Evidence of meeting #9 for Transport, Infrastructure and Communities in the 41st Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was business.
A video is available from Parliament.
Conservative
John Anderson Research Associate, National Office, Canadian Centre for Policy Alternatives
Thank you for allowing me to present today.
My name is John Anderson. I'm here representing the Canadian Centre for Policy Alternatives, for which I produced a recent report published in October 2013 entitled “Why Canada Needs Postal Banking”. This report, which I believe has been distributed to you, is published in English and in French and is available online for downloading.
The decisions announced by Canada Post in its five-point plan last week are very troubling. Particularly troubling, and with which I disagree, is the decision to end home mail delivery. Canada becomes the only major country in the world to do this—a dubious first for Canada.
The decision affects millions of urban dwellers who live in homes with a street entrance. This move will particularly affect seniors and people with disabilities, especially in our long and harsh Canadian winters. In many cases, community mailboxes will produce much more use of vehicles that pick up mail and more greenhouse gases than home delivery does right now.
It is also important to note that the postal worker, man or woman, is often the only person who visits homes five days a week, and thus can be a vital contact with many citizens. As we have an aging population, home delivery should be seen as a positive service that should be used more fully.
Shutting down home delivery has to be one of the blindest business and public service decisions. Rather than recognizing the delivery network as a tremendous social and business opportunity, facilitating letters and package delivery directly to most homes in Canada, this is seen as a weakness.
Raising stamp prices from 63¢ to $1 is an increase of over 58%. Have wages or pensions increased at this rate?
Lastly, the decision to cut 8,000 jobs and the commitment to lower wages and benefits, complaining about high salaries when the average postal salary is around the average for Canadian workers, and starting salaries are even less, seems to represent a move to a low-income, precarious work world. Do we want to slash all decent jobs and go backwards to mail delivery at minimum wage or pay-by-post piecework?
Over the last 20 years, about 1,700 post offices, mainly in rural areas, have been closed, and it looks like more will be on the agenda with this announcement. Yet Canada Post has made profits in 17 of the last 18 years, letter mail is still very substantial, and parcel delivery is growing at double-digit rates.
Canadians are being told to pay more for less service. This is not a plan for sustainability, but for self-inflicted obsolescence. The decision by Canada Post, supported by the present government, moves in a very backward direction from every other G-7 country and other industrialized countries. These countries have looked at the choices to preserve their post office systems and have made different choices. Canada Post, as I've said, is the only one to cancel home delivery.
Other countries regard their postal service first as a public service, not first as a business to make a profit at all cost. The major different policy choice of almost everyone else has been to bring in postal banking or postal financial services. Countries as diverse and varied economically and politically as the U.K., France, Switzerland, Italy, and New Zealand, which are the countries that I looked at particularly in the report—and there is a detailed outline of each of these countries—have decided on postal financial services. We could too.
Offering financial services has worked in providing an important stream of revenue, which Canada Post does not have. Seventy-one per cent of the profits of Swiss Post come from its banking, as do 67% of the profits in Italy's postal services. Seventy per cent of the profits in New Zealand Post are from Kiwibank, which is their postal bank. In the U.K., under David Cameron, where they've enhanced financial services, 25% of sales of the post office come from financial services. In France, 36% of profits of La Poste are from La Banque Postale.
In the recent Conference Board of Canada study, which we just heard about, this option of financial services was not examined. The report states:
Canada has a highly developed financial service sector.... [T]he conditions that allowed other postal administrations to succeed in banking do not exist in Canada. Therefore, this report does not explore financial services as an option in Canada.
That report did not even examine this option, as I did in my report.
The Universal Postal Union, the United Nations organization of which Canada is a member, had a report on postal banking that it presented in October 2012, which showed that, after banks, postal operators and their postal financial subsidiaries are the second-biggest worldwide contributor to financial inclusion. In developing countries, postal banking grew from 70 million to 500 million accounts between 1980 and 2011. In industrialized countries during the same period, it grew from 170 million accounts to 220 million accounts in that period of 1980 to 2011.
