On 12 May last, I asked the then Minister, Deputy Dermot Ahern, if his attention had been drawn to a call from An Post staff at the Communications Workers Union conference in Galway for an Oireachtas inquiry into the earlier mismanagement of the State postal service. The Minister reported to the Dáil that it was not until he decided to refuse to bring its 2002 accounts to the Cabinet that the company accepted it was in financial difficulty.
I have before me the An Post presentation given by group chief executive officer, Mr. John Hynes, to the Joint Committee on Communications, Marine and Natural Resources in January 2003. According to the report, an operating loss of €18 million was predicted to become a €1 million profit in 2003. In reality, the 2003 outturn was an operating loss of €42.9 million even after profits of €13.3 million on the disposal of land and buildings were taken into account. In the meantime, significant bonuses were paid to the outgoing chief executive, Mr. Hynes. While Mr. Hynes's board refused to prepare a so-called survival plan in the first part of 2003, the new chief executive, Mr. Donal Curtin, declared very soon after he took over in July of that year that ongoing losses at An Post were unsustainable. The revelation of this astonishing turnaround in the finances of a vitally important semi-State body was a shocking blow to the workforce and its confidence in An Post's management. It raises serious doubts about financial forecasting and the reliability of elements of audited accounts.
The previous Minister, Deputy Dermot Ahern, declared he was only advised of what he called the true financial situation in September 2003. In apparent panic, he demanded monthly financial reports to the shareholder — in this case, himself — and attended several board meetings. He also began to suddenly take an interest in the calibre of Government appointments to State boards and talked about personal probity tests and the provision of tax clearance certificates. There appears to have been an effort by the Minister, as in Chairman Mao's China, to re-educate directors on boards under his remit, but as with much of the Minister's administration of this Department, those reports turned out to be useless waffle.
The saga of the 2002 and 2003 accounts have played a major role in the breakdown of trust between An Post workers and management. The financial mismanagement is regarded by workers as a grotesque repudiation of the transformation through partnership deal to which they committed themselves wholeheartedly. The more recent lack of consultation by the present management and total confusion over the financial prospects of SDS have greatly added to this sense of having placed trust in the professional competence of managers and feeling badly let down. It must be noted that the decision not to increase the price of the basic stamp for 12 years up to 2003 is also a factor in the current difficulties that have emerged at An Post.
I refer briefly to the nature of the universal postal service. For over a century and a half, every developed country had a national post office following the British invention of the stamp in 1844 and the German creation of the international Universal Postal Union in 1874. All the member nation post offices delivered a universal postal service without distinction between urban and rural or local and national, and with free daily delivery to every door. In economic terms, there was cross-subsidisation between cheap to handle urban post and the more expensive to deliver rural service. The great post office networks of the world were rightly celebrated and included in national laws such as the US postal code, which instructed the post office in its governing legislation to bind the nation together through the personal, educational, literary and business correspondence of the people.
The British Royal Mail, the ancestor of our Irish service, inspired the poet W.H. Auden to commemorate the great national endeavour of the postal service in his poem, Night Mail, which reads:
This is the Night Mail crossing the border,
Bringing the cheque and the postal order,
Letters for the rich, letters for the poor,
The shop at the corner and the girl next
Letters of thanks, letters from banks,
Letters of joy from the girl and the boy,
Receipted bills and invitations
To inspect new stock or visit relations,
And applications for situations
And timid lovers' declarations
And gossip, gossip from all the nations . . .
Nowadays, the lovers would not be so timid. They would be texting, and some of the rest would be sent by e-mail.
That wonderful and interesting universal postal service celebrated by Auden is now being captured bit by bit by market and regulatory forces unleashed under EU legislation in the name of transparency and competition. In this new framework, national public postal services must be reclassified as monopolies. The mutually beneficial terminal dues regime operated across the Universal Postal Union by national governments must be subject, under Article 81 of the EU treaties, to close scrutiny by the European Commission and the European Court of Justice.
Increasingly, the universal postal service, one of the chief representatives of European culture and civilisation, is being reclassified as "services", that is, commercial activity within a market structure. An intense international campaign is being waged against universal postal service terminal dues by organisations like the International Express Carriers Conference based in Washington DC, with the aim of replacing public provision by competitive market provision in one segment of the postal market, namely, cross-border mail, and that effort is increasingly successful.
As these developments proceed, the EU is increasingly confining and reducing the sphere of so-called monopoly held by national postal services, that is, the reserved activities. The sphere of the universal postal service, the area of service of general interest, is being squeezed increasingly and ComReg and similar regulatory bodies across Europe have busied themselves with studies and consultations regarding service delivery performance, future postal rates and bland talk about sharing the universal service obligation across various companies.
The development of the EU Single Market for postal services began in 1992 and the Postal Directive 97/67/E.C. was issued in December 1997. This directive, as amended by Directive 2002/39/E.C. of the European Parliament and Council of June 2002, was pushed through Dáil Éireann by the then Minister, Deputy Dermot Ahern, as the European Communities (Postal Services) Regulations 2002, SI 616 of 2002. Under these provisions, from January 2003 the reserved area was reduced to letters of 100 grammes, with a price multiple of three. In January 2004, the market for all outgoing international mail was opened to competition and in January 2006, the thresholds for full competition will be reduced to letters of 50 grammes and over. In 2009, it is envisaged that full market opening will extend to the 20-gramme letter.
