Plans to make the Post Office more commercially driven by running it as a state-owned company will go before this month’s Tynwald.
The move has been recommended in a report to the Council of Ministers by consultant Elmar Toime, former chief executive of New Zealand Post, chairman of US-based postal technology company Postea Group Inc and member of the supervisory board of Deutsche Post.
In his confidential report, seen by the Manx Independent, Mr Toime poses the question: ‘Is the Post Office at a cliff edge of profitability today? Probably not but the more it fails to keep or generate new business the more difficult it will be to prosper.’
He says there are tangible benefits of following the example of Jersey and Guernsey Posts which have been transformed into companies at arms-length to government and seen significant revenue losses turned into sustainable profits.
It will prompt a cultural change away from the civil service ethos to commercial thinking, and improved the speed of response to major changes in the business base.
Mr Toime accepts change will bring uncertainty and a degree of risk. ‘Would this new Post threaten social obligations, employment conditions, executive remuneration, private sector competition?’ he asks.
The answer, he says, is to have the new company governance structure tied in with a memorandum of understanding approved by Treasury to give the necessary protection.
This is one of six recommendations which Tynwald will be asked to support. Other recommendations are that the Treasury Minister becomes sole shareholder who will appoint the chairman of the non-political board.
The proposals for corporatisation were first mooted in the 2006 Scope of Government report.
But they have already resulted in the sacking of Graham Cregeen MHK as Post Office chairman, his fundamental conflict with the board policy’s deemed ‘untenable’ by Treasury Minister Eddie Teare.
Mr Toime says that the Post Office’s transition from statutory board to state-owned company could happen before the general election.
He says the Post Office’s island-related business more or less breaks even – the local post office network makes a net loss – but its profitability comes from its commercial competitive and international business activity where the rate or return is currently good.
The decline in traditional business and risks to its existing competitive business could threaten cash reserves and the £2m annual dividend it pays to Treasury.
CoMin approval should be sought for any proposals to reduce the local post office network, the consultant suggests. In another protection for the consumer, government could ask the Post to limit price increases to one that produced an ‘acceptable’ profit margin.
Mr Toime says no one wants to see companies reduce employment conditions for their workforce but it is generally accepted conditions and pay levels are more generous in the public sector that for private sector companies.
But he seems to signal more money for the bosses. Inability to reward good performance through bonus structures has been raised by the Post Office, he says, and ‘an effective board ensures proper management remuneration’. Board remuneration would have to be approved by the shareholding Minister.