might mean to the Post Office, particularly in a Royal Mail context where
opportunities greater but also in Counters because we have to go to DTI
whenever we want an additional product which is an inhibition. The
Chairman and John Roberts will also go through logic of conversions.
MR. EVANS: Financial impact - potentially looking at sizeable hole in our
finance and if conversions continue to be halted it would drive a coach and
horses through our Business Plan. 5 Year Plan which assumed conversions
at the current rate. If no conversions by the end of 5 year period the
business would not be making a profit. Conversions are underpinning the
financial headroom to invest in other parts of the business. If that is cut off it
would undermine the strategic model of the business. We will flag up to the
Minister if we are prevented from daing conversions that it has very serious
repercussions for the viability of Post Office Counters as currently targeted.
That is not saying we will immediately want to jump a relief on targets. We
want to run a business that is sustainable. If we cannot continue doing
conversions we would be forced to look at addressing that cost base issue in
a different way. We may well have to get into size of network and ways in
which we can address our cost base.
MR. EVANS: We will say the target is unachievable. We are back to the way
the strategic model works. If we cannot generate savings to reinvest in other
parts the whole edifice collapses. We cannot give competitive price to
clients. The big impact potentially that you would find most untenable is we
would have to bear down on the size of the network. When talking about
sums of that magnitude you are into drastic measures to recover.
THE GENERAL SECRETARY: Last time you said cutting the network does
not cut costs.
MR. EVANS: This would have to be measures on a sizeable scale - it is
surgery.
THE GENERAL SECRETARY: Reducing the size of the network will reduce
its capability to sustain itself.
MR. EVANS: Indeed, which is why over the years we have tried not to
reduce the size of the network. To respond to the scenario now presented to
us we would have to respond in a like way. Cutting the network would be one
of many parts which we would have to pursue.
MR. BURROWS: Have you any feel for the size of the reduction?
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MR. EVANS: No. I
MR. BURROWS: You use the word “significant”.
MR. EVANS: If you want to recover £30 million by closing post offices you
are talking about thousands. The rural network do not wash their face to the
tune of around £30 million.
THE GENERAL SECRETARY: Will John Roberts and Michael Heron put that
sort of point and detail to the Minister?
MR. EVANS: I think so.
THE GENERAL SECRETARY: Would they not be arguing for a reduction in
targets? The ensuing result of your action could lead to a reduction in the
size of the network.
MR. EVANS: We believe it is important for Post Office Counters to retain the
ability to run its network in the most cost-efficient way. . If we are hide bound
by being forced to run offices in a way that freezes in that delivery
mechanism that is an uncommercial thing to force us to do.
THE GENERAL SECRETARY: How realistic do you. think you will be with
that threatening approach? How realistic with Alan Johnson sitting there?
Do you realistically expect to re-generate the conversion programme?
MR. EVANS: I do not know the answer. We want to understand from
Government two things. What are their actual concerns about the conversion
programme - in the Minister's letter to the Post Office they expressed
concern. Only concerns we know of are CWU which is about loss of
members, although they say customer service, franchise. John Roberts and
the Chairman will say what are the concerns to the Minister. The Minister will
be asked - If you still want to stop us from conversions, what is your approach ¢
to the whole in the business plan?
THE GENERAL SECRETARY: Who sets the Counters contribution to the
Government target?
MR. EVANS: The EFL for Counters is part of the Group target, so
Government does not actually say how much EFL Counters should produce.
Counters profit is set by Government at 2.9% on turnover.
THE GENERAL SECRETARY: We have been concerned about the current
financing of the Counters Business, training, security budgets. What is in
store for us on training and particularly security?
