Jeff Watson

[Business of Supply, January 28th, 2014]

Mr. Speaker, the member will know that at the transport committee, in a hearing on December 18 of last year, not only was Canada Post called to explain and defend its five-point plan, but we also heard from other important witnesses. They were academics on the left and right, groups of Canadians who have disabilities, and we heard from the union itself. One of the interesting things that was made very clear was that there is a structural problem. It is a global problem, and everybody agreed to that.

In fairness, there were differences of opinion about how to resolve it. However, this is a complex problem that does not lend itself to easy solutions. For example, small businesses said they had no problem getting rid of door-to-door delivery, but consumers said they would not mind if it was alternate-day delivery. It is not easy to reconcile all of these things.

I wonder if the member could comment on this complex situation, the structural problem and that action needs to be taken now, and whether or not he believes this plan put forward by Canada Post will bring the corporation back into balance.

[Business of Supply, January 28th, 2014]

Mr. Speaker, I just want to clarify something with respect to door-to-door delivery. I have lived in an apartment building. I have lived in an urban setting with a community mailbox. I have lived in a rural setting with a box at the end of a laneway, and I currently live in a small urban centre with door-to-door delivery. At my current address, I open my door and reach out to my mailbox on the wall. That is door-to-door delivery. If I were in an apartment, it would be like a community mailbox, but indoors. It would not be to my door. If we actually had to pay a postal worker to go door to door to door, that would be door-to-door delivery. If, for example, I lived with a post office box at the end of my laneway, that would not be the same as paying a postal worker to come to my door in a rural situation and put it in.

Let us be clear. What we are talking about is that only one-third of Canadian addresses actually receive door-to-door delivery, and that is the issue being dealt with.

I have asked this question about postal banking several times. Maybe the member can tell me what it would cost to capitalize a postal bank, what it would cost to operate a postal bank, and how Canada Post would capitalize that bank when it is running deficits.

[Business of Supply, January 28th, 2014]

Mr. Speaker, I have a simple question that I would like to ask the member.

If maintaining existing door-to-door delivery is an essential service, which is currently only delivered to one-third of Canadian addresses, is the member saying that it should be expanded to the other two-thirds of Canadian addresses, which do not receive door-to-door delivery? If so, how does she propose Canada Post, which is losing money, pay for that?

[Business of Supply, January 28th, 2014]

Mr. Speaker, I appreciate the intervention by my colleague, who, as chair of the transport committee, will remember that we had an important hearing on this matter. Not only did Canada Post appear there in order to defend its five-point plan, but we also heard from witnesses, including the Canadian Centre for Policy Alternatives, which the opposition says commissioned a study on postal banking. Perhaps the member will remember that I asked if that study had been submitted to Canada Post for its consideration during the public comment period, but that CCPA said no, that in fact it had not even submitted it for consideration at all.

Second, in response to a simple question like, “Have you looked at the costs of postal banking?”, all their report contained was a suggestion that maybe we should get some kind of a committee together to look at this in some ongoing fashion. In other words, it was a recommendation for further delay. They had not really done their own due diligence.

Perhaps the member would like to remind the House that in fact the other side has not even fully explored that particular issue. It could not provide an idea of what it would cost to capitalize a bank much less to run it, and how that would not be a solution for Canada Post to pursue.

[Business of Supply, January 28th, 2014]

Mr. Speaker, we had an important hearing before Christmas on this particular matter. Every single witness who was there agreed that Canada Post has a significant structural problem, that business as usual cannot continue at Canada Post, and that this is part of a global phenomenon. When I say “everyone”, I am referring to the Council of Canadians with Disabilities; the Canadian Union of Postal Workers, which was there; and the Canadian Centre for Policy Alternatives, which was paid by CUPW to come up with a report on postal banking. That was in turn carried out by the former director of parliamentary affairs for the opposition.

Every one of them, whether they were on the right side or the left side of the spectrum, knew that business as usual cannot continue at Canada Post and that action is needed now. Why is it that the member opposite supports more delay rather than getting on with some action now?

[Business of Supply, January 28th, 2014]

Mr. Speaker, I first would point out that Canada Post is run by a CEO and a board of directors who make strategic decisions on a day-to-day basis as to how it will operate and what its business decisions are on a go-forward basis. That is why it has a five-point plan.