The countries that I looked at have very large and concentrated banking sectors similar to Canada's. Canada's banking system, which is impressive in size and scope, has a number of weaknesses that a postal banking could help solve—such as, not everyone in Canada has adequate banking services.
The total number of bank and credit union branches has declined in Canada over the last two decades. While the number of branches increased in the last few years, the recent increase did not make up for the decline of over 1,700 branches, or 22%, since 1990. It's down to around 6,200. There are actually more postal outlets than there are bank branches in Canada now.
Credit union branches have declined by around 480 branches from 2002 to 2012, which is a decline of 13.5%. Canada now has considerably more people per branch, at 5,621, compared to the United States, where there are only 3,225 people per branch.
Thus, many communities do not have a financial service. Also, I would say that many largely low-income people use fringe financial institutions. In other countries, the postal banking services can offer alternatives to some of those services they offer.
Aboriginal communities have poor financial services. There are only about 54 banks and credit union branches on first nation reserves, and there are more than 600 first nations communities, many of which have post offices.
In many lower-income urban neighbourhoods, as well as rural neighbourhoods, bank branches have closed, such as in mine in Ottawa, while there is still a postal outlet. That's the case in my neighbourhood.
Past presidents of Canada Post, including Moya Greene, who is now the CEO of the Royal Mail, have spoken many times in favour of postal banking. In fact, she spoke before a parliamentary committee in saying this was the direction that Canada Post should go in, but only the present CEO seems opposed to that, and said in the The Globe and Mail yesterday that financial services is “a crowded market that it doesn't know”.
Well, this is exactly the same case in all of the other countries we looked at. There are existing financial institutions. Partnerships with existing financial institutions is one of the options that financial services in postal operations use, so it's not the question that one has to start everything from scratch. We know that credit unions such as Desjardins, which is the major francophone credit union network, and Credit Union Central have studied this issue and have examined the possibility of partnerships.
How would postal banking work? It's not a left or right policy direction. Canada Post already has much in its favour. It used to deliver banking services and did until 1968, so for 100 years after Confederation, Canada Post did deliver financial services. It only stopped that in 1968. It still has many financial products. It has the largest retail network in the country, with 6,400 postal outlets.
The federal government itself has a large and sophisticated banking sector, which includes not only the Bank of Canada, but also the BDC, the FCC, and the EDC, all of which have expertise in-house, inside of federal government institutions, around banking, and the expertise at the world level in terms of postal banking is very great.
Finally, 63% of Canadians in a recent poll supported postal banking.
In the U.K., under the Cameron government, the postal financial services have been expanded and are delivered by a partnership between the post office and one major bank, the Bank of Ireland. As well, you can deposit or withdraw money at any post office with a bank card from any major bank. In France, the Banque Postale, created in 2006 and now under a socialist government, has become one of the top 50 safest banks in the world.
As well, they offer different products in different ways.
In Switzerland, PostFinance offers accounts through the post office, while a partnership with the private sector offers loans and mortgages. There are different and variable ways of delivering postal financial services. France has special programs for low-income earners and for the social economy sector. In New Zealand, Kiwibank has special mortgages that it offers to Maori borrowers.
Not only could postal banking be a major boon to postal revenues, it would also be a huge boost to economic development and to small businesses in many communities. It could help save home delivery and save many jobs.
In conclusion, what I propose is that the federal government and Canada Post immediately set up a task force to choose which services to deliver, including current accounts, loans, mortgages and other products, and how to deliver them, either by Canada Post or by Canada Post in partnership with existing financial institutions. I think this is something that is very feasible, and it would be a very different direction from that offered by the present leadership in Canada Post.
Conservative
The Chair Conservative Larry Miller
Thank you very much, Mr. Anderson.
Mr. Campbell, you have 10 minutes or less.
Robert Campbell President and Vice-Chancellor, Mount Allison University, As an Individual
Thank you very much, Mr. Chair. I appreciate the committee's invitation today.
