OGGO Committee Meeting

Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.

For an advanced search, use Publication Search tool.

If you have any questions or comments regarding the accessibility of this publication, please contact us at accessible@parl.gc.ca.

Previous day publication Next day publication

37th PARLIAMENT, 3rd SESSION

Standing Committee on Government Operations and Estimates

EVIDENCE

CONTENTS

Thursday, April 22, 2004

0905

The Chair (Mr. Paul Szabo (Mississauga South, Lib.))

Ms. Anne Joynt (Acting President and CEO, Canada Post Corporation)

0910

0915

The Chair

Ms. Anne Joynt

The Chair

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, CPC)

0920

Ms. Anne Joynt

Mr. Jacques Côté (Senior Vice-President and Chief Financial Officer, Canada Post Corporation)

Mr. Paul Forseth

Ms. Anne Joynt

Mr. Paul Forseth

Mr. Gerard Power (Vice-President, General Counsel and Corporate Secretary, Canada Post Corporation)

Mr. Paul Forseth

0925

Mr. Jacques Côté

Mr. Paul Forseth

The Chair

Mr. Gilles-A. Perron (Rivière-des-Mille-Îles, BQ)

Mr. Jacques Côté

Mr. Gerard Power

Mr. Gilles-A. Perron

0930

Mr. Jacques Côté

Mr. Gilles-A. Perron

Mr. Jacques Côté

Mr. Gilles-A. Perron

Mr. Jacques Côté

Mr. Gerard Power

Mr. Gilles-A. Perron

Mr. Gerard Power

Mr. Gilles-A. Perron

Mr. Jacques Côté

Mr. Gilles-A. Perron

0935

Mr. Jacques Côté

Mr. Gilles-A. Perron

Mr. Jacques Côté

The Chair

Mr. Tony Tirabassi (Niagara Centre, Lib.)

0940

Ms. Anne Joynt

Mr. Tony Tirabassi

Ms. Anne Joynt

Mr. Tony Tirabassi

The Chair

Mr. Leon Benoit (Lakeland, CPC)

Ms. Anne Joynt

0945

Mr. Leon Benoit

Ms. Anne Joynt

Mr. Leon Benoit

Ms. Anne Joynt

Mr. Leon Benoit

Ms. Anne Joynt

Mr. Leon Benoit

Ms. Anne Joynt

Mr. Leon Benoit

The Chair

Mr. Leon Benoit

The Chair

Mr. Leon Benoit

0950

Ms. Anne Joynt

Mr. Leon Benoit

The Chair

Mr. Alex Shepherd (Durham, Lib.)

Mr. Jacques Côté

Mr. Alex Shepherd

Mr. Jacques Côté

0955

Mr. Alex Shepherd

Mr. Jacques Côté

Mr. Alex Shepherd

Mr. Jacques Côté

Mr. Alex Shepherd

Mr. Jacques Côté

Mr. Alex Shepherd

Mr. Jacques Côté

Mr. Alex Shepherd

Mr. Jacques Côté

The Chair

Mr. Jacques Côté

The Chair

Mr. Jacques Côté

Mr. Alex Shepherd

The Chair

Mr. Jacques Côté

The Chair

Mr. Alex Shepherd

The Chair

1000

Mrs. Lynne Yelich (Blackstrap, CPC)

Ms. Anne Joynt

Mrs. Lynne Yelich

Ms. Anne Joynt

Mrs. Lynne Yelich

Ms. Anne Joynt

Mrs. Lynne Yelich

Ms. Anne Joynt

Mrs. Lynne Yelich

1005

Ms. Anne Joynt

Mrs. Lynne Yelich

The Chair

Mrs. Lynne Yelich

The Chair

Mrs. Lynne Yelich

The Chair

Mr. Tom Wappel (Scarborough Southwest, Lib.)

Ms. Anne Joynt

The Chair

Ms. Anne Joynt

The Chair

1015

The Chair

CANADA

Standing Committee on Government Operations and Estimates

NUMBER 009

3rd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, April 22, 2004

[Recorded by Electronic Apparatus]

¿ (0905)

[English]

The Chair (Mr. Paul Szabo (Mississauga South, Lib.)): Good morning.

Pursuant to Standing Order 81(4), we are here to review the main estimates for 2004-05. We're also here to have a report from Canada Post Corporation, their auditor's report for the fiscal year ended March 31, 2003.

We have with us this morning Anne Joynt, acting president and CEO. Good morning, welcome, and thank you for accommodating our time schedule.

If you would, please introduce your colleagues to us. I understand you have some words to share with us, and then I'm sure the members will have some questions, so please proceed.

Ms. Anne Joynt (Acting President and CEO, Canada Post Corporation): Thank you very much.

Good morning; bonjour. I am pleased to be with you this morning in my capacity, as you mentioned, of acting president and CEO of Canada Post Corporation. With me is Canada Post's chief financial officer, Jacques Côté, and our vice-president, general counsel, and corporate secretary, Gerard Power.

We welcome every opportunity to speak with our shareholder about the corporation's performance and to discuss the challenges that lie ahead of us. I will begin my opening remarks with a review of the highlights of our 2003 annual report and some of the programs included in the main estimates. The balance of my presentation will try to place this year's performance in perspective in terms of Canada Post's evolution to date and its prospects for the future. Our annual report was tabled in Parliament three weeks ago.

[Translation]

We recognize our obligation to provide Canadians with the quality of information they need to understand how Canada Post is performing. This year's report reflects Canada Post's effort to continuously enhance the level of disclosure and transparency in respect of our financial reporting. I am pleased to say that the document provides a standard of public disclosure that meets or exceeds the practices of Canada's largest publicly traded corporations.

[English]

The 2003 annual report shows Canada Post generating a net income of $253 million. Consolidated revenues from operations reached $6.3 billion in the past year, an increase of $190 million or 3% over the previous year.

On the cost side of the equation, Canada Post's consolidated cost of operations totalled almost $6.2 billion in 2003, also higher than in 2002. The net income figure of $253 million benefited from several extraordinary events that represent non-recurring savings.

The first involves the accounting recognition of a future tax asset arising from the settlement of over $400 million of employee termination benefits. The second relates to a one-time settlement of international terminal dues with the United States Postal Service that was worth $118 million. If we exclude these and some other one-time items, Canada Post's net income in actual terms would have been closer to $66 million. This is more in line with our expectations for the year and with our historical trends.