Members do not have to take my word for it. If they read the last Auditor General report on Canada Post, it is clear that the CEO and the board of directors make the strategic decisions for the company. At that time, they were commenting on the postal transformation initiative. Let us be clear. That is the way Canada Post was designed to run in the first place.

In 1981, it was a government department, running chronic deficits and costing taxpayers enormous amounts of money. It became a crown corporation in 1981 and was given a mandate to deliver the mail in a financially self-sustaining way. It has been trying to do that through efficiencies and improvements. It has invested in optical reading and other importing sorting equipment, which has generated some savings. However, the savings are not sufficient to offset the structural trends that are happening.

People are just not mailing as they used to. That is a significant collapse in revenues, and it is forecast to get worse. Therefore, Canada Post had to come up with a five-point plan, and we support its right to make that plan.

[Business of Supply, January 28th, 2014]

Mr. Speaker, Canadians are speaking very loudly through their choices. If we look at banking, Canadians are increasingly moving away from old branch infrastructure. They are moving to online banking, whether on their desktop or by using new apps created for their smart phone in order to do that kind of banking. I do both. I do Internet banking myself. I will sit here and do banking on my BlackBerry as well. It is the way the world is moving. It is increasingly so. In just nine short years, over half of banking consumers will be from younger generations who are not using old infrastructure.

It is the same situation with respect to postal services. Canadians are speaking through their actions. They are sending far fewer individual letters. They are sending more parcels and doing more online shopping. Those trends are reflected. However, parcel delivery would not be enough to save traditional letter mail and the postal service, the way it is today. That is why Canada Post has a five-point action plan and that is why it believes it needs to take action now, and not delay any further so that the losses continue to pile up. These trends are irreversible. Canadians are speaking through their actions now with respect to postal services changing.

[Business of Supply, January 28th, 2014]

Mr. Speaker, during some of the years when there was postal banking in Canada, Canada Post was turning massive deficits. In the example of New Zealand, the Kiwibank has actually cannibalized postal service because of the enormous demands to capitalize the bank and it came out of the postal service. It is now slashing mail delivery and mail jobs and closing post offices by the dozens, in a small island nation like that.

Now the opposition members are asking us to figure out a way that Canada Post would capitalize a new bank, then operate a bank. It is about $1 million per branch to operate a bank in ongoing costs as well. That is just touching the surface. This is an expensive transition that the member proposes, and she probably does not know what the numbers are that it would actually cost to do that. This is for a model that The Globe and Mail, in an article last May, says is disappearing. This is what it said: “...the branch infrastructure will be rendered increasingly obsolete”.

That is where banking is going. Over 50% of banking consumers in just nine years are going to be Gen Y. They are going to be millennials. They are not going into branches of banks currently, so why would we ask Canada Post to adopt an obsolete system that already does not work? It does not work to cross-subsidize and save postal services in other parts of the world. It makes new revenue for governments, I guess, but it does not cross-subsidize postal service in any example in the world.

[Business of Supply, January 28th, 2014]

Mr. Speaker, in the interests of full disclosure, I have received three electronic petition responses and one email response. None of them, I note, was by individual stamped letter mail, by the way, which is the trend that is the problem at Canada Post.

I have spoken with many seniors, and they recognize that there is a deep fundamental structural problem at Canada Post and that business cannot continue as usual. They appreciate that. They also appreciate that these are complex decisions that have to be made, and some of them are tough decisions.

I do not know if the member opposite is suggesting that because seniors currently do not receive door-to-door delivery in two-thirds of Canada that door-to-door delivery should be expanded to the rest of Canada. Maybe she will want to clarify that in a moment. If she does, maybe she will explain how Canada Post, which is forecast to lose a billion dollars a year by 2020 if it does not act right now, would be able to pay for that expanding service.

[Business of Supply, January 28th, 2014]

Mr. Speaker, I rise to speak to the motion calling on the House to oppose Canada Post's plan to realign mail delivery and the pricing of its postal services.

The fundamental issue in this debate is the threat to Canada Post's long-term financial viability, the serious risks this situation poses for taxpayers moving forward, and the urgent need for immediate action.

