Policy & Research

Background briefings

Hooper report 2008

The volume of mail being sent in the UK is falling as people and businesses switch to digital communication. In response to this trend and other changes facing the UK postal market, the Government commissioned an independent review of UK postal services in December 2007. 

Led by Richard Hooper, the review produced the report was Modernise or decline: policies to maintain the universal postal service in the United Kingdom in December 2008. The report’s recommendations led to the Postal Services Bill, which was published by the Government on 26 February 2009. 

The report found several challenges facing Royal Mail, which were: 

• Royal Mail’s performance was found to be 40 per cent less efficient than its European counterparts
• Royal Mail’s historic pension deficit is one of the largest in the UK, with estimates in March 2008 placing it at £5.9 billion
• Increasing postal prices would not generate sufficient revenues to counteract falling volumes, as previous price increases have shown
• Industrial relations in Royal Mail need to improve. In 2007, 60 percent of all the days lost in the whole UK economy were accounted for by Royal Mail
• The relationship between Royal Mail and its regulator, Postcomm, has also been a difficult one, owing largely to the regulator focusing on one company 

The three main recommendations from this report were: 

• Royal Mail should be part-privatised
• The Government should take responsibility for Royal Mail’s pension deficit
• Postcomm should become part of Ofcom 

Headlines

The headlines section from the report is presented below, and the report itself can be accessed on the Department for Business, Innovations and Skills website.

 

1. This review was established to maintain the universal postal service. The size and scope of the Post Office network – the country’s largest retail and financial chain – are largely outside its scope 
2. The universal postal service is important. The ability to deliver items to all 28 million business and residential addresses in the UK is part of our economic and social glue 
3. But the universal service is under threat. The explosion of digital media – internet, email, mobile text and broadcasting – has prompted an unprecedented decline in the letters market 
4. There is a positive future for the postal service, provided that postal companies are able to respond quickly to the changing needs of customers and embrace the opportunities which new technology brings 
5. The only company currently capable of providing the universal service in the UK is Royal Mail.  But it is much less efficient than many of its European peers and faces severe difficulties
6. There is a general consensus that the status quo is untenable. The universal service cannot be sustained under present policies 
7. A radical reform of Royal Mail’s network is inevitable. The company has a plan to achieve this. But the pace of change needs to accelerate significantly 
8. Unless Royal Mail can modernise faster, a forced restructuring under European rules is highly likely. That would be a costly and poor outcome for the taxpayer, for consumers, for Royal Mail and its employees 
9. Now is not the time to reduce the universal service. Reducing the number of deliveries each week from six to five would be in no one’s best interests
10. Sustaining the universal service depends fundamentally on modernising Royal Mail
11. The company urgently needs commercial confidence, capital and corporate experience to modernise quickly and effectively
12. Modernisation will not happen through conflict or attrition. The Communication Workers Union (CWU) and Royal Mail must develop a more constructive working relationship in which both are engaged in the long-term strategic future of the company
13. We recommend a strategic partnership between Royal Mail and one or more private sector companies with demonstrable experience of transforming a major business, ideally a major network business
14. Given the wider social role of the Post Office network, Post Office Ltd should remain wholly within public sector ownership
15. We also propose that the Government should tackle the historic pension deficit, to enable the company to reap the benefits of modernisation
16. Effective competition can help realise a positive future. A new regulatory regime is needed to place postal regulation within the broader context of the communications market
17. Parliamentary accountability for providing the universal service should be strengthened
18. Our recommendations are a package. Each element of the package is needed if the universal service is to be sustained: modernisation achieved through partnership, tackling the pension deficit, and changing the regulatory regime
19. Our recommendations require substantial change. But we believe that they are proportionate to challenges faced by the postal sector and can be implemented successfully