Moving beyond the numbers, Canada Post has long played a vital role in helping the Government of Canada achieve other policy objectives. We provide a number of services, from delivering food to remote communities in the north to helping Canadian Forces personnel communicate with their families. In addition, our act provides free mailing privileges for literature for the blind. We also facilitate communication between Canadians and their MPs through the parliamentary free mail program.

The government recognizes the social benefit of these programs as well as the need to fund them in a transparent way. That is why $22.2 million is allocated annually from the government's main estimates to pay for these estimates, at roughly $11 million each.

Also included in the main estimates is a provision for transitional support for the Canada Post pension plan. In the year 2000, the corporation took over responsibility for the pension and related future benefits for Canada Post employees. As part of this move, the government is providing transitional support, which will end in the year 2010. This year the support is $175 million. It will decline by $25 million every year. This funding will help offset some of the costs associated with this obligation.

It is important to note that the transfer of the pension plan to Canada Post occurred in the year 2000, on the eve of the worst stock market decline in 30 years. This situation has left the corporation with a solvency deficit that we are taking steps to manage in accordance with our obligations.

I would like to devote the balance of my remarks to providing you with some context for this year's results and a perspective on the challenges that lie ahead.

Despite its turbulent beginning, Canada Post has undergone a remarkable transformation. Before the creation of the corporation, the post office department was losing over $500 million a year, deficits that came directly out of the pockets of taxpayers. Postal service was poor, and labour-management relations at the department were among the worst in Canada.

Canada Post Corporation was established in 1981 to fix these problems and deliver affordable, universal postal service. In fact, Canada was the first country to turn its post office into a corporation. This model for success has since been followed by nearly every other industrialized nation.

The corporation was mandated to operate as a business and be profitable. The results since that time reflect the positive impact of commercial discipline.

Over the first seven years of operation, financial performance steadily improved. By 1989, the corporation turned its first profit. This marked the end of government funding of company losses.

While we didn't turn a profit every year from 1989 to 1994, the company's financial performance over that period was essentially break-even. Since then, Canada Post has been profitable for nine consecutive years. It has generated over $779 million in net income and produced over $448 million in dividends and return of contributed capital to the Government of Canada.

Equally important, increases to the basic domestic stamp price have been capped at two-thirds of the rate of inflation since 1997.

Canada Post has also substantially improved service. In the mid-1980s we became the first postal administration in the world to independently measure and publish on-time service performance against set standards. In the intervening years, this measurement process has been systematically expanded to include service to all parts of the country. Today service performance measurement is a key pillar of the Canada Post culture and we are doing quite well. In the year 2003, we achieved an on-time service performance score of 96.6% for letter mail in all of Canada—a significant improvement from the 1980s, when on-time delivery even in major urban centres frequently remained below 85%.

In summary, the commercialization of Canada's postal service has been a success. We are a $6.3 billion crown corporation. We provide vital services every day to over 30 million Canadians and more than one million businesses, and our letter mail rates are the second lowest in the industrialized world. We are Canada's sixth largest employer and among the top ten employers in every province. We employ more than 66,000 Canadians directly and provide work to a further 30,000 Canadians indirectly. By any measure, then, Canada Post is indeed a valuable asset belonging to the people of Canada.

However, the challenges the company faces have also evolved considerably since 1981. I want to talk to you about a number of these risks. The most significant external risk is the impact of electronic substitution and the erosion of letter mail volume. In 1981, the exclusive privilege to deliver letter mail in Canada was an effective means of funding universal services. Since that time, technology, particularly faxes and e-mail, has substantially eroded the effectiveness of this mechanism. There is now an alternative to every service we provide.

For example, Canada Post is seeing some of its most important traditional mail business vanish, as utilities and other service providers encourage customers to receive and pay bills electronically. Canada is not alone. Letter mail is declining throughout the industrialized world at rates ranging from 1% to 5%. Furthermore, while letter mail volumes are falling, we are serving up to 175,000 new addresses every year. This means fewer pieces of mail are being delivered to a larger number of addresses. Since the year 2000, Canada Post's network has expanded by over 7%. During the same period, exclusive privilege volume declined by 5%. So the net effect has been a 12% decline in revenue generated at each address and a $300 million total impact on Canada Post's earnings over three years.

Turning to organizational risk, our most significant issues involve managing costs and improving productivity. As you know, we are a very labour-intensive organization that remains committed to providing quality benefits to all of our employees. The actual costs of these benefits, however, are constantly rising. In the past two years alone, the combination of increasing health costs and the declining real rate of return have added over $150 million of costs. We have made some progress in this area. For example, we have reached an agreement on benefits that has seen our employees assume some of the responsibility for these costs.

On the productivity side, ensuring our people are at a competitive advantage is central to Canada Post's strategy going forward. We have negotiated eight consecutive collective agreements with our unions without losing a single day to work stoppages. I am hopeful that the most recent agreement concluded with the Canadian Union of Postal Workers can help achieve some of the operational flexibility needed to meet the significant challenges ahead.

This brings me to the operational risks facing Canada Post. Over the past 20 years we have made significant advances in the efficiency of our mail processing operations through investments in technology. We now need to achieve similar efficiency gains in our delivery network. One of our biggest operational challenges is managing the costs associated with the most extensive retail network in Canada.

¿ (0910)

We have approximately 7,200 full-service post offices and retail franchises, of which approximately 5,000 are located in rural Canada. Some of these cost much more than they earn and are often located within a few kilometres of another post office. The people in this room know better than most that the local post office matters to Canadians. Canada Post is proud of our retail network and is committed to being a presence in communities across Canada. To this end, we continue to hope that the government will leverage this significant federal presence across the country and use us to deliver government, commercial, and financial services.

Management understands the risks facing the corporation. One of the ways we have addressed these risks is by increasing our involvement in competitive lines of business. In 1981, competitive services represented less than a quarter of our revenues. Last year, they generated almost half of our revenues, or more than $2.9 billion.

Our success in providing universal postal service at a low price is made possible because of this business, the vast majority of which involves our parcel and courier services; however, there is too little growth in these markets alone to secure Canada Post's profitability. That is why we have become involved in other activities that complement our core services. These include e-services, like epost, Canada's first electronic mailbox. It also means developing a growing presence in the logistics business to enable us to help Canadian business compete in domestic and global markets.