Let us review the facts. Canada Post, as an arm's-length crown corporation, is responsible for its operations, including business and financial decisions. Since 1981 it has operated under a mandate to provide postal services on a self-sustaining financial basis, and until recently it had succeeded in coping with the impact of falling mail volumes through incremental efficiencies and price increases. Then in 2011, for the first time in 16 years, it lost money and fell into a deficit. These losses were primarily due to rapidly declining letter mail volumes.

Letter mail is the fundamental problem at play here, and this downward trend is irreversible. Fewer Canadians are using the mail system, visiting post offices, or buying stamps. According to Canada Post, a typical Canadian household buys only one to two dozen stamps per year. Mail volumes have dropped almost 25% per address since 2008, and they continue to fall with no end in sight. This has sharply cut Canada Post revenues, and it is neither a fad nor a short-term problem.

People are choosing instant communication through text and email over mailing paper, with even banking and bill payments moving to the Internet. Major mailers in Canada, including governments, are making concerted efforts to reduce their use of postal services in order to cut costs to taxpayers and consumers. Ad mail faces intense pressure from online advertising as well as email and mobile options. As Canadians go online for their information, demand for print publications is also declining. Publishers are moving toward digital versions for tablets and phones.

The one area of growth is parcel delivery, where e-commerce is driving demand for delivery of packages from online retailers and distributors to homes and businesses. However, parcels make up a small percentage of total mail traffic.

Canada Post's 2012 annual report indicated that domestic mail volumes have dropped by 23.6% since 2008 and will continue to decline over the next five years. That means that the corporation's financial picture is not going to improve unless effective action is taken, and taken now. Its draft 2014-2018 corporate plan projects a loss of $437 million in 2014, growing to nearly $700 million by 2023. In short, the corporation's current business model no longer works. It cannot earn sufficient revenues to offset its costs. Without changes, the future viability of the postal service is, at best, uncertain. We should remember that Canada Post cannot long sustain losses like these without being forced to take even more drastic measures.

The move to electronic communication is a fact of 21st century life all around the world, not just in Canada. Those suggesting that Canada follow the direction taken by other countries may want to look more closely at their choices, which include the privatization of Royal Mail in the United Kingdom, the merger of the Danish and Swedish postal services, and massive postal workforce layoffs of up to 40% in countries around the world.

Canada Post has done what it could to generate savings through its 2008 postal transformation initiative. This includes installing state-of-the-art optical readers and sorting equipment and restructuring carrier routes. The result has been a projected savings of about $250 million through to 2017.

Yet despite these improvements, the savings to date are not enough to ensure Canada Post's long-term financial health. Clearly, the corporation cannot avoid taking action to cut costs and raise revenues, action that reflects Canadians' changing habits and preferences.

There will, undoubtedly, be a residual level of demand for mail services, but it is impossible to determine what that level will be. No single change would prevent significant and growing losses on postal operations, but coordinated steps that align service standards with Canadians' choices should enable Canada Post to return to financial stability.

This is the direction Canada Post announced it would take on December 11, 2013. Canada Post's five-point action plan proposes steps to meet Canadians' need for postal service while reducing costs substantially. Let us look at the proposal that gets the most attention: community mailboxes. The corporation proposes to move the one-third of Canadian households that still receive door-to-door delivery to these community mailboxes. Door-to-door delivery is easily the most expensive delivery method, with an annual cost more than twice as high as that for community mailboxes. The purpose of this change, according to Canada Post, is to save money by cutting a high-cost service that most Canadians already do not now receive.

Two-thirds of Canadians already receive their mail through community mailboxes, apartment lock boxes, at post offices in their communities or through end-of-laneway mailboxes. Community mailboxes provide secure mail storage and a convenient place to receive parcels and packets. The corporation has committed to working with people with mobility issues to meet their needs. Canada Post already works co-operatively with municipalities and provinces to find safe, non-obtrusive locations for community mailboxes.

