HOUSES OF THE OIREACHTAS
Report of the Joint Committee on Public Enterprise and Transport
on Meeting with An Post
Irish Postmasters’ Union on the Post Office Network
HOUSES OF THE OIREACHTAS
Report of the Joint Committee on Public Enterprise and Transport
on Meeting with An Post
Irish Postmasters’ Union on the Post Office Network
The Joint Committee on Public Enterprise and Transport was established by Order of Dáil Éireann of 13th November, 1997 and by Order of Seanad Éireann of 19th November, 1997. In addition, Standing Orders state that the following powers may be conferred on a Committee:
“(1) power to take oral and written evidence and to print and publish from time to time minutes of such evidence taken in public before the Select Committee together with such related documents as the Select Committee thinks fit;”.
This report of the Joint Committee on the Post Office Network was agreed at its meeting on 9 March, 2000.
Seán Doherty, T.D.
AN COMHCHOISTE UM FHIONTAIR PHOIBLÍ AGUS IOMPAR
JOINT COMMITTEE ON PUBLIC ENTERPRISE AND TRANSPORT
Déardaoin, 25 Samhain 1999.
Thursday, 25 November 1999.
The Joint Committee met at 2.03 p.m.
Deputy Martin Brady
Deputy Simon Coveney
Deputy Austin Currie
Deputy Brian O’Shea*
Deputy Michael Ring*
Deputy Dick Roche
Deputy Trevor Sargent
Deputy Ivan Yates
Senator Peter Callanan
Senator John Cregan
Senator Liam Fitzgerald
Senator Shane Ross
DEPUTY SEAN DOHERTY IN THE CHAIR.
Meeting with An Post and the Irish Postmasters’ Union
Chairman: I welcome Mr. John Hynes, chief executive officer of An Post and ask him to introduce his colleagues to the committee. Members have other business to attend to and the postmasters union is appearing before the committee later. This may not be the only occasion on which the committee may wish to speak to you.
Mr. Hynes: Thank you, Chairman. I am accompanied by Terry Reynolds, director of post offices for the past decade, his successor Mr. Eamon Ryan who has just taken over the brief, Mr. John Daly, who looks after financial matters in the post offices division and Mr. Tony Waters, operations manager for post offices. I am also accompanied by Mr. John Foley whom some of the committee may know.
I will operate within certain constraints of confidentiality dictated by the fact that we are negotiating prices with some of our major corporate customers.
Chairman: In the interests of An Post and the committee we can go into private session to discuss such issues.
Mr. Hynes: I will try to present a report on what we have been up to during the past six or seven years in the post office network. An Post has about 8,500 staff of whom 6,500 work in the letter post division. About 1,000 people work in courier and parcel services in the SDS. The subject of today’s meeting is Service Plus which is a red brand indicating that the parcel service is computerised and offers many services. There are also about 2,000 sub-post office postmasters and postmistresses and perhaps some assistants. These figures are from the 1998 annual report.
The group earns £389 million, 21% of which is earned in the post office division. This 21% is broken down into 48% social welfare, 25% from savings activities, 10% from licences, mainly television, and 10% from bill payments, such as phone bills. There is an interesting statistic that the £81 million revenue comes from four customers - the Department of Social, Community and Family Affairs, the Minister for Finance through the NTMA, licences through the Department of Arts, Heritage, the Gaeltacht and the Islands to RTE and Éircom bills. We have four corporate customers accounting for 90% of revenue for this division. An Post made a profit of £5 million last year which accounted for just over 1% of sales. We do not have a great deal of slack within the organisation. It requires a considerable effort to balance revenues and costs on a yearly basis.
More than one and a half million customers use post offices every week. We handle six billion customers annually. The transactions are almost exclusively cash transactions rather than cheques or credit cards. Ours is a cash business. We have two million customer accounts through the post office savings bank. We process 60 million financial transactions every year and 20 million mail transactions. One of the great characteristics of the post office network is that it is primarily a cash payments business rather than a mail business. We employ 1,000 staff and 1,800 postmasters as well as their assistants.
In a nutshell, our primary obligation under the 1983 Act would be the statutory duty to make sufficient profit to cover reinvestment in the business. The Act states that charges should be kept to a minimum, revenue should be sufficient to meet all charges and funds should be generated for capital purposes and the repayment of borrowings. An Post is not a borrower so we must basically only worry about re-investment.
The first EU postal directive is a new statutory development this year. Competition rules state that we can no longer cross-subsidise from a monopoly activity - the letter post business - into any other business activity of An Post. That is prohibited by law. Next year, an Irish regulator will be appointed to police the fine detail of that. Another business reality underlying that is that people are very reluctant to pay extra for a service if it will go towards something in which they are not interested. People buying letter services, 80% of whom are business people, do not want to pay any more than is required to obtain a letter service. They do not want to have to pay extra to subsidise some other activity. For the past six years, although not this year, profits have been made in the post offices division. The success story behind those profits will be evident from the slides which will be shown later. We did not make a profit this year, which is a crucial point for us.
If we look at the post office network, we start with the company offices, our own staff, post office clerks and overseer superintendents. The 97 company offices account for 30% of our business by volume. There are 703 towns and villages with a population of more than 200 people and the post offices in those towns and villages account for a further 61% of our business, bringing us up to over 90%. Therefore, 90% of our business is carried out in 800 offices. For the information of Members, the red colour coding denotes computerisation. We recently computerised 200 offices in smaller, rural communities which account for a 3.5% share of the business. Finally, we have the 913 uncomputerised rural locations - marked in yellow - which account for 5.5% of the business.
A total of 33% of the population or 1.2 million people live in small rural locations and smaller rural communities. Of those, only one in four uses the local post office and three out of four go into the larger towns. I am not sure whether any of the committee Members come from Kerry-South. We built a new office in Killarney and spent £10 million modernising our company offices. More importantly, we spent £42 million installing computers into post offices. That was assisted by the Department of Social, Community and Family Affairs and the NTMA as customers. They agreed to prices which enabled us to do that and I want to thank them on behalf of An Post. More than £50 million was invested in that initiative. The slide shows computerised post offices which are connected across a nationwide network to our central computers and onwards to the Department of Social, Community and Family Affairs, the gas companies, Cablelink television, telecommunications companies, banks, Aer Lingus - our latest live connection - and our own mail systems. More than 80 corporate customers are now directly connected to us. When I say “corporate”, I mean a customer on whose behalf we carry out work. Personal customers are those who attend post offices in person to transact their business.
Our network has been designed not to go down; I do not know what happened to share transactions between Dublin and New York but social welfare payments transacted between An Post and its customers were not affected last Friday. The only link which crashed was Éircom’s own link, all the others worked fine. The network is very resilient and is operating well throughout the country.
We can pat ourselves on the backs but what do our customers think of us? The next slide shows the marks awarded out of ten. The green column represents customers who gave us nine or ten out of ten for efficiency, friendliness, presentation or attitude. The orange denotes marks of seven or eight and the red denotes marks of six or under. The service is highly popular, reflecting well on An Post staff.
The independent research results shown on the next slide was carried out by the MRBI.
Deputy Yates: Who pays for that?
Mr. Hynes: We do. We run four independent checks on our services every year. I use those to measure how well my managers are doing. The issue which arises most often is queuing - the left hand column shows that 40% of people did not have to queue at all and 29% queued up to one minute. In terms of queuing time, 60% of people queued for less than one minute, 80% for less than two minutes and 90% for less than four minutes. Again, that is externally measured and is representative of rural and urban, large and small, company and postmaster offices.
Nobody can stand still in business these days. Businesses either grow or fall behind. How have we performed in regard to the four big drivers of our business? The figures outlined on the slide relate to the periods 1991 to 1993 and 1995 to 1998. This set relates to welfare payments, namely unemployment payments, child benefit payments, pensions etc. There has been spectacular growth in this area from 36 million in 1991 to 45 million in 1998. That growth curve turned down in 1999 and has decreased to 43 million. There are two main reasons for this, namely that less people are unemployed and that more people are opting to have their child benefit or pension payments paid into bank accounts.
“Bill Pay” has been one of our success stories increasing from three million transactions, primarily telephone accounts, to ten million. That was enabled by our technology and is very important to us, given our dependence on our other big customers. We are very exposed to our big customers changing their minds.
Savings and investments have increased from £2 billion to £4 billion although the role of small savings will change with the advent of the euro. Television licences stood at 900,000 at the beginning of the decade but we hope to issue 1,045,000 this year.
