The great post jobs massacre

THE new boss of the Post Office today announced the scrapping of 30,000 jobs and the closure of 3,000 urban post offices. The second post is to be axed and the cost of sending a letter increased by a penny on first and second class raising the price to 28p and 20p respectively.

The moves are part of a huge shake-up designed to stem record losses of £1.1bn in the last financial year. Postal unions warned of an end to the principle of a 'universal postal system'.

Allan Leighton, the new chairman at the Post Office, revealed he is to change the company's name back from Consignia to Royal Mail Group just 16 months after the £2m re-branding exercise. Leighton, a former boss of Asda, also announced the departure of the group's chief executive John Roberts and launched a withering attack on Consignia's previous management.

He said: 'Management mistakes have been made over a number of years, including a failure to resolve deep-rooted industrial relations problems. There has been too much infighting. Frankly the business is in a mess and there's no point trying to hide that fact. Instead of a well-paid, highly motivated workforce and an efficient operation we've got low-paid employees, high operating costs and low morale.' On scrapping the second post, he said: 'I know people are not going to like it but it's a purely commercial decision.'

Closing 3,000 post offices, which amount to a sixth of the urban ones, will cost the Government £210m in compensation or £70,000 per post office. Rural post offices will be underpinned by £1.8bn of funding aimed at preserving the universal postal service.

The £1.1bn losses are made up of operating losses of nearly £1m a day plus £800m in restructuring costs. A total of 17,000 jobs are to go on top of the 13,000 announced already, making the 30,000 revealed today. Redundancies will be voluntary.

Defending the scrapping of the second post, Leighton said: 'The second delivery accounts for 20% of Royal Mail's total costs and 30% of the time taken to deliver letters, but delivers just 4% of the UK's mail.' He said the move will save £350m a year. He said plans to raise the price of stamps 'is just not an issue'. He said: 'It is the best value of anything you can buy in this country.'

Roberts is taking early retirement and Leighton envisages replacing around 70 of his 200 strong senior management team. He said he is searching for a new chief executive who will be offered a package worth £500,000 plus performance bonuses, adding: 'We need one of the countries top leaders to restore one of Britain's great institutions to its former glories.'

Leighton added: 'By the end of 2002, the company's corporate name will become Royal Mail Group. The new name reflects the greater concentration on our core commercial services and is particularly apt in this Golden Jubilee year.'

The Communication Workers Union said it could not accept such huge job losses, warning that 'indiscriminate' shedding of staff was not an option if the universal postal service was to continue. General Secretary Billy Hayes said the union would insist that every single job cut was justified by management and would not affect the service. He added: 'It has suited the Government to keep the price of stamps artificially low for years. Had prices risen in line with inflation the business would have an extra £500m and would have made an operating profit of over £200m.' But he welcomed the scrapping of the title Consignia, adding: 'We want to put that folly behind us.'

Where it all went wrong

Poor revenues: Sudden growth of email meant that revenue grew much more slowly than expected. Stamp prices could not be pushed up quickly to make up the funding gap. Postage prices are among the lowest in Europe.

Union power: Postal unions are among the strongest and least flexible unions. Efforts for shake-up and reform have met intractable opposition.

Poor management: It has been unable to attract high quality top-level managers. Middle management is also stuffed with second-or third-rate time servers.

Political interference: Government has refused to allow the Post Office full commercial independence while continuing to suck funds from it in the form of dividends to the Treasury. The Post Office is now seeking a rebate of £1.8bn of dividends.

Parcelforce: Parcel business has been loss-making for more than a decade. Last year, the UK parcels business lost nearly £100m.

That name: Rebranding of Royal Mail as Consignia aimed to make it sound more businesslike. But it was a disaster, hated by all and understood by nobody.

Overseas expansion: The Post Office was late in joining the dash to build overseas operations. In 1999 it acquired German Parcel for £289m. The price was too high and the German operations have been loss making.

Biggest challenge for man who went plural