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Will a strike cancel Christmas for Royal Mail’s boss, Rico Back?

The chief exec faces a workers’ ballot this week, and his problems don’t stop there

When Rico Back jets from his home in Switzerland to London this week, he will fly into a gathering storm.

The German chief executive, who splits his time between an exclusive apartment overlooking Lake Zurich and running Britain’s former postal monopoly, Royal Mail, will arrive to an ominous announcement.

On Tuesday, the Communication Workers Union (CWU) will reveal the results of a strike ballot of its 110,000 postal worker members over conditions, pay and alleged bullying. The results are expected to confirm management’s worst fears: a mass walkout at its busiest time of year, during the Black Friday shopping frenzy at the end of November, or Christmas — or both. The last ballot, in 2017, returned an 89% vote in favour of strike action.

The timing could not be worse. The 503-year-old postal service is in a vicious downward spiral: emails and instant messaging are eroding what remains of letter deliveries, nimbler rivals are undercutting it on parcels and wage inflation is further damaging its cost base. It has crashed out of the FTSE 100 index. Meanwhile, Labour wants to take it back into public ownership.

Back, 65, has not enjoyed much stability since taking over from Canadian Dame Moya Greene last year. His £5.8m “golden hello”, paid to lure him from Royal Mail’s GLS parcels subsidiary, which he founded and sold to Royal Mail in 1999, attracted one of the biggest revolts in British corporate history when almost three-quarters of voting shareholders refused to support his remuneration package last year. Boardroom turmoil ensued.

Chairman Peter Long, who appointed Back, was forced out after 34% of shareholders rejected his reappointment, concerned over the pay deal and Long’s other commitments. His replacement, Les Owen, did not last long, replaced by former British Airways chief Keith Williams. UK boss Sue Whalley also was ousted.

A profit warning and dividend cut have driven Royal Mail’s shares to just 218.1p, down two-thirds since their May 2018 high, and valuing it at £2.2bn. Worse may lie ahead. Liberum analyst Gerald Khoo said: “The valuation is wholly unreflective of the structural challenges facing the group.”

The contrast with Royal Mail’s 2013 privatisation is stark. Ministers were criticised for selling the company on the cheap, depriving taxpayers of greater proceeds. Bankers and politicians were hauled before MPs to explain their actions after its shares surged 38% on the day of the float.

Back’s revival plan, published in May, involves cutting costs deeper and faster while attempting to grow its parcels business. The 40% dividend cut will pay for £1.8bn of investment, including three giant parcel hubs, and adding a second, van-delivery parcel service.

Standing in the way of all that is the knotty problem of productivity — and getting staff to agree to changes, such as shrinking a postie’s hours from 37 to 35 a week. Staff agreed to the closure of its final salary pension scheme last year, but they are now digging in for a battle.

Royal Mail’s workforce forms the majority of its costs — 70% in its UK business. Thanks to the universal service obligation, the Ofcom-enforced law that says it must deliver letters six days a week to every address in the UK for a set price, those costs are notoriously difficult to cut. Letter volumes fell by 8% last year and Royal Mail expects 5%-7% more this year. As volumes fall, the company is forced to put up prices to cover the cost of maintaining deliveries — but this risks driving even more customers into the hands of rivals.

These have already made life hard for Royal Mail. Despite its incumbent advantage and huge network of depots, vans and staff, competitors such as Yodel and Hermes have undercut it by using cheaper gig-economy workers. Amazon is increasingly taking deliveries in-house as it rolls out features such as one-hour slots. Royal Mail still struggles to offer same-day delivery.

A national strike threatens to erode competitiveness further, but unions fear that another motivation lies behind Back’s overhauls — a plot to erode the universal service obligation by stealth. Their fears may have some foundation. While Royal Mail insists that the £1.8bn of investment is about “protecting the universal service”, City sources are increasingly sceptical that it can be maintained and reckon the board is preparing for inevitable changes, which could see Royal Mail reduce deliveries to five days a week or fewPe-day delivery would cost 20,000 jobs, the CWU estimates. Royal Mail denies such plans.

“It does not look like universal service [is sustainable],” said David Kerstens, analyst at the investment bank Jefferies. “You are looking at [labour-cost] inflation in the high single digits. That’s impossible to offset. If you increase prices too much, you can get further substitution.”