In 1991, measured by the amount of time we took, we had an index of 638 but have now risen to 855. In other words, we have done 34% more business volume, not revenue. Volume drives our costs, what we pay our staff and postmasters. There is an interesting story behind this slide. I referred to 200 rural post offices earlier. Where did the growth occur? I brought forward the 34, denoted on the left hand side in red. If we look at the 800 post offices in towns, villages and cities with a population greater than 200 people, we got 36% business volume growth there. In the 200 rural community offices with computers, we got 4% and in the 913 rural offices without computers, we got 2.5%. Technology, which drives new business, does not drive it into the rural network. There is no technology effect here in terms of business volume.
Chairman: Will rural renewal drive it in?
Mr. Hynes: I will deal with that question later. One can place his or her ticket with Aer Lingus. One will soon be able to book it with Aer Lingus and other airlines. One can buy a mobile phone, do a top-up or get a speak easy and do a bureau de change. All post offices do not want these services. If one has a multichannel and is working in Cork, one will not be interested in the rest of the network. Aer Lingus want this service in 1,000 offices. Many others have elected for 200, 300 or 400 offices only because this is where their business is. It is not automatic that new business goes right through the network.
One cannot pay ESB bills in post offices by way of this service. We believe if this service was available, perhaps 40% of people would use the service. Earlier this year the Government encouraged the ESB to open that business up to us. Since then we have been talking to the ESB. The up-to-date position is as follows. We proposed a price which compares favourably to charges they are getting from existing third party bill receivers such as banks and credit card companies. For confidentiality reasons, I will not quote the price. The ESB’s formal response was that they want to move to low cost billing methods, including receiving by third parties. The impact of this must first be discussed with the trade unions, followed by a public competition. Then it will be open to An Post to compete for that business against other low cost competitors. I will not be budgeting on this next year.
On motor registration, we put a proposal to the Department of the Environment and Local Government. We were careful in our proposal not to interfere with existing arrangements with local authorities or cashflows. We stepped round all of this. We just want to add to their services, not substitute for something they already do. We are preparing a proposal in relation to driving licences. The Chairman mentioned the possibility that the Government will go for a one-stop shop. Clearly, we are doing our best to persuade the interdepartmental committee of the merits of the Post Office network in this context. We have put the proposals regarding motor registration, driving licences and Government payments to the interdepartmental committee.
Other things are happening and we know if we stay rooted to where we are the moment, we may fail to participate in new channels to our customers. I have a few examples of this. We have one direct business. Members may have heard the advertisements for 1 800 22 22 22. This is a call centre based in Athlone which sells motor and home insurance. Later in the year we will be taking on credit cards and other financial products. We are pleased to say that when people pay for their insurance through one direct, 70% opt to pay through post offices. This is a reinforcing strategy and a development strategy.
Retail deposits apply to where, say, the video store in Greystones lodges the cash in the post office across the street, we provide a cheaper bank charge which we use to pay out for our customers. Therefore, we both skip bank charges. We made a little business from this called retail deposits. On Post Trust, last year President Clinton and the Taoiseach initiated a big ceremony in Clonsaugh. We have made this service available to our electronic customers. One must deal with people they can trust over the Internet. This is the first time we have announced e-bills in public. There will be an Internet site which encourages major companies such as gas companies, energy companies, telecom companies and cable companies to pay their bills. For those customers who are Internet aware, the bill will be on the Internet site. Customers will be able to look at the bill, click on it, pay it and An Post will host the service. If bill business moves away from us, we want to be there to receive it when it moves. We will have to compete for share in the new markets being opened up. Finally, we have a website on which one can get details, including track and trace.
We have some big customers such as DSCFA which at 48% is make or break for us. Mr. Ahern made a statement to the Dáil of 17 November which I will read. Our current contract expires this year. Earlier this year, the Government said that it wished to see it extended for three years. This is provided for in the contract. The Minister’s statement reads as follows:
“… the Government has decided that the term of this contract should be extended for a further three years up to the end of 2002. … The new contract must also comply with the requirements of EU legislation on the procurement of services of this kind and the Government was cognisant of these requirements when making its decision. Following the decision a third party with an interest in the area of payments and payment systems raised certain legal issues regarding the extension of the contract with the EU Commission… Clearly it would be inappropriate to finalise a new contract while the issues raised with the Commission are still under examination…. No new contract will be signed until the matters raised have been resolved.”
Our contract with NTMA expires in the year 2000. They are aware of the cost of funds. As interest rates fall, the money paid to the middle man becomes a bigger share of the cost of raising these funds. We expect to come under serious price pressure in this regard. DSCFA want the extension at lower prices. We are currently operating at 1996 prices and they want these cut in the context of an extension. In relation to RTE, the real customer here is the Department of Arts, Heritage, Gaeltacht and the Islands. The three year contract with RTE extends to the end of 2000. There is competitive tendering in relation to this and they want a downwards review of 2000, notwithstanding that we already have an agreement. We have annual contracts with Eircom. That company is now privatised. It is not interested in anything other than a highly competitive price for bill payments. This is 90% of our business.
We have big ongoing commitments on the expenditure side. They do not vary downwards, they vary upwards given the cost of living and so on. Our certainty of contract renewal is now in a competitive tendering situation. That is compounded by the fact that people are making choices about how they want to be paid. We face a challenging future. Members will see that an ordinary credit card has been swiped - in a post office in this case. The benefit can be seen on the computer and it is paid in cash. One can pay benefits in convenience stores, such as Shell or Texaco stations. People can use laser cards and get cash back. It is the same technology. The difference is that those service stations charge nothing. We cannot compete against nothing. We will do our best to compete against a lower price but we cannot hire 1,000 staff in 1,800 post offices and expect them to work for nothing. This has happened in the United States. The service is free in the beginning and then people are asked not to come when the store is busy. Then customers will be charged £1 for the service. We are not in favour of this system. We will build new company offices in outer Dublin. We would like to convert some of offices in smaller towns to sub-post offices. This would save money. We would be using the same premises and same service. This would be more cost-effective. We are providing new sub-post offices in growing urban areas. We recently opened one in Killarney. One will open in Drogheda in a week or two. We will retain all the other offices. Our policy is not to reduce the network size. We do not decide the policy or seek to change it, we just implement it. We are an intermediary, a middle man. We are between corporate customers and personal customers. Our network cost will remain the same as it is fixed. Obviously it needs to be remunerated - you may hear more about this later - as people want to be paid more money for running that network. We have to operate cost effectively. On the righthand side, our prices are falling. The price pressure is driving down our revenue even though our volumes are growing. One can survive at a volume growth of 30% for a while but volume growths have fallen off. The only big customer remaining is the ESB. We are open to more competition. More competition leads to more choice and more choice means people opt to use banks etc. Finally we cannot top up Post Offices Division from our other businesses anymore. That is now illegal. That rock and a hard place is now beginning to bare on us. That is the underlying reason we have gone from making profits for six years. We dipped gently into a loss making situation this year. Unless we do something, we are facing the possibility of escalating losses under our current business arrangements. That is why we have a slight hesitation about embarking on new initiatives. We need to be certain they will improve our financial position, which is a statutory duty, rather than worsening it.
We computerised 200 rural post offices at a cost of £1.5 million. We did so in the belief that it was worth doing for the people concerned and that we would see a benefit but we did not. We are not obsessive about the bottomline but we have to keep an eye on it all the time. We have to retain current major contracts and get significant additional business. I am determined to win the ESB business on terms acceptable to them. We will have to do something about the emerging financial shortfall from social offices which relates primarily to policy. Policy is discussed by the shareholders and the Minister. This year the major unions involved, CWU, representing the staff, the Irish Postmasters Union representing postmasters signed confidentiality agreements with us. We made a full disclosure of our financial forecasts, our strategic analysis and our business plan and we have engaged them in dialogue of how we will go forward. We are trying to keep as many people as we can in the scrum. We, as management, cannot drive it forward on our own.
Chairman: Thank you.
Deputy Yates: I welcome the delegation and thank them for their presentation. You said your financial performance has been very poor in terms of earnings per share and you put forward a list of explanations for that. You have, however, said very little about SDS which has performed very poorly. It is not possible to extrapolate from your accounts the exact performance of SDS. I put it to you that it is disappointing and I would like to know what proposals you have to improve it. You also said little or nothing about the liberalisation of the EU postal directive. The cost of posting a letter from Dingle to Malinhead is more expensive than to post a letter from Dingle to Tralee yet the cost to the consumer is the same. There is a real prospect that you will see Dublin delivery service companies coming in here with liberalisation whereby they will cherry pick on short distance mail and stick the rest into the postbox and you will be left delivering the rest at great cost. Others will cream off the profitable end of the market. Could you make a submission to this committee as to the best way to preserve the integrity of the Irish postal system so that it will not be cherry picked. This was not referred to during your submission.
