Watchdog warns on Post Office Competition
Introducing competitiontoo quickly could damage the Post Office’s ability to offer its services across the whole country, according to a government watchdog.
Sir John Bourn, head of the National Audit Office, will today warn that imminent plans to remove much of the monopoly protection enjoyed by Consignia, the renamed Post Office operator, could hinder its ability to meet obligations to provide a universal service, including rural areas. The tone of the NAO report will provide support for union leaders and postal managers who have warned of the danger of allowing rival operators to “cream off” the most lucrative mail customers.
It may also undermine attempts by Postcomm, the government regulator, to speed up the introduction of competition. Postcomm is expected to deliver long-awaited proposals to remove large parts of Consignia’s monopoly within a few days.
The regulator hopes the threat of competition will encourage Consignia to become more efficient and compensate for the loss of revenues from rival operators.
Combined with the economies of scale enjoyed by the existing Royal Mail network, it is hoped these efficiencies will allow Consignia to continue meeting its universal service obligations as in successfully liberalised markets in Germany and the Netherlands.
However, the NAO warns there are “serious risks” with this approach – particularly if Consignia cannot make its planned efficiencies, which have already sparked a row with unions, over up to 30,000 job cuts.
The NAO also pointed out that service levels are already struggling, especially the percentage of first-class mail delivered next day. “If it were to lose significant custom to its competitors, Consignia might find it had to finance the provision of a universal service at current price or service levels.”
Consignia said the report supported its argument for greater commercial freedom from the government if it is to compete and maintain service levels. “Our ability to provide a universal postal service – delivery of letters to the UK’s 27m addresses at a uniform and affordable price – could be in jeopardy because of cream-skimming of profitable sectors of the mail market by companies given a licence by Postcomm,” it said.
Postcomm, which is expected to reveal its proposals next week, said: “We understand the risks that are inherent in competition, and have thought about them pretty deeply, but there are opportunities, too.”
* A ballot on industrial action by the Communication Workers Union got under way yesterday, with 145,000 members being consulted. The action, if agreed, may include postal strikes.