MR. EVANS: Cannot answer in detail. We have already had to go back to
Regions this year to make budget cuts just to meet the profit target. 1997/98
and the next year, and year after, we are facing a very large peak of costs
4 NC/POCL {NETWORK - 3 JUNE 1997
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help alongside the implementation and the training of has pound signs
attached. We will paying Pathway for the use of the system increasingly
before we start getting the real benefits from new business on the platform. If
you look at the business plan of Horizon it costs us a lot of money and
because we are now getting nearer to implementation it has meant we have
had to put aside more money for Horizon implementation this year and have
had to say to Regions and other parts of the business we have to save more
money. We are in the middle of an exercise to see what we can switch off to
save money and resource.
around Horizon. We will be picking up costs because putting in people to I
THE GENERAL SECRETARY: Regions say we cannot afford to meet
security bills and in the same way the Government are behaving now by
stopping conversions - you are behaving the same way with Sub-
Postmasters. You are asking a lot of people but not being able to meet your
share of it.
MR. EVANS: Well-1 cannot imagine Retail Network Managers saying here is
opportunity, can we persuade Sub-Postmasters to do up premises, but from
the pot of money we cannot afford to help this Sub-Postmaster to move his
safe or alter screen in the quantities any of us would want it to be.
MR. BURROWS: Is it being re-deployed because RNMs appear to be using
restrictions as an excuse not even to offer. It is an easy opt out for the
business.
MR. EVANS: I do not think that is being deliberately to save money I now
have all Regions reporting to me and am convinced from all of them they are
sufficiently under the cosh financially, some more than others. The headline
of the financial position of the business irrespective of conversions is
because of peak costs of Horizon implementation.
MR. BURROWS: There is a situation of some Sub-Postmasters naturally
requiring refurbishing. There are, however, others who are verbally
blackmailed into improving and refurbishing and they do, knowing the
business would pick up the security costs, but are then let down.
MR. EVANS: If you know of individual cases where undue pressure is being
put to bear it should be taken up and pursued through the Region. It is not
our line at all to lean on Sub-Postmasters. We are all seeing huge benefit to i
synchronise refurbishments with Horizon but the sums of money to transform
the network are not there. But it does not mean we should be trying to screw
Sub-Postmasters.
MR. BURROWS: Some Retail Network Managers actively encourage Sub-
Postmasters to do refurbishments and perhaps it is not actually necessary.
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THE GENERAL SECRETARY: The other end of the spectrum is to be
considerate by acknowledging that you cannot stand a share of the costs,
when asking Retail Network Managers to be sensible.
MR. EVANS: In the end Sub-Postmasters can say no.
MR. PEBERDY: These things were encouraged last year and are percolating
through. Now arrived in this financial year with the refurbishment and the
Regions saying you have to pay. There is a problem because the contract
tefers to certain levels of payment for re-siting security equipment. Sub-
Postmasters perceive Romec to be expensive. There have been 100
refurbishments in the Midlands alone.
THE GENERAL SECRETARY: At Nutfield Priory training was identified as a
top objective. Has that become a victim? Training for incoming Sub-
Postmasters and on-going training.
MR. EVANS: That is part of the bedrock of the business. There are ways in
which we can improve, I have not seen any suggestions that training should
be switched off.
THE GENERAL SECRETARY: What about the quality drive, the EFQM; is
Business Excellence going to continue or wound down?
MR..EVANS: It is a cost but quality cannot be'seen as an operational extra to
switch on and off if you can afford it. To continue running the business in a
total quality way is probably more important than before. Whether that
means we will do the same number of unit excellence reviews or Regional
reviews is another matter. I think there are some arguments for easing down
on that. Do not read into that that we are giving up on quality. That is not
true. Stuart Sweetman is firmly committed to business excellence approach.
MR. EVANS: You raised issue of short term consequence of conversions. ¢
We are having to assess the repercussions on us and we are not completely
through that. One thing which it will force us to do is to reconsider all of the
cost elements we are expecting to incur in the coming year, including pay.
Therefore, the practical implication is that whereas you would be expecting
shortly to get into firm negotiations on pay, we are not in a position to do that.
To put it bluntly, what we were previously expecting to be able to afford we
are having to reconsider. Our objective and whole strategy has been to pay
Sub-Postmasters at an appropriate rate and is still our intention but we
cannot just blindly say we can carry on doing that whilst all this noise is going
on.