In 1995 Price Waterhouse produced a report on An Post. Are you satisfied with the implementation of its recommendations? Again, your presentation did not refer to those recommendations. On the social welfare contract, I got the impression, rightly or wrongly, that on each file we had the green for “go” and the bottom file dealt with the 913 uncomputerised sub-post offices which were producing very little revenue and were a monkey on your back. You said you would be delighted for them to remain open. I detected that you were saying this was uneconomic and produced a financial deficit. Perhaps you could also make a submission on this matter to the committee though I am not suggesting you do so now. If the argument is that the preservation of these 913 sub-post offices is purely a facet of regional and social policy, could you not put forward a policy in terms of how that should be done and perhaps that should be delineated out of the contract in question so that it is a transparent social exercise.
Reports commissioned by consultants or whatever usually tell the sponsor what it is they want to see. I have been receiving a number of complaints in relation to overnight deliveries. There is no reason we do not operate a 100% overnight delivery service. With modern technology and postal systems your performance has been short of what is desired. Your weekend service is also very poor. If I post something from my constituency on Saturday or Sunday it will not be delivered until Tuesday. I have encountered a situation several times whereby key documents required to be in a person’s office by Monday morning were not delivered on time.
Chairman: Headage payments.
Deputy Yates: Yes, perhaps. People expect that overnight delivery means something posted on Friday will be received on Monday. I am saying anything posted on Friday, Saturday or Sunday would be expected to arrive then also.
Mr. Hynes: A number of the questions raised are out of the terms of reference of this inquiry. Deputy Yates said our submission contained nothing about SDS, we can speak about it if he wishes. On liberalisation, tariff policy and cherry picking, that is a very large area. It is all decided in Brussels and it is down to how we skillfully implement it in Ireland. I could deal with that issue but it would be a major exposé. The way the market has been sliced and diced by the Commission makes it quite a technical subject now. We are very much at risk. People worry about rural post offices. They do not worry about 2,000 or 3,000 rural postal routes where the postman employed in the townland and is working out of nearly 600 post offices and going out every day irrespective of volume. That is where we have far more exposure to cover than in rural post offices yet it is rarely commented on. Deputy Yates is right to draw attention to that matter.
We have implemented 100% of the recommendations contained in the Price Waterhouse report save for certain items finally negotiated with our trade unions. It is too sensitive to say any more than that. We are committed to the 913 sub-post offices. It is our policy as a State company and we implement that policy. Policy is made by Government and we implement it. I would welcome transparent accounting and social services as distinct form commercial services. It is fraught with technical difficulty but it can be done. Next year we will have to publish accounts which split the reserve services from the universal service. That will be done under the supervision of an external regulator. On our overnight delivery quality and scepticism about the monitors in our annual report, whilst I appreciate it does exist, the letter post quality monitors are under EU rules, are submitted to the EU and supervised by them. We have not written ourselves a test that makes us look good. This test is external and submitted to the Commission and ours is a derivative of that one.
The network runs on a Sunday night. An item posted on a Sunday should arrive on Monday and if there are shortcomings in the Deputy’s area I will look into them. There will be failures in a network of such a scale. Our service target is not 100% next day delivery. At the moment we are aiming for 90%. We do not achieve that everywhere, particularly from Dublin to the provinces. I know that can affect Members of the Oireachtas who rely on it.
I really came prepared to deal with the rural question and I will be guided by the Chairman whether I can go beyond that.
Deputy Yates: The presentation covered the whole income profile.
Mr. Hynes: That is just one slide.
Deputy Yates: So it is really the rural post offices which are being dealt with today. I did not realise that.
Chairman: If the witness would like to make a written submission, as Deputy Yates suggested, we will meet again. It would help to have it in advance.
Deputy Yates: I did not catch what was said about SDS.
Mr. Hynes: I am prepared to go into it. It is our third largest business.
Deputy Yates: Is it a black hole?
Mr. Hynes: Letter post is the biggest business and it will be exposed to liberalisation. At a 1% profit margin on sales, we have no chance.
Deputy Yates: My question about SDS was that all these things came about under pressure from external competitors but SDS is under An Post’s control. Is Mr. Hynes happy with SDS? I am not happy with it. Its financial performance is not good.
Mr. Hynes: I am happy with it. We do not publish financial details but I am prepared to discuss it with the committee in private session.
Chairman: We can do that another time.
Deputy Yates: I hope they have taken a note of my points. We can discuss this with the clerk and the committee.
Chairman: There is no problem with that. If we can stick to the post office for now, there may be developments between now and our next meeting which will allow Mr. Hynes greater flexibility.
Deputy Sargent: I will focus on the post offices business. I thank Mr. Hynes and his colleagues for discussing this with the committee.
I noted in the presentation that there was a reference to An Post being mainly a cash payments business if it is broken down. A total of 60 million transactions was mentioned. I wrote to An Post and raised in the Dáil the issue of it not being possible to transfer cash using any kind of bank giro facility between post offices and banks or other financial institutions for the payment of mortgages and similar bills. Given that the Minister told me that under section 67 of the Post and Telecommunications Services Act, 1983, An Post is free to seek the necessary authorisation to provide this service, is that being given further consideration?
In a reply from Mr. Nicky Mullen, retail and quality manager, it was mentioned that it is being reviewed in line with customer demand. If An Post is interested in obtaining business which is being diverted through people using other financial services, it is important that money can be transferred not just by money orders, which are costly and uncompetitive in comparison to other financial institutions. There should be more consideration given to that. Business is being lost because people find it more convenient to use other means to transfer in money. If they wish to transfer money from a post office, they must leave with a wad of cash. That is not recommended in terms of convenience or personal security.
The importance of retaining sub-post offices was mentioned. My experience of that is unsatisfactory. Swords in north Dublin is growing at an extremely fast rate, with a population of 35,000, yet the main post office in that town was faced with a hiatus and possible closure. There was a very small amount of money available to keep a post office to serve such a population open. Is An Post depending on the good will of postmasters and postmistresses, brought about through their human contact with customers, to continue providing a service or does it feel that is fair remuneration for their positions? I understand An Post is in a difficult position and must look at ways of saving money but it relies on a considerable amount of good will on behalf of the postmasters and mistresses which could be running out. Swords sounded a clear warning on that point, although it has since been resolved.
Some of the postal service’s latest collection times are at 4 p.m. That presents huge difficulties for businesses. The day’s post requirements must be finished by them. Does the technology not exist to allow An Post to respond to the pressure from chambers of commerce which are asking for a 5 p.m. collection time? The situation as it is carves up the business day.
Mr. Hynes: I will deal with the last point and then Mr. Reynolds will deal with the other two points. We discussed late collections with business interests, the main supporters of our services, and we are trying to arrive at a service which suits them. It remains possible for us. Early collections tend to happen when a postman has finished his delivery route and he is working back to the office from very far out. He will start collecting at 4 p.m. but by the time he arrives back at the office, he is picking up mail at 6 p.m. We have to traverse the ground. We collect at 10,000 venues everyday and not all of them can be visited at 6 p.m. It is, however, important that the balance is right from the business users’ point of view.
Mr. Reynolds: A number of points were raised about giro facilities and cash. The money transmission system we use, money orders, is antiquated and we are reviewing it with a view to creating a money transmission system through our automated network. That would be much more efficient. I would not, however, like to give the impression that we are a totally cash-based business. People can pay their telephone and gas bills by cheque and Laser and we will start to accept credit cards in the course of the next year. We are not standing still on cash.
When people make large withdrawals from savings accounts, to buy a house for instance, we give them a cheque. We do not expect them to walk away from the post office with a large amount of money. We do not propose to start a giro bank in the European sense. We have examined that idea in depth and feel that it would not be financially viable given the state of the banking market. In most of Europe the postal giro systems are moving away from the post office almost entirely and becoming commercial banks.