My name is Robert Campbell. I'm president and vice-chancellor of Mount Allison University.
I've been a researcher on postal matters since the late 1980s. I've published two books on Canada Post. One is called The Politics of the Post, which is about the history of postal service in Canada, and the other, on modernizing postal service, is The Politics of Postal Transformation, a book that compared Canadian postal systems to developments in the rest of the world. In 2008 I chaired a mandate review for the federal government.
That is by way of background in terms of my interests and what I do when I'm not doing my day job as a university president.
I thought it might be useful for the committee to know what the strategic review panel had to say on this matter in its report. This was not something that we analyzed or made a direct recommendation on, but in our discussion of the future of the universal service obligation, we made the following observation with respect to options for the USO in the future, which, by the way, is the government's responsibility to define. I quote from page 47:
The Advisory Panel believes that the historical service mechanisms for delivery to individual homes—for example, letter carriers going door-to-door or delivery to the end of laneways—should always be open for reconsideration in light of changing demographics and technology....Canada Post should continue to develop and implement the most appropriate delivery approaches to achieve its USO.
Our view was that the issue was how Canada Post was going to deal with its financial and business challenges going forward, and that it had to come up with a business model that was sustainable to maintain a level of service that Canadians were willing to pay for, without government subsidy, but in ways that would be financially self-sustainable over time.
To this extent, I'm here today before the committee with no strong point of view one way or the other on Canada Post's decisions, other than to make the observation that Mr. Stewart-Patterson made earlier, which is that the financial sustainability model of Canada Post is somewhat weak at the moment.
One can look at numbers any which way—there's the famous adage about there being three kinds of lies: lies, damned lies, and statistics—but it seems pretty clear to me that the core business of Canada Post, that is, the letter-mail business, is weak and declining, and that generates much of its costs, particularly in terms of sorting and delivery. So Canada Post has to make a decision as to how to properly align its costs with its revenues going forward.
The revenue picture for Canada Post on the letter side is not strong. The revenue picture on other areas of its business looks more promising, but these may or may not lend themselves to home delivery, and that's something for the management and board of Canada Post to evaluate.
All countries in the western world, as has been noted, are struggling with transforming a traditional industry, or what might be called a legacy industry, into a modern technological industry in the face of enormous competition, which is what has basically undermined the monopoly of Canada Post.
Different countries manage things in different ways. My wife is Dutch, so I'll give this as one example. If you were to go to Holland today, you would not be able to find a post office. The retail postal network of the Dutch post office doesn't exist anymore. It has been completely outsourced.
That makes some sense in a country like Holland, where real estate is expensive. Their network of delivery continues, but it's a small and compact country. Canada is a very large country across five time zones with a relatively thin population, so the delivery element of the postal service is relatively expensive compared to that of other countries.
In conclusion, I will make one last little comment on postal prices. Historically, postal prices in Canada have been low. They've always been low relative to world prices.
I didn't have a lot of time to do this, but I just quickly got onto the Internet before coming over here. In Europe, in nominal prices, that is, European prices, there are domestic prices and European prices. The countries are pretty small. The domestic price for a stamp in Norway is about $1.68 in Canadian terms. To mail into Europe, which would be like mailing in Canada, it's $2.25. In Denmark it's $1.50 and $2.10. In Italy, France, Germany, the U.K., and the Netherlands, the price of a domestic stamp is around 85¢ to 90¢. The price of a stamp to Europe is about $1.10. That's the comparative context.
Mr. Chair, I'm going to stop there because I know there's only about 20 minutes left in this panel discussion. I'll let committee members have a chance to ask participants a question.
Conservative
The Chair Conservative Larry Miller
Thanks very much, Mr. Campbell.
We'll move to Madam Boutin-Sweet. You have seven minutes, please.
NDP
Marjolaine Boutin-Sweet NDP Hochelaga, QC
I would like to thank everyone for coming on such short notice. This is a very important matter. The fact that there are many journalists present shows that this is an issue that affects many people.
