Colleagues, I'll call this meeting to order.
This is the 26th meeting of the government operations and estimates committee, and we're dealing with the Canada Post study.
Colleagues, if I could have your attention before we get into the meeting proper, there's a bit of committee business. I've spoken with some of you individually. This is concerning the upcoming cross-Canada tour to study Canadians' opinions and expectations of Canada Post.
We have a meeting tomorrow afternoon at 3:30. If you are available, I have asked the logistician who has been putting all of the details of this tour together to meet with us at 3 p.m. in this meeting room just prior to the start of our 3:30 meeting.
The itinerary for the tour, which starts on Sunday—at least the flights are starting on Sunday—will be sent to all of you electronically, probably tomorrow morning. You'll have an opportunity to take a look at it.
The purpose of the 3 p.m. meeting is to answer any specific questions you may have. On ground transportation, if you arrive at an airport at 3 o'clock in the afternoon, will someone be there to meet you, or do you take your own transportation to the hotel? Where are the hotels, etc.? How will the meetings be conducted? You will have an opportunity to pose all of these questions tomorrow at 3 p.m. We'll send out a notice of that as well. If you are available, it's 3 p.m., in this room, to talk about the logistics behind the cross-Canada tour.
With that, we'll commence the meeting.
As you know, colleagues, we are engaged in a study on the future of Canada Post. The minister responsible, the , wanted to have extensive consultations. As part of those consultations, she established a task force. Those members are with us today to discuss the findings of their report. Their report has some specificity to it about the financial viability of Canada Post as a corporation moving forward. Of course, we will be going out and talking to Canadians about their expectations for the future of Canada Post.
Following that, this committee will then engage in writing a report based on both the findings of the task force and on what we have heard from talking to Canadians from coast to coast to coast. That report will be tabled in the House of Commons prior to the end of this year. From there, the government will make its decision in due course.
We are here to listen to the task force.
Madame Bertrand, I understand you have a 10-minute or so opening statement. Before that, perhaps you could introduce your task force colleagues, and then commence with your statement. Following that, we'll get into questions and answers from committee members.
Madame Bertrand, you have the floor.
It's our pleasure to be here today after four months of intensive work.
I'd like to introduce to you the three other members. I'll start with Krystyna Hoeg, who is from Toronto. She is sometimes in St. Andrews, where she has a house as well. She says she's somewhat bipolar.
Also here is Marena McLaughlin. She's from New Brunswick. She was a public servant for many years. If you love football, you will know Jim Hopson. He is from Saskatchewan. These are the four larrons, as we say in French, all with different backgrounds and experiences.
Also here are some of the members of the department who helped us with the work. I want to salute them, because it's an effort of many people. You'll be on the road very soon with our work.
We had to assess the financial situation of Canada Post as of today—not an audit, but as of today—and its projections. We had to assess the needs of Canadians. We've opened a website. We've received lots of letters, and 22,000 Canadians gave us their opinions. We also did scientific polling. We polled more than 1,200 Canadians in order to understand their needs and also how they behave. Sometimes you'll see that there is some difference there. We also polled some businesses. We thought that businesses often have needs that are different from personal usage.
Once we assessed the financial situation and knew the needs, we needed to see if we could find different ideas to bridge the gaps. For that, we worked with firms that had international experience in order to bring to us the best practices in postal services around the world.
The financial assessment itself was done by EY, Ernst & Young. The polls were done by EKOS, Patterson Langlois, and Environics.
Let me start by saying that lettermail volumes for us have declined by 20% over the last five years and now make up less than half—c'est-à-dire, 42%—of Canada Post's mail volume. Over half the mail now delivered is admail, not only flyers but also addressed admail. On the other hand, e-commerce has driven parcel volume increases, so we may say that Canada Post went from being a mail-centric business to a parcel-centric business.
Unfortunately, lettermail volumes are expected to continue to drop. I say “unfortunately” because it is where the majority of the revenue comes from. The future of admail itself is questionable, given recipient preferences and greening initiatives. The parcels market is highly competitive and is becoming even more so. This means that when you're in the parcel business, you have to go by the market reality. You cannot say that you'd like an increase. You can ask for an increase, but of course you are not in a monopoly situation, as you are with the mail.
A major challenge faced by Canada Post is that its costs are largely fixed. These costs are difficult for the corporation to reduce in reaction to declining business volumes. Canada Post has a vast infrastructure of processing plants, depots, and post offices for processing the mail. Postal services are highly labour-intensive and, as such, labour costs represent about 70% of Canada Post's total costs.
Canada Post also has a pension plan with a current estimated solvency deficit of $8.1 billion. As a result of temporary relief granted by the government, Canada Post was able to defer payments of about $1.4 billion in 2015. Unless the interest rate environment improves substantially, which we all wish for, Canada Post will not have sufficient cash on hand to finance its operations when it resumes making its solvency payments.