THE GENERAL SECRETARY: You will be re-visiting every facet for every
part of the business?
MR. EVANS: The assumptions of what we can afford this year have been
undermined.
6 NC/POCL [NETWORK] - 3 JUNE 1997
MR. BURROWS: Is that your philosophy?
MR. EVANS: You are aware of this. We are going to have to re-think where
the Business can spend money in the coming year and that will include how
much we can afford for pay rises. No offer has been made to any group, and
neither will there be until we know where we are. The only way is down on
what we were expecting to pay.
MR. EVANS: I suggest you tell the Minister you have had early indications
from the Post Office that they regard suspensions of conversions this year
has been so great it has had effect to curtail activities this year.
MRS. KENDALL: Because of this tremendous problem of non-conversions
was it wise to base profits of business on conversions and to meet targets
based on selling off the family silver?
MR. EVANS: I am all ears for suggestions. The business makes on average
3% return on its income and Government target is 2.9%. So to replace £6
million of costs, to replace with additional business you need £200 million
worth of income to generate £6 million profit at 3% - equivalent of 4 new DNS
contracts.
THE GENERAL SECRETARY: Leaving finance, let us took at automation
and start off by giving us the cost of automation to Counters Business which
we believe is £24 million.
MR. EVANS: It is a figure which we do not have to spend. in that since it is
ting-fenced. We want to make sure Horizon is implemented properly and that
was the last estimate.
MR. BURROWS: Do you see the financial situation delaying the automation
project?
MR. EVANS: No, of being able to resource it properly, no. It is still our top
priority to see it through and will want to give it our best shot. I am not saying
we cannot now afford to do it. That would be one of the last things.
THE GENERAL SECRETARY: Are there any further delays in the roll out?
MR. EVANS: Depends on the last information.
THE GENERAL SECRETARY: I was with Paul Rich and John Bennett last
Wednesday and they did not report any further delays but there is some
rumour.
MR. EVANS: There is something going on and apologies because I have not
assessed the latest position. Suffice to say there is a potential further delay
knocking around. I cannot say precisely what at this stage.
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THE GENERAL SECRETARY: There are disturbing rumours being received
about non-cash account offices being approached and the Sub-Postmaster
being scared witless when it is put to them prematurely to decide whether to
become cash account offices and this is proving to be the last straw.
MR. EVANS: You reckon this is encouraging people to go.
THE GENERAL SECRETARY: Yes, but may be not intentionally.
MR. EVANS: Let me have a note.
MR. BURROWS: I understood laptops were to be provided for satellite
offices but a Sub-Postmaster has been told make up his mind because no
equipment will be installed.
MR. GRANVILLE: No pressure should be put on non-cash account offices to
become cash account offices.
THE GENERAL SECRETARY: If you need to be a cash account office for
automation, then why put them through cash accounts pre-automation?
MR. GRANVILLE: The issue is preparing ourselves. The aim is to ensure
when offices are. automated that suitable kit goes into suitable offices. In the
absence of a clear resolutions at the moment no pressure should be put on
people. If there are individual cases please feed them through.
MR. BURROWS: May be over active Retail Network Managers but there are
a number of cases of RNMs going to smaller offices and saying “make up
your mind”. Are we going to have satellite offices under automation or will
they all go? I understood we would have a lap top which would go back to
the host office and then transfer onto the main frame.
MR. GRANVILLE: I do not think the technological solutions have been
teached yet. What you describe sounds like over activity. We will follow it
up.
MR. DAVIS: I have heard about individual cases but I still feel uncomfortable
because if we bring a case that Sub-Postmaster has already been scared and
it may be too late. That is not the way to approach it. The cash account is a
horrendous document to complete.
THE GENERAL SECRETARY: This is only because they need to be a cash
account office for automation. Why not wait?
MR. DAVIS: Please withdraw the ACC because it puts the wrong message
out.
