27 January 2010 - Mark White - © Hellmail Postal News

Billy Hayes, leader of the Communication Workers Union told a packed House of Commons Committee Room yesterday that unless the Government acts quickly to underwrite the pension deficit, scheduled repayments could seriously damage the Royal Mail's future operations.

There has been growing concern that the deficit, rumoured to have grown to £10bn, would leave the Royal Mail strapped for cash at a time when it needed to automate mail processing on a large scale. The stalled Postal Services Bill, now on ice after the government failed to find the right buyer, has left the Royal Mail with the mammoth task of clearing the deficit and rivals furious that much-needed regulatory reform appears to have been shelved.

The issue for many is that Postcomm, the industry regulator, is charged with regulating and monitoring Royal Mail on the one hand and overseeing competition on the other and that without a long-term solution to Royal Mail's financial burdens and a fresh approach to regulation, the industry is back-pedalling.

John Coghlan, Chief Executive of TheDX, is also concerned that present regulation is stifling the postal industry:

"The challenge is to introduce enough competition to promote change and modernisation, but not so much as to have major detrimental financial consequences nor to stifle Royal Mail.

"Such a framework can’t be achieved via Competition Law. It simply cannot address the challenges created by the cost-justified pricing that is critical to the industry. This means that the regulatory regime must be prescriptive, tight and lay down rules that provide certainty to the market."

Royal Mail Chairman Donald Brydon last year said:

"Whatever the Government decides to do with its shareholding, the well understood problems of regulation and the pension fund deficit will not go away.

Presenting the union's new document Time to Deliver - Royal Mail Pension Fund Deficit, CWU general secretary Billy Hayes argued yesterday that then government, as the sole shareholder - and therefore, the ultimate owner of the company, has a specific responsibility to address the crisis, and that decisions made and existing regulation by this and previous governments had actually created the deficit.

Steve Lawson, editor for Hellmail Postal News, who last year chaired a meeting with senior representatives and advisors from across the postal industry, said:

"It is widely acknowledged that urgent regulatory reform is needed but one gets the impression that Lord Mandelson is not keen to do anything ahead of a general election. Neither will he accept that a stable footing for the Royal Mail, a solution to the pension deficit and progressive reforms can be undertaken seperately. I believe they can, and regulatory reform, which included a transfer of regulatory responsibilities to Ofcom seems to have been completely abandoned, despite Lord Mandelson arguing so vigorously over the need for change in the House Of Lords.

"The forward plan, as set out in the Hooper Report on an 'all or nothing basis' means that having failed to secure a strategic partner for the Royal Mail, the entire plan has now ground to a halt. The government must acknowledge the pressure faced by all players particularly with mail volume in decline and regulation so out of step. There appears to be no timetable at all on this."

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