Canada Post is also contending with other challenges stemming from the obligations outlined in the Canadian Postal Service Charter, which includes the requirement for mail to be delivered five days a week. This is at odds with the views of surveyed Canadians, where 73% of Canadians were open to the idea of alternate day delivery. The charter also maintains the 1994 rural moratorium under which Canada Post is prevented from closing or franchising almost 3,600 corporate post offices. As a result of population growth, some areas that were previously rural are now suburbs of major cities. I will give just a few examples: Halifax, Moncton, and Saskatoon. Those are now cities. We all know this.
When we did the fact-finding around the situation, we found out that even today Canada Post had a small profit of $99 million for the last year. For us, it's a small profit, not for our own portfolio, but for the portfolio of Canada Post. When you do the projections, you see that in 10 years from now it will be a loss of $700 million. We felt that we ought to be really looking, as was asked by the minister, at what could be done in order to help Canada Post remain as what Canadians have told us they like.
The majority of Canadians—and I mean over 80% to 90%—have told us this about Canada Post: I like their service, I'm attached to it, and I want it to remain a public service, but the reality is that I don't use it as much as I did. Ninety-one per cent of Canadians are connected to the Internet, and 69% of Canadians receive and pay their bills through the Internet, so of course those are reasons that we don't see as much mail usage as we used to.
What we have done, with Oliver Wyman, is look at different options that could bring either savings or new revenues. We've filtered the possibilities that we scanned from the different postal services in the world with three criteria. The first one was whether there is a fit with the abilities and the competencies that exist in Canada Post. The second was whether there was some space in the market. The third was whether they have the means. Would there be a need for a lot of investment, given that financially it is a very narrow possibility? Is it possible to do it without making a huge investment?
After having scanned more than 30—it was 38, actually—we eventually chose, given those criteria, to present to you for your consideration eight possibilities, most of which involve savings.
One that you will recognise will be the community mailbox conversion. Given what we have heard from Canadians, we thought it would be important.... In the stakeholders meeting we had, we were told that we should not consider installing community mailboxes in downtowns in cities, where there is a lot of traffic and little space. The majority of Canadians—I'd say more than 90%—told us that people with mobility problems should get their mail door to door. If you exclude all these, there are about 800,000 addresses where Canadians were prepared to go with community mailboxes after understanding the financial situation.
The other one was converting about 800 of the highest-volume corporate post offices. I was alluding to Halifax, Moncton, and Saskatoon. Those are examples. All across the country, rural realities in the nineties have become either suburbs or urban areas.
The other thing that is very interesting to point out to you to be considered is alternate-day delivery. Right now, you understand, parcels are being brought to the home by the same people who bring the mail. Canadians have told us that it's important for them to have the parcel the same day, but for mail, it can be once, twice, or at most three times a week. When it's a community mailbox, they told us that often they go only once a week to pick up their mail, because of the reduction of volume.
The other possibilities we are offering for your consideration is the streamlining of processing operations. Of course, as any business, we can always streamline. We think that savings could be estimated at $66 million.
You all know that Purolator belongs to Canada Post. There are already some synergies between Purolator and Canada Post. We think more can be done, and we say we could get a $60-million savings there.
We have a few ideas on more revenues, but they're not huge amounts. One is advertising to be sold on post offices and on the fleet. It's a large fleet, so it could be interesting. We said between $15 million and $20 million; we have put $19 million.
On the last mile, the obligation to Canada Post to reach out to all Canadians wherever they on the territory, that is a revenue of about $10 million if they were able to find other partners that could do the delivery. Those are the ones that you can identify as budgetary types of options that we're presenting to you.
Looking at the situation and how serious it was, and the fact that we're in the digital world and it will move on, with the oversampling we've done with the young people—and I'm looking at you, Mr. Drouin—we felt from what we discovered that not only is it going Internet, it's going mobile. The speed will be even faster as we go, so there is a necessity to understand that we're at a crossroads and that some measures can be taken to adjust the budget in the short term and mid-term. However, there will be a need to look into the long term, and the long term will require more types of structural options.
We've put forward some solutions for your consideration. From our point of view, they are around offering the post office services that could remain after a review of what is really rural to municipalities, to provincial governments, to other services in the federal government, and even to the private sector, such as banking. We know that banks have left some communities. Would they be interested in partnering with Canada Post to offer service in those areas?
The other solution that seemed to be interesting would be a change of governance. Is there some interest in changing the arrangement to make sure that for such a complex institution, we have all the stakeholders around the changes that will need to occur?
Also, we all know that the relationship with the unions is not an easy one. We were observers of that situation lately, and we felt that we should propose to you that you should consider the idea of bringing a third party to the table with the stakeholders—not an arbitrator or a mediator, but somebody to work on a restructuring of the operation to make sure it responds to what Canada Post has become.
There is also always the situation of adjusting the price of the stamp. That was used in 2014, when there was a step from 63¢ to 85¢. It cannot be said that this was the reason there was a decline, but it could be expected that the more you raise the price of the stamp, if you go over what the indexation is, you might be in a situation where you accelerate the stamp. Certainly there is no view in the analysis we've done with Ernst & Young that the price of stamps should be frozen. That, again, is for you to consider.