On the general point, not Swords in particular, we are looking at the service to customers in outer Dublin. When a sub-post office reaches a point when it is very large, it is no longer economic for a person to run it under contract. In Tallaght and Blanchardstown we have opened company offices because the population in those areas is as large as it would be in cities such as Limerick and Galway. I do not have the details but my colleague, Mr. Éamon Ryan, will know more about Swords. There were remuneration difficulties with the postmaster. I do not have the details but I will hand it to my colleague, in relation to Swords itself. We had some difficulty in relation to the remuneration with the postmaster. We cannot make exceptions in terms of one postmaster as against another. I accept that when a sub-post office reaches a particular point it becomes very difficult for the postmaster to add additional staff to cope with the additional transactions because we have a regressive type of payment system where the higher the volume of business the lower the unit rate of payment. That is one of the reasons city and town post offices are extremely economical to run while in smaller areas they are not so economical.
Mr. Hynes: We will certainly deal with the question of Swords after the meeting. Éamonn could talk to the Deputy about it.
Deputy Sargent: I am quite happy to do that. I am asking if An Post is interested in increasing bill pay transactions and so forth. For instance, if someone goes to a post office hoping to pay his mortgage he must either get a money order and then go to the building society or walk out of the post office carrying a wad of cash. The temptation for that person is to do that transaction and make all other bill payments in a bank. The post office therefore loses that and other ancillary business, for the want of a cash transfer facility. Mr. Hynes talks about reviewing this. Has any urgency been given to that review?
Mr. Reynolds: If someone wishes to pay money into a building society and we have an arrangement with that building society he can do so by cash, cheque, Laser or credit card at a post office. We do not have a facility to withdraw money from someone’s bank account and transfer it to a mortgage company. Someone who wishes to do that will almost certainly use a standing order or direct debit from his bank account.
In relation to money transmission where a customer wishes to send money to someone or pay a bill, he must currently buy a money order. By the end of next year we will have an automated system for doing that, nationally and internationally.
Deputy Sargent: It is still necessary to involve the bank. This is where An Post is having to share its business and probably share it too much.
Mr. Reynolds: I accept that is the reality. We also talked to two of the major banks about transacting business for them in areas where they do not have branches. They are becoming a little more positive towards that as they feel they may want to reduce the sizes of their branch networks.
Chairman: Would that be on an agency basis:
Mr. Reynolds: It would. However, we have not concluded any agreement with them. There is some recognisable resistance to the suggestion from local branches and managers because they are afraid they may lose business entirely to us. I feel this is an area of business which will be feasible in the future as bank branches shrink while ours are maintained.
Deputy Sargent: Does Mr. Hynes see any improvement in technology for collections? In Balbriggan, for example there is a four o’clock collection.
Mr. Hynes: There will not be relief in Balbriggan today but I hope there will at a future date. I undertake to come back to the Deputy on that matter.
Chairman: What potential is there for a relationship with building societies in this time of great housing boom? Outside major urban centres people could consider the post office as an agency operator.
Mr. Reynolds: An Post is moving into that business as an intermediary. We are currently involved in home insurance with One Direct whereby one can pay through the post office. We will move onto mortgages in due course. There is potential for people to pay their money in but, like utilities and others, the cheapest method for most institutions to collect their money is by direct debit from a person’s bank account. Where institutions can get that facility that is what they will do. They are loath to move across to us but it is a potential area of bill payment. We have discussed it with a number of building societies and life assurance companies because we found that in the case of our own motor business in One Direct, we are the only insurance company which will take the money in cash. One cannot pay an insurance premium in cash with any other company. About 70% of those who buy our product pay at the local post office.
Deputy M. Brady: It is very important that An Post continues to provide a universal service at a uniform rate to all citizens and customers, rural and urban, irrespective of location. Deputy Yates and Deputy Sargent touched on a matter about which I have a more direct question. To what does Mr. Hynes attribute the decline in service in terms of next day delivery? Some years ago 90% of post was delivered next day. Recent figures give next day delivery at 82%. There must be some reason for that. In my constituency I get numerous complaints from people who say they never know when they will receive letters. In Dublin 13 post sometimes arrives at 10 o’clock and sometimes at 1 o’clock and it is difficult to plan accordingly. Are there staffing and capacity problems in the Dublin mail centre and what measures are being taken by An Post to rectify quality of service problems in relation to next day deliver?
A viability plan was launched in 1991 and much was said about overtime and reducing costs. Have overtime levels for sorters, postmen, clerks and superintendents increased or decreased in the past ten years?
I believe that 30% of letter business is cross-border. In the light of future competition and of the peace process are there any plans for a strategic alliance with the Royal Mail, for example? The Minister for Public Enterprise recently made reference to a strategic alliance by An Post so there is obviously some plan for that. I also read recently that An Post might face competition from Dutch and German post offices. What has been done to deal with that situation should it occur?
Are security measures adequate for the protection of staff and of cash on post office premises? What amounts have been lost in robberies in the past five years? An Post is involved in providing consultancy services abroad. What is the extent of that consultancy? The recent management problems at Flexco impacted on the joint venture prize bond operation. Given that it is based in Killorglin, is An Post satisfied with the capabilities and probity of Flexco management? One of the reports referred to consultancy services. What type of outside consultancy services has An Post engaged over the past five or ten years and for what purposes? What were the costs involved and do the delegation regard them as having been good value for money? I understand the philatelic service is still losing money. Why has the company failed to develop this into a highly profitable business? Why has the company failed to develop a franchise business, for example, for peel and stick stamps?
Chairman: -----ranging slightly out to rural post offices and post offices generally now.
Deputy M. Brady: The delegation was asked about SDS earlier. Has the company any plans to sell off SDS? I am not sure if the delegation will want to answer that question.
Chairman: Mr. Hynes will deal with that also.
Deputy O’Shea: May I suggest that all the questions are asked now and there would be one response?
Chairman: That is fine.
Deputy M. Brady: From a historical point of view, does the company have any plans to set up a postal museum or archives?
Deputy Ring: I wish to raise a number of items with the An Post representatives. Would Mr. Hynes accept that most rural post offices are making a major effort to generate business themselves? Over the past number of years, they have been competing and looking for business.
In relation to off shore islands, the postmistress in Clare Island in Mayo recently retired after long and loyal service to An Post. However, An Post expected all types of facilities in terms of the rules and regulation governing applications for the job and this is not possible on an island. An Post cannot expect the same standard of facilities on an island that it would seek in major urban centres. I ask Mr. Hynes to consider the Clare Island situation again and to relax the rules in relation to off shore islands because the people on Clare Island who applied for the job were unable to meet the costs involved in providing the type of facilities required by An Post. In addition, as Mr. Hynes knows, the salary and amount of business would not justify them. People were prepared to provide the service but they cannot do so because of the rules and regulations. I ask Mr. Hynes to reconsider this situation particularly with regard to the off shore islands.
I am not sure if county councils or An Post is to blame regarding the problems involved in the household budget scheme. People use it to pay their bills but six weeks later they receive a letter from the county council saying that they have not paid their dues to the council. When I and other public representatives make representations, we find that the payment made through An Post has not been registered in the council. It may be the council’s fault but regardless of whose fault it is, it is wrong. I ask Mr. Hynes to respond to this issue because I intend to take it up with the council at the estimates meeting shortly. Where does the fault lie because it is unfair on the punters?
From reading the booklet, I compliment An Post on improving its customer facilities in Blanchardstown, Killarney, Ashbourne and other places. However, I have written to An Post on numerous occasions about the situation in Ballinrobe in County Mayo. I will be nice to the representatives today because this my first face to face meeting with them. They have been most courteous in their replies and I have no axe to grind or personal or financial interest in the matter. I have made every effort to facilitate An Post in relation to getting a building in Ballinrobe. I found private people who were prepared to construct a post office which could be rented by the company. Other people made sites available and An Post representatives have visited the town on numerous occasions. If the delegation examined the travelling expenses submitted, I am sure they would involve a reasonably large sum because people have travelled to the town on several occasions.
I want Mr. Hynes to give a commitment to the people of Ballinrobe. Wheelchair bound people and others have to wait in the street and that is not good enough in 1999 in a town the size of Ballinrobe. If six or seven people have to go to the post office, three or four of them have to stand in the street because there is no room or facilities. One cannot operate a business on that basis. Facilities must be provided to people. An Post improved the facilities in its office in Westport and increased the volume of business. It had a similar problem to Ballinrobe for years but it was improved and the level of business increased. Private investors in Ballinrobe are prepared to play ball with the company and I ask Mr. Hynes to give me a personal commitment that An Post will deal with the situation in Ballinrobe. I do not want to have to write to the company any more because I am only giving State money to An Post. I write to the company regularly and I want commitments regarding the problems in Ballinrobe and Clare Island.
