Government Operations Committee on Oct. 7th, 2016

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Mr. Thériault, I must interrupt you because I want to ask Mr. Anderson a question.

Mr. Anderson, you talked about the postal banking service. We hear a lot about new revenue sources, and that is positive. We should expand our horizons, and that is one option to consider.

However, I am concerned about the cost-effectiveness of the postal banking service when the banks have abandoned that service in the regions because it was not profitable enough. What will make that service profitable for Canada Post when it was not profitable for the banks?

I do not know whether the banks' salaries and social benefits are comparable to those of Canada Post, since I have not analyzed them, but I find it hard to understand how we will be able to avoid subsidizing this service in the regions when the banks abandoned it because it was unprofitable.

[The Chair, Conservative, Tom Lukiwski]

I understood, but I know this question is going to come up again.

A very, very brief answer.

[John Anderson]

The first thing is that the Conference Board did not study postal banking services in 2013. That study was not part of its mandate.

However, if we look at what is going on in other countries, such as the United Kingdom, we see that the banks have abandoned the rural areas and that people are conducting their banking transactions at the post office. The clientele is there. It costs much more for a bank than Canada Post to keep a branch open and to pay employees. The post office already has employees, a place of business, and the space to offer banking services.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Kmiec, for seven minutes, please.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you, Mr. Chair.

I am an MP from western Canada. So I am going to practise my French today.

Thanks to all the witnesses for their contributions to our work.

Mr. Esch, my question concerns the Canadian postal service protocol and the moratorium on rural post office closings.

The committee has learned that several rural regions have their post offices in community centres. I understand that. However, there are still rural post offices in Saskatoon, Brampton, and Halifax. As a result of a moratorium, Canada Post may not close post offices in those cities in order to reorganize its service.

What do you think of a suggestion that the committee might make, that post offices should be closed in regions that have become urban—Canada has urbanized in the past 20 years—to fund postal service in the rural regions?

[Hervé Esch]

That might be a good solution to consider. As I mentioned, Canada Post is often the last representative of public services in the rural regions. I have also heard about banking services. I can personally attest that that service could really be promising. In my region, for example, the caisse populaire was closed, leaving three municipalities without banking services. Some residents now have to travel 25 kilometers to conduct their transactions at the nearest ATM. It would be a good idea for the post offices to offer a range of services in the rural regions.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I see.

With your permission, Mr. Anderson, I will correct one of the statistics you cited.

According to testimony we have heard, 60% of respondents feel it is a bad idea to provide banking services in post offices, whereas 38% think the potential in that area is good. Of that 38%, 7% said they might use banking services in post offices, and only 2.7% of respondents indicated they intended to use those services if they were offered. Consequently, the percentage of interested respondents is much less than 7%. Furthermore, to provide banking services in its post offices, Canada Post will have to make enormous structural and IT investments. A bank is much more than buildings and employees.

Do you think 60% of Canadians are opposed to the idea that Canada Post should take this kind of financial risk to maintain its financial sustainability?

[John Anderson]

The chair of the task force on the Canada Post review, Ms. Bertrand, made a mistake in her presentation to the committee. It is 7% of all Canadians who will open an account, not 7% of people who are in favour of postal banking services. If you reread the report, you will see that she made an error in that regard. It is 7% of all Canadians who would certainly open an account—those are the figures—and 22% who would probably open one.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I put another question to the union representatives in various cities about employee skills.

Canada Post has 50,000 employees. Before introducing postal banking services, they would have to be trained to improve their skills in that area. Have you conducted an analysis of the skills of Canada Post employees?

[John Anderson]

That appears in the major report that is still confidential.

Canada Post has prepared an 800-page report in which these questions are addressed. The report concludes that it is possible to offer banking services and that they would be a winning option for both parties. This has been done by a Conservative government in Great Britain and by a socialist government in France. Both countries offer postal banking services in various ways. The cost is not enormous.

I questioned the vice-president for postal banking services in England, and he told me that sector is staffed by 300 employees at head office. Partnerships have been established with one bank in particular to deliver the services. You may use a bank card from another bank at any post office in the UK. You can withdraw and deposit money as well. It is a model—

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I have another question for you.

The service that is offered in England is a good example, but the post office has been privatized in that country. In Canada, we know that would pose an enormous risk. Canada Post's operating loss would be $700 million by 2026. Do you think that would be a good idea, since the union members are in favour of postal banking services—from what I have heard in committee—and of using the union's money to fund the creation of postal banking services?

[John Anderson]

The post offices in England have not been privatized. It is the delivery service that has. There are two postal companies, one state-owned and the other private. The one that offers postal banking services has not been privatized. It is a crown corporation. That is the first point to note.

The other is that the Royal Mail delivery service, which is directed by former Canada Post president Moya Greene, is private. Of course, the idea is not to offer all services starting tomorrow. That has to be done gradually. Canada Post already offers certain financial services, and it is not true that employees have no training in the field. Canadians can obtain money orders and credit cards at the post office. In short, I believe we must expand services and do what has been done in the UK. Services have been offered gradually in one region at a time.

[The Chair, Conservative, Tom Lukiwski]

We're out of time, but perhaps Madame Trudel will pick up on the last questioning.

Welcome back to the committee.

[Karine Trudel, NDP, Jonquière, QC]

Thank you, Mr. Chair.

I want to thank the witnesses for their presentations. They are very much appreciated.

Mr. Anderson, I will use the seven minutes allotted to me to ask you some questions.

I agree with you that the report is incomplete and contains false information. I would like to hear what you have to say about the report that has been submitted.

