Good morning, and thank you very much for having us back to conclude our remarks here today. As you know, my name is Mike Palecek. I'm a letter carrier from Vancouver and the national president of the Canadian Union of Postal Workers.
I have with me today our director of research, Geoff Bickerton. He has been with our union since 1977, and was intimately involved even in the formation of Canada Post as a crown corporation and in every single review afterwards. I would hope that between the two of us, we can come up with some answers for whatever you ask.
As you know from our letter to the committee chair, CUPW has done a critique of the task force's discussion paper, as promised. I believe last time we were here we said we would do that and submit it to you for consideration. This document outlines our concerns about financial matters and postal banking. I would like to highlight some of our concerns and also answer any questions you might have. Of course, I won't have time to be comprehensive in this.
First are the labour costs. In one place the discussion paper states that Canada Post's productive unit of labour costs are up to 41% more than those of comparable businesses in the private sector. In another place, it states the Canada Post productive labour rate is 45% more than its competitors'. Based on information that Canada Post provided to us, the difference is nowhere near 41% or 45%. You can see this on page 2 of our critique.
I'll move on to financial performance. The task force based much of its negative projections for the future on its analysis of the past five years, but they got it wrong by lumping the results together. In 2011, they didn't look at the impact of the one-time events, such as the pay equity payment estimated to cost $250 million, or the one-time increase of $63 million in pension benefit costs. Without these one-time costs, Canada Post would have made a profit from operations, in spite of the rotating strikes and full-scale lockout in 2011, which have been estimated to have cost between $50 million and $70 million.
For 2012, the task force reported a loss, which is not true. Canada Post reported a $94-million profit in 2012, but restated it in 2013 for comparative purposes only, when the corporation introduced new accounting standards. For 2013, the task force completely ignores the huge impact of the one-time accounting changes and instead cites the financial results as evidence of long-term unsustainability. The fact is that Canada Post would have reported a $321-million net profit, had it not been for those accounting changes in 2013.
For 2014, the task force acknowledges a profit but attributes it largely to March price increases that generated $214 million in revenue. They neglect to mention the impact of the increase in the benefit-cost discount rate, which reduced benefit costs by $181 million. For 2015, the task force doesn't say much except that it was a profitable year. Canada Post, on the other hand, tried to attribute the profits in 2015 to the CMB conversion program, even though the conversions happened at the end of the year and the impact in reducing costs was minimal.
The 2015 profits were the result of an increase in parcel volumes, productivity gains, and Canada Post's ability to reduce staffing in response to lost volumes. It was also achieved despite a decrease in the benefit discount rate from 5% to 4%, which increased the benefit cost by $189 million.
For 2016, the task force predicts a loss before taxes of $63 million. They predict a loss in spite of the fact that all evidence points to another profitable year for Canada Post. Canada Post reported $45 million in profits before tax in the first six months of 2016. This represents the highest profits for the same period, since 2010, when they started reporting profits quarterly. Plus, this was all achieved in spite of Canada Post instructing large-volume mailers not to mail during June of 2016, when they drove their business away threatening a labour dispute.
The corporation has a long track record of being wrong. I would ask that you review page 6 of our critique for this.
I have just a few more observations before we move to the questions.
The task force makes only one reference to our new collective agreement. They cite a clause in the urban contract requiring that there be 493 corporate retail outlets. They see this clause as negative. We do not.
They either fail to mention or were not told by Canada Post about two very positive developments. The task force does not mention the new rules that were negotiated that will allow Canada Post to significantly increase its market share in ad mail and the parcel market, particularly by delivering parcels on evenings and weekends. Similarly, there's no mention of a new activity values in the RSMC agreement that will increase productivity.
On postal banking, in addition to the financial issues, we have critiqued the task force's observations on postal banking. We hope you will read this section with interest.
I would like to highlight two major errors right now. The task force's report says, on page 82, that only 7% of Canadians who like the idea would actually use a postal bank. According to their own polling, it's not 7% of those who support the concept, but 7% of all Canadians. Furthermore, another 22% of Canadians say they would probably use a postal bank. In short, the task force's polls suggest postal banking has huge potential, and up to 29% of the country say they would probably use it.
The second error is found on page 86, where the discussion paper states “having a government entity competing in the financial sector would contravene Canada's trade agreements with other countries”. This statement is also incorrect. A postal bank would be subject to trade agreements and would have to operate within those rules, but there is currently nothing in any trade agreement that would prevent a postal bank from actually operating.
In conclusion, we believe that the task force's paper should be disregarded, as it is biased, and based on errors, omissions, misrepresentations, and unsupported speculation.
Thank you for listening.
