By Suzannah.Brecknell

16 Nov 2011

Ed Davey, charged with mutualising the Post Office, argues that past mutualisations haven’t won the backing of employees. Suzannah Brecknell hears him discuss the challenges – and praise the power of ‘nudge’ technique

Ed Davey is concerned about perceptions. As a business minister with responsibilities for employment relations, corporate governance and consumer affairs, he’s worried about what consumers think of business, and what businesses think of government. When we meet, he’s concerned about what the public thinks of the Post Office; and in particular, he’s interested in what you think of it. Davey hopes that civil servants will play a key role in giving the struggling body a sustainable future.

Davey has long wanted to be postal affairs minister, according to an article that he wrote recently for subpostmasters’ magazine Subspace: mentioning his experience working as a consultant for post offices around the world, he wrote that one of his proudest achievements as an MP has been securing a new post office for his constituency. Soft soap aside, this is an exciting time to be in charge of the Post Office: it’s undergoing a “dramatic transformation”, he says, both within branches and in its structure. The plan is to separate Post Office Ltd from a privatised Royal Mail, and to turn it into a mutual organisation part-owned by employees, subpostmasters and customers.

Davey launched a consultation on the proposal to mutualise in September. He is a strong advocate of mutual organisations generally. “The mutual sector in the UK is quite a strong one, and I think we need to rediscover its power in certain settings,” he says. Rather than thinking only in terms of public/private ownership, “policymakers need to think afresh”.

Given his long-standing interest in mutuals, what should policymakers bear in mind as they encourage the development of new, public sector mutuals? Firstly, Davey replies, they must ensure that employees are properly engaged.“I’ve seen examples where people have tried to impose this on the staff,” he says, “and that ain’t gonna work, because the whole change of culture that you’re trying to bring about through a mutual is to make it clear that they have a choice, and therefore you don’t want it to be imposed.” The example he mentions, he explains, is Your Healthcare, a social enterprise set up to provide health services in his Kingston constituency. Concerned about how it was being set up, he reveals, he intervened to slow down the schedule so that staff could be properly engaged.

It will be just as important to involve employees – and unions, which did not welcome the proposals earlier this year – in the Post Office’s mutualisation, says Davey, noting that in recent meetings union reps “have been open for debate, wanting to be engaged”. One point about which Davey and the unions agree is that mutualisation will not be the solution to the Post Office’s troubled finances. “You won’t be able to mutualise the Post Office until it’s on the right financial footing. At the moment it’s losing a shed-load of money,” he says. The organisation must reduce costs and improve income, and the current programme of modernisation is designed to save money while extending opening hours and reducing the infamous postal queues; it will also improve service and look at ways to make the business more sustainable.

This links to a second point that Davey makes about mutualisation: it’s just as important to engage customers in the plans. Service users don’t feature heavily in much of the coalition rhetoric around public service mutuals, but Davey argues that “you need to make sure that customers see the benefit of this.” Customers could be engaged through part-ownership, or through a dividend model – as with the Co-operative retail operation. Sharing the ownership of post offices with customers in this way could help “create sustainability and community engagement,” he says.

Finally, Davey emphasises the need to consider a mutual’s capital needs. Investment mechanisms, he says, differ from those for straightforward private or publically-owned companies. Mutuals can be given capital on their creation, borrow from banks, or “raise it against contracts: future streams of income that they’ve been told they can get”, Davey explains.

This is where the civil servants come in, for another aspect of the coalition’s plans is that the Post Office should win contracts to provide government services – eventually becoming the ‘front office of government’, as the coalition’s report on the future of the post office network put it last year. This is not, however, a done deal, says Davey: the Post Office will have to compete with rivals for the work. “We can’t just give the Post Office contracts,” he says. “It’s got to win them.”

In awarding contracts, he stresses, service quality will be just as important as price. And if the Post Office can get its offer right, there’s plenty of work: as the ‘digital by default’ agenda produces results, departments will need contractors for tasks including identity assurance, assisted digital services, and form-checking to help reduce costs due to errors.

Yet in some ways it seems as though government is drawing away from the Post Office. Last week National Savings & Investments decided to stop selling savings accounts through post offices, and earlier this year the work and pensions department (DWP) gave the contract for processing of benefits payments to PayPal, ending years of association with local post offices. What is Davey’s reaction to this sort of announcement?

“I can give you some examples where we’re going forward,” he says, mentioning contracts awarded to local post offices by Westminster Council. The DWP, too, has recently appointed the Post Office to run a service which lets local authority employees access government systems, and is running pilot scheme whereby benefit claimants in rural areas can sign on at their local post office. Davey also indicates that there may be “announcements in the next few months which will show the Post Office has competed successfully to win other contracts”.

This could be a straightforward politician’s dodge to focus on a positive rather than negative story, but it could also be an attempt to use a ‘nudge’ technique on government departments – for behavioural psychologists argue that attempts to encourage a particular type of behaviour are more successful when they emphasise that most people behave than when they focus on the minority who don’t. Given that Davey’s brief covers a large amount of regulation (employment and consumer regulation plus corporate governance) and that his department is leading efforts to cut red tape, I ask for his thoughts on nudge and similar alternatives to regulation.

He points to his mug, which reads: ‘nudge nudge, wink wink, know what I mean?’, and to the only poster in his office: an illustration from Mindspace, the Institute for Government report which explains nudge techniques for policymakers. “I’ve given a clear nudge to people that I’m a big believer in nudge,” he quips.

In his consumer affairs remit, Davey has launched an initiative called ‘midata’ which aims to help consumers make better decisions by telling them more about the information which companies such as British Gas hold about them. The initiative was developed in partnership with the Cabinet Office’s Behavioural Insight Team, and Davey also argues that the ‘Employer’s Charter’ – which he published in January to inform employers about what they can and can’t do under UK law – is a nudge policy “because you’re trying to change perceptions”.

Sometimes, he says, businesses and individuals “have a perception of government policy which is completely different from the reality”. In such cases, he says, there’s no point changing the policy to meet their needs; policymakers must instead find effective ways of changing people’s perceptions. As an example, he mentions a survey about employment law carried out as part of the government’s red tape challenge which found that sole traders – one-man bands – had a more negative view of employment law than businesses that employ people. Convincing sole traders that it’s easier than they think to employ people could help tackle unemployment and support economic growth: “You don’t need to change the law or the regulations,” he says. “You need to think about the psychology and the behavioural economics that underlie it”.

As his staff usher us out of the interview, Davey concludes: “Obviously, I’m worried particularly about business perceptions and trying to see where we can correct those, because I think that’s important for growth.” And just as changing perceptions of regulations will be important for economic growth, changing perceptions of the Post Office will be important to the success of its “dramatic transformation”; to turning this troubled organisation into a “partner for many parts of government – not a partner that they’re dragged to by ministers unwillingly, but a partner of choice.”

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