Government department snubs Royal Mail over GBP12m postal contract

The Communication Workers Union yesterday attacked the decision by the Department for Work and Pensions to award a GBP12m contract for post services to UK Mail, a leading rival to Royal Mail.
The union said it was disappointed that, at a time when the Department of Trade and Industry was finalising plans for investment in Royal Mail’s postal services business, other departments were giving work traditionally done by the state-owned former monopoly to private sector rivals.
The union’s general secretary, Billy Hayes, said: “This is a prime example of how disjointed departments in government are. Instead of using private postal services it is essential that the government understand they have a moral and social responsibility to the network and by not using the service themselves it does not exude confidence to the British public in a government-controlled institution.”
At a time when the DTI was conducting a review of the postal service, it was vital other departments did not make rash decisions which could affect its future, the union said.
A DWP spokesman said it had been urged by the government’s spending watchdog, the National Audit Office, to look at the way it bought postal services to see if it could achieve efficiency savings. The decision to award the contract to UK Mail, a subsidiary of Business Post, followed that review and would save the department about GBP2m over the 13-month life of the agreement.
The contract, which starts next month, will involve pension statements and winter fuel payment notifications, with tens of millions of items sent from regional distribution centres in the north-east and north-west.
However the DWP spokesman said: “We still have a very large contract with Royal Mail to provide large numbers of services. This is simply about how to make the overall postal services used by the department more efficient.”
Britain’s letters market has been fully open to competition since the beginning of last year and it is calculated that around one in eight letters is now handled by Royal Mail’s rivals, though the state-owned company still delivers the letters under so-called “access agreements”.
Yesterday a Royal Mail spokesman declined to comment directly on the DWP contract but said the organisation was facing intensifying competition. “We remain focused on our customers and we will fight for every letter.”
Last year the DTI agreed in principle to a financial package under which Royal Mail could put some GBP850m of its reserves into a special account to help tackle its huge pension fund deficit while the government would back a GBP900m borrowing facility, at commercial rates, to help finance a GBP2bn investment programme to modernise Royal Mail’s letters business.
However the government has yet to rule on the contentious issue of allowing Royal Mail to give employees shares in the business – a move the management argues is an essential incentive to win backing for the modernisation programme.
The CWU is firmly opposed to the idea, which it sees as a backdoor privatisation of the business.