The diversification of Canada Post services into these areas is important, but these initiatives are not enough on their own. To sustain affordable, universal postal service, Canada Post will need to continue to evolve. For this to occur, the unique situation the corporation faces must be recognized.

Canada Post operates in two worlds. One is highly regulated and driven by a legislative mandate; the other is highly competitive and dominated by well-financed, multinational corporations that face few, if any, regulatory constraints. A sustainable future for Canada Post will depend on a policy and regulatory environment that allows our company to compete in the one world so we can meet our obligations in the other.

It will also necessitate choices. I believe we have an excellent opportunity to establish the right kind of an environment in the period ahead. The government is scheduled to review the multi-year policy framework that establishes Canada Post's service, productivity, and financial performance targets in 2004. We also understand that this review will be undertaken after Treasury Board has concluded its review of crown corporation governance this fall.

This represents an ideal opportunity to examine, in a comprehensive way, all of the elements that will affect Canada Post's ability to serve its customers, taxpayers, and the Canadian public in the future. The achievements of the past 20 years have been considerable.

¿ (0915)

[Translation]

We believe they represent a solid foundation for building a sustainable future for affordable, universal postal service. We look forward to building that future.

Thank you.

[English]

The Chair: Thank you very kindly.

The members did receive the annual report. It's quite a comprehensive document and I think it gives ample information for the committee and for stakeholders, including all Canadians.

To start, I'll ask you how would Canadians get this kind of information themselves? Through your website? That would be the preferred way?

Ms. Anne Joynt: Yes, it is posted on our website when the annual report was tabled. We also sent out a press release, but that's a one-page document. So, yes, it's on the website. We do, actually, track our website hits. I haven't seen the results for this last month, but I will look forward to seeing whether there was in fact a peak after that release.

The Chair: We'll begin our questioning with Mr. Forseth.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, CPC): Thank you, and welcome to our committee today.

First, before I ask you some questions, you did briefly touch on this program you offer about distributing food, and perhaps medicine, in the north. I was very pleased to meet a delegation that came from Russia to consult with representatives of your organization on that specific program. I want to complement you for what you're doing in that area. That's perhaps a very interesting little sideline that isn't talked about an awful lot.

Now I want to get down to specifics that affect small business and the average Canadian. Do you have a published plan as to the rise in postal rates for business planning and business predictability, as to when, say, a first class letter is going to go to 50¢?

¿ (0920)

Ms. Anne Joynt: Yes, we do. I'm just trying to think....

Mr. Jacques Côté (Senior Vice-President and Chief Financial Officer, Canada Post Corporation): Because the rate of the stamp will increase by two-thirds of inflation, based on the projected inflation we foresee a rate increase of 1¢ again in 2005 and no rate increase in 2006. This is the current estimate on the table. Those numbers are part of the corporate plan. In fact, we have a five-year projection on this. Depending on the inflation rate in Canada over the next two years, 1¢ can move from one year to another, but by and large those numbers are well known.

Mr. Paul Forseth: All right.

The reason, of course, why I asked how much of that is on your website and how much you're able to communicate, especially with the small business community, is because a 1¢ change has a lot to do with the viability of small business in Canada, and predictability is very important. So doing your partnership share of ensuring we have a stable economy, clearly communicating if there's going to be a rise, the date of the rise, and if it's an annual rise it's going to be July 1 every year, or not September, those things are very important.

I wanted to perhaps re-emphasize that. You outlined a bit of a corporate strategy about maybe yes, maybe no, but the whole communication around that and the predictability for the small independent businessman is fundamental.

Ms. Anne Joynt: I would add that we heard this message loud and clear over the last couple of years. As a result, we've focused our price increases in the month of January, in fact, in the second week in January for the basic letter mail raise. Then for courier and other products it's in October. We do consult with associations in advance and ensure that everybody knows this is happening.

To your point about whether it's on the website, that's a very good point. I'm not certain, and that's exactly, obviously, the place to put these things as well once they are gazetted and agreed to.

Mr. Paul Forseth: All right.

On that theme of access to information, one of the other things that has been talked about a lot on Parliament Hill for a long time is your organization coming under the Access to Information Act. Can you give me the corporation's view on that issue? Certainly, it's not a surprise to you, because it's been talked about in the House and bandied about an awful lot.

We even have a bill in the House on that matter right now, a private member's bill, I believe. So can you address that topic?

Mr. Gerard Power (Vice-President, General Counsel and Corporate Secretary, Canada Post Corporation): Thank you very much.

Yes, it's been an issue that has been discussed both inside Parliament as well as through a number of studies that have been done through the Treasury Board. At the same time, recognizing that Canada Post is operating in a competitive environment, the Treasury Board established a policy that there should be a level playing field in terms of the rules. To that end, in the past year we have worked very diligently to ensure that the degree of disclosure within the annual report, the management discussion and analysis portion of that annual report, was on a par with that of publicly traded companies. Equally, the CFO made himself available to the business press--or press generally, but in particular the business press--to discuss the annual report after having had a teleconference for the analysts within government on the results themselves.

To place Canada Post in all of its activities under an access regime when competitors of Canada Post are not under an access regime does create an imbalance and a non-level playing field, and that in particular is of concern. We have been asked to provide comments on that particular matter to the Treasury Board and we are working on those at this time.

Mr. Paul Forseth: All right.

I would hope you'd also let this committee know, and parliamentarians, because your stuff may go to Treasury Board and get lost in the bins there and all of a sudden you find, whoops, there's a bill that puts most of the corporation in the wide open field of access to information. So you have to be skilful and comprehensive in your communication.

You mentioned a level playing field, and I'm seeing the somewhat rather successful commercials of going brown and what it means to use brown, which is the United Parcel Service competitor, and there are others. They're doing very well. Can you comment on the success of your division that directly competes with those? My assumption is that the Canada Post division is not doing all that well in comparison to those other private sector competitors, and perhaps you can comment a little bit about your business success expansion and so on in that direct competitive sphere.

