Penal costs of Royal Mail bid: Labour is harming Britain by waiving this terrible deal through, says ALEX BRUMMER

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https://www.thisismoney.co.uk/money/com ... UMMER.html

The Ofcom review of Royal Mail focuses on how best to ensure a reliable delivery service for consumers amid the fast-declining volumes of post.

The regulator has come down on the side of a less frequent second-class, low-price service and a premium first-class delivery.

Much of the debate, as this goes out to consultation, will centre on whether two 85p second-class deliveries a week, with Saturday off the agenda, is good enough.

Ofcom has no direct role in decisions on change of ownership at Royal Mail.

The ‘Czech sphinx’ Daniel Kretinsky is in line to buy its owner, International Distributions Services (IDS), for £3.6billion.

A highly leveraged bid, driven by City hunger for fees (some £142million), will place huge pressure on Royal Mail’s ability to generate income and profits.


The victims, when takeovers are financially driven, are end-users. Interest rate bills must be met, as consumers at Thames Water are learning.

Similarly Asda, Morrisons and countless other UK companies are struggling with high borrowings.

The biggest victim is the taxpayer. Market scepticism about Chancellor Rachel Reeves’s fiscal rules and her October Budget have jeopardised public finances because of the surging interest rate cost of the national debt.

The only means Ofcom has of combatting the extra risk layered on Royal Mail by a financially-driven deal is to put in place extra protections designed to ensure, however feeble or grasping the ownership, consumers are protected.

This is to be achieved by backstops. Ofcom proposes taking on fresh powers to fine heavily if second-class letters and parcels pile up at delivery offices, or should first-class deliveries not arrive the next day, including Saturday.

How then will Kretinsky make ends meet, given the financing costs of his deal and pledges on jobs made to the posties?

Asset sales and squeezing extra income from a property portfolio are normally how predators begin.

But it is all but inevitable that the price of first-class stamps, currently £1.65p, will rise. If the UK were to go the way of Denmark, the cost of 100-gramme letters could jump to £4.

It is unforgivable that the Government has not woken up to the dangers.

The Kretinsky deal is likely to see Royal Mail burdened with interest payments and heavy fines. It will fuel inflation and burden small and medium sized businesses.

Instead of swanning around in Davos at taxpayers’ expense, the Business Secretary should recognise that Labour is making a terrible blunder by waving the takeover through. It will crush consumers and every small enterprise in the country.

Jonathan Reynolds and his party will not be forgiven.