House of Commons Trade and Industry Committee Royal Mail after Liberalisation Second Report of Session 2005–06 Volume II Oral and written evidence Ordered by The House of Commons to be printed 13 December 2005 HC 570-II Published on 7 February 2006 by authority of the House of Commons London: The Stationery Office Limited £14.50 The Trade and Industry Committee The Trade and Industry Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department of Trade and Industry. Current membership Peter Luff MP (Conservative, Mid Worcestershire) (Chairman) Roger Berry MP (Labour, Kingswood) Mr Brian Binley MP (Conservative, Northampton South) Mr Peter Bone MP (Conservative, Wellingborough) Mr Michael Clapham MP (Labour, Barnsley West and Penistone) Mrs Claire Curtis-Thomas MP (Labour, Crosby) Mr Lindsay Hoyle MP (Labour, Chorley) Mr Mark Hunter MP (Liberal Democrat, Cheadle) Miss Julie Kirkbride MP (Conservative, Bromsgrove) Judy Mallaber MP (Labour, Amber Valley) Rob Marris MP (Labour, Wolverhampton South West) Anne Moffat MP (Labour, East Lothian) Mr Mike Weir MP (Scottish National Party, Angus) Mr Anthony Wright MP (Labour, Great Yarmouth) The following Member was also a member of the Committee for this inquiry: Mrs Maria Miller MP (Conservative, Basingstoke) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at http://www.parliament.uk/parliamentary_committees/trade_and_industry.cfm. Committee staff The current staff of the Committee are Elizabeth Flood (Clerk), David Bates (Second Clerk), Grahame Allen (Inquiry Manager), Clare Genis (Committee Assistant) and Joanne Larcombe (Secretary). Contacts All correspondence should be addressed to the Clerks of the Trade and Industry Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5777; the Committee’s email address is [email protected]. List of witnesses Tuesday 18 October 2005 Mr Allan Leighton, Mr Adam Crozier and Mr Alex Smith, Royal Mail Group Ev 1 Monday 7 November 2005 Mr Peter Carr, Mr Gregor McGregor and Dr Roisin Doherty, Postwatch Ev 19 Mr Nigel Stapleton, Ms Sarah Chambers and Mr Richard Moriarty, Postcomm Ev 28 Tuesday 15 November 2005 Mr Nick Wells, Mr Guy Buswell and Mr David Sibbick, Mail Competition Forum Ev 39 Mr Billy Hayes, Mr Dave Ward, Mr Jeremy Baugh, Communication Workers’ Union Ev 47 Mr Barry Gardiner MP, Under Secretary of State for Competitiveness, Mr Mark Higson and Ms Ruth Hannant, Department for Trade and Industry Ev 54 List of written evidence 1 Association of International Courier and Express Services (AICES) Ev 61 2 British Chambers of Commerce Ev 63 3 Campaign for Community Banking Services Ev 64 4 Communication Workers Union Ev 65 5 Communication Workers Union (Supplementary) Ev 70 6 Department of Trade and Industry Ev 71 7 Direct Marketing Association (DMA) UK Ltd Ev 73 8 Federation of Small Businesses Ev 75 9 Intellect Ev 76 10 Mail Competition Forum Ev 78 11 Mail Competition Forum (Supplementary) Ev 81 12 Mail Users’ Association Ev 86 13 National Federation of SubPostmasters Ev 88 14 Periodical Publishers Association Ev 92 15 Postcomm (The Postal Services Commission) Ev 93 16 Postcomm (Supplementary) Ev 103 17 Postwatch Ev 109 18 Postwatch (Supplementary) Ev 111 19 Postwatch (Supplementary) Ev 112 20 Royal Mail Ev 113 21 Department for Trade and Industry (Supplementary) Ev 120 Trade and Industry Committee: Evidence Ev 1 Oral evidence Taken before the Trade and Industry Committee on Tuesday 18 October 2005 Members present: Peter LuV, in the Chair Roger Berry Judy Mallaber Mr Peter Bone Anne MoVat Mr Michael Clapham Sir Robert Smith Mr Lindsay Hoyle Mr Mike Weir Miss Julie Kirkbride Mr Anthony Wright Witnesses: Mr Allan Leighton, Chairman, Mr Adam Crozier, Chief Executive, and Mr Alex Smith, Director of Strategy, Royal Mail Group, examined Q1 Chairman: Gentlemen, welcome to this first successful both for end customers, competitors evidence session and first public meeting of the entering and, indeed, the Royal Mail as it stands Trade and Industry Committee of this today, so I think ‘so far so good’. parliamentary session. Can I begin by welcoming you very much personally and asking you to Q4 Chairman: You have not lost those items; you are introduce yourselves and tell us what you do? still actually delivering them, are you not? You are Mr Leighton: I am Allan Leighton. I am the actually taking them and putting them through the Chairman of the Royal Mail. letterbox at the end of the day? Mr