Chairman: The committee will have to put a charge on you for the personal commitments being given here.
Deputy O’Shea: I wish to address a possible doomsday scenario. Against the background of ongoing negotiations with its three major clients who provide 59% of post office revenue, what would the knock on effect be in relation to the post office network and to employment if An Post lost any or all of those contracts?
Mr. Hynes: I will try to answer each question in one sentence and see how I do. Regarding Deputy Brady’s point, there was a decline in next day service quality in March and April and it did not recover until the middle of June. It is the second busiest time of the year after Christmas. March is very busy for An Post. We are accountable for that; I am accountable for it and I apologise for it. It came back in the summer and our current target is 90%.
In the Dublin mail centre there were staffing and capacity problems in March and April. We have put on an extra 60 staff. A couple of weeks ago the board approved £15 million to expand it by 60% and add equipment to it. At present, we are very tight on capacity in our national network. We have had 8% growth for a long time and we are delighted with that, but we are being put to the pin of our collar and we adding resources as quickly as we can. We are on a knife edge and that will be the situation until approximately the back end of next year when the capital investments come through for us. Looking back on it, we did not see the boom. We should have invested ahead of it and had the capacity in place to deal with it, but we did not do that.
The overtime levels came back because we are able to employ temporary and part-time staff. There are, as always in a business, particularly one as busy as An Post, some peaks in overtime with which we are not happy. We are talking to the union about reducing them and changing from an overtime culture in the context of our transformation agreement I mentioned earlier which is in the final stages of negotiation.
Cross-Border business is 28% of daily volumes in Ireland. We are uniquely exposed as a post office in Europe. We will have to come to some arrangement with the British, the Germans or the Dutch. At present, the British have an operation of their own in Ballyfermot. They have just bought Williams Freight. The Germans own half of Securicor. One will see it in the street, Securicor Omega Express, and they own a quarter of DHL. The Dutch own TNT so competition is here and we will be put to the pin of our collar. We are looking at it inside the partnership process with the unions, the shareholder, the board and the management. We will all have to move together on this issue and it will come to a major decision some time in 2000. We will have to crystallise our position on where we will go and it is full of difficult dilemmas because if one picks one particular operation, one will incur the wrath of the other. It is not an easy one to call.
Regarding security and cash, we have made major changes to our cash handling systems. We have invested in bullion centres. Last year of the £6 billion, £45,000 was robbed from us. We are in good shape thanks to the Garda Síochána, Cobra, our own investment and the work of our postmasters and postmistresses.
Chairman: Were any injuries sustained?
Mr. Hynes: No, thankfully. Four years ago there were four armed robberies a week in Dublin. Now it is a fairly rare occurrence. There are still some but it tends to be one group of perpetrators which will hit a series of post offices and the Garda Síochána will get them. Colour television, time lock safes and bandit screens have made a huge difference.
Regarding a consultancy service abroad, we are not in the business. We are doing a tiny one in Latvia at present. It is no longer business for us. We exited from it.
Regarding Fexco and prize bonds, we are very satisfied with Fexco. They have never let us down. They are half of what we do and we are the other half. We have no reservations about them. There is a row going on there among the management and rubbish will be thrown over the wall in one direction and back in another. We are happy with it and have no reservations about it. It has had one impact.
The NTMA will not allow us to avail of the new contract we had won jointly with Fexco until this matter is cleared up, but we have taken all reasonable steps to satisfy ourselves that there is nothing to worry about and I would reassure people with prize bonds that they have nothing to worry about.
As to whether the use of outside consultancy is value for money, sometimes it is and sometimes it is not. If it is not, then one does not hire those guys again. We are not major users of consultants. We are quite good at our own technology development. We have used some of it, obviously in the legal area to do with competition law and in other areas. Where we are buying equipment we have not bought before, we would hire outside technical experts to undertake evaluations for us.
The philatelic sector was losing money but that is no longer the case. There are now 800 peel-and-stick stamps franchisees. We have reached an agreement with the Irish Postmasters’ Union and we will be recruiting more people to sell peel-and-stick, which will be available in a customer-friendly format.
We are not selling off SDS. We are proud of it. Ten years ago it had a market share of 8% and was going out the door and into perdition. It has now a market share of 38%. That was done by the postal staff and managers of An Post against the best the competition could throw at us. In that sense, we are not worried about liberalisation. If the gloves come off, An Post will not be a pushover.
We will create a museum. The only thing we have done so far - my colleague, Mr. Ryan, will laugh at me on this - is that after we ceased sorting the mail at night on the trains, we had one restored to mint condition. We have a travelling post office. CIE gave me stick about it because before we did it we would not spend any money on them because we were getting out of them.
To answer Deputy Ring’s questions, most of the sub-post office staff, many of whom are women, are trying extremely hard. The staff is excellent. On Clare Island, we are on our fifth lap. It is a local scene, as the Deputy will be aware is the case on the islands. The smaller the community, sometimes the harder the knot to be unravelled. We have made a couple of very innovative suggestions there but we cannot and will not conclude a financial arrangement on Clare Island which sets a precedent for the rest of the network. We will keep at it until we solve it.
On household budgeting, I look at the figures and review the performance of these divisions every month. We get 98% of the money that is paid to us on the same day, it is in the bank account of the people to whom that money belongs the following day - they have a computer tape to go with it - and the following day 100% of it is there. Therefore, there is no reason it should be more than two to three days. The rest of it must be further down the line.
In answer to Deputy Ring, yes, I will make the commitment on Ballinrobe which he sought.
On the doomsday scenario to which Deputy O’Shea referred, I am not here to scaremonger. Clearly what is happening here is not an earthquake but it is a shift. It is about the point where one starts to lose volumes. We are a large fixed cost business and we make our few bob on the very last few transactions at the end of the year. Many businesses are in that situation. We can see here, in some of our very big contracts, real alternatives for the first time. They are highly cost effective and, furthermore, may be quite popular with people. That does require a policy response. In the end An Post cannot be left to carry the can for this problem because we are not all of the solution and therefore we should not be the only receiver of the financial problem. I said the knock-on effect would be the loss of 1,000. If we lost those big contracts, it would actually bankrupt the company in its entirety and not just the post offices in a year. That is the long and the short of it. We would not have a bob left.
Chairman: The Industrial Relations News of 6 May 1999 stated that present net margins are between 2% and 3% compared to up to 15% in some of its main competitors. That is a very narrow market. Is that true?
Mr. Hynes: It is not a sustainable margin. It is true. That figure of 2% or 3% is the figure before tax. The figure I gave you was the after tax one.
Chairman: What are the differences between An Post and its main competitors?
Mr. Hynes: The benchmark we have discussed with trades unions, board and shareholders is that we absolutely must be at 9%, which in terms of last year would mean a profit of about £34 million. We will get a roasting on some of our prices when competition hits us because averaging between rural and urban will not work in the exposed sectors; it will only work inside a monopoly area and not in any other way. Therefore, we will lose our current prices in the competitive services and that will come right out of profits. Before we get that cut in revenues, we need to build up a cushion.
Second, we must heavily invest in the modernisation of our letter post physical business. We will have to invest between £50 and £80 millions in the next two to three years in our letter post business. In that sense, the recent sale of PostGem Ireland On-line, which netted us just over £100 million, was a just-in-time sale because we must plough all that money into our main business.
We have compared ourselves with European post offices. Our competitors will sort about 85% to 90% of the letters every night using machinery and we only sort 25% of them using machinery. We can never win at those levels of automation.
Chairman: I asked you a question when you were making your presentation. The company has over 900 post offices which are catering for 4% per cent of the population. This is a major obligation in rural areas at a very high cost. I asked you about rural renewal. Has An Post participated in any creative or imaginative exercises in conjunction with some of the organisations associated with the developments in rural Ireland and rural renewal generally.
Mr. Hynes: One or two, but generally no. The reason is we respond in the end to the wishes of our major customers. If there are things in which they do not want to get involved and if they do not want us to reach those people that way, we do not get involved in them. Eircom, for example, would want to be totally electronic and operate over the telephone. It is not the slightest bit interested in reaching out through post offices because that is not its business and there are quite a number of businesses like that.
To look at use of the Internet in rural Ireland, for example. we have a couple of Internet kiosks in some of our Dublin post offices and the level of use is low. People access the Internet with a PC at home, but they will not do their Internet business in front of other people in a post office. The Internet has nothing to do with post offices. In many cases it is a substitute for it. One will not find An Post embracing the scorpion which will sting it to death. That is the commercial dilemma which An Post faces.