¿ (0925)

Mr. Jacques Côté: Maybe I can attempt to answer that question. UPS is a $40-billion-odd Canadian corporation that operates on a global basis. If you take the total distribution market in Canada, obviously a significant portion of it is cross-border, north down, going to the U.S. and coming from the U.S. Canada Post, the group of companies, by virtue of its national name, is ill-equipped to compete in this segment. UPS and FedEx enjoy, obviously, a benefit in operating in this segment.

Also, when you look at Canada Post as a group, a significant portion of our business, approximately 50%, which is letter mail, is also declining by 2% per year. Obviously this affects the total results of the group.

Canada Post has to incur over a year about $30 million worth of costs to service the network as new housing is being developed. It costs us about $160 on average to go to every new home per year. There are about 200,000 new homes per year that get built in Canada. So we do also have to incur some of the costs under the universal service obligation.

Comparing those two companies is difficult. If you look strictly at our distribution business at Canada Post per se, last year we had a growth on measured volume of 11%, which was, in my opinion, probably higher than what UPS did.

Mr. Paul Forseth: I think I'm out of time at this point. I'll stop there.

The Chair: Mr. Perron.

[Translation]

Mr. Gilles-A. Perron (Rivière-des-Mille-Îles, BQ): Thank you, Mr. Chairman.

Good morning, Ms. Joynt and gentlemen.

I would like to ask you several questions. In your report, you stated that salaries and social benefits accounted for 60.3 per cent of your expenditures.

How does this percentage of payroll and benefits compare to countries such as, for example Australia or the United States? Does this 60 per cent figure apply to them as well?

Mr. Jacques Côté: I cannot answer that question. I will have to come back to you on that matter. From what I can gather, everybody in the distribution sector is more or less in the same situation. Some postal organizations have product lines that we do not offer, such as financial institutions, banking services or things like that, but generally speaking, the model, which is primarily based on hiring many individuals to deliver the product every day throughout the network, is one which is based for the most part on salaries.

Mr. Gerard Power: On average, in the United States and in Europe, 60 per cent of the expenditures pertain to employees. In certain developing countries, the figure is lower because the benefits and salaries are not as high. But when we compare ourselves to Australia...

Mr. Gilles-A. Perron: When you compare apples with apples it is... All right.

There is one other thing that has always disturbed me, and this does not apply only to Canada Post, but to any organization. Salaries and benefits all fall under one heading. Why not provide a further breakdown? For example, you could indicate that the administration costs such and such an amount for the payroll at various levels, so that we would have a much more precise idea. The same accounting system is used in all private companies: there is a heading for salaries and benefits. I would be really pleased if you could, in future reports, manage to breakdown this budget envelope a little further, or provide greater details about this expenditure envelope.

¿ (0930)

Mr. Jacques Côté: We could certainly consider your suggestion. When we prepare financial statements, the challenge is that it must be done in summary format. We could provide you with millions of pieces of information such as the information you would find in the newspaper, where there is the “other” categories, in which you find $900 million. It is general and it is shown as an amortization of $150 million in technology costs for $300 million.

Mr. Gilles-A. Perron: Accounting costs, advertising costs, etc. I know, but in order to have a clear idea, some items need clarification. I am not interested in knowing what your salary is, Jacques, but by determining that you earn $300,000 per year or the letter carrier earns $10,000, we can see whether or not salary increases are in proportion to cost increases. This is something that would be really good for us to know, particularly since we are dealing with taxpayers money. Even if you are a so-called private company, it is the taxpayers who are paying your salary.

Mr. Jacques Côté: We will take that under advisement.

Mr. Gilles-A. Perron: Now I am going to criticize you about something for which I have already criticized Quebec Hydro. Companies like yours and like Quebec Hydro produce such beautiful annual reports! I think that you have the most beautiful annual reports but that must cost money. How much did it cost to produce that? How many copies do you print per year?

Mr. Jacques Côté: Gerard, is that specific information?

Mr. Gerard Power: About four years ago, we decided that we would start producing everything internally. Except for the actual printing, all of the graphic work is done in-house. The printing is done externally, but instead of printing perhaps 50,000 copies, we produce a very limited number because, indeed, thanks to the Internet today, we can communicate the same information to more people for less money if we put it on the Internet. That is why we print a few thousand copies only. We could provide the committee with the exact number of printed copies, as well as the cost, but if I remember correctly, we spend about a third of what it cost us in the past.

Mr. Gilles-A. Perron: According to the acting president's statement, you are experiencing problems, costs are rising. As far as I am concerned, this is all fine and dandy, it looks really nice, but you have to pay extra money to do that all the same.

You have in fact answered the sub-question that I was going to ask: why produce a pretty document like that when you can put it on the Internet and when most people now have access to the Internet?

Mr. Gerard Power: With respect to your main question, one of the reasons why we produce such a beautiful document is that we are players in many competitive markets, particularly on the international scene, where we have clients, such as Russia, who are telling us that we have some very good systems at Canada Post and that they would be interested in having us share this information with them for a fee, of course. So we provide commercial consulting services. Producing a beautiful annual report, with all the challenges of being a Crown corporation, is a good marketing tool.

Mr. Gilles-A. Perron: It is hockey season, we see a lot of it right now. How much do you have to pay for those rink side announcements that we see at every game? How much do you have to pay for advertising? What is your annual advertising envelope? It must be a fortune!

Mr. Jacques Côté: Unfortunately, I cannot answer that question. Obviously, the company promotes its products and services. We have a marketing team at Canada Post and we advertise in the newspapers to obtain some visibility. I will have to get back to you with a specific answer on the amount of advertising dollars spent in arenas.

Mr. Gilles-A. Perron: This is just a comment, which you may or may not choose to respond to, but I think that at Canada Post, there's a lot of “fat” that could be trimmed, like advertising, etc. That way, you might not have to follow through on your forecast one-cent increase in the price of a stamp, which would bring the price to 50¢. You could start by paying attention to where and how money is being spent. I'm trying to save a cent for the person buying a stamp or the small business, like Mr. Forseth was saying, that has to pay a fortune to send its bills by mail.

Surely, you know—and you mentioned it knowingly—that you are faced with a major competitor: the Internet. You say that you are selling fewer stamps, and your reports show that your revenue, the conventional letter and the work of the conventional letter carrier are all on the decline. I think that it is in your interest to start thinking about tightening your belt a little, because if the price goes up by 50¢ to $1 a letter, your stamp sales will dry up.

