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In Strictest Confidence
POB(98)Sth
PO98/50 to 63 sepy Ne
POST OFFICE BOARD
Minutes of the meeting held on 12 May 1998
at 148 Old Street, London
Present
Dr Neville Bain Chairman
Mr Peter Allen
Mr Richard Close Managing Director Finance
Mr Jerry Cope Managing Director Strategy & Personnel
Dr David Grieves
Sir Christopher Harding
Mr John Roberts Chief Executive
Mr Richard Adams Secretary
Mrs Nicky Jayson Notes
Mr Richard Dykes, Managing Director Royal Mail
Mr Stuart Sweetman, Managing Director Post Office Counters Limited
Mr Kevin Williams, Managing Director Parcelforce Worldwide
MINUTES OF PO98/50
PREVIOUS MEETING
The Board approved the minutes of its meeting of
14 April 1998.
MATTERS ARISING PO98/51
POB(98)32
The Board noted the matters arising from the
meeting of 14 April 1998.
CHAIRMAN’S PO98/52
BUSINESS
(a) The Chairman had spent time building internal and
external relationships.
(b) He provided positive feedback about the Senior
Managers’ Conference which he had addressed.
(c) The Minister had agreed to help speed up the process
of decision making and ensure no breakdown of
communications between The Post Office, DTI, his
private office and the Treasury.
(d) The Minister had accepted the proposed new Board
structure but was keen in the next twelve months to
appoint new Non-Executive Members with three year
contracts with a right of renewal subject to both sides
so agreeing. The search for new Non-Executive
Members would continue with shorter timescales.
Despite the Chairman's wish for continuity, the Minister
was clear that he wanted a fresh contribution from new
32
In Strictest Confidence
GRO
(e)
(f)
(9)
(h)
ACTIONS
The Chairman
Sir Christopher Harding
& Peter Allen
The Chairman
The Chairman
CHIEF EXECUTIVES
REPORT
JOHN ROBERTS
(POB(98)33)
(i)
(ii)
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Members, although this was no reflection on the
contribution of the present Members.
In his role as Chairman of Legal and General Sir
Christopher Harding had a possible conflict of interest
with POCL’s planned new financial services Products.
In view of this he would consider whether he could
remain a Member beyond June 1998
Other members felt that the Minister's handling of the
issue could cause damage to the reputation of
individuals and the Board as a whole. Peter Allen
would consider whether he wished to remain a Member
of the Board beyond June.
A meeting with Alan Johnson MP had provided insights
into the union and the Government review process.
The Remuneration Committee was due to meet lan
McCartney in June to discuss contractual issues
telated to Executive Members. The Chairman would
consider attending.
To convey to the Minister the Board's disappointment
over the decision concerning the Non-Executives
To let the Chairman have their considered view on
their own position in the light of the Minister's decision
To circulate the specification for Non-Executive
Directors
To consider attending the Remuneration Committee's
meeting with lan McCartney in June
PO98/53
Financial Performance. The outturn results reflected
a very strong performance with all financial targets
being exceeded. The results would be yet another
record with no increases in inland letter prices
Government Review. All groups were now operating,
albeit slowly, and consultants were being appointed
The DTI were planning to make an interim report at
the end of May with the main report and '
recommendations in July and Ministerial decisions in
the Autumn.
i
In Strictest Confidence
(iii)
(a)
(b)
(c)
(d)
(f)
(9)
(h)
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Horizon
At its April meeting, the Board had concluded
that its interests would not be served by taking
immediate action against ICL for contractual failures.
The Treasury study headed by Adrian Montague of the
PFI Unit was now under way.
Project slippage now meant that a key milestone date
of 5 October could not be achieved with consequences
for the whole project timetable.
John Roberts and Stuart Sweetman had met Frank
Field, the Social Services Minister now responsible for
the project for DSS, on 5 May. He was thought to
consider Horizon an obstacle to his long term strategy
for delivering social security benefits. Efforts had been
made to persuade him it was, instead, a route towards
his strategy.