A good deal of thought must be given to rural development and I welcome the Government’s decision to do it on an integrated basis. At the end of the day, we are not like the creamery businesses, the Garda stations or schools and we have not done any of the things they have done. We have stuck it out and we intend to stick it out, but we definitely need a little help at this stage.
Chairman: Thank you, Mr. Hynes.
Deputy O’Shea: I did not get an answer to my question. Did Mr. Hynes say that if An Post lost its three major customers, the business would fold? Is that scenario likely if An Post loses less than the three?
Mr. Hynes: If we lost them completely, the whole business would fold. It is unarguable. Therefore, if we lose them over time, we will reach a point at which we can not take the financial pain any longer without looking at our costs and the Deputy is aware of our costs. I do not have to spell it out for him here.
As long as An Post is coping and balancing its books at the end of the year, I will be criticised by some people for not having shareholder value but nobody will be worried about it. Prices have not increased in the postal service for ten years. Prices in the post office division are falling. Nobody has to put their hand in their pocket and we are managing with the current staff and post masters. I do not think anybody is worried about it. When we are not able to manage, then the policy community will have to come to our assistance and we are getting close to that point in my view.
Chairman: Mr. Hynes and the other gentlemen, on behalf of the committee I thank you for coming before the committee. The Irish Postmasters’ Union is coming in now. We deliberately avoided certain areas because of what you were asked to come about in the first instance. The committee was glad of the opportunity to hear what you had to say on certain matters. We recognise that there are other questions which we would like to put. We recognise also that there are some matters which are of a sensitive nature at present also. I hope we will all be in a better position to exchange these views another day. I take this opportunity of wishing all of you a happy Christmas.
Mr. Hynes: Thank you, Chairman.
Chairman: The sitting will be suspended for a few minutes while representatives of the Irish Postmasters’ Union take their seats. I ask members to remain in the seats.
The Committee suspended at 4.10 p.m. until 4.15 p.m.
Chairman: I welcome the delegation from the Irish Postmasters’ Union, and the general secretary, Ms Vera Hogan. I apologise for the delay but we had an unexpected and unprecedented arrival of a delegation from Eircom, which set us back. Perhaps you could introduce your colleagues to us. The committee proposes that you should make a short verbal presentation. We have already received a written presentation which will become the base material. Members will then put questions to you in order to understand the salient issues and aspects of your case. That is probably better achieved through the process of questions. I invite you to make the presentation.
Ms Hogan: I will introduce my colleagues as follows: Mr. Brendan Moriarty is president of the Irish Postmasters’ Union; Mr. Seán Maher, represents the post office in Berkeley Road, Dublin, which is a very busy city office; and Mr. Bernard Bradley is from Rochfortsbridge - a medium-sized post office. Therefore, we have a representative sample of offices here. We welcome this opportunity to meet with you, Chairman, and members of the committee, to present our case on behalf of the union. We welcome and wholeheartedly support the Government’s commitment to retaining a nationwide network of post offices. However, if that commitment is to be honoured the post office network urgently needs reappraisal and investment. It is starved of investment at the moment. As you know, Chairman, there are 1,800 sub-post offices of which we represent over 90%. Having heard the debate earlier, I do not have to tell any members of the committee that post offices play an important social role in the community as well as having an economic role. That socio-economic role has been the focal point in communities for generations and it has been treasured, admired and accepted by communities. For many older people the post office is often the only point of call in the entire week, so as well as providing a valuable economic service it has a social role.
It is a matter of continuing concern to postmasters and postmistresses around the country that, de facto, An Post is refusing to recognise the social role of post offices as well as their economic role. As a result of this failure to recognise the socio-economic role and all it involves, the cost of supporting the network weighs heavily on the shoulders of postmasters and postmistresses.
I can provide a few examples to illustrate this point. Based on 1998 figures, which have not changed in the meantime, some 926 post offices - that is half the national network - each earn a gross income of £10,000 per annum. Out of that figure they provide accommodation, staffing, lighting and heating free of charge. We engaged an independent consultant who found that the average per-tax net income figure for almost half the post offices in the country is £6,500 per annum.
Chairman: Are these the post offices that do 4% of the business?
Ms Hogan: I heard that figure of 4% but I do not have access to the inside breakdown. One can take a different perspective on that, however. I would like to see the breakdown between the 1,800 sub-post offices. One must also look at it in terms of the ratio of business transacted in each community because those figures can be quite misleading. I will deal with that later. Yes is probably the short answer, but I will give a longer answer as we go along.
Our independent analysis of the largest 77 post offices in the country shows that, when accommodation, lighting, heating and staffing costs are removed, their gross earnings average £18,700 before tax. They are extremely underpaid and, in my view, are subsidising the services of An Post. We have people earning as little as £1.50 per hour in the smaller offices, after accommodation costs are taken away. That is one third of the proposed minimum wage. There are earnings and capitalisation crises in the post offices.
We put a major emphasis on delivering technology driven services. Our goal, and the primacy of our position, is to provide services, in an inclusive way, to all citizens, irrespective of whether in a town or the country. There should be equal access to services, irrespective of location.
The Government has a policy, which we welcome, of maintaining the network of post offices. However, the de facto position of An Post is the opposite because, the refusal to automate almost 1,000 post offices is, in our view, forcing those post offices to wither on the vine until they disappear. The Government has stated it wants us to be the e-commerce centre of Europe, if not the world. Is it not, then, a nonsense that almost 1,000 communities are being denied access to basic services such as money orders, passport express, prize bonds and post office savings bonds? The sole criterion for their exclusion is their rural location.
We heard figures earlier about the one in four take-up in smaller rural communities. That results from two factors - the lack of modern, automated facilities and the full range of services. Denying people something as basic the ability to get a money order in a post office in itself forces people to move into larger areas where they will get what they see as a sophisticated, complete service. It is a chicken and egg argument. We would argue very strongly that the provision of automated services increases the take-up by the community. That has been our experience and, from branch meetings around the country, I am aware that is the position. We strongly urge the automation of the remainder of the post offices because otherwise they will not survive. It is a well documented fact that if people collect their State benefits and do their business in the local post office, it retains services in the community. That, in turn, helps retain the local economy and people living in the community. The reverse is also the case. The balance of the network will disappear if it is not automated, which is already the experience where post offices are starting to close.
We realise the post office of the next millennium will be very different to the one we know today, given the massive and rapid developments in information technology, e-commerce and so on. We have pioneered over the past few years the concept of the one stop post office service and information centre. I went to Ballyheigue, which has a one stop shop, four years ago. I sat down with 40 local community interest groups, including golf clubs, GAA clubs, rehousing groups, resettlement groups, local shopkeepers, local publicans, farmers’ associations, Macra na Feirme and the ICA. I asked them what services they wanted and we drew up a document. We then submitted proposals, which were accepted by the Department of the Taoiseach, and we got European funding for four pilot one stop service and information centres. They are in Ballyheigue, County Kerry - which is Brendan Moriarty’s - Ceann Tragha County Kerry, Loughglynn County Roscommon and Kilmihill, County Clare. When they started we believed we would get no money for them but we got European funding to buy the hardware and software. They have been a tremendous success.
These pilot projects are palpable proof that it can succeed. We have a comprehensive information service on social welfare, Teagasc schemes, tourism, FÁS schemes, bus timetables, local education schemes and so on. We also provide Internet access and e-mail. They are hubs of activity. I launched three of them and they have been greeted with great enthusiasm. More importantly, they have been used by the local communities. Businesses, shops, hotels, golf clubs, farmers and GAA people mail wedding greetings and death notices to the media. Children send e-mail. Local farmers update their accounts. There are queues in Brendan Moriarty’s shop for the Internet and e-mail and he has put in a queuing system.
Once the technology was put in, they became self-financing for the postmasters and postmistresses. There is no middle man involved. We keep the prices as low as we can for the local community. It results in additional earnings for the post offices, helps their viability and, above all, introduces additional services into the community. That, in itself, creates an outward, developmental image for the community and increases community confidence, which is very important.