¿ (0935)

Mr. Jacques Côté: As Gerard said, the cost of the annual report has gone down for the past four years. Today it costs less than half, perhaps one third, of what it used to cost. It's that easy to measure the cost. Let's say that the report cost a total of $25,000. It's easy to measure its cost. What isn't easy is measuring its value. If we get a contract with Russia and generate 2, 3, 4, 5 or $6 million through Canada Post internationally, you don't see that, but it's part of an overall effort to promote the corporation's image and its business management skills. It's true that it's easy to measure the cost, but when it comes to measuring the resulting value, that isn't easy at all.

Mr. Gilles-A. Perron: The same phenomenon occurs when you go to an exhibition to advertise your products. It's the same phenomenon for any company. It costs money to advertise, but the return is unknown.

Mr. Jacques Côté: If you consider that Canada Post has turned a profit for nine years and the cost of stamps is one of the lowest in the world, except for Australia, and given that our geography is quite a disadvantage, in that there is a low population density, I think that the management model seems to be quite reasonable and to produce quite satisfactory results.

[English]

The Chair: Mr. Tirabassi and then Mr. Benoit.

Mr. Tony Tirabassi (Niagara Centre, Lib.): Thank you, Mr. Chair.

I'd like to offer my thanks and welcome to the representatives from Canada Post for being here today.

I had the privilege, as I'm sure all members did, of being invited to visit the control centre in the head office of Canada Post here in Ottawa. I took up the invitation. Of course, for me as a member of Parliament, I'm always looking at efficiencies for Canadians with regard to delivering the mail, from when they deposit it in the mail box to when it arrives at their destination.

When I heard about efficiencies in the 90% range, I would have found it difficult to believe, until I made that visit and saw just how closely you track the travel of mail in this country. Then I see in the information package that IBM did a letter/mail delivery performance report, and again it reflects that no matter where the mail was deposited and where the destination was in Canada, there were high, mid-90%, efficiency rates.

I know that also from talking to constituents, because once upon a time the constituents were telling me if you were paying a bill you could bank on five, six, seven days before the company cashed the cheque, the payment you sent. They can't bank on that any more. They know it's going to be received and probably deposited within three, four days. That really speaks to the improvements Canada Post has undertaken.

What I'm a little concerned about, or I have a question regarding, Ms. Joynt, is when you mentioned that fewer pieces are going out to more addresses. We know Canada Post undertook further efficiencies by the introduction of the super mail boxes on street corners rather than house-to-house delivery.

If fewer pieces are going out to more addresses, I see that translating into a higher cost for Canada Post to deliver the mail. Are there any other changes Canadians should be aware of, coming down the pipe, regarding door-to-door delivery, aside from what you've done today?

¿ (0940)

Ms. Anne Joynt: Obviously a company is always looking forward, and we are looking at what the future holds. You need to have two parallels here. One is you want to encourage the growth of letter mail, and certainly we are trying to do things in the advertising mail area with major mailers that would improve the number of pieces that get delivered every day.

Two, we also want to encourage growth in the parcel business. That's why we're in electronic commerce and so on. We want people to deliver more parcels every day. What we want to see is more parcels and more letters going to each location.

Could we put in more community mail boxes, which is what we call these things? Yes, as communities grow, that is what tends to happen. Certainly we'll be looking at various ways of reducing cost over time.

But ultimately we want to grow as much as we can. At the same time we've looked at the electronic post box as our way of offsetting the letter/mail erosion that we know is going to happen.

Mr. Tony Tirabassi: On another topic—security—as it relates to mail, certainly post-9/11, there were not only ongoing threats of what was happening with the airline industry, but there was also the threat of chemical terrorism, let's say, and Canada Post or other postal groups in other countries being used as a vehicle to deliver this.

We know Canada Post is very quick in putting in place security measures, but here it is, two and a half going on three years later. How can Canadians be assured that this is still a top priority with Canada Post, to have enhanced security measures to screen this type of thing?

Ms. Anne Joynt: It is a priority with Canada Post. In fact we have a general manager of corporate security. This is a management person whose job it is to ensure that security in the Canadian postal system is good.

He liaises with Canadian security people. There are quite a few committees currently set up in fact to ensure that safeguards are in place and so on. Also, in the international postal community, the same kinds of processes take place. I would say that Canada does as much as most other industrialized, civilized countries in this matter.

Mr. Tony Tirabassi: Very good.

That's all, Mr. Chair.

The Chair: Mr. Benoit.

Mr. Leon Benoit (Lakeland, CPC): Thank you, Mr. Chair, and good morning.

You may be aware that there was an article in one of the major British Columbia papers last week—I think it was Vancouver's The Province—about a contest Canada Post had put on during the Christmas season last year. I guess they've done this for several years. The contest offered a $25,000 prize to the winner. There was no purchase necessary.

A Canada Post spokesman said there were over 800,000 responses to this contest, which makes it a pretty expensive contest, handling 800,000 pieces of mail just to deal with the contest.

Laura Jones, the B.C.-Yukon vice-president for the Canadian Federation of Independent Business, made a response to this contest. She said she couldn't understand why Canada Post would want to raise its profile. The reason given by the Canada Post spokesperson for holding this contest was to raise the profile of Canada Post during the Christmas season. Laura Jones said it would make sense for a business to run contests to raise their profile when they're in a competitive market, but Canada Post has a monopoly, at least in its delivery of first class mail. How would you respond to that?

Ms. Anne Joynt: Well, yes, we do have a monopoly in first class mail. However, what I said in some of my opening remarks was that on every front there is competition. In other words, people don't necessarily use the mail to send Christmas greetings. They do send e-mails.

What we were doing—and this was an advertising program, and with regard to advertising programs in our company, we normally review them and then look for a benefit. One tries not to advertise just for the sake of advertising. We were looking for an improvement in revenues around the Christmas season for parcels, packaging materials, and so on that were sold in post offices.

This was an attempt to get people into the post office, frankly, and we think these kinds of things are important to do to generate increased revenue.

¿ (0945)

Mr. Leon Benoit: On the one hand, you're saying you're competitive on all fronts. On the other hand, the rate is set through government regulation. Canada Post is almost put in a conflict or in a space between the free enterprise system and a totally government-regulated system, and that seems to cause a lot of difficulties. One of them is in the area my colleague referred to earlier, access to information.