In my experience, when a business makes major cuts and increases its prices, it loses customers, its sales drop and this often leads to the business closing its doors.
Mr. Lemelin, earlier you said that Canada Post has to make changes. You do not deny it. You have already told us what you think of the business plan proposed by Canada Post. I would like you to elaborate on that. For example, what effect will it have on the corporation itself? Are you concerned that, with its service cuts and price hikes, Canada Post will scare customers away?
National President, Canadian Union of Postal Workers
We talked mainly about door-to-door delivery, but we also have concerns about the price of stamps, even though we do agree that Canada Post must be self-sustaining.
I would like to say something about door-to-door delivery. There is a big unknown here that Mr. Chopra did not talk about and that is the postal transformation. In fact, Canada Post started making changes in 2007. The postal transformation mainly affected delivery. A model was developed that used motorized letter carriers and sequential sorting, with mail going directly to the letter carrier's bag. This model is not used everywhere; it is to continue until 2017. The implementation of this new delivery model alone, the multi-service letter carrier, will save Canada Post $270 million in 2017. That is an important element. Now, Canada Post is changing its position again, putting aside this new model and putting an end to door-to-door delivery.
What we think of that is very simple. A business like Canada Post has two major advantages: its network and its brand. It wants to eliminate one of its advantages, which is contact with its customers.
Another important aspect of the plan is the elimination of public post offices, which will be turned over to the private sector. Canada Post had already tried this in 1980, but the initiative was blocked because it realized that it would lose direct contact with its customers.
Once you crack open the door, it can be pushed wide open and everything goes. In Canada, there are some vultures, or major corporations such as TransForce, UPS or FedEx that are just waiting for the right moment to take over the market. That is what is happening in Great Britain with privatization and the arrival of TNT, which also offers door-to-door delivery.
We are not fearmongering. We see that Canada Post is going in the wrong direction. Instead, it should be expanding services.
NDP
Marjolaine Boutin-Sweet NDP Hochelaga, QC
In other words, this bad decision will reduce the number of Canada Post customers and also discourage people from using its services. The amount of lettermail will decrease and, consequently, so will profits.
National President, Canadian Union of Postal Workers
This will reduce profits and also interest in the postal service. Fundamentally, the postal service has a certain mission: to put people in contact with one another. We have to ensure that it is person-to-person contact. Two people can be in the same room and communicate with a device, but that is not the best way to communicate. We believe that people must communicate directly. The letter carrier has a distribution role as well as a social role. The role of maintaining social contact must continue and must be strengthened.
NDP
Marjolaine Boutin-Sweet NDP Hochelaga, QC
As I recall, in 2011, when Minister Raitt made postal workers return to work after the lockout, she spoke about essential services. However, we don't hear those words these days. They seem to have been forgotten.
There is no more door-to-door delivery. Does that mean it is no longer essential?
National President, Canadian Union of Postal Workers
People use certain words when it suits them, but when it does not, they forget about them.
The main objective of our union has always been to maintain a public and universal postal service. That has always been the case and we will continue to fight for that because we are postal workers, of course, but we are also Canadians. Our members have a relationship with Canadians and are forging ahead.
We believe that the only way to go is to think positively and to be more active in the marketplace. We agree with the business focus because it contributes some elements. However, at the same time, we have to maintain that relationship.
Conservative
NDP
Marjolaine Boutin-Sweet NDP Hochelaga, QC
I would now like to talk about the consultations.
You both made suggestions to Canada Post, but these positive suggestions were not taken into consideration. People from Canada Post tried to meet with Minister Raitt. Mr. Anderson, you suggested things that, even you, Mr. Stewart-Patterson, mentioned, but these were not taken into consideration in the report.
Mr. Anderson, I would like to hear what you have to say in that regard.
Research Associate, National Office, Canadian Centre for Policy Alternatives
Do I have any time?