Finally, you've seen the headlines in the different media in the country. They've picked up on our idea of marijuana and they really misunderstood. They did not really read the full report. What we meant there is that marijuana is already medically distributed by Canada Post. If ever the government should see fit, in its wisdom, to do something about legalizing marijuana, maybe it should consider a part for Canada Post. We didn't talk about production or retailing; we talked about the distribution arm.
Did I forget something, my friends? No?
Thank you, Mr. Chair.
Your task force has done a remarkable job. I have a few words to describe it. First, you have a constructive approach. You also have a comprehensive approach. You have looked everywhere, you have researched the issue and you surrounded yourselves with experts. Moreover, your approach is realistic.
Just before we start the tour, I am apprehensive about meeting many people who will tell us they would like to have a lot of icing on the cake. Unfortunately, we have a problem, as the cake is missing yeast, it is stale and it won't rise. That is what you have shown us.
I really liked what you said when you mentioned that the opinion poll revealed that, once Canadians were told about some of the financial challenges facing Canada Post, it was easier for most of them to accept the changes. At the committee's previous meetings, we had discussions with our analysts about the way we could educate Canadians on the dramatic situation experienced by Canada Post, which provides a service we are all attached to.
My first point is about the fact that I come from a region with a large rural portion with no community mailboxes. I have mixed feelings because I see community mailboxes in some rural regions provided with postal service. We want to maintain the current postal service in a few parts of my riding, but elsewhere, as well. Finally, people with an inferior level of service will be asked to remain at that same level. I am concerned about fairness.
You previously talked about people with mobility problems. You said that the door-to-door service should be maintained in their case. In my riding, people with mobility problems do not have access to a door-to-door service.
I think we should find solutions that apply to all Canadians. Otherwise, the regions could turn against the cities. People will tell themselves that, because they live in the regions, they do not have the kind of service they should expect and must pay to maintain a deficient postal service.
I am talking a lot, but I have a number of issues to go over.
I will move on to my second point. Could you talk about the governance issue? It's a topic that is both intriguing and vague. Of course, the moratorium is another issue.
I will not promote my own cause in this case. Politically, it was a worthwhile thing to do. We were saying that post offices should be left alone, but it's a fact that they cost more and provide an inferior level of service. You expressed that very well in your comments.
Should we not try to take things further in terms of scenarios? The government may not accept everything you have proposed. If we don't go far enough, I figure that the government will come up with half measures.
I have talked a lot, but I want to congratulate you once again.
I've been very fortunate in my career to spend a lot of time in rural Saskatchewan. I have lived in Moose Jaw and Regina, but I've also lived in places like Lumsden, Sturgis, and Ceylon, so I've experienced a great variety of mail service and have always been happy with it.
I understand the comments made about rural areas. I pick up my mail in a franchise that is part of store, and it is the only place people really congregate. We understand that.
It seems that people, wherever they receive their mail and however they receive it, are generally happy. The ones we heard who weren't happy were the ones who had the conversion, but they became much happier with the service once they had incorporated the change.
I think the hub idea is important. The depopulation of rural Canada, particularly in my area of rural Saskatchewan, has resulted in fewer businesses and schools. There is less mail to deliver. How do you keep those places viable, and how do you maintain the community aspect?
I think the hub idea offers other services to Canadians. The Internet can be very important to people in those situations. If banking could be made a part of the hub, along with other government services, I think this would help people.
We consistently heard that there are many ways to receive the mail and send it, and that people are generally happy with it. One size doesn't fit all: that would be the catch phrase for Canada Post. What works in Montreal is different from what works in Silton, Saskatchewan.
Thank you, Mr. Weir. Good afternoon, everyone.
Unlike my colleague, Mr. Blaney, I am very disappointed with your report. The document describes viable options. I understand that you carried out a financial analysis, but I was expecting to see more solutions. The preamble spends a lot of time on the Canada Post situation. However, I am under the impression that, after our tour, the same report will be submitted to the minister. I have a feeling that it's already done. The report comes to several conclusions instead of outlining potential solutions.
In your report, you mentioned a number of experts and researchers. A number of figures were also put forward. For example, on page 82, it is not explained where those figures come from. Who are the experts? Who carried out the studies? I would like to know what information was gathered through surveys. Earlier, you also said that you received a number of submissions. What I am asking for is that the task force make available to the parliamentary committee the information it used, so that the members can consult and review it before they draft their report.
You talked about Canada Post's financial situation. In 2011, when you conducted the financial analysis, you made no mention of the lockout. Why did you not mention it? That was a difficult year for Canada Post.
Much has been said about banking services. Canada Post actually carried out a study on the topic. As part of the committee's work, I have previously asked that the study be made public. It was made public, but it was censored. I think it would be relevant for us to also receive that document, as it contains useful information. If the banks have made $135 billion in profits, there is surely some sort of availability in terms of that market.
You also talked about a number of solutions. Some potential solutions require an infrastructure investment. So I would like to know why you have already rejected the proposal of postal banking. Do you have with you a non-censored document on the study Canada Post carried out on postal banking?