John Hynes is keen that there will be no problems - I do not think he will receive a card if there are. I am sure that the cards will be delivered on Friday, although I am glad that I am not responsible for it. The system needs to be examined by the committee so it can understand how the technology works.
Mr. Pigot referred to the introduction of codes and it is very easy to say that codes are simple and would improve the system. The technology being used at present can read almost any address. It has a unique address system that would not be provided by codes. The new system is much better than a system of codes in many respects. I suspect that we need to examine these matters on a deeper level to ascertain why certain people are asking for the introduction of codes. Mr. Pigot would like to be able to bring mail to Skibbereen - I believe that the Chairman is from that part of the country - to be delivered there by An Post. The unique code system is of greater benefit to people like Mr. Pigot, who collect or produce mail and like to place it in the system further down. They wish to pay only the cost of delivery up-front.
The presentation my union will make today will deal with the other side of this issue. One cannot have everything the way one wants it. Someone will have to pay at some stage. It is all very well to say that one would like to have a perfect universal service, but that is no use if one takes steps that mean that regardless of whatever else one has, one does not have a universal service. Mr. Pigot's mail may be delivered cheaper, but someone in Ballydehob, the Black Valley or Donegal will have to pay more for their mail if the service develops in such a direction. People often say they want a perfect system with a high quality delivery service - Mr. Pigot made such a demand - but they do the things that make such a service impossible. As a country with a population of less that four million people, Ireland faces huge disadvantages in terms of economies of scale. My presentation will elaborate on these concerns.
We need to examine the type of environment in which we work. The Minister for Finance spoke about demographics when he launched the national pay talks. One can look at things slightly differently when one talks about demographics, if it suits one to do so. This is an important aspect of the postal service that will be provided by An Post in the future. We have a peripheral market - we represent less than 1.5% of GDP. It is hugely significant that we have the lowest ratio of citizens living in urban areas in the EU as it means that we simply do not have the economies of scale found in other countries.
One size fits all in Europe but, thankfully, the European Parliament took a huge interest in this area in the most recent EU directive. Many Fianna Fáil, Fine Gael and Labour Party MEPs were actively involved in the debate and put down a number of amendments. The general view was that while the market should be liberalised, account should be taken of where everyone is at present. People often talk about proportionality and subsidiarity, but they ignore such important concepts when making decisions.
Mr. Pigot referred to the fact that 28% of An Post's revenue comes from international mail, compared to the EU average of 9%. This shows that a liberalised international mail market will not help An Post - no great scientific explanation is needed to show why An Post would lose. The fee for domestic deliveries has to be charged when dealing with post from countries like Germany, France and the UK. If one sends a letter to another EU country, the local postal service charges the local delivery rate, which is higher in almost all EU member states. An Post is making a loss because it does not receive the revenue it should from the letters it delivers for the large multinational companies. It is not a complex matter.
Mr. Pigot made the point that An Post's charges have not increased for some time and I will speak about this matter later. Charges were not increased because An Post was able to survive due to the increased mail volumes that were caused by the growing economy. Mail tracks the growth, or otherwise, of the economy. If the economy is growing, mail volumes will do likewise.
I mentioned regulation and liberalisation at the beginning of this speech. The debate that took place about this matter over a long period of time eventually concluded in the European Parliament, which took a different view from the Commission. The Parliament decided on a slow roll-out of liberalisation to take account of events in the industry. The EU directive will open an average of 23% of European markets, but it will expose about 44% of An Post's market to competition. An Post will be affected by liberalisation to a greater extent due to demographic differences in Ireland and its high proportion of international mail. This proves that "one size fits all" regulations do not work. The Government's biggest decision in relation to this issue relates to the type of service it wants to provide. Many European Governments are paying lip service only to the idea of retaining the type of quality service we have in Ireland. A good standard of service cannot be maintained if one cuts corners and reduces costs.
The Chairman mentioned the question of cherry-picking. It was recently suggested that the addressed publicity post market should be liberalised. This is a matter of concern to members of the Communications Workers Union as we do not believe that one can draw a distinction between publicity post and other post. One cannot decide which mail belongs in which category. We would need to be certain this area could be policed and we do not believe that is possible. There will be cherry-picking, as there currently is in the telecommunications area. These companies do not want to compete in the west, the Black Valley or similar areas. They will only compete where they can make money, which will be in large population centres.
According to what is known as the 80:20 rule, 80% of revenue derives from 20% of customers. In such circumstances, why would one go after the other 80% of customers who only have 20% of the revenue? Companies will not be prepared to do this. If liberalisation comes about or does so too quickly, profitability will be affected and jobs will be lost all over the country.