We have money coming from Canadian taxpayers or, more importantly, rates set by government, and appointments, including your own.... All the top positions--or the top position actually, in Canada Post, is appointed by the Prime Minister. There seems to be a lot of conflict in that.

If Canada Post is competitive on all fronts, as you're saying now, is there a need to have Canada Post as a crown corporation?

Ms. Anne Joynt: Well, that's quite a question.

First of all, I should mention that I am actually appointed by the board of directors for a three-month period. I'm not appointed by an order in council appointment because of Mr. Ouellet being suspended.

Canada Post, as I mentioned, was the first postal administration to become a crown corporation across the world, and most industrialized postal administrations have followed suit. Many have gone the next step, which is to privatize—the Germans, the Dutch, and so on.

At this stage, if we can get this balance right.... And my opening remarks were trying to give you this view that we do operate in two worlds: it is an exclusive, privileged world—the regulated world—and then it's a competitive world. It makes every decision we make difficult, but we think we've been pretty successful in nine years in making this thing work, and we have to keep making it work.

Mr. Leon Benoit: You wouldn't be opposed to it turning into a fully competitive organization some time in the future.

Ms. Anne Joynt: Sorry. Did you ask whether I would be...?

Mr. Leon Benoit: Whether you would be opposed to becoming a completely competitive organization at some time in the future when that balance can be found—privatized, in other words.

Ms. Anne Joynt: No. I didn't say I supported that.

Mr. Leon Benoit: But are you opposed to it? That was my question.

Ms. Anne Joynt: I think at this point we feel things are working well, so I'd like to leave it at that. Probably I'm not the one to be making these kinds of comments.

Mr. Leon Benoit: A recent Auditor General's report, of which you're no doubt aware, pointed to a problem. The Auditor General actually pointed very directly to a problem in Canada Post with the ad scam issue. Have you looked into that issue, and if so, what have you found?

The Chair: I don't think it's appropriate for this committee to go there. The public accounts committee is seized with this specifically, and I would suggest that question is out of order for the purpose that we're here.

Mr. Leon Benoit: Why is that, Mr. Chair?

We're hear to talk about the estimates as they apply to Canada Post, and this certainly has to do with that—spending of Canada Post. I'm going to ask, Mr. Chair, after we get an explanation of what's been done, for an explanation of what's been done to examine why that happened. I'm going to ask what precautions have been taken to prevent it from happening in the future. That's certainly something this committee is responsible for dealing with.

The Chair: The committee certainly has.... But we're here to look at the annual report of Canada Post Corporation. If you'd like to phrase it in terms of management controls, propriety of expenditures, etc., fine. But I don't think we should talk about a specific matter that is being dealt with by another committee. I think you would understand that. But in terms of what we are doing, sure.

Mr. Leon Benoit: Yes. I'm certainly looking at it in a different way than the other committee. My question was, have you examined that, looked at it, found out why it happened, and if so, what proposals will you have to ensure that it won't happen again?

¿ (0950)

Ms. Anne Joynt: Basically, the board of directors of the company initiated an external audit on the recommendation of the minister and the Auditor General. That started February 24, I believe, and the auditors are currently in the process of reviewing marketing sponsorships and so on in Canada Post, including management practices. Their report will be tabled with the minister, I believe, May 25. At this stage that activity is going on, and as a member of management I am not involved in it. I am not privy to the results or the findings as we go forward. I assume I will be after the report is tabled.

As to our management controls in the company, we do have management controls, and in the past, three years ago, we put in a fairly significant system called SAP, which makes our expenses and our requisitioning and normal buying of goods and services very transparent, which is something I would say that these kinds of systems.... The kind of system we did put in place is state-of-the-art in large companies. So we do have controls.

However, let me be frank, when the findings are given to us by the board of directors, obviously if there are issues, we of course will take steps to improve the situation. That goes without saying. That's management's responsibility.

Mr. Leon Benoit: These controls--

The Chair: Sorry, Leon, we have two or three more colleagues. We're going to quickly do Alex and then Ms. Yelich, and then I have one question before we complete the session.

Mr. Alex Shepherd (Durham, Lib.): To get back to the orders of the day, which basically were to review ten, I think, of the appropriations for Canada Customs and Revenue Agency, I guess the funding you're asking for from Parliament is to do with mailing privileges of members of Parliament. I see the $197 million. From an efficiency point of view, these pieces of mail are going out without stamps on them and so forth. From an administrative point of view, if you are handling that mail, as opposed to other forms of mail that have normal stamping, it would appear that this is an exception in your efficiency system. Is the $197 million based on just the fact that there are no stamps on those pieces of mail, or is it increased handling costs?

Mr. Jacques Côté: The $197 million is the sum of three different programs. The government fee for mail is $11.2 million. That is taking the volume of mail the government ships, which is made up of regular-sized mail and oversized mail, and applying the average rate you would be paying Canada Post as a privileged customer. That gives us the market value of the services for the government. That's how the $11.2 million is derived. This number has been consistent since 1999-2000.

Mr. Alex Shepherd: You said $11.2 million?

Mr. Jacques Côté: Yes, the government's fee for mail.

¿ (0955)

Mr. Alex Shepherd: Am I misunderstanding? There's $197 million in operations.

Mr. Jacques Côté: There is another $11 million for literature for the blind. About four million parcels are being sent to the blind and sometimes returned for exchange. That is also provided free, and on this we've got a small loss of 5.7%. Then there is the transitional funding for the pensions that Canada Post assumed responsibility for in 2000. This is worth $175 million.

Mr. Alex Shepherd: What is that?

Mr. Jacques Côté: When in 2000 the government transferred to Canada Post the responsibility for managing the pensions and a number of benefits the employees had, those costs were higher than what the government was charging Canada Post at that time. To assist the corporation in taking this risk to manage the benefits going forward and assume the obligation, the government put in place transitional funding, which is declining now by $25 million per year and will finish in the year 2009-2010.

Mr. Alex Shepherd: If members of Parliament were required to put stamps on these letters, or people were prepared to put stamps on them, would it cost less than $11 million?

Mr. Jacques Côté: Our best estimate is that it would cost the same. This is an estimate of what it would cost.

