Tuesday, 27 January 2004

Questions (493, 494)

Paul McGrath

Question:

609 Mr. P. McGrath asked the Minister for Communications, Marine and Natural Resources his proposals to introduce legislation to give effect to the employee share ownership trust for postal workers; and if he will make a statement on the matter. [1920/04]

View answer

Fergus O'Dowd

Question:

614 Mr. O'Dowd asked the Minister for Communications, Marine and Natural Resources if he has received a letter from the board of An Post in May 2003 confirming that the workers in An Post had complied with their side of the ESOP agreement; and if he will enact the long overdue legislation to give effect to the An Post ESOP. [2077/04]

View answer

Written answers (Question to Minister for Communications, Marine and Natural Resources)

I propose to take Questions Nos. 609 and 614 together.

The An Post ESOP, which was signed in 2000, provided for the transfer of up to 14.9% of the company to employees, on a phased basis, in return for specified costs savings and profits. 5% of the transfer was for transformation and 9.9% as a profit share. The purpose of the ESOP was to facilitate the transformation of An Post into a viable and profitable postal operator in order to successfully deal with challenges arising from liberalisation and electronic substitution. In return for 5% of the company, cost savings amounting to €34m were to be achieved between 2000 and 2003. However, instead of achieving savings the opposite has happened, i.e. staff costs rose by €24m between 1999 and 2000 which represents a 6% increase, by €52m between 2000 and 2001 a 13% increase and by €40m between 2001 and 2002, an increase of 9%.

In regard to profits, the table below sets out profits envisaged under the ESOP and the actual financial outturn for the company:

Year

ESOP

Annual Report

€m

€m

2000

7.6

9.8

2001

8.9

(6.7)

2002

20.3

(17.8)

2003

34.3

(29.5)

forecast

In May 2003 the An Post board advised that cost savings for 2000 set out in the ESOP amounting to €7 million had been achieved. However, according to documentation supplied by An Post at that time, achievement of savings was substantially below target levels in the ESOP agreement, was delayed, and took place between 2001 and 2003 instead of in 2000. In September, 2003 An Post advised, following a review of company finances, that forecast profit of €1 million had turned into a loss of €29.5 million. Therefore, having regard to the substantial losses notified by An Post for 2003, the board has been asked to review the cost savings verification process and respond to the Department. We are still waiting for a response from the board of An Post on the verification of the cost savings issue. The Government is still committed to an ESOP in An Post, if and only if, it can be demonstrated that real transformation has occurred and that the cost savings envisaged in the ESOP have been achieved.