Conor Lenihan (Dublin South West, Fianna Fail)

I am replying on behalf of the Minister for Communications, Marine and Natural Resources, Deputy Dempsey. I wish to be helpful by outlining the state of the postal sector at this time. The sector has changed significantly in recent years as the European postal market has been liberalised and postal operators have moved from national to international markets. The postal market in Ireland and, primarily, An Post faces challenges such as increased competition which arises from the liberalisation of the market as well as falling mail volumes and competition from electronic substitution. As it operates in a more competitive market, An Post will need to offer high-quality postal products and services to consumers who, increasingly, will be able to choose from a range of postal providers. We can expect such a postal market in future.

As the full liberalisation of the sector by 2009 is a real possibility, An Post must prepare to ensure that it can continue to be a strong player in the Irish postal market. Already the parcels sector in Ireland is fully liberalised in line with the EU postal directive and this has led to major international players operating in the Irish market. An Post now holds only 25% of the parcels market in this country.

The implementation of full liberalisation by 2009 will, if achieved, open up the letter post area to full competition. The Commission is undertaking further studies on the impact of competition on the universal service requirement which is enshrined in EU and Irish law. The requirement means that all addresses, both business and private, are entitled to deliveries at uniform tariffs with a guaranteed frequency. No decision has been taken yet at EU level on the future nature of the universal service obligation if the market is fully liberalised in 2009.

An Post is the designated universal service provider in Ireland and therefore the universal service obligation is a statutory requirement of the company. Furthermore, the European Communities (Postal Services) Regulations 2002 set out the area of the postal market solely reserved for An Post to allow the company to fulfil its universal service obligations. These exclusive rights for the delivery of certain services are deemed necessary to ensure the maintenance of the universal service.

There is agreement that change is required if the postal services of An Post are to adapt to the modern business environment and to continue to offer a top class countrywide delivery service to the customer into the future. To progress the change agenda, an exhaustive process of negotiations between An Post management and trade unions, with the assistance of the State's industrial relations machinery, has been ongoing for some time. An Post unions and management have been involved in intensive negotiations under the auspices of the Labour Relations Commission, LRC, in a bid to agree a recovery plan that will put the company on a sound footing.

The LRC appointed assessors to draw up a report on whether the company was right to invoke the inability to pay clause of the Sustaining Progress agreement. The assessors' report, presented to the LRC and An Post on 2 June this year, concludes that An Post is in a position to pay a 5% payment under Sustaining Progress. It is my understanding, however, that the assessors' report finds that An Post cannot afford any further elements of Sustaining Progress or the mid-term review of the national wage agreement other than in the context of securing finalisation on rationalisation and restructuring requirements.

I understand that An Post intends to pay the recommended 5% increase, back-dated to 1 January 2005, to its employees by the end of this month. However, An Post unions are in disagreement with the findings of the report and the matter will be referred to the Labour Court.

A real solution to the outstanding difficulties in An Post is for all stakeholders to agree on and implement a viable recovery plan which will enable An Post to deliver quality services to our citizens, while at the same time providing sustainable well-paid employment for its staff. I thank the Deputy for raising this matter.

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