Give Royal Mail to the workers; don’t fiddle the books

[TrueBlueTerrier]

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The government is breaking every rule in its own book to get rid of Royal Mail and its pensions liability, but instead of selling the business, why not give it to the pension fund? That way the post would be owned by the people who can make it pay.

The privatisation plan gets Royal Mail off the public books, but only because the books are fiddled. It means swapping the funded pension liability of £34bn for an unfunded scheme. That allows the state to pinch the £26bn of assets – bonds, shares and properties that will be sold and put into the Treasury pot – but the liabilities will have to be met from general taxation for decades to come.

So the assets go onto the government’s books but the liability does not. That is a staggering accounting scam – probably worthy of a commemorative stamp. But from a business secretary who has already seen his plans for a mansion tax and a graduate tax shredded, compromising on a few more principles may not matter.

The pension swap goes against sound and transparent financing, but Vince Cable – despite opposing foreign ownership of Cadbury’s chocolate company – is now willing to see a monopoly mail service sold abroad. And for bad measure he is throwing in a government guarantee on the new pension scheme that does not apply at present.

He is happy to hand 10 per cent of Royal Mail to the workers to win their support. It would be better to give them 100 per cent however, letting them own it through their pension scheme. What bigger example of the Big Society could there be? The Post Office is to be split off into a mutual anyway.

The value of the mail business is nothing like enough to close the pension fund’s £8bn deficit – but that means the state is losing little by giving away the operation instead of selling.

But handing it to the pension fund puts the responsibility for closing the deficit in the hands of those with the ability and incentive to reduce it. The mail’s workers can increase contributions or limit benefits to balance the books and they can run the service in such a way it becomes profitable and can boost the fund. No guarantee would be necessary.

The Royal Mail business is currently as much a liability as its pension fund. Putting the two together could make the business into a profitable asset whose value finances future pensions. It would keep the business British and mean it is run for the benefit of both workers and customers. And it would get the operation off the government’s books genuinely – not through a bookkeeping fiddle.