The week that was: 4 March 2011
Donahoe says bailout not required, US regulator to provide opinion on five-day week, and disappointment over UK Post Office contract loss… The working week is coming to a close, so let’s crack on with ‘the week that was’…
“We will not need a bailout,” said US Postmaster General Pat Donahoe on Wednesday, as he was questioned by the House oversight subcommittee in the US Congress. While Republican Congressman Connie Mack attempted to draw the Postal Service chief executive into a humiliating plea for taxpayer assistance, along similar lines as the big US banks in 2008, Donahoe insisted there were other solutions to the multi-billion dollar losses at the Postal Service. Following on from last year’s record $8.5bn loss, this year the USPS is projected to post a $6.4bn loss, with its borrowing reaching the legal limit of $15bn by the end of the fiscal year in September. The Postmaster General said that a few key resolutions from Congress – relieving pressure from the USPS pension and future retiree healthcare obligations, and proving it with more flexibility to cut costs – would be enough to hold off insolvency. He said other than the pre-funding requirements; his staff had already managed to cut costs to cope with the 22% drop in mail volumes over the past decade. During his testimony, Donahoe explained his organization’s view – which is backed by regulators – that the USPS has paid too much into its retirement systems because of the “arbitrary” system of payments enacted in the 2006 PAEA law from Congress and would otherwise by balancing its books. Ruth Goldway, the chairman of the independent federal regulator, the Postal Regulatory Commission, supported his view, stating: “Bottom line: without the retiree healthcare benefits fund the Postal Service would have broken even despite the impact of the recession and declining mail volumes.”
Staying in the US, regulators are set to provide an advisory opinion to Congress “shortly” concerning proposals by the US Postal Service to move to a five-day delivery week. Ruth Goldway said that her team had been “working overtime to resolve complex and technical policy aspects” of the USPS request to drop Saturday deliveries. The loss-making USPS submitted its request to the Commission 12 months ago, setting out the proposal as one key part of its strategy to cut costs. The Commission’s advice on the proposal is seen as important in influencing how Congress puts forward legislation on reforms needed in the USPS. Last March, the Commission said it would produce its opinion on the matter within six to nine months, but has remained quiet on the issue over the winter. Speaking before the postal oversight subcommittee at the House of Representatives on Wednesday, its chairman said the request to remove the USPS obligation to provide a six day per week delivery service had been the “most difficult and multi-faceted issue” she had faced in 13 years on the Commission. Goldway said: “The Postal Service proposal to end Saturday delivery is a serious effort to improve its bottom line. But, cutting 17% of service in order to save what the Postal Service estimates to be $3bn must be carefully considered within our objective to keep prices down, maintain service standards and ensure efficient postal operations.” The Postal Regulatory Commission chairman said she hoped the advisory opinion would help Congress to decide on whether the USPS six-day delivery directive should be lifted.
In the UK, industry bodies have hit out at the Government after Post Office Ltd lost its contract to provide welfare payments. The Department for Work & Pensions announced that Citibank will provide a new ‘over-the-counter’ service at PayPoint outlets from 2012, in a contract that is worth around £20m a year. The National Federation of SubPostmasters (NFSP) described the news as “bitterly disappointing”, whilst the Communication Workers Union (CWU) labelled the move as a “betrayal of Britain’s most vulnerable”. Payment by cheque is to be gradually phased out, with the Government blaming a “dramatic fall” in use. Less than 2% of welfare payments are now made by cheques, costing the taxpayer around £30m annually, despite still being open to fraud. Minister for employment Chris Grayling said: “This new contract represents value for money for the taxpayer. The facts are payment by cheque is now too costly and too open to abuse and we want our payment system to be as cost effective as possible.” NFSP general secretary George Thomson said: “Benefits cheque customers rely on their local post office to provide this important service, with subpostmasters and trained Post Office staff providing assistance to hundreds of thousands of vulnerable customers each week. Many of these customers will be unwilling or unable to travel to a Paypoint outlet such as an off-licence or garage forecourt to claim their weekly pension or benefit allowance. Subpostmasters need significant volumes of work in order to survive, including regular repeat transactions such as benefits payments. Ministers have to deliver new government work to post offices, not more broken promises. As the government plans to remove Post Office Ltd (POL) from Royal Mail Group and make it a stand-alone company, this imperative is even greater.” Billy Hayes, CWU general secretary, said: “This is a cut too far. Taking Government business away from the Post Office on top of privatising Royal Mail… will cause the biggest closure programme we’ve ever seen.”
And finally…
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