Full market opening for all letters may not happen. Our larger EU partner countries appear to be having second thoughts about the so-called competitive markets as they fail to deliver the excellent universal service that was once taken for granted when there was not a regulator in sight. This decision will depend on a European Commission study of the effects of deregulation on the universal market due in 2006.
Meanwhile, the delivery of a nationwide universal service becomes more and more difficult as An Post-operated main post offices are sold to support the cost-cutting programme or regraded to become sub-post offices. Throughout the past two years, I and many other Deputies in this House were contacted by important centres like Clonakilty and Cahir where the main post offices are being reclassified as sub-post offices or on an agency basis. The Irish Postmasters Union made a worrying submission to the Oireachtas committee on communications showing a massive decline in the post office network over recent decades from nearly 2,000 offices to just under 1,400. The graph is still falling as operators in small rural communities become older and possible successors refuse to carry on the service given the low rates of remuneration paid by An Post. In 2001, approximately 100 sub-post offices were temporarily closed as a result of postmasters retiring.
Given the growing danger to a universal national network, the 2001 interdepartmental report set out a range of options to secure the service. Financial supports from the State to maintain rural networks were seen as essential, although that would entail State-aid clearance from the European Commission. The retention of the contract for social welfare transactions was also seen as critical. The report also proposed an interesting Government services outlet model as a one-stop shop for all Government services in small local and rural communities. Other proposals included a universal banking service and Internet links, where the local post office would act as the local link of the public services broker, and Reach, the new enabling website for Government. Over the past three years, An Post management has received little encouragement from the Government to develop those models. That is the challenge now facing the Minister, Deputy Noel Dempsey, in the remainder of his term and I urge him to address it.
The failure to pay cost of living increases to workers and pensioners, and the recently rejected restructuring proposals for the collection and delivery service, are other effects of the pressure to downgrade the whole postal service in the spurious name of competition. The impact on the delivery of the universal service obligation from the restructuring proposals as outlined to me by the Communications Workers Union seems to be detrimental. An Post management proposes to rationalise the number of delivery offices and delivery posts and rural deliveries will be handed over to private contractors who, presumably, will also be awarded a universal service obligation. Important priority deliveries for business customers will be drastically cut.
The conditions of the postal workers will be savagely worsened in the current proposals with the abolition of traditional grades, compulsory redeployment, compulsory relocation, reductions in annual leave and electronic tracking of deliveries. Despite the negative national and Oireachtas reaction to roadside delivery boxes when proposed by the previous management, the idea has re-emerged in these proposals. It seems clear that the long and wonderful tradition of the rural and urban post person who knew every customer and was a lifeline to the world for elderly and infirm residents is under serious threat if these proposals are accepted in their current form. The Minister, Deputy Noel Dempsey, has a grave responsibility in that regard to ensure that type of development does not happen. He also has a grave responsibility with regard to the events at SDS.
I met a group of owner-drivers in this House a few weeks ago who outlined to me their tremendous hard work to develop the business of the company. They had been full SDS workers up to the time of the recovery plan of 2003 when they took voluntary redundancy to become owner-drivers. Despite fierce competition in the parcels market, they spoke of their deep appreciation of their mainly small business customers and the scope for higher revenues from their service. The detailed information obtained on the subsidiary by the Communications Workers Union shows a reasonable revenue projection from February 2004 of €69 million. That would put the expected losses for the year at under €5 million and would, therefore, indicate a significant reduction from the €12 million lost by the company in 2003. Had there been modest price increases, which workers indicate the market could have borne, and a reduction of other costs identified in the Sweeney report, SDS would have approached a break-even position in 2004. I urge the Minister and his Department to investigate and urgently address these apparent discrepancies and halt the closure of the SDS company.
With regard to the Government's proposed amendment of the Labour Party motion, I too welcome the involvement of the national implementation body and the greatly experienced Mr. Peter Cassells. One of the key issues which Mr. Cassells and other facilitators must address is the failure of An Post, the Minister and his two predecessors to bring forward an employee share ownership trust in An Post. Although there was a definite commitment to an ESOT in the Transformation Through Partnership agreement of 2000, the Minister's predecessor made no serious attempt to introduce the Postal (Miscellaneous Provisions) Bill 2003 on Second Stage in Dáil Éireann. I have grown weary asking the Taoiseach to bring forward this agreed legislation.
Despite the current difficulties An Post remains a great national resource. The collection and delivery service for mail and parcels, the post office branch network, the bill payments facility, the investments and savings products, the very successful management of the national lottery and the other great An Post undertakings represent a nationwide service of great distinction. Again, I salute the An Post workforce.
Given the onslaught from deregulation and the arrival of electronic substitution, it is clear that a modernisation and development of the company in a spirit of close consultation and partnership between the workers and their trade union representatives, management and the Government is essential to secure the future of the universal public postal service.
Management failure over the past few years with regard to the financial administration of the company has brought us to the present position. This is illustrated by the unilateral decision to close SDS and threaten 1,400 jobs.
With a spirit of partnership in a company which is a classic people business and the strong support of the Minister and the industrial relations machinery of the State, the Labour Party believes the current difficulties can be overcome. I thank Mr. Steve Fitzpatrick, Mr. Seán MacDonagh and Mr. Michael Bride of the CWU and Mr. Larry Donald and Mr. John Foley for their useful briefings. I have also been assisted in my contribution by unpublished work on the erosion of the public postal service by Mr. Fergus Ó Raghallaigh, the distinguished journalist and economist and personal adviser to the leader of the Labour Party. I commend the motion to the House.