We greatly welcome the commitment in the White Paper on rural development to the delivery of the most comprehensive range possible of State services to all citizens. There is a commitment to provide one-stop-shops in communities. The White Paper also stresses the importance of information and communications technology, especially for rural communities, and stresses the importance of the post office network in that context. We welcome those commitments. However, the future depends crucially on modernisation and automation of the post office network. This requires both the commitment and the ability to invest in the creation of the necessary infrastructure. Unless that is done, we will not have the network. What is urgently needed now is the framework for investment and the timescale for completion. I have no doubt, from our experience of the one-stop-shops, of what a great injection of hope, enthusiasm and additional services that will be to the rural and urban communities - we must remember there are also urban communities with their own way of life. As Seán Maher has often said to me, Dublin is a collection of villages. That is very true, where the post office is concerned.
In regard to social banking, we believe, notwithstanding what is said about Europe and so on, we must look to our own demographic structure and situation to see what is best for us. The evidence points powerfully in favour of the local post office as the village bank, in terms of social banking. Hundreds of thousands of citizens do not have bank accounts. The post office is ideally placed to broaden the base of account holders. It is in the community, where it is trusted, and people already have a record of saving with the post office. We believe that a basic banking service, that would allow deposits and withdrawals from the local post office, would bring a modern service to local communities and greatly enhance the viability of the post office. We must move with the times.
This works very well in Britain. We should examine how this is done in the North of Ireland. It works there, where it increases the viability of post offices. They had banking before they had automation in Britain.
We would strongly push the idea of banking for post offices. It is a nonsense that post offices cannot cash third party cheques. If one cashes a FÁS or health board cheque, one runs the risk of incurring the wrath of the corporate body, An Post. The only alternative is to turn the customer away. Given how life is in local communities, one often takes the risk - if I dare say it - of cashing the cheques rather than turn customers away. It does not make sense not to have an automated banking facility in post offices. They are already well used to handling money and are more than capable of doing it.
I want to talk now about business opportunities. Post offices are facing much tougher competition today than ever before. The post office does not have a monopoly. It does not have a monopoly on social welfare and bill paying. There is great competition from the financial institutions for all of the core business. Social welfare recipients can have all their benefits paid into a bank if they so choose. It is essential that the exclusivity which applies in relation to the social welfare contract and An Post is maintained and strengthened into the future because it is 48% of the core business of post offices. It is much higher because when people come in to get their social welfare they also do other business as well. It is essential that that contract is retained. We are disturbed to hear today that the contract has not been signed. We strongly urge that that matter is resolved because post offices will not survive without social welfare. We have already had that campaign and I will not rerun it here.
Even though we are subject to competition it does put major emphasis the ability of post offices to compete for new business, particularly the ESB bill payments. It is nonsense that the ESB bill is the only domestic household bill that can be paid in post offices. We are turning people away daily. We conduct a campaign and people think we have won the ESB bill paying contract. People flood in to the post offices to pay their ESB bills. The ability to pay an ESB bill in the local post office is a basic essential service.
Chairman: It is about price.
Ms Hogan: When Mr. Hynes gave his presentation earlier he said it was competitive. I do not believe this is about price. Post offices have been taking-----
Chairman: Social welfare payments were about price.
Ms Hogan: We have already had that debate. I do not accept that. One could take a narrow cost benefit analysis and talk about price or one can look at the total picture. The reality is that we have 1.5 million people using post offices every week. The vast majority of whom do so to pick up their benefits in cash. We failed to recognise in making that argument that there is a large number of people who do not have bank accounts and people who cannot afford them. If we look at the day-to-day lives of people who depend on social welfare we can see that they are not capable of being involved in banks. They live meagre lives under social welfare and they need their benefits in cash. Anyone who started out with a little money in their pocket will know the importance of having money in their hand at the end of the week to try to get the basic necessities of life. We must look at all of those things when we look at cost benefit analysis and when we build cost benefit equations in terms of cost. This is a much broader issue. It comes down to the network of post offices and whether we want to retain them and the universality of services available to all our citizens.
I want to move ahead and put major emphasis on the question of the ESB bill payments. I also urge Government to urge State bodies to use the local post office to distribute payments to, for example, FÁS, farmers and health boards. Think of the regeneration that would result in local communities if more payments could be distributed via post offices. We must also look at the development of the post office.
Chairman: Would that be different from the cheque in the post?
Ms Hogan: Yes.
Chairman: Has the IPU discussed that with the IFA or the ICMSA?
Ms Hogan: As part of our one-stop-shops initiative we sat down with local representatives from the IFA and lots of other communities. They were enormously supportive. Macra na Féirme, the ICMSA, all the farming organisations and the ICA supported us during our social welfare campaign. I would be quite happy to sit down and talk to the IFA organisation.
Chairman: I am serious about my question.
Ms Hogan: Yes.
Chairman: These people receive their moneys through a cheque in the post. It is part of the concept. It is known as envelope farming and that is the way it is done. Farmers will not like having to get into their cars and go down to the post office to collect the same cheque that would have been delivered at 10 a.m.
Ms Hogan: Some people like to get their benefits paid through the post office and they should have that option. I would not disagree with a farmer who wishes to get his cheque in the post. However, farmers should be able to cash their cheques in the post office and we are frequently asked to do that. We must say no but they should be able to cash it. If we had banklink facilities we could open up the full range of facilities. That is what I am talking about. I am not saying a gun should be held to people’s heads to make them go to the post office. We have an efficient service but if it was modernised it would be more cost effective plus people would have an option. I have no doubt people would use such a post office. As services are modernised and made more available the post office would be used more. Existing one-stop-shops have proven that to us beyond doubt because business has been increased due to a greater throughput of people.
I want to refer to PostGem/Ireland Online and investment. I have talked about under investment. Ireland Online has netted a profit of £100,000. At the launch of the sale the Minister for Public Enterprise said:
“An Post is facing into new competitive challenges. Some or all of the capital proceeds from this sale will allow An Post to achieve its plan for major capital investment, including investment in the rural post office network.”
The IPU welcome this but we are concerned about the absence of any discussions with us in relation to how this will be done and the proportion to be spent on the network. It is an ideal opportunity to ensure that this money, which is available for capital investment, is invested in post offices and in their automation. We strongly urge that consultation takes place and ask for joint agreements on spending targets, including the £104 million gained as a result of the sale of PostGem/Ireland Online, with regard to investment in post offices. That commitment was given by Government at the announcement of the sale of PostGem/Ireland Online.
The national development plan opens up unparalleled development and investment opportunities. It will allow new horizons to develop capabilities across every sector. For us it is essential that the post office, which pioneered modern communications, is not left behind. For a modest investment, as compared to the total moneys to be invested, we could put type technology in our one-stop-shops and post offices. That would give all citizens equal access to services. Someone in a rural or an urban community should have equal access to Government information services through the Internet. All the emphasis is on e-commerce and on getting more information on the Internet on behalf of Departments and State bodies. Post offices are in place, they have got the personnel and we have proven we can take on technology. An Post is ideally placed to deliver those services and that would bring in new business and result in another regeneration of the local community infrastructure. The IPU support that.
Chairman: The committee has just received a copy of the document that Ms Hogan referred to. It is an informative document which will form the subject of further examination by the committee. An Post will come back here again. The IPU document and whatever questions are put to her organisation will form the basis of additional questions that will be directed at An Post.
Deputy O’Shea: I am interested in the four pilot projects mentioned. I am familiar with the post office in Ventry because I go on holiday there, or quite near there, every year. This year I sent a fax from it. What type of funding was involved in providing the equipment and what effect did it have on turnover? There would have been an increased turnover in terms of the services provided and a knock-on increase in turnover by having more people in the post office. I would be interested to hear how it was worked out and what were the precise effects.
Mr. Moriarty: The project started about four years ago in my office. I have noticed a huge increase over those four years and it is gaining momentum all the time. People come in, check their e-mails and use the Internet, fax and photocopying facilities. It is a successful project. It also puts extra money in my back pocket. My earnings are not that great. Post offices exist on small earnings and everything is a help. It is extra business for post offices.
Ms Hogan: I can send the committee a document that is appended to our report. It will give Members an updated report on the four one-stop-shops. It sets out volumes. With regard to the photocopy service, Mr. Moriarty’s post office has an output of 300 copies per week. The survey was carried in July, 1998 and figures have increased since then and it faxes us 200 pages per week. The email facility now attracts approximately 25 core users and again that has increased substantially since this document was done. As I said, the back of that has details of the uptake of the services in each of the four post offices, bearing in mind that some of them were in the embryonic stage then. Brendan’s would have been up and running a year and a half at that stage, or two years. The email and internet were only in about a year, if I remember correctly. There are the details. I would be very happy to send Members all of the documentation that I have on it.