Frank Field invited The Post Office to join the DSS in
issuing a Cure Notice to ICL to take necessary
corrective action to meet the terms of the contract
within 13 weeks. He also asked that the matter be put
before The Post Office Board
Legal advice from The Post Office Solicitor and from
Slaughter and May was that The Post Office was
already protected legally and that it would not be in its
interest to issue a Cure Notice at this stage; if
necessary, this would best be done following the
Treasury Review.
Although the contract was signed jointly by DSS and
POCL, the former could act unilaterally, albeit this
would create presentational difficulties for them in
explaining why they were acting unilaterally.
lan McCartney had met Frank Field on 11 May and
had withdrawn DTI objections to issuing the Cure
Notice. It was also understood that Treasury officials
had taken a similar position.
Taking fully into account:
- the latest project slippage
- the likely consequences for ICL
- the absence, at this stage, of an alternative POCL
strategy
34
In Strictest Confidence
ACTIONS
John Roberts
Stuart Sweetman
The Secretary
(iv)
(vy)
(vi)
(vii)
(viii)
In Strictest Confidence
- the unequivocal legal advice to defer any action until
the Treasury Review was complete
The Board unanimously confirmed its view that The
Post Office should not join with DSS in issuing a 13
week Cure Notice against ICL.
To convey the Board's position to DTI, explaining the
reasons
To circulate the advice on Horizon from Slaughter and
May to Members
To produce a preliminary note on the Board's
discussion on Horizon for the Chairman and John
Roberts
Project Gloria. The Minister had reacted favourably to
the project and there were signs that it would not be
opposed. A non-binding offer of $34.5m had been put
in for Gloria. A July conclusion was expected.
Senior Managers’ Conference. This year the number of
managers involved had doubled to about 600
managers across The Post Office with four separate
sessions. The theme was preparing for competition
and its implications. The format this year included a
case study with interactive audience participation.
Industrial Relations. Derek Hodgson had been elected
as General Secretary of the CWU and his deputy
would be elected in August. Meetings with executives
had commenced with deals completed on delivery and
the conduct code and a productivity deal was due in
the summer. The Post Office had committed to being
primarily a full time employer, to a 5 day week for the
majority of employees and had given assurances on
delivery weights. The agreements signed or in
prospect went a fair way to meeting the objectives of
the Employee Agenda. It remained to be seen whether
they would be fully implemented at local level.
Monopoly. TNT & Racer had been breaking the
monopoly. The DTI had been alerted and legal action
would be threatened before the next Board meeting.
LEK. A report would be considered at the July Board
meeting covering tariff implications, transfer pricing,
collection and delivery, surplus staff, etc. Cross
business teams had approached this in a constructive
5
In Strictest Confidence
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(viii)
ACTION
Stuart Sweetman
FINANCIAL OVERVIEW
RICHARD CLOSE
(iii
(iv)
(vi)
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way. 250 general administrative staff had already been
transferred from Parcelforce to Royal Mail.
Lottery. Dick Wheelhouse had been appointed Project
Director with an immediate priority to determine
appropriate timescales.
To determine timescales for the lottery project before
the June Board meeting
The Chairman and the Non-Executive Directors
formally congratulated John Roberts and his team on
the outstanding results achieved in 1997-98
PO98/54
Provisional profit for 1997-98 now stood at:
Royal Mail £547m
POCL £33m
Parcelforce (£14m)
SSL £5m
The group results for 1997/98 showed a substantial
record profit and capital expenditure was also the
highest ever reflecting greater rigour in control,
particularly on accommodation expenditure. The EFL
expected outturn was £338m with a £22-25m surplus
to rollover.
The Parcelforce full year target of a £15m loss
had been reduced to £14m. The 1998-99 Parcelforce
budgets based on month eight contained balanced
risks and opportunities
Counters’ had come in at the full year profit forecast of
£33m. The uncertainties surrounding Horizon would
need very careful management in 1998-99.
SSL produced a profit of £5m against a budget of £9m.