Mr. Alex Shepherd: I know you've been doing a lot of work with epost. I've been one of these people who got onto it, experimented, and played with it, but nothing seems to be happening there. That's my perception. You went to a certain point, got so many subscribers, but even for my own personal things, I don't find it very good, because it doesn't encompass enough companies in the system to work. Has Canada Post given up on that whole experiment? What's going on?

Mr. Jacques Côté: No, we're not giving up on the whole experiment; we're still working on it. This is the chicken and the egg. People don't go in large numbers to the mailbox because mailers don't send out a large number of pieces. Mailers don't sent out a large number of pieces because the people don't go to the mailbox. There's no doubt in my mind that one day down the road people are going to receive their mail electronically. It makes sense. It's faster, cheaper, and so on. But the building of the market, the density in the mailbox, and value-added services at the mailbox that make it worth your while to go there every week to see if you've got mail are going to take a little time. Canada Post or somebody else will find a solution. We believe we've got the right model. We believe the model by which you go on your hydro site to get your invoice or to your telephone company to get your invoice is not going to work. We believe you are going to go to one electronic place to see all your invoices and have the benefit of paying them on-line.

Mr. Alex Shepherd: I believe in that technology, but so many suppliers opted into that originally and then it just seemed to stop. There was some kind of saturation thing, and nobody else wants to be part of it.

Mr. Jacques Côté: Last year our volume grew by 100%, but of a small volume. It takes a while, but eventually it is going to go up. We still think that's a winning business model; we're still committed to it. We're finding ways, though, to create value, to make it worthwhile for you to go there frequently, and that's giving you more invoices in it.

The Chair: We have to move on.

The reference was made to millions. It's $197,000, isn't it?

Mr. Jacques Côté: Millions.

The Chair: But the notes I have say it's $25,000 less than in 2003-2004.

Mr. Jacques Côté: That's right.

Mr. Alex Shepherd: These are in thousands of dollars.

The Chair: Well, I'm looking at the official notes from the Library of Parliament. This refers to just the amounts for CCRA under this particular vote with regard to parliamentary free mail and literature for the blind. That is not $197 million.

Mr. Jacques Côté: The literature for the blind is $11 million.

The Chair: But in this vote--

Mr. Alex Shepherd: It is $11 million for parliamentarians.

The Chair: The official Library of Parliament summary for members has an error in it. Somebody dropped three zeros, and this is where somebody says, what's a million?

Ms. Yelich.

À (1000)

Mrs. Lynne Yelich (Blackstrap, CPC): I would like to talk about rural closures. Who makes the decisions on rural post office closures?

Ms. Anne Joynt: You mean the individual who makes them?

Mrs. Lynne Yelich: Or what area?

Ms. Anne Joynt: They're made in Ottawa. We have a general manager of retail operations.

Mrs. Lynne Yelich: And those are based on lots of investigation, I'm assuming, lots of research.

Ms. Anne Joynt: Yes.

Mrs. Lynne Yelich: When they make those decisions, is one factor the cost of the infrastructure or upkeep?

Ms. Anne Joynt: Yes. The retail network of Canada Post is a very valuable network, but we do have operations in some rural areas where it costs much more than we ever bring in, and we are the last remaining business in the small centre. So if a postmaster retires and there is close by, let's say within five kilometres, another rural post office, we have been known to close it. In the last three or four years we've closed under twenty post offices. But it's done after looking very carefully at where customers will go to get their mail. If they're already going to the next little village to get their bread and milk, our thought is that they can get their mail there too, if it makes sense. So we try to look at the variables and the costs.

We are also implementing in 2,000 of our rural outlets electronic communication. So we hope we can provide government services. We're very interested in getting more government services into our rural network. This is why we're going to be equipping them and automating them.

Mrs. Lynne Yelich: I see nothing wrong with having service to the door and continuing that. I think you're getting a little ahead of yourself, because I think your first master has to be Canadians. It was alluded to that you'll probably do even more electronically. What about those of us who become seniors? Isn't it nice to have that mail delivered to your door? It seems you're way ahead of what I think your original mandate should have been, to give Canadians postal service. I'm confused too. Who is your master? Your master should be Canadians, the people in the rural areas. When you have a post office in your small town, it's quite a service that enables you to go and buy stamps. Now it's reduced to just a mailbox. There are still 50 people who use that little community, more than 50 people probably, but that's the place you want to close, because you think the community's too small to send mail to. I think you're confusing Canadians.

The reason the mail service is going down is the service is so poor. I'm 45 minutes from Saskatoon. When I mail a letter in Kenaston, my home town, it goes to Regina, it spends the night in Regina, and who knows where it goes after that to get back to Saskatoon? There's no sense in the way you deliver now in Canada. That's who I think your first master should be, Canadians and individuals in communities. You took it upon yourself to make sure you had that service in the north, and that's fine, but what about us in communities that are losing their mail service? It's a big issue. Before you close any post offices, whoever is going to do it, I would like to be at that table, because I think there are lots of places that say they could have better service.

The other thing is infrastructure. To re-cement in January in a little town in Saskatchewan is the stupidest thing I've ever seen. I don't know if you know it's cold in the prairies, but January is not the time to re-cement a walk. It does get icy going into the post office, so I think it was a wonderful idea, but you don't do it in January. There are so many stupid decisions made, and I don't know if they're made across the nation or if it just happens in places where they don't really care what the service is like.

However, my main point is that we have a huge amount of mail begging us not to close these rural places, because they do serve people. That people don't want mail service and everybody is going to operate electronically I don't think is the case. Even in the future, there will still be many people who want mail service.

À (1005)

Ms. Anne Joynt: We're not saying everybody will be electronic. In fact, we heard earlier that the number of electronic epost mailbox customers, while it's growing by 100%, is still very small. So there is no question that Canada, for the foreseeable future, is going to have hard copy mail. We just don't know when it's suddenly going to drop off, or if it ever will. At this point it's a very slight decline.

Mrs. Lynne Yelich: You put your money into advertising to try to get your presence out there, but you've got your presence. You've got presence in every community in Canada by letting your mailboxes be handy and used. Put it into the mailbox and service.

You even say your Christmas card mailings have gone down. Do you know why? Because it's getting too expensive for people to send a bulk of Christmas cards. Everybody will tell you they used to send hundreds, but now they're down to 50, and pretty soon people will just quit sending them, because it costs a lot more to send a Christmas card than it used to. For you to have $800,000 worth of advertising in Vancouver to get the Christmas business.... I'd like to help you re-evaluate your priorities.