The potential impact of this change on Canada Post's bottom line would be significant. It is expected to reduce the projected 2020 operating deficit by $576 million. That is more than half the projected deficit. Community mailboxes also offer some advantages to Canada Post and its customers. With all deliveries done by motorized carriers, Canada Post could offer marketers opportunities to deliver direct mail items and samples that are too large for a postal carrier to carry; and the installation of community boxes for all residential addresses would support universal access to secure parcel delivery boxes. Any loss of convenience in letter delivery would be offset by increased convenience in parcel delivery. This is, according to Canada Post, a significant benefit given the rise in online shopping and parcel delivery.

Another target of criticism in the plan is the increase in the price of postage. The truth is that Canadians thus far have not been paying the full cost of delivering a letter. The announced increase would bring stamp prices more in line with the full cost of actual delivery. Currently, the price of a Canadian stamp is among the lowest of all developed countries, so there is still good value in sending mail.

According to the Conference Board of Canada, two-thirds of Canadians send two or fewer pieces of regular mail per month, and three-quarters of those surveyed no longer pay their bills by mail. As for businesses, some will be more affected than others. Canada Post says it will introduce a new tiered pricing structure for letter mail that will provide stamp discounts to consumers and businesses. This plan is a practical response to a clear and pressing problem that threatens the financial viability of this important service. It would help to ensure that Canada Post is on a solid financial footing and better reflects Canadians' current choices.

With fewer people buying stamps and mailing letters, we cannot afford to maintain a nationwide industrial system created to handle the large mail volumes of the last century. Clearly, not all Canadians are ready to forgo paper mail, so the answer is not to get out of the letter mail business entirely. Nor is privatization a real option; the same pressures would affect the private mail service as affect Canada Post currently.

There is no guarantee that a privatized mail service would be able to guarantee door-to-door mail delivery at a cost Canadians would pay. For example, the U.K. government had to assume huge pension obligations and other long-term debt before it could begin privatizing the Royal Mail.

Some have suggested finding other sources of revenue to offset letter mail losses; these include parcel delivery services and banking.

Let us take parcels first. The suggestion is that parcel revenues, which are growing as a result of online shopping, could offset the decline in mail revenues. While the parcel market is growing, it is far from the point where it could compensate for the decline in letter mail. The Conference Board of Canada has projected a 26% increase in parcel volume by 2020. However, this would remain small as a share of total mail traffic. We should remember that Canada Post does not have a legislated monopoly on parcel mail, as well. This lucrative market is open to competition.

Then there is banking. It is true that postal services and banking were once combined in Canada. Canada had postal banking from 1868 until 1967, when it was closed down due to a general lack of usage. However, Canada is already well-served by a strong banking industry. If any industry is being transformed by the Internet faster than communications, though, it is banking. With banking services moving online and bank branches consolidating and offering fewer walk-in services, why would we want to offer banking services in post offices?

Therefore, we are back to better controlling costs in a way that better aligns the business model and delivery network around choices that Canadians are making today. As the mail stream continues to change to less mail and more parcels, Canada Post will need to continue transforming its operations.

It is important to acknowledge that reducing labour costs, including the sustainability of Canada Post's pension plan, is a necessary element of Canada Post's plan. Labour is a significant component of Canada Post's rising costs. It is about 70% of its costs. It is obvious that any plan to return the corporation to financial health would have to reduce labour costs.

Canada Post estimates that its plan would result in a reduction of between 6,000 and 8,000 positions by 2019, to be achieved largely through attrition, as Canada Post expects that nearly 15,000 employees will retire or leave the company over the next five years.

Finally, we need to assure rural Canadians that Canada Post's action plan would not affect mail delivery in rural Canada. Any changes under the plan would continue to honour the service levels set out in the Canadian Postal Service Charter and the moratorium on closure of rural post offices.

Canada Post's management has put forward a plan it believes would return the corporation to financial self-sustainability by 2019. What is needed now is not second-guessing but action. It is important that this plan be implemented as quickly as possible to achieve the necessary cost savings and avoid other more drastic measures that would require significant taxpayer assistance. That is why the government supports Canada Post in its efforts to fulfill its mandate of operating on a self-sustaining financial basis. We understand its purpose, which is to protect taxpayers while modernizing its business and aligning postal services with Canadians' choices.

We look forward to seeing the rollout of Canada Post's plan and the transition to a more efficient postal service equipped to meet Canadians' needs now and in the future.