Post Office can cut up to £2.4bn

THE Post Office is under pressure to cut costs by up to Pounds 2.4 billion a year, it emerged yesterday.

Postcomm, the regulatory body set up by the Government to regulate the postal sector, said the Post Office had scope to reduce annual expenditure by 30 per cent.

Martin Stanley, the Postcomm chief executive, told MPs yesterday that Consignia, parent company of the Post Office, “does seem to have lost control of its costs”.

Speaking to the Public Accounts Committee, Mr Stanley said costs had shot up 12.6 per cent last year with no clear reason. Some sorting offices were operating at just 65 per cent of efficiency.

The Post Office has already set out plans to cut costs by Pounds 1.2 billion, indicating that some 30,000 jobs could go by early next year. Unions fear that Postcomm is preparing to impose a tough pricing regime on postal charges that will contribute to thousands of additional job losses.

Yesterday the Communication Workers Union made a fresh threat of strike action, linked to a dispute over pay and two dismissals in London. John Keggie, CWU deputy general secretary, said the union had pencilled in dates in March unless progress was made in pay talks.

Postcomm is expected to force a reduction in the price of stamps despite Consignia’s financial problems. Last year it lost Pounds 281 million in six months. In addition, the postal market is to be opened to full competition after 2006.

Yesterday Mr Stanley defended the move to introduce rapid competition, saying that the management would not improve unless it was forced to.

He said: “There will be financial problems for the company, and the shareholder (the Government) will have to consider what action to take.”

Mr Stanley also said he was looking at a new compensation scheme for customers who suffer poor service.

(c) Times Newspapers Ltd, 2002