Crozier: I am Adam Crozier, the Chief Mr Crozier: We are still doing the final mile. Executive. Mr Smith: I am Alex Smith. I am the Director of Q5 Chairman: I find lot of resentment among the Strategy. unions at the level of work they were having to do compared with the work your competitors were Q2 Chairman: Can I begin by making a comment, if doing in delivering into the sorting oYce. They felt I may? We got some excellent evidence from the they were doing all the hard work and their unions, some excellent evidence from Postcomm competitors were doing all the easy work. Is that too. Your evidence to us was a photocopy of your not fair? submission to Postcomm. It is a very interesting Mr Crozier: I can understand the point of view, but document, which I have actually read, but I was a bit the fact is that the issue we have with access business, surprised that you did not target it to us. Were there as we have with a lot of the ways in which any particular issues you think the Committee competition is coming in, is that clearly the should be focusing on that are distinct from your competition do not look to target social mail, clearly evidence to Postcomm? the competition do not look to target unprofitable Mr Leighton: Probably not. The thing is, there is so mail, what they look to target is the mail that makes much stuV floating around at any one time, as you money and leave the Royal Mail with the mail that can imagine, about this particular issue. We are very does not make money. The thing about access consistent, and I think it is often more important to arrangements is that they can make money on those. be consistent than tailored, so we try and provide the It is very diYcult for us to take much of that cost out same information for everybody so that everybody of the business once we have lost that business, and is looking at the same interpretation of the same therefore it really does hit our bottom line. So I can things, and so this was done by design. understand why people feel like that, but it is a fact and it is here to stay, and obviously part of our job Q3 Chairman: That is looking at the past. Let us is to try and combat that. look at the future, shall we? The new access regime has been going for some time now; I have been to see Q6 Chairman: Of course, if you put the prices up too its operation locally in my own constituency. Do you much, if you were able to put the prices up too much feel your charges to competitors are about right for for that part of the work, it would encourage your the access regime? competitors to develop their own distribution Mr Crozier: Yes, I think they are. As it currently networks sooner as well? stands, we have lost around one billion items Mr Crozier: Indeed; I think it is a fallacy that people annually to access, which is actually about the level seem to have that somehow we will lose just that Postcomm in their predictions are suggesting we upstream business and that the Royal Mail will might lose by 2009–-2010; so that would suggest that always do the final mile for everyone everywhere, clearly the market has opened up a great deal further because our belief is that that is not what will than the regulator expected and has been very happen, that in fact competitors will actually set up Ev 2 Trade and Industry Committee: Evidence 18 October 2005 Royal Mail Group delivery forces, for instance, in major city centres, Chairman: Can we move on to the future of the which is where there is a lot of money to be made, Universal Service Obligation, which I will ask Sir and simply put the rest of the mail, the more Robert Smith to deal with. unprofitable mail, into the Royal Mail for it to deliver, and that is what we call “cream skimming”, and that is one of our biggest fears on the regulatory side, that that will happen. Q9 Sir Robert Smith: Obviously of great concern to Q7 Chairman: Despite the fact that all the people the whole Committee but especially those who provide the access mail to you do is basically representing large rural areas, remote areas and print it, put into envelopes and deliver it to your post deprived urban areas is the maintenance of a oYce, sorting oYce, where it is then sorted by universal service and that everyone in the country machines, hand sorted and taken out in vans and gets access to the same service at the same price from bicycles and delivered, and then, of course, all the Royal Mail.