Jefferies estimates that cutting the working week by an hour would add at least £100m to Royal Mail’s costs because it would not be matched by a rise in staff productivity. Throw inflation into the mix, and costs could soar out of control.

Attempts to save money using technology have been met with resistance from the CWU. Royal Mail issued 70,000 handheld scanners to workers in 2015, allowing them to track parcels and customers to sign for deliveries. However, the union is not happy with one function — the device’s ability to monitor the location of staff and how fast they complete their rounds. “We don’t want people tagged like they’re criminals,” said a union source.

The CWU reckons plans for a second delivery, which would run at different times from letter deliveries and handle bigger parcels, is an attempt to create a new workforce. General secretary Dave Ward said: “We are confident our members will deliver a massive ‘yes’ vote. They know this is the fight of our lives — to defend their jobs but also the service they provide.”

Back has a battle on his hands. In a belated admission that he may have lost touch with his workforce, he is recruiting a director to run the UK business once again. It may be too little, too late.


LICENCE TO KILL. Pressure on PM to honour manifesto.



Pressure on PM to honour manifesto.

Daily Mirror

12 Oct 2019

BY MIKEY SMITH Political Correspondent.



LABOUR is piling pressure on Boris Johnson to save free TV licences for over-75s in Monday’s Queen’s Speech.


Deputy leader Tom Watson has urged ministers to keep their manifesto pledge to pick up the bill for the lifeline £154.50-a-year benefit – and “right this wrong at last”.


In a letter to Culture Secretary Nicky Morgan, he said refusing to fund it meant “millions of the oldest in society will have to choose between being worse off or being cut off from the wider world”.


It comes after a committee of MPs urged the BBC to cut a deal with ministers to restore the benefit.



As things stand, free licences will be means tested from next year and 3.7 million pensioners face losing them. The Mirror is campaigning to save the benefit, which the BBC says will cost it £745million a year.


But former culture minister Ed Vaizey said yesterday: “I think the BBC actually has the right policy.


“I think a free TV licence for everyone over 75 is probably the wrong policy. But I do agree with the select committee, that if it is the Government’s view that there should be a free TV licence for over-75s, the Government should partner with the BBC and help fund that cost.”


In his letter, Mr Watson adds: “For those housebound or entirely on their own, television is a lifeline.


“Four in 10 older people say television is their main source of Labour’s Watson company. Taking that away from vulnerable people at the time of a national loneliness epidemic is unthinkable. You cannot means test for social isolation.”


MPs urge BBC and ministers to cut a deal to restore free TV licence for over 75s.

MPs urge BBC and ministers to cut a deal to restore free TV licence for over 75s.

Digital, Culture, Media and Sport Committee chair Damian Collins said the broadcaster put itself in the ‘invidious position’ of administering welfare benefits


Mikey Smith Political Correspondent

11 OCT 2019



The BBC should cut a deal with ministers to restore free TV licences to the over 75s, a committee of MPs has said.

The broadcaster put itself in the ‘invidious position’ of administering welfare benefits after the Government refused to keep its promise to keep paying for TV licences, members of the Digital, Culture, Media and Sport committee said.

A new report slammed the “behind closed doors” process which led to the Beeb taking responsibility for a benefit it couldn’t afford to maintain.

And as things stand, it will be means tested from next year, leaving 3.7 million pensioners facing the loss of their free TV licence.

But the Mirror is campaigning to save the entitlement, which the Beeb estimates would cost them £745 million a year to maintain.



Prime Minister Boris Johnson has repeatedly refused to honour the Conservative Party’s promise to pick up the bill for the benefit.




Committee chair Damian Collins said: “This is an invidious position for the BBC to put itself in.

“It agreed to fund a pensioner benefit that it couldn’t afford and as a result, false reassurances were given to the over 75s that their free licence fees would be maintained.”

He added: “The BBC finds itself here as the result of a deal done behind closed doors that allowed no transparency for licence fee payers.”

Deputy Labour leader and Shadow Culture Secretary Tom Watson said: “I’m very pleased to see the DCMS Select Committee calling for saving free TV licences for over-75s. The consensus is overwhelming: the Government must act now.

“The Government should never have foisted the responsibility for funding free TV licences onto the BBC in the first place. It was an act of political cowardice and now 3.7 million older people are set to lose out next year.

