The State's post offices are technically insolvent and will quickly become bankrupt without a change in the way they are funded, a new report says.
Published yesterday by the Minister for Public Enterprise, Ms O'Rourke, the report says the "only real option" for financing An Post's losses is for the State to pay a subvention to the company.
Written by an industrial relations consultant, Mr Phil Flynn, the report says the company cannot reconcile its legal obligation to trade effectively, with a Government directive to keep all 1,900 post offices open.
It says large post offices are facing a viability crisis - a problem previously assumed to be confined to small rural outlets.
While the company's cost structures are proving uncompetitive when it seeks to create new business, Ms O'Rourke's spokesman said an announcement on the transfer of certain bank payments transactions to An Post was imminent.
The report, details of which were revealed in The Irish Times last month, says An Post's "preferred option" is to close 1,500 sub-offices and maintain only 400 of its 800 automated outlets.
While Mr Flynn says that strategy made the best business sense, An Post would still require a £4 million subvention this year and £27.1 million by 2005 to keep 400 post offices open.
The company will require £83.2 million in subvention by 2005 in a "no change" scenario, Mr Flynn says.
Describing the situation as "very worrying", Ms O'Rourke yesterday established an inter-Departmental group to provide a blueprint for the future funding of the post offices.
Including Mr Flynn's study, this will be the fourth examination of the post office network in recent months.
PricewaterhouseCoopers has compiled a separate study submitted to a working group - with members from An Post, the Department of Public Enterprise and the Department of Finance - which itself has been assessing the business.
In that group's meetings, the Department of Finance is known to have serious reservations about the size of the subsidies cited by Mr Flynn. Senior civil servants from the Department will participate in the new group established by Ms O'Rourke.
Others from the Department of Public Enterprise, the Department of Social, Community and Family Affairs and the Department of Arts, Heritage, Gaeltacht and Islands will also join the group, which must report to Ms O'Rourke within three months.
This is seen as crucial because Mr Flynn said An Post was under extreme pricing pressure from its main corporate clients.
The company has been forced to forgo price increases and accept price reductions in order to retain its current levels of business.
The largest of the company's corporate clients is the Department of Social, Community and Family Affairs, which pays it to distribute social welfare payments.
The second-largest is the National Treasury Management Agency, which manages funds invested in An Post's savings products. The third-largest is RTE, which pays for the television licence fee collection service through the Department of Arts, Heritage, Gaeltacht and Islands. An Post, which is seeking a strategic partner from the international postal industry, welcomed the report. Its spokesman said the company had noted Mr Flynn's recommendation for an increase in the remuneration of post-masters. The cost of such an increase should be met by the Government, Mr Flynn says.