Until now, the Government and others have shared our view on two connected issues, namely, uniform tariffs and universal service. Universal service is about providing the same service for everyone, regardless of where they live, at a uniform tariff. If one starts to liberalise in a certain way, this will no longer be possible. We saw this at first hand in telecommunications. We know that once the die is cast, it cannot be rolled back unless the Government is prepared to pay to do so. One can deliver a quality, universal service to customers - perhaps better than has been the case to date, particularly in terms of business customers - within the resources of An Post, provided it is regulated in a particular way. The only way in which this can be achieved is for the Oireachtas to set out clearly what kind of postal service it wants.
I mentioned the delays in getting increases in tariffs. I, and my colleagues, have no desire to see prices increased beyond what is fair. We have not complained that we have not had an increase in price since 1991 and when the price was rebalanced in about 1998 or thereabouts, it was slightly reduced. I understand An Post has received permission from the regulator to increase international rates, but has not cleared the hurdle on domestic rates.
A company operating in an unregulated business which was not making a profit would do what every similar business would do, namely, increase prices. If one considers how prices have evolved in the postal sector, it would almost drive one to drink. The consumer price index far exceeds price increases in postage. The cost of newspapers is a good illustration of rising prices, while transport costs continue to increase, primarily because they must.
Customers of other companies, for example, the ESB, who want a particular type of service or network must pay for it through investment. We saw this in the telecommunications sector recently when the regulator decided to change the mechanism for increasing prices from the CPI minus eight formula to CPI minus zero, which is recognition that keeping prices at current levels entails costs, one of which is that companies are forced to lose money.
We now serve many masters. We deal with the company on a daily basis through the board and chief executive. We also have a relationship with the shareholder, which is the Minister and his Department. In the middle, we have the regulator who can make arbitrary decisions, with whom no one can talk and from whom no satisfaction is forthcoming, which is frustrating.
As I stated earlier, people say all the right things. The regulator, for example, has published a report setting out her views. There has been considerable changes in the past 25 years, not all of them for the better. Her regulatory responsibility is to ensure the daily delivery of post remains an essential feature of life here. Action is needed to make that happen. Commenting on investment, Business Week noted that it is an economic truism that low prices yield low investment and one gets what one pays for.
I am sure the committee is interested in ways of improving An Post's services. We are not here to defend the company. Over the past three years, we have been involved in a radical change agreement with An Post which was set to bring about a cultural change in the way we operated and provided service to customers. In one way we did this for selfish reasons, namely, recognition that the world is being changed by deregulation and liberalisation and we will need to live in this new environment.
The introduction of new technology is essential. An Post needs to explain to the committee what it is doing with its new technology. The technology in place around the world is centralised. All the mail in Northern Ireland, for example, is brought to Belfast before being redistributed. What An Post is doing is, therefore, not unusual. The hiccups being experienced are not entirely due to a problem with a centralised system. There are also management issues which need to be ironed out. The idea of a local box has some merit and should, therefore, be considered.
The agreement we made was predicated on the introduction of substantial change. The committee will understand that one of the long-running problems in the post office was overtime. While problems arose in many forms and in many schemes, as soon as one digs a little deeper, one finds that the main problem is overtime. Staff need overtime to get a half decent wage because they are low paid, whereas the company needs overtime to run the system.
The company's problems could never be solved without addressing the overtime issue. At some risk, we decided we had to solve the problem. Our view was that the cake could be divided up in such a way as to allow An Post to pay half decent wages to its staff, while ensuring the work was done in an effective, efficient manner. Employees would be given contracts which provided that they could work a fixed amount of overtime and in return a certain measurable level of service was demanded. We made substantial progress in this regard, although at times not to the extent we would have liked. For example, last year we had some problems in the post office division, which we could have done without. Coming from the angle of the telecommunications side of the organisation, I had a feeling at one point that it would be difficult to implement changes. However, I received excellent support for them from my own side. Regrettably, however, the commitment given by the company at the outset was not sustained.
The issue of roadside letter boxes has been raised. We are discussing this matter with the company in the context of a new pay agreement in the deliveries area. The company argues that substantial savings could be made in deliveries, which is true. These would arise because fewer staff would be required. It also argues, with some justification, that roadside letter boxes are in place in other European countries, with the exception of here and Britain. We have not taken a principled stand on the issue one way or the other. We have held discussions with the company, some of which has been geared towards making savings.
