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The changes will start to come into force after the Bill receives Royal Assent. As announced in July 09, market conditions made it impossible to conclude the process to identify a partner for the Royal Mail on terms that Government can be confident would secure value for the taxpayer. There is therefore no prospect in the current circumstances of achieving the objectives of the Bill. When market conditions change Government will return to the issue. It is not possible at this stage to predict when will be the right time to restart the process. Until conditions are right to take forward the Bill, Royal Mail must press on with its modernisation plans.
The Government continues to believe that the package of measures proposed by the Hooper review offers the best prospect for securing the future of both the universal postal service and Royal Mail.
The Government commissioned an independent review of postal services in December 2007, chaired by Richard Hooper CBE. The review looked at changes taking place in the postal and wider communications markets and what the implications of those changes were for the UK postal service, in particular the provision of the universal postal service. In December 2008, its findings were published in a report entitled: Modernise or Decline: policies to maintain the universal postal service in the United Kingdom. You can find the report of the Hooper Review section of the website.
The review concluded that people are turning away from post as a medium for communication, preferring instead to use electronic means of communication such as e-mail, the internet and texting. Mail volumes have been declining steadily since 2005. Royal Mail now handles around 9m fewer items per day than it did three years ago. The number of text messages sent in the UK over the same period more than doubled from 82m per day in 2005 to 216m per day in 2008.
The report showed evidence that Royal Mail is currently unable to respond rapidly enough to these changes in the market because of a range of constraints. These included the company’s lack of efficiency and automation, its pension deficit (latest figures show this was £6.8bn on an accounting basis), poor industrial relations and a difficult relationship with the postal regulator, Postcomm.
Hooper concluded that action is required to tackle these constraints, put Royal Mail on a secure footing and sustain the universal service. He proposed a package of measures:
The Government accepted Hooper’s recommendations in full. The Postal Services Bill, which will enable the implementation of the recommendations, was introduced into the House of Lords on 25 February 2009.
Royal Mail Group Ltd and the Post Office Ltd are two distinct organisations that provide different services to the public, and face different challenges. Royal Mail collects, sorts, transports and delivers post. Post Offices provide access to Royal Mail's services - letters, parcels and stamps - but they also deliver a much wider range of government and financial services, playing a vital social and economic role in the communities they serve.
The Hooper report was about how to safeguard the universal postal service, in line with the Government’s manifesto commitment to review the impact on Royal Mail of market liberalisation. The Government’s policy on the Post Office network was set out in May 2007 following a 12 week consultation.
Despite their different challenges, the Royal Mail and the Post Office depend on each other in order to be successful. So it is in the interests of both Post Office Ltd and its network of post offices to see the finances of the Royal Mail turned round and the business transformed. In Parliamentary debates on the Bill in the House of Lords, the Secretary of State has been clear that there will be no further programme of Post Office closures.
In summary, the Bill creates the legislation that would allow the Hooper Review recommendations to take effect. The Bill is split into 3 parts –
This part of the Bill includes provisions to:
This part of the Bill:
This part of the Bill:
As the Hooper report indicated, the business now urgently needs to modernise. Legislation must be passed to enable Government to make the necessary radical changes as a package to reform the regulatory regime to safeguard the universal service, protect the pension rights of Royal Mail staff and introduce a strategic partner for the business.
The Government has prepared a full assessment of the impact of the changes proposed in the Bill, and a copy of this can be found on the key documents page.
Royal Mail's latest results show that while the headline profits are in the millions, the pensions deficit is in the billions and confirms that the Royal Mail remains in a precarious financial position. The company is technically insolvent and mail volumes are expected to fall by as much as 10% this year. The need for urgent modernisation and fundamental reform is crystal clear. Looking more closely at the Group’s latest set of annual results shows that:
A detailed reading of Royal Mail’s annual results underlines the need for change, not the reverse. They make the case for change and the need for modernisation and reform unquestionable. This is a business that currently isn’t profitable enough to drive modernisation and secure the universal service.
Absolutely not. The Hooper report recommended that Government seek a commercial partner for Royal Mail, to help transform and modernise the business. The legislation makes it clear that any commercial partner could only ever have a limited, minority stake in Royal Mail. Royal Mail will remain publicly owned. The regulator will continue to protect customers and ensure the maintenance of the universal service.
We will only enter into a partnership that makes sense both for Royal Mail, and for the taxpayer. Potential commercial partners will be assessed against very strict criteria to ensure that their involvement will benefit Royal Mail and the users of postal services in the long term. These criteria include:
At the moment market conditions have made it impossible to conclude the process to identify a partner on terms that Government can be confident would secure value for the taxpayer.
The Bill will ensure that Post Office Limited (which operates the post office network) will remain owned in its entirety by Government.
No. As the Secretary of State has committed to Parliament during the passage of the Bill, the Government will not support any further programme of post office closures.
No. The Bill is all about maintaining the universal service (collection and delivery to every UK address six times per week at a uniform, affordable price).
The Bill benefits all users of postal services - social and small or large businesses, and continues to give everyone easy access to essential postal services. Ofcom will have to establish a Postal Consumer Panel to promote the interests of domestic and small business postal users.
Post is one means of communication amongst many, such as e-mail, text messaging and social networking. The main challenges that Royal Mail and other postal service providers face have arisen because consumers and businesses are making greater use of digital technology to communicate, rather than post. The creation of Ofcom brought together a number of regulators with years of experience of regulating rapidly changing media markets. This experience of regulating digital and telephonic media will be helpful in identifying and addressing the challenges for postal services in an increasingly digital environment.
To reflect that post is now part of the broader communications market, the Bill transfers responsibility for the regulation of postal services from Postcomm to Ofcom. Postcomm will be abolished, and its functions assumed by Ofcom, whose primary duty in relation to post will be to ensure the provision of the universal postal service is maintained. Ofcom will also have powers to examine Royal Mail’s costs and ensure that other companies’ access to Royal Mail’s network is regulated on a fair basis.
In order to enable Royal Mail to modernise through a partnership agreement, Government proposes to take responsibility for the historic pension liabilities within the RMPP relating to benefits earned by members prior to December 2008. The responsibility for future service entitlements after December 2008 will remain with Royal Mail and Post Office Ltd.
The proposals in the Bill will ensure that Royal Mail is left with a scheme that is more manageable for the company. The Government will legislate to ensure that members’ past service entitlements that are transferred to Government are protected in primary legislation.
A new pension scheme will be established to pay out the benefits that are the responsibility of Government. The new scheme will be comparable to public service schemes such as the NHS or Teachers’ schemes. The Government will work closely with the Royal Mail Pension Plan Trustees and Royal Mail on the planned changes, so they are confident that members’ interests will be protected. We will also working hard to make sure that members continue to receive the same high quality service whilst the changeover between schemes takes place. If you have a Royal Mail pension, and would like to know more about how the Bill will affect you, or have another query about your pension, please phone the Royal Mail Pension Plan helpline on 0845 603 0043.
The implementation of these changes depends on the conclusion of a partnership agreement and EU state aid clearance being obtained. Government has been clear that it will not cherry pick Hooper's recommendations and tackle the pension deficit in isolation and that taking on the pension deficit can only be justified in the context of real and lasting transformation of the business.
The Government remains convinced that Hooper's combined package of recommendations offers the best chance for securing the future of the universal postal service and Royal Mail. When market conditions change we will return to the issue. As has always been the case, Royal Mail should remain in dialogue with the Pension Trustees about how to meet its pension obligations and it is for those parties to negotiate a suitable settlement on the basis of the actuarial valuation which is currently underway.
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