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Report of the Isle of Man Post Office Board Strategic Recommendations

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Report of the Isle of Man Post Office Board Strategic Recommendations GD 2018/0085 REPORT OF THE ISLE OF MAN POST OFFICE BOARD STRATEGIC RECOMMENDATIONS REQUIRING TYNWALD APPROVAL 2 REPORT OF THE ISLE OF MAN POST OFFICE BOARD STRATEGIC RECOMMENDATIONS REQUIRING TYNWALD APPROVAL On Tuesday 17th July 2018 it was resolved that Tynwald – “recognises the unique attributes, capabilities and social value of the Isle of Man Post Office; acknowledges the challenges it faces in its core business sectors; views with concern its future prospects; believes that the Isle of Man Post Office has a significant role to play in the future delivery of enhanced public services in the Isle of Man; supports Isle of Man Post Office Board to ensure the long-term future of Isle of Man Post Office for the benefit of the people of the Isle of Man; requires Isle of Man Post Office to report back to Tynwald with its plans for Isle of Man Post Office by December 2018; and recognises the importance of putting aside any determination to pursue corporatization.” Isle of Man Post Office Board Membership Julie Edge MHK (Chairman) Tanya August-Hanson MLC (Vice Chairman) John Hollis (Member) Christopher Mitchell (Member) Jane O’Rourke (Member) Copies of this report may be obtained from the Isle of Man Post Office, Douglas, Isle of Man, IM2 1AA Tel. +44 1624 698400. All correspondence with regards to this report should be addressed to the Chief Executive Office. 3 TABLE OF CONTENTS 1 FOREWORD – CHAIRMAN ................................................................................................................ 5 2 EXECUTIVE SUMMARY ..................................................................................................................... 7 3 INTRODUCTION ............................................................................................................................... 9 3.1 BACKGROUND ..............................................................................................................................................9 3.2 TYNWALD MOTION .................................................................................................................................... 10 3.3 DOCUMENT SCOPE .................................................................................................................................... 10 3.4 PUBLIC CONSULTATION .............................................................................................................................. 11 3.5 INTRA-GOVERNMENT CONSULTATION ........................................................................................................... 11 3.6 EMPLOYEE AND UNION ENGAGEMENT .......................................................................................................... 12 4 OVERVIEW AND RECOMMENDATIONS ........................................................................................... 13 4.1 REVENUE AND PROFIT GENERATION OVERVIEW .............................................................................................. 13 4.2 PENSIONS OVERVIEW ................................................................................................................................. 14 4.3 LETTER MAIL OVERVIEW ............................................................................................................................. 15 4.4 PARCELS DELIVERY AND THE GIG ECONOMY OVERVIEW ................................................................................... 16 4.5 RETAIL NETWORK OVERVIEW ...................................................................................................................... 16 5 APPENDIX A: REVENUE AND PROFIT GENERATION SUPPORTING INFORMATION ............................. 17 6 APPENDIX B: PENSION SUPPORTING INFORMATION ...................................................................... 21 7 APPENDIX C: LETTER MAIL SUPPORTING INFORMATION................................................................. 24 8 APPENDIX D: PARCEL MAIL AND THE GIG ECONOMY SUPPORTING INFORMATION ......................... 28 9 APPENDIX E: RETAIL NETWORK SUPPORTING INFORMATION ......................................................... 31 10 APPENDIX F: IOMPO STRATEGY ..................................................................................................... 36 11 APPENDIX G: PUBLIC CONSULTATION FULL RESULTS ...................................................................... 37 12 APPENDIX H: EXTRACT FROM DEFINED BENEFIT FRS 102 PENSION SCHEME VALUATION ................. 56 13 APPENDIX I: IMPACT OF POSSIBLE BENEFIT CHANGES TO DEFINED BENEFIT PENSION SCHEME .......... 1 14 APPENDIX J: PENSION SAVINGS FORECAST 2018 TO 2032 ................................................................. 1 4 1 Foreword – Chairman “This report outlines recommendations for which the Isle of Man Post Office (IOMPO) is seeking Tynwald approval and support in order to protect the long-term future of the Island’s post office, in the best interests of the Manx community, its staff, customers and key stakeholders. The recommendations stem from the IOMPO Board and its staff initiating a high-level strategy to modernise the IOMPO. This was presented to the Department for Enterprise, (the IOMPO’s sponsoring department), the Council of Ministers and Tynwald Members earlier this year, setting out the key challenges facing the Post Office and detailing the reasons for necessary change so as to minimise the risk of a future subsidy from Government. This strategy is being formally laid as a separate document concurrently with this report. As Chairman of the IOMPO, I made a statement in the July sitting of Tynwald to provide Members with an update on the IOMPO’s strategic aims, and how it would be seeking approval for any fundamental changes we wish to make to the post office network, letter deliveries and our pension scheme. It is the belief of the IOMPO Board that Tynwald approval for the recommendations presented within this report are fundamental to the future success of the business, enabling it to create efficiencies and savings whilst not compromising the high quality standard of service the IOMPO provides to customers Island-wide. The absence of these changes will have a detrimental impact on the organisation, and in consequence the community, which should not be underestimated. The board are committed to acting in a financially responsible way, whilst providing services that meet the needs of the Island’s community. Our governing legislation requires the IOMPO to have regard to efficiency and economy; to the social, industrial and commercial needs of the Island, to the desirability of improving and developing our operating systems and to the developments occurring in the fields of communications and banking. I believe that our strategic business plan addresses those obligations squarely. Appreciating the heritage and unique attributes, capabilities and social value of the postal service, the board ran a public consultation during the summer to gather the valued opinions of Island residents, businesses, organisations and the IOMPO clients. This was to gain a better understanding of customers’ needs and how our services might be improved, offering value for money, while ensuring the Isle of Man Post Office remains self-funding and sustainable into the future. The IOMPO strongly believes customers are best placed to contribute as to the type, frequency and location of required Post Office services. So with their support, the IOMPO is proposing changes to make the business more fit for purpose and to reflect the supply and demand nature of the postal industry. It is grateful to the 2,700 plus people who took the time to have their say in what they expect from the IOMPO as a modern postal business. The results continue to inform our discussions with key stakeholders including staff, unions, sub postmasters, local commissioners and other parts of Government on the key issues and the future service options. With regard to the future of the post office network, more exploratory work needs to be undertaken in this area and when ready, the IOMPO will seek Tynwald approval for any proposed material changes. In the meantime, the consultation results with regard to changing the frequency of letter delivery support the recommendation laid out in this report. We are addressing our pension scheme which despite being substantially funded, is no longer affordable or sustainable in its current form. The recommendations within this report are for the mutual benefit and protection of the business and the scheme members. 5 The urgency for modernising the IOMPO is reflected in the £1.2m loss reported in the 2017/18 annual report and accounts which were laid before Tynwald in October. This was the first loss in the history of the IOMPO, emphasising the need for the business to adapt its current operations and practices to ensure it is financially responsible in delivering services that meet the changing needs and reasonable expectations of its customers. The IOMPO’s commercial success, which has historically helped to sustain an overall profit, is no longer sufficient to offset the increasing costs of providing the service obligations required under the Post Office Act. Therefore the board are focused on improving the efficiency and effectiveness of those services, while actively seeking new business and enhanced delivery opportunities. Addressing the issues the IOMPO faces, does call for some hard decisions and changes. Throughout this change process thus far, the IOMPO has sought to be inclusive, informing staff of the reasons
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