Deputy O’Shea: That would be the most effective way of doing it and I thank Ms Hogan.
Chairman: You can send it in to the clerk of the committee and we will circulate it then to all Members.
Senator Cregan: Just a quick question Chairman. Probably I should have directed my question at the previous group and not at this group but I am sure she can comment on it anyway. Mr. Hynes or one of his colleagues passed a remark about changing some post offices to sub-offices. Am I correct in saying that, Chairman?
Ms. Hogan: Changing post offices to sub-offices?
Senator. Cregan: In the same breath the person said there would be no diminution of services, that services would be retained. Why would An Post want to do that and what would Ms. Hogan’s view be on changing post offices to sub-post offices?
Ms. Hogan: I heard him say that. Presumably from their point of view it has to do with cost effectiveness.
Senator Cregan: Yes, but if one has to retain the same level of service….
Ms Hogan: It is a very good question. The Senator has put his finger on the button.
Senator Cregan: Well as I said, I should be directing my question to Mr. Hynes. I will have an opportunity in the future.
Ms. Hogan: No because there were two different statements. The sub-post office network, which the figures bear out, is highly cost effective. I am not going to speak for An Post but when they become sub-offices, because there is a very tight financial regime and the margins are so tight in some post offices, they are highly cost effective. There is a monetary saving in converting them into sub-post offices. Deputy Trevor Sargent made the point earlier about Swords, where the rent rose by something like 13 to 22 per cent, which had nothing to do with the size of the office. It had to do with the fact that the rent more than doubled and clearly they were not able to live on the earnings they had, of which £9,000 or £10,000 would be left after it. That was a failure to address the remuneration circumstances in post offices crippling both rural and urban offices, not even making a distinction. To answer the Senator’s question directly, I imagine, without speaking for An Post, that it would be more cost effective to turn a company office into a sub-office.
Senator Cregan: Has Ms Hynes had any occasion to have any negotiations or discussions with An Post on this matter?
Ms. Hogan: There was a brief mention of confidential proposals relating to converting a certain number of company offices into sub-offices. We have not had any discussion since on that. We have had major discussions to try to get An Post to recognise the one-stop shop scenario. We have been pushing very hard for banking. We have obviously been trying to advance the matter of pay and so on but there has been very little discussion on that. That is true to say.
Senator Cregan: Would Ms Hynes see any future in the areas where rural post offices have closed down for instance? Would she still be of the view that those should be brought back and replaced, even brought back as sub-offices for the benefit of the people in extreme rural areas?
Ms. Hogan: I grew up in rural Ireland and in a small town. I know what it is like to live in the country. If I am living in rural Ireland, I should have equal access to services and that is mine and the union’s core belief.
Senator Cregan: Would a situation ever be revisited where a post office has closed down? Could those offices be re-opened in some shape or form?
Ms. Hogan: Perhaps if we developed the post offices already there and we put in modern facilities. It is an absolute nonsense to be running two parallel systems. On cost structures in An Post, there is a paper based system, an automated system and people manning both. That is economic madness. It does not make sense and the cost of technology is decreasing daily. Technological facilities could be installed in all the offices. To answer the Senator’s question - one upgrades what is already there. One can imagine the great injection of hope given to communities if these modern services are put in. It costs very little in the overall scale of things. Put that in and then perhaps move on and examine what the Senator is referring to.
One should have maximum services. We are quite open and willing to sit down and examine what services need to be where and where they can be best positioned to meet people’s needs. I have sat down with many rural communities in Roscommon and so on, to discuss that. We should develop what we have, move it forward and of course if we can move that on again another step, we certainly would welcome that.
Senator Cregan: Thank you Chairman.
Chairman: This seemingly concerns what is socially desirable. I would be an advocate for retaining post offices and my colleagues were very sensitive to the argument on the side of the retention of rural post offices, in particular. However, we seem to be confronting, on the one hand, the social desirability and on the other, the competition out there. I was concerned this morning to hear An Post itself say that if anyone of the four major customers pulled the plug, the system would collapse. Then one had the major competitors from other retail outlets which are going to give free services to people. There is the third one, which is the automation of homes, where homes will be able to theoretically order and have delivered to their door many products for which they might have had to travel by car.
The use of plastic as a form of currency exchange, is becoming a reality. What do you see as the more sustainable and substantial method of bringing about new product development in post offices, and taking account of what the cost of automation would be in 1,000 post offices required to do this? It is an unkind world and most loyal people found in many of the country halls in support of the local post office did not use it, strangely enough. They did not use the local pub oftentimes. They went to town and many of the things that were local were great areas of debate and great causes of increases in the decibel level but there was little visible evidence of their support for it. “Shop locally”, was heard for years - the local shop disappeared. It applied too when prices were different in towns north of the Border. One could find more there in some of the local towns than one could in my own county. How can we get around that continuing difficulty?
Ms. Hogan: You put a very important argument that will keep going on and on. To get around it, where you have started, and I agree with you is with a social role. It is about the whole socio-economic role. Do we follow the European policy regarding rural places as living spaces? The whole question of subsidiarity and maximum provision of services at local level is involved. If we follow that does that mean maximum provision of services? I understand, what you are saying, Chairman, on take-up. It is a chicken and egg argument. If one looks at the other retail outlets where they are saying they will do it for nothing. We had this during the social welfare campaign where banks were going to do it for virtually nothing. But what is that offering? This involves cherry picking the service and offers us the more profitable aspects. There will still be 1 million customers who need them coming in every week to collect their benefits in cash. We are going to have to retain that service for those citizens even on an uneconomic basis. This is about services and a way of life as well. Does a strict monetarist economic model determine everything or in building our cost-benefit analysis equation, do we include the right of the citizen and the poorer people to access their cash at the local post office? Do we build into that that people should have a right to equal access to services? If that is the case, then perhaps there is going to be an involvement of State in paying for the citizen’s right to be access services via the internet in their local area. If a farmer wants to know the local grants should he have to go to the biggest town or should he be able to access them locally?
Chairman: Or access them in his sitting room
Ms. Hogan: Or go into his sitting room. I understand what you are saying. We have in many ways, by pioneering the one-stop shop that we did, tried to get ahead of the posse. When I came into the Irish Postmasters’ Union, I had a look at it and said,“Look, we are standing still, unless we start to change, we are not going to make it into the millennium”. We have to move with the times. I do not believe we are all going to be sitting inside in our sitting rooms pressing buttons and not going out to see the light of day.
Many people use the post office for social purposes and they like and need to have their money in cash. For some older people going to the post office is often their only point of call in the entire week and their concerns must be addressed. We cannot turn our back on people living in communities because some large multinational believes it can offer a better price structure or provide the service for nothing. The banks were competing for social welfare payments. I am not going to comment on banks as members are well aware of the level of bank profits and how they are made. However, the value of the postal and social services provided by local post offices, and there is potential for additional services, is incalculable, and no bank is going to help the 25% of people who are illiterate to fill in their forms. Who will provide that service currently provided by post offices? Brendan Moriarty in the one-stop-shop is available at any hour of the day to give people information on all benefits and taxation and social welfare implications. These are essential services and the issue of who pays arises.
Chairman: You have a good argument to make. It is a question of who will pay the cost of providing essential social services and how supportive society is going to be in certain areas for that service. Would you consider making a written submission to the committee on the issues you think it should pursue with An Post? We thought it appropriate to invite An Post to speak to the committee separately as we do not provide a forum for close combat. However, the committee recognises the case you make and it is only when these services are withdrawn that people express regrets.
I raised the issue of rural renewal this morning. If rural renewal is to occur due to increased population, decentralisation, improved communications, roads and technology it would be a pity to arrive at that point having lost services in the meantime. I am still in a dilemma about how this will be achieved. Taking account of the impact of European directives on competition, it is not easy to look into the crystal ball. The committee will gladly raise issues of concern to you with An Post if you make a submission. We will try to obtain information. We are not going to carry out a consultancy exercise but we will place the reply before the Houses of Oireachtas in minute form which will be available to everyone. Perhaps some people will access them through the Internet at their local post office.
I thank the delegation for attending. We understand your difficulties but we do not have a particular function beyond placing the documentation before the Houses.
The Joint Committee adjourned at 4.55 p.m.
JOINT COMMITTEE ON PUBLIC ENTERPRISE AND TRANSPORT
List of Members
* In substitution for Deputies E. Stagg and J. Mitchell respectively.
* John Cregan appointed in substitution for Des Hanafin on 13/07/99.