“The only option now is for this Tory Government to admit they got it wrong, and commit to funding free TV licences for over-75s today.”

Mr Collins comments come alongside the committee’s report on the BBC’s annual accounts.



The report found the 2015 funding negotiations which led to the handover of free TV licences was a ‘flawed’ process on all sides that gave no opportunity for consultation with licence fee payers.

And it accused ministers of seeking to “bounce” the broadcaster into accepting the responsibility.

Caroline Abrahams, Charity Director at Age UK welcomed the committee’s report, saying the Government and BBC “would be wise to sit down and broker a solution now that keeps the over-75s’ TV licence free, before all hell potentially breaks loose next summer.”

She added: “Older people will be immensely pleased and relieved if this happens, as will be the almost a million who have signed petitions in support of them.”




Sir David Clementi, Chairman of the BBC, said: “Under the 2015 agreement, the BBC was given responsibility for the policy, and related funding, of the concession for over 75s. 

“We are pleased that the committee recognise that there was no automatic assumption that the BBC would continue to bear the cost of these free TV licences. There is also clear recognition from the committee that it would be unsustainable for the BBC to take on the full cost of all these free licences alone.

“The committee report is also clear that the value of the licence fee will continue to be under pressure from inflation in the TV sector.

 “The Committee say that the Government’s process in 2015 was flawed and we agree with this; it was never a process the BBC would have chosen. That’s why there must be a different way of doing things in the future. In terms of the agreement itself, we are satisfied that it was properly discussed within the BBC and properly authorised.

“We will continue to implement the decision we have taken – after extensive consultation – on over 75s licence fees with great care and responsibility.”

The Committee urged the government to overhaul the way negotiations are handled before the next BBC charter renewal in 2021, to provide greater transparency for viewers.

And MPs warned the BBC’s funding model could become “unsustainable” if it doesn’t continue to find revenue on top of the license fee.


Mr Collins said: “This issue has also exposed that if the current trends in inflation for TV production costs continue, the value of the licence fee will continue to diminish as a source of revenue for the BBC.

“The rapidly changing viewing habits of younger audiences, particularly those under the age of 34 who are moving away from broadcast TV to online and on demand channels, poses a further threat to BBC licence fee revenue in the future.

“We are seeing clear evidence that the funding model of the BBC will become unsustainable without substantial increases in commercial revenue from BBC Studios and new subscription on demand viewing services like Britbox.”

Just do the deal, BBC.


MPs want free TV licences restored




THE BBC should cut a deal with ministers to restore free TV licences to the over 75s, MPs have said.

The broadcaster has taken on an awkward role as an administrator of welfare by shouldering the burden of funding the benefit that it cannot afford to maintain, said the Commons Digital, Culture, Media and Sport committee.

The Committee slammed the “behind closed doors” process that led to the move, accusing ministers of trying to “bounce” the BBC into accepting the responsibility.

The Mirror is campaigning to keep the free licences, which will be means tested from next year with 3.7 million expected to lose out. The Beeb estimates it would cost it £745million a year to maintain.

Committee chairman Damian Collins said: “This is an invidious position for the BBC to put itself in.” The Committee said it was “calling for free TV licences to be restored to those over 75 who are not in receipt of Pension Credit”.


Protesters at BBC Media City in Salford, Greater Manchester.


Keep them free.


The move to axe free TV licences from the over-75s was “wrong” and “flawed.”

That’s the conclusion of the all-party Commons Digital, Culture, Media and Sport committee. The MPs do not mince their words.

They accuse the Tories of bouncing the BBC into taking responsibility for the benefit.

The committee is right in its analysis and right in its demands.

The party should stick to its manifesto promise and give the BBC the money it needs to restore free TV licences for all those aged 75 and over.



Branches will be aware that we have now begun the process of moving into our new equality structures. The CWU acknowledges the role played by the four Advisory Committees previously administered by my department.

The attached booklet further acknowledges the role of the DAC and is a formal way for this Advisory Committee to say goodbye.

Any queries on this LTB should be directed to Fevzi Hussein in the first instance.

Yours sincerely,


Kate Hudson

Head of Equality, Education & Development

19LTB584 – A Farewell from the DAC

Meet the DAC booklet

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