UK Post Office faces fines if it does not deliver

UK Post Office faces fines if it does not deliver
By Kevin Brown, UK Affairs Editor, in London
Published: January 29 2001 20:48GMT | Last Updated: January 30 2001 02:50GMT The UK Post Office was on Monday given a maximum of three years to start hitting its service standards or face substantial fines by the UK Postal Services Commission, the newly appointed industry watchdog. The commission also imposed price controls on a wide range of letter and parcels services, and made clear that the Post Office will be forced to give access to its business infrastructure to new companies that want to compete with it.
The tough conditions were included in a draft licence to take effect from March 26 when the Post Office will be renamed Consignia and become a wholly government-owned plc with significant commercial freedom. The commission also made clear that it wants to open much of the existing Post Office monopoly to competition by licensing other companies. Talks are taking place with European post offices and private express mail companies. “It is our intention to be demanding,” said Graham Corbett, commission chairman. “We clearly did not want to come in with a soft touch that was not going to impose any pressure on the Post Office.” Mr Corbett said discussions with potential competitors were confidential. However, he said it would be “quite disappointing if we were not able, in a reasonable time, to introduce competition into the market”. The draft licence requires the Post Office to hit its target of delivering 92.5 per cent of first-class mail overnight within two or three years, depending on further discussions. It has failed to hit the first-class target for the past five years, and is delivering about 91 per cent of mail overnight. However, it has exceeded its second-class target of delivering 98.5 per cent of mail within three days.
The draft licence proposes a two-year price freeze on a wide range of letters and parcels, including first and second-class services and many business services. The Post Office will be able to apply for permission to raise prices, but would have to demonstrate it is unable to cut costs. Industry observers said the draft licence was likely to prove demanding for the Post Office, which also faces a reduction in its monopoly over letters weighing more than 350 grammes.
The European Union is expected to agree soon on moves to liberalise the European market, and the UK watchdog is expected to deliver separate proposals in the summer.
The Post Office said it would “carefully study” the draft licence, which is subject to 28 days’ consultation. It said it was investing hundreds of millions of pounds to improve services, and had cut letter prices by more than 8 per cent in real terms in the past five years.