As if the Government hasn't enough problems already dealing with state-owned companies, the annual results issued yesterday by An Post highlight further difficult decisions to be faced. Put simply, An Post is facing unsustainable losses on its network of sub post offices and increasing competition in its mainstream business. The issues are similar to those in many other State companies and the Government's response has echoed its recent approach to the companies it controls in this area - a mixture of uncertainty, delay and confusion.
An Post is currently obliged by Government to fund a network of 1,800 sub post-offices, while also maintaining a commercial business. It can no longer do both. The post offices division will lose £13 million this year, rising to £28 million in 2004. These losses are unsustainable. EU legislation means that profits from An Post's mainstream postal business - under pressure in any case due to rising competition - can no longer be used to prop up the post offices. Until these issues are sorted out, it will be impossible for An Post to plan its future., which may well include striking a strategic alliance with an international grouping.
A report by consultant Mr Phil Flynn, presented to the Minister for Public Enterprise, Ms O'Rourke, earlier this year, outlined the issues clearly. It said that the Government and An Post need to agree a financial framework for the operation of these sub post offices. Such a deal might include the closure of some offices, the franchising out of welfare payments and stamp sales to other retailers in some areas and the retention of other offices. Clearly, if the Government wants An Post to retain a sub post office network for social reasons, it must provide it with a subsidy to do so. An inter-departmental group is shortly to report back to Ms O'Rourke on this issue.
An Post faces other challenges. The EU Commission is examining its monopoly of social welfare payments, while the margins in its mainstream business are being squeezed . An Post will report to the Minister later this year on how it proposes to address these issues - and in the meantime will seek a price increase. However, it is now essential that the Government agrees quickly with the company an approach to the future of the sub post offices; it is no exaggeration to say that any further delay could threaten the company's financial viability.