Seán Kyne (Galway West, Fine Gael) | Oireachtas source

I thank the Senators for their contributions to the debate. Undoubtedly, An Post is entering a period of significant change in order to cope with the rapidly changing environment in which it operates.

I thank Senator Horkan for voicing Fianna Fáil's support for the Bill. I understand and accept his view on the importance of An Post as a rural service, that the An Post business model is a strategic asset and that we should harness its resources where possible. An Post has commissioned McKinsey & Company to undertake a fundamental review of An Post and its operations with a view to identifying the strategic changes and restructuring necessary to maintain the company on a sound financial footing. The timeline for delivery of that report is the second quarter of this year. This is a separate exercise to the Bobby Kerr report but the findings of both reports will inform the future strategic direction of the company. There is no doubt that An Post will undergo significant and necessary change in the future and in this regard the Government looks forward to being briefed on the McKinsey & Company review. Many of the issues the Senator raised will be dealt with in the context of the implementation of both reports.

Senators O'Mahony and Boyhan also addressed the issues for the future. Obviously, the McKinsey & Company and Kerr reports will deal with these. The final Kerr report was presented to An Post on 23 December last. It contains a number of recommendations which are being considered by the board of An Post, and the Government looks forward to details of any implementation plan that arises from that. It would not be appropriate to comment further on these matters until both reports have been fully completed and considered.

Senator Conway-Walsh spoke about the impact of the price increase. Obviously, there is concern that the legislation will have the effect of accelerating the decline in volume. An Post engaged Indecon Economic Consultants to examine this question and the findings indicate that price increases will not necessarily escalate electronic substitution. The findings of that work will inform An Post's consideration of the appropriate level at which to set a revised pricing structure. The chief executive officer has indicated that the price increase will be in the range of 12% to 38%. Such an increase will bring the price in line with European norms. The Senator also said that the purpose of the Bill was to get rid of ComReg. Its purpose is to respond to the dire financial situation of An Post. It is a serious financial position and that is the reason we are here. Clearly, the company will undergo significant restructuring. Such restructuring takes time and this legislation will give the company the financial headroom to restructure while awaiting the implementation of the Kerr and McKinsey & Company reports.

I acknowledge the role of post offices in rural Ireland and their importance for older people in particular. We wish to prevent any more closures in so far as we can. That is in everybody's interest. Senator O'Mahony also spoke about the history of post office closures over a long number of years. He pointed out that this is an emergency short-term measure. Clearly, there is potential with regard to the parcel service and also through the implementation of the Kerr and McKinsey & Company reports.

Senator Boyhan spoke about the Department of Communications, Climate Action and Environment having responsibility for the postal sector. That includes the governance of An Post and ensuring that the company is fully compliant with the code of practice for the governance of State bodies and governance functions, including in the statutory framework underpinning An Post. Following a Government decision early last year, responsibility for the post office network and implementation of the Kerr report and associated matters transferred to colleagues in the Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs. The Senator met with representatives of the IPU. They have been engaging with officials in the Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs on the matters raised. The outcome is that the McKinsey & Company and Kerr reports will have to be implemented together.

Senator Lombard spoke about the pricing structure and the comparison with the EU. We are below average is respect of the cost of postage stamps. The Senator also mentioned that the main players had appeared before the communications committee and expressed their concerns, including the importance of the service for rural communities and elderly people. There are some issues with viability in some rural communities, but this emergency legislation is necessary.

As I said earlier, the mails business is undergoing profound structural change, both here and internationally. Electronic substitution has had a significant impact on the letters business while also providing opportunities for growth in the parcels business. This trend is particularly apparent for large volume postal customers, such as banks and utilities providers. The trend has been evident for some years and it accelerated in 2016, resulting in An Post facing serious financial difficulties. The outcome for 2016 represents a doubling of year on year volume declines. As the mails business generates approximately two thirds of An Post's revenue the scale of decline is having a significant impact on the company's finances. In addition, the impact of the 2.5% Labour Court pay recommendation to An Post staff added €8.5 million to the payroll in 2016.An Post has started a fundamental review with a view to identifying the strategic changes and restructuring necessary to maintain the company on a sound financial footing. The Government fully supports this review, the outcome of which is expected early in the second quarter of this year, and accepts that the company requires some financial headroom to be able to implement the findings of the review while continuing to deliver on its universal service obligations.

The Government has agreed to introduce this Bill as a matter of priority to repeal the price cap mechanism. This is the most viable option for supporting An Post in the short term while a restructuring plan is implemented. This is not a decision that was taken lightly. NewERA has conducted an in-depth review of the company in recent months on behalf of the shareholding Ministers and has confirmed the seriousness of the situation facing An Post. We all agree that An Post still has a number of strengths, including a strong brand and nationwide reach. Any restructuring plan will build on these strengths and position the company for the rapid changes in its external environment. Clearly it will take time to restructure and turn the company around and that is why it is imperative that this legislation is passed quickly in order to give the company the financial headroom to do this. The consequences of not introducing this legislation cannot be underestimated.

It is important to point out that despite the difficult financial situation, there is no threat to the mail delivery element of the universal service obligation of An Post. The company will continue to deliver post to every address on every working day. This amended approach to pricing aims to ensure that An Post can continue to fulfil its obligations in this regard.

I thank all Senators who contributed to this debate and look forward to further discussion on this matter on Committee Stage.