The budget had assumed a major upturn from the half
year with increasing telebusiness income. The upturn
occurred, but at a much lower level than expected.
Tribute was paid to the finance teams as books were
closed exactly to forecast within 10 days.
It was agreed that Richard Close would report to DTI
the forecast outturns at (i) above and would seek
agreement to a Parcelforce target for 1998-99 of £(9m)
against a budget of £(12m), with an assumption that
36
In Strictest Confidence
THE POST OFFICE
REVIEW
JOHN ROBERTS
(POB(98)34)
(ii)
(ili)
(iv)
(v)
(vi)
(vii)
In Strictest Confidence
the target would include some benefit from the
continued pension holiday.
PO98/55
a formal paper would be submitted to DTI at the end of
May as the Board's response to the Government
Review
the 3 key issues for the Board were:
(a) whether to continue to support the IPOC model
(b) its position on a minority share sale of up to
49%,
(c) whether the conclusions of the Review would
apply to the business as a whole
an IPOC would require primary legislation so there
would need to be interim changes before it could be
enacted
the freedoms must be delivered and be based on what
the business needs
if the deadline for the Autumn 1999 legislative
programme were missed the following year would be
uncomfortably close to the next likely date of the
General Election
given the sensitivity of the 49% share sale option, the
Board would not wish to adopt a public stance in its
favour at this stage but Members felt that this variant
on the IPOC would have a number of benefits:
(a) ‘city’ disciplines would be preferable to Government
controls
(b) interference was likely to continue without the
pressure
(c) the Treasury were prepared to agree significant
financial freedoms if linked to a share sale
Schroders would continue as lead financial advisers, at
least until the end of the Review
It was agreed that
- the preferred option for obtaining commercial freedom
would be through a 49% IPOC.
- this line would be reflected in the formal response to
Government with no other communications on the
Board's position at this stage
37
In Strictest Confidence
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PRINCESS ROYAL
DISTRIBUTION CENTRE
(PRDC)
RICHARD DYKES
(POB(98)35) 0)
(ii)
(iii
(iv)
CORPORATE
GOVERNANCE
THE SECRETARY
(POB(98)36x)
ESTABLISHMENT OF
A COMPANY IN
GREECE
THE SECRETARY
(POB(98)37x}
ANNUAL REPORT &
ACCOUNTS
APPROVAL PROCEDURE
RICHARD CLOSE
(POB(98)38x)
In Strictest Confidence
- commercial freedoms should apply across the whole
Post Office as one entity
PO98/56
30% of mail passes through PRDC. It has been
subject to disruption by a relatively small number of
trouble makers
action to tackle the problem carried a risk of escalation
throughout London which would be difficult for the
Union leadership. There was, therefore, a good
prospect of containing the situation within PRDC. The
union leaders should be led towards a fair and
equitable solution.
lessons learnt from PRDC had been well documented
and were relevant to Mount Pleasant and the
international hub
in pursuing the actions set out in the paper, fairness
and consistency would need to be demonstrable. Firm
action would demonstrate that employees could not
take unofficial industrial action with impunity. The
existing EVR provisions and package would be used as
necessary.
The Board agreed the proposed approach in the paper
and noted the risks in the recommended process for
tackling strike action
PO98/57
Noted
PO98/58
Agreed
PO98/59
Noted. Details would be passed to Government two
days before the announcement
38
In Strictest Confidence
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I
L
I POWER TO PO98/60
f AUTHENTICATE THE
I POST OFFICE SEAL
THE SECRETARY
t (POB(98)39x) Agreed
APPOINTMENT OF PO98/61
DIRECTORS TO
SUBSIDIARIES
THE SECRETARY
(POB(98)40x) Agreed
ANY OTHER BUSINESS P098/62
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The Chairman would be taking over as Chairman of
SHL PLC, but resigning from its Audit and
Remuneration committees, so there would be no
additional demands on his time.
DATE OF NEXT
MEETING
PO98/63
9 June at 148 Old Street
39
In Strictest Confidence