What is your opinion, based on the research you have done, on what should be in a report and what should not, and by that I mean what Canada Post management considers as nonsense. In addition, tell me about the impact of postal banking services and post office closings in rural areas. What direction should we take on that subject? I would like you to clarify further what you said in your presentation.

[John Anderson]

I conducted a study on post office closings in rural areas. It is available in English and French and I hope it has been distributed to you. I also conducted surveys of the mayors of municipalities where there were post offices, but where they had been closed for more than 20 years. It appears those closings have caused enormous problems in the rural regions.

Canada, like Australia, is one of the most urbanized countries in the world. Increasing numbers of people live in and around major cities, and services in the rural regions have been cancelled. I find that ridiculous. The post office is a key service. Several mayors wrote to me, in particular the mayor of Boulter, Ontario, and told me that the fact they no longer had a post office was a disaster, partly as a result of the large number of seniors, who are more numerous in the real regions.

Post offices are still being closed in rural areas, in all kinds of ways, even though it is not theoretically permitted. A lot of excuses are being used to continue closing them, but it is a public service. I think they should be kept open.

What Canada Post could do is not as complicated as that. I think we must take into consideration what is being done by countries of roughly the same size as ours. I am thinking here of France, the UK, Italy, and even Switzerland. Those countries have decided to offer other services. We have to start with financial services. All those countries offer them, each in accordance with its own model. In other words, there are various methods.

A Conservative government could find a way to provide financial services that would be different from that of the Liberal or an NDP government. The important point is that all these financial services are profitable. In Canada, major companies such as Loblaw's, Canadian Tire, Rogers, and Walmart, have all invested in banking. They have not spent enormous amounts of money to do so, but they now offer services that are profitable.

The post office could choose the services it wants to provide. Some services could be offered by the post office, through its own bank, and others could be offered jointly with existing credit unions and banks. Loblaw's, for example, has its own credit card service, while some bank accounts belong to CIBC.

We could use those kinds of models. I think various possibilities are available to Canada Post. With respect to payday loans, it would be possible to offer products in the post offices that could replace those of Money Mart, for example, which charges rates of 600%. Far less expensive services could be offered. They may not be very profitable, but it is not necessary to make as much money as Money Mart. After all, we are talking about a service here. It merely has to be profitable, and it will be. To get a payday loan, applicants must have a job and a source of revenue. Otherwise they cannot get that kind of loan.

It would be profitable and interest rates would be the same as those paid by Canadians on their credit card balances. The rate would not be 600%. I think this is an enormous opportunity. In France, for example, postal banks have established ties with the municipalities and grant them loans. They have focused on that and on social economy institutions, including cooperatives.

In Canada, we can choose the services and the part of the industry we want to focus on. All that is profitable, in my view. I have stated some figures, but I think that more than 100% of profits in France and Italy come from financial services.

That means that other services have lost money. Financial services have therefore made it possible to continue delivering the mail. They have done by earning revenue from financial services.

[Karine Trudel, NDP, Jonquière, QC]

After the task force report was tabled, we saw that 2011 was the year selected for the average, whereas 2011 was the year of the pay equity settlement and the lockout. That was the only year where there was an operating loss. What you think of that? Why was that year used as a basis.

[John Anderson]

I think that is an exaggeration of what is happening. It is generally a profitable company. True there are losses in mail delivery, but it is also true that there has been an increase in revenue from parcel delivery.

The corporation has also begun to offer certain services such as same-day delivery in major cities such as Toronto, and those services are very profitable. It will be profitable in the long run if it adds more services.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Next up is Mr. Lightbound.

Welcome to our committee.

[Joël Lightbound, Liberal, Louis-Hébert, QC]

Thank you very much, Mr. Chair.

[The Chair, Conservative, Tom Lukiwski]

Mr. Lightbound, you have seven minutes.

[Joël Lightbound, Liberal, Louis-Hébert, QC]

Thank you.

I would like to go back to Mr. Anderson's remarks.

You talked about companies that are providing banking services. Canadian Tire, as you will remember, used to print money. Just imagine.

More seriously, I am speaking to you now, Mr. Cusson. Your recommendation n^o 3 states that UMQ requests that Canada Post study the various services that the post office could offer.

What is the tenor of your discussions with your members on the banking services that Canada Post might offer.

[Alexandre Cusson]

We have not specifically discussed any one of the services. We think that, since Canada Post is everywhere and is often the last service offered in a smaller municipality and in the remote regions, it might be advantageous to add other services, such as federal services, insurance or banking services.

As we are not experts in the field, we recommend that a serious analysis be conducted to determine what profitable services we could offer the public, but we have not examined each of those services.

[Joël Lightbound, Liberal, Louis-Hébert, QC]

For example, is any pressure being put on the mayors of small municipalities to evaluate the issue? We see the impact this represents. For example, Mr. Esch discussed the Caisses Desjardins branches that are withdrawing from certain municipalities.

[Alexandre Cusson]

Many provincial, federal, and commercial decisions that have been made in recent years have really hurt small municipalities in remote regions and even, in some instances, small municipalities located near major centres. We are seeing government and banking services leave. Even schools close their doors at some point. It is very important for the vitality of those communities to retain those services. Canada Post Corporation, for example, could exercise this leadership, and that would definitely contribute to the vitality of those territories.

[Joël Lightbound, Liberal, Louis-Hébert, QC]

Mr. Esch, I am turning to you now.

A little earlier you answered a question on banking services offered in small municipalities such as Ristigouche-Sud-Est. You mentioned an area of 25 kilometers.

Can you describe a little what banking services are currently available in a municipality such as yours?