Jeremy Warner: Way forward for the Royal Mail

[TrueBlueTerrier]

http://www.independent.co.uk/news/busin ... 93037.html

Outlook If nationalisation is meant to be good for the banks, why is privatisation thought good for Royal Mail? This is not my line, but comes from the postal union, which for a change makes a not half bad point in challenging Lord Mandelson's plans for part-privatisation of Royal Mail. Everything else seems with frightening speed to be slipping into the hands of state control, yet the Gov-ernment now proposes to distance itself from the one business it has up until now felt unable to privatise.

Nor is this the only irony of yesterday's statement. As he prepares to bow out, Allan Leighton, the chairman, is finally getting what he thought he was signing up to when he first joined seven years ago. Sometimes it has felt to him like beating his head against the wall. Now it will be his successor who reaps the benefits.

Privatisation has always been the Post Office's best hope of a viable future, yet Labour, though not Mandelson, has always been vehemently opposed to it, believing it would undermine what remains of the rural and urban network of Post Offices and destroy the universal delivery service. There is still something to be said for these arguments, for it is hard to see how in the long term the universal service obligation can be maintained in an age of electronic communication and intense competition for the most profitable postal business without massive state subsidy.

However, it is equally certain that without action Royal Mail would have become an unsustainable burden on the taxpayer culminating, as Richard Hooper, a former chairman of the communications watchdog, Ofcom, says in his review, in abject disaster for the company.

There are three key elements to yesterday's plan of action, all of which are long overdue. One is to bring in a strategic partner, likely to be either TNT or DHL, both now part of larger European postal services. This will bring in much-needed capital for modernisation without further recourse to the taxpayer.

The second is to free the company from its legacy pension liabilities, which have been eating up the company from within. These instead will be assumed by the state, where they belong, freeing up some £800m a year of cash for further modernisation and investment in services. Then finally, Postcom, which has been an extraordinarily destructive force in the affairs of Royal Mail, is to be disbanded and responsibility for postal regulation placed in the hands of Ofcom, where a more enlightened approach may hold sway.

Britain put the cart before the horse by deregulating postal services before it had privatised the Post Office. In the rest of Europe, policymakers did it the other way around, allowing their legacy postal services the time needed to modernise and develop into strong all-round delivery and logistics firms before unleashing full-scale competition on the market.

Starved of capital, weighed down by legacy pension liabilities, and buffeted by the demands of the politicians, Royal Mail has been slowly dying on its feet as lower cost, more fleet-of-foot private competitors stole its most profitable lines of business. Royal Mail has been left with the costs of maintaining a universal service but increasingly few of its benefits.

The banking crisis has given post offices a new lease of life, with deposits flowing into trusted postal savings in record quantities. Part-privatisation will further underpin the company's future. Posties might think it a sellout, and promise to defeat Lord Mandelson's ambitions for a second time, but in fact it is the best news the company has had in years.


The drive to, er, “liberalize” - code for privatise - postal services comes under EU Directives 97/96/EC ‘Privatisation of Postal Services’, and 2002/39/EC ‘Further opening of competition of Postal Services’.

Article 87, 88 and 89 of the Amsterdam Treaty oblige the Government to seek the permission of the EU Commission to give state aid to Royal Mail.

Furthermore, by 2011, Britain’s postal services will be open to full competition regardless of the social and rural consequences under Section 2, Articles 87-89 of the Treaty of Amsterdam, 1997.



Posted by Tom MacFarlane | 18.12.08, 08:38 GMT

It was the last Tory and this labour government that allowed the pension holiday to be taken by RM that directly led to the pension crises RM have now.Successive Governments have also taken money out of RM thus leaving less for investment.Now in this so called new era of mail competition RM are made to deliver their competitors mail at 40% less than their cost to do so,and we wonder why their profits are down.If TNT or any other operator wants to enter the market it should have been done with their own money not by introducing highly unfair practices.The Government now want to claim they are the saviours of one of our great British institutions renowned as probably the best mail services in the world,When if fact it was them that put RM in the situation their in now.If this madness does go ahead then like all the other privatized utilities it will just end up costing us all more for a worse service and one which we will never be able to get back.

Posted by Geezer | 17.12.08, 15:04 GMT


Royal Mail is one of the most prominent symbols of the nation. Selling part of it - to a foreign firm - and, most cynically, changing its name from Royal Mail to TNT Mail is an attack on the very national identity of the British people.

If failing banks can be bailed out or nationalised, the government should be able to find a way of rescuing Royal Mail without selling it.

Modernising the Post Office, so that it becomes more competitive, is a one-off expenditure that is not unaffordable.

Posted by Martin | 17.12.08, 10:05 GMT

[Big Daz]

Where on earth did the 800 million figure come from.

[TrueBlueTerrier]

I think that's the figure Royal Mail quote when people ask how much it costs them per year to keep up their pension payments. Whether its true or not is open to debate.

[k979aaa]

ENRON=ROYALMAIL