Research Associate, National Office, Canadian Centre for Policy Alternatives
I think it was a terrible pity that the Conference Board report did not look at postal banking in detail as an option. It certainly has to be considered as one of the major options that most postal services in the world are using. We have to look at that.
Conservative
Liberal
David McGuinty Liberal Ottawa South, ON
Thanks, Mr. Chair.
Thank you very much, gentlemen, including Mr. Campbell at Mount Allison.
Mr. Chair, last week I wrote to the Parliamentary Budget Officer to ask the PBO to help us understand the ramifications of this five-point plan. I can see now that we're desperately going to need this insight from the PBO, because here's how it looks to I think most Canadians who are fair-minded and are watching this debate and tracking this.
On the one hand, you have Canada Post, which retains the Conference Board of Canada, a good institution located in my riding, and it does some tough, probative work analysis of how the corporation should move forward. On the other hand, CUPW and the postal workers hire the Canadian Centre for Policy Alternatives, and they get their blue chip panellists. Then we have a combat between two third party, blue chip panellist research institutions.
So I think most Canadians would want me to ask this question: why aren't you working together?
Mr. Lemelin, I take it from your testimony that the union is not at all in favour of the corporation's plan.
I take it from the previous testimony of the CEO of Canada Post that it is not at all in favour of the union's proposal for postal banking.
It's the 21st century. It's 2013. Why weren't you all convened into a room and asked to work together to try to come up with a plan whereby the postal workers and management could actually come out of this thing together, united?
Since when can we afford this kind of conflict in 2013 with a crown corporation? Does somebody care to reply on behalf of fair-minded Canadians who are watching?
National President, Canadian Union of Postal Workers
Yes, I can address that issue.
Last year, when Minister Raitt was appointed Minister of Transport, I wrote a letter to the minister saying, “We want to meet with you to talk about our vision for the future of the postal service.”
When the problem with the pension plan arrived, I wrote a letter to Minister Raitt saying, “Minister Raitt, you need to have all the parties together to talk about the pension plan.” I again wrote a letter to Minister Raitt two weeks ago, again talking about that issue, because we felt and we still feel.... And Canada Post was there. They said, “Okay, we could face a deficit in 2020, and at the same time we have to pay $100 million every month for the solvency deficit of the pension plan.”
We were aware of that. We were aware of the cashflow of Canada Post. For a couple of years, we have been trying to sit down with Canada Post on this issue. We succeeded in that, but at the same time, we know that the only way to solve the long-term issue and, in the short term, pensions, we have to look at the long-term issue at Canada Post. So we tried. We tried to involve the minister on the issue.
Liberal
David McGuinty Liberal Ottawa South, ON
So you made an overture to the minister.
Let me ask you this. To your knowledge—because I don't think you can speak for the president of the corporation—did Canada Post make a similar overture to the minister to get everybody in the same room?
National President, Canadian Union of Postal Workers
I don't know. We were talking about the pension plan, and when the press release for the third quarter went out, there was a line saying that we were discussing with the shareholders what was happening with the solvency deficit. We were not informed about that.
Liberal
David McGuinty Liberal Ottawa South, ON
Mr. Stewart-Patterson, can I just ask you, given the four corners, presumably the parameters under which you were retained by Canada Post, were you restricted in your creativity in terms of trying to figure out possibilities going forward and, for example, were you asked to examine in detail the merits of the proposal that was being investigated by the Canadian Centre for Policy Alternatives?
Vice-President, Public Policy, Conference Board of Canada
To be clear, what Canada Post asked us to do was to take an outside look at where the business was going and how customer behaviour was changing and, from there, what some of the options were. We were not asked to make recommendations to favour one path forward over another. They wanted us to identify the dimensions of the problems and to provide a foundation for a discussion with Canadians. In other words, we were not being asked to come up with a report to tell them where to go. They asked us to come up with a report that would let them engage in a productive discussion with Canadians.
Liberal
National President, Canadian Union of Postal Workers
It depends. We represent about 50,000 or 52,000 urban and rural workers, but according to the latest report of Canada Post, it is about 68,000 people.