8 NC/POCL [NETWORK] - 3 JUNE 1997
MR. GRANVILLE: The issue is not looking to frighten. Where there is a
sensible opportunity to become a cash account office it seems sensible to
take it. Not looking to frighten. Issue is automation itself reduces the fear of
doing the cash accounts.
MR. EVANS: If there is activity in the Regions which is causing force majeure
closures we want to know. It is still Post Office Board policy to retain the rural
network and we should make every attempt to do that.
MR. GRANVILLE: There needs to be clarity of the message in what we are
seeking to do. We are not about frightening or creating unnecessary work.
THE GENERAL SECRETARY: There are other issues of automation. No
Sub-Postmaster has been asked to pay any money for screen modifications
or alterations to their office at all. Is this applying across the Board? There is
also the issue of training. When are we going to address that?
MR. GRANVILLE: We need to arrange an early meeting to discuss the issue
of training and multiple transactions and some pragmatic issues on which
knowledge is becoming clearer as activity in the North East develops.
THE GENERAL SECRETARY: I now suggest that we discuss the general
size and shape of the network. If the Post Office has been stopped from
doing conversions would they start to create another type of post. office?
Activity, particularly in Northern Ireland where their activity seems to have
gone mad. We are seeing more re-siting and re-locating in Northern Ireland
than anywhere else. I do not understand why and neither do Sub-
Postmasters in Northern Ireland. I think we would like to understand the
global network message, the direction of the 5 year plan.
MR. EVANS: I am happy to give you some thoughts. This would lend itself to
a proper thought through session when I could lay out a lot of the plans we
have.
It was AGREED to convene a Network Forum meeting (Nofe: subsequently
arranged for 7th July 1997).
MRS. KENDALL: When you talk about reigning back and conformance, will
conformance be stopped?
MR. EVANS: Conformance is wrong expression. Wwe are trying to raise
standards in the network - network transformation. The reason for activity in
Northern freland is because for last 10 years they have been very inactive
and because of political change able to now change. We have decided it
should not impede the Horizon implementation, we should not try to transform
a network or get a Sub-Postmaster to refurbish if that in any way jeopardised
Horizon. The top objective of this year is we want to continue transforming
the network.
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THE GENERAL SECRETARY: The consultation process with the Federation
seems to have ceased. Distance standards also seem to have fallen victim to
time. We would like to raise those two issues in a constructive way when we
talk about network with you.
MR. EVANS: I would much prefer if the Federation and Branch officials were
alongside with what we were trying to do with network transformation. If there
are opportunities to achieve that then by all means.
THE GENERAL SECRETARY: What has the DTI rejected when Post Office
Counters has approached them for new work?
MR. EVANS: The DTI turned down entertainment tickets, car insurance.
Because it is a finite market would like to make up our own mind, not go to
DTI.
MR. BURFORD: What timescale would it require to get back on track?
MR. EVANS: If tomorrow the Minister says suspension is off, there is
probably enough time to recover many of those stood down. That is not likely
to happen. If it goes on for 2 to 4 months we will have stood down all those
potential partners so much they would have gone away. EVR options remain
changed. Effectively starting from scratch again on trying to find conversion
solutions in those outlets.
MR. PEBERDY: Have‘some cases of conversions been put to the Minister
and he has said you cannot go ahead? I know a Sub-Postmaster who has
costs involved, paid half a licence fee, legal fees etc. Will there be
compensation for those people?
MR. EVANS: Those potential changes who think they have costs incurred for
which they want compensation should write to us.
THE GENERAL SECRETARY: We are grateful for the time and sharing of
information. But we only seem to share information when we have trouble. It
would have been better if we could share information all the time.
MR. GRANVILLE: I cannot update the position as it stands. I will check with
Paul Rich, issue is when best to make the pitch. I will find out and feed back
to you. It is about getting time right for maximum advantage. A little later
than originally perceived but in the light of all the circumstances it was better
to buy a week or two of time. Will check out and get back to you.
MR. BURROWS then thanked Mr. Evans and Mr. Granville for their
ettandancaland_narticinatian....
GRO
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