The Chair: The member has raised an interesting specific case. Was it the town of Kenaston?

Mrs. Lynne Yelich: Yes, in Saskatchewan.

The Chair: Let's just get the case. Mail sent from Kenaston has to go to Regina to get to Saskatoon, and this doesn't seem to make much sense. I wonder if you would ask someone on the operational side about that specific case. Send a note to the clerk, and it will be circulated in both official languages to all the members, so we can look at the optics and the facts of this particular case. I think we should know.

Mrs. Lynne Yelich: I did investigate it, and what they told me was, that's just the way it is. I said, well, change it. The answer was, you can't, it's been there for 25 years. I said, well, get with it.

The Chair: Please have whoever does this explain it so that my grandmother would understand the answer.

Mr. Wappel has a very quick question, just a technicality, I think.

Mr. Tom Wappel (Scarborough Southwest, Lib.): Thank you, Mr. Chairman. I'm sorry I'm late. I was at another committee meeting.

I want to thank you very much for the complimentary stamps. I do appreciate having had them over the many years from the first day of issue. However, I was a little confused, because for the first time in receiving stamps from you, Ms. Joynt, it says on your compliments card, “President and CEO”. Today, when I received the notice of meeting, I noticed that it said “Acting President and CEO”. I'm wondering why we're calling you acting president and CEO and your compliments card calls you president and CEO. Can you help us there?

Ms. Anne Joynt: I am appointed to act as president and CEO of Canada Post by the board of directors. The board of directors said I should call myself president and CEO. That's it. There is a suspended presidency.

The Chair: I want to thank you kindly for appearing and accommodating us. I know it was short notice and it changed.

There is one issue I'd like to ask you about. When I had my tour of the control centre, I got the former parliamentary secretary to Public Works who was then responsible for Canada Post. I was very fascinated by the fact that we were so dependent upon commercial airline carriers for the efficiencies we have. Now we have a situation where our national air carrier, Air Canada, has been on a very interesting track, and theoretically, in the worst-case scenario, there could be significant changes in the service provided by Air Canada, including to Canada Post. That could be, I could imagine, devastating. What plans does Canada Post have to address the disruption or decline of service availability from a major carrier?

Ms. Anne Joynt: Thank you. It's a good question.

In the last two years there has been already a significant reduction in the number of flights to rural Canada, to each of the coasts, and into the interior of many provinces. So we have had to adjust our network significantly. Our subsidiary, Purolator, uses a chartered overnight freighter network to move courier product, and we also put our product on that plane. Air Canada used to be in that business 10 years ago, but got out of the overnight courier business.

We have seen, as a user of their services, a reduction in Air Canada's capabilities. In the last year they've again shrunk things. They do have a flight that goes from here to wherever, but they used to have two flights. It doesn't provide us with the right kind of service delivery, so we have put a lot of our mail on the road. We're putting more on the rail as well. The problem with both road and rail is that they're not as fast, so you have to stream the product through your plants much more quickly. We have moved almost 12 hours of processing time out of our end-to-end process by moving it more quickly through the plants and getting it on highway services or air services or rail services. We have a strategy to do that.

If we cannot use Air Canada in the future, obviously we will have to look to increased recourse to this charter airline we use, or something like that. We need to have air service in Canada to move products. Many other companies have products in the air as well.

The Chair: Thank you again.

I also had the opportunity to meet Mr. Jeremy Cotton, who is your general manager of parliamentary relations. Members should know there is that position and there is someone there for you to make inquiries of. Don't hesitate.

Thank you again for accommodating us. We're going to move on to votes now. We'll just stay here.

We're going to suspend for a moment.

À (1015)

The Chair: We're resuming.

Colleagues, we've tried our very best to get people under the various groups for which we are responsible for reviewing the estimates. We have until the end of May to report the mains. Obviously, there's the prospect of, maybe, an election, as well as the fact that we're getting the whistle-blower legislation. The minister will be before us on Tuesday. The steering committee decided that we wanted to get on that as quickly as possible.

We're not sure how many more of the estimates we're going to be able to see. I have discussed it with Mr. Forseth, and I think you will understand that we probably at this point should vote on simply the estimates of the three groups that have appeared before us, Canada Post, the Public Service Commission, and the Information Commissioner. The committee has had an opportunity to ask them questions in regard to the estimates. So I think at this point we'll vote on those.

We cannot operate on the basis of what might happen. We should continue to operate. We'll start on the whistle-blowers, and we'll have to see the availability of other groups for which we have to review the estimates. We have until the end of May to do it. We'll fit them in as the committee recommends. The steering committee will recommend what others we will see before we make a final report.

In the event that we carry our work through on whistle-blowers right up until the summer break and don't do any more estimates, the estimates are deemed to have been reported without amendment. But three of the departments have come before us, and we have done a specific review with regard to that, so taking the vote on those three probably is all we can do at this point.

The first one is vote 10 under Canada Customs and Revenue Agency, related to Canada Post, who we just heard from. Shall vote 10 under Canada Customs and Revenue Agency, less the amount voted as interim supply, carry?

CANADA CUSTOMS AND REVENUE AGENCY

Canada Post Corporation

Vote 10--Payments to the Canada Post Corporation for special purposes..........$197,210,000

(Vote 10 agreed to on division)

The Chair: The second item is vote 100 under Canadian Heritage. It is related to the Public Service Commission. Ms. Barrados and her team were here on Tuesday. Shall vote 100, less the amount voted as interim supply, carry?

CANADIAN HERITAGE

Public Service Commission

Vote 100--Program expenditures..........$128,351,000

(Vote 100 agreed to on division)

The Chair: Vote 20 under Justice is related to the Information Commissioner's office, which appeared before us also on Tuesday. Shall vote 40, less the amount voted as interim supply, carry?

JUSTICE

Offices of the Information and Privacy Commissioners of Canada

Vote 40--Program expenditures..........$4,443,000

(Vote 40 agreed to on division)

The Chair: Shall the chair report the estimates on those three votes to the House?

Some hon. members: Agreed.

The Chair: We'll do that on Monday.

[Proceedings continue in camera]