Can Royal Mail survive a shift to the private sector?

[POSTMAN]

http://www.standard.co.uk/comment/comme ... 00879.html" onclick="window.open(this.href);return false;

The Coalition’s dogmatic resolve to sell the postal service must herald a new determination to shrink the state


The Government is cleaning out its cupboards again. Every so often, bits and pieces such as the Royal Mint and the Dartford Crossing, overlooked in the great privatisations of the Eighties and Nineties, are dusted down to see if they can be sold to raise some cash.


This year, there are bigger assets to consider. A fresh push to return Royal Bank of Scotland and Lloyds into the private sector might actually happen before the next election if the Treasury relaxes about making a loss on the bailouts. Chunks of the Civil Service could be mutualised in the style of John Lewis.

They are the maybes, but listening to business minister Malcolm Fallon speaking at the Policy Exchange on Monday night, there is one certainty. If this government has its way, Royal Mail will have private hands on it in less than a year.

It was the one sell-off that even Margaret Thatcher wouldn’t contemplate, saying she was “not prepared to have the Queen’s head privatised”. Yet the debate is being framed as if there is no alternative. What has changed?

Selling Royal Mail ticks lots of boxes. At a stroke, the country’s second-largest employer after the NHS will be transferred into the private sector, helping to shrink the role of the state. Share ownership will be spread among 140,000 postal workers. The company will be able to raise fresh cash to invest in its systems to deliver more parcels and preserve its universal delivery model. Sounds good, but there are still many dissenting voices.

This is a corporate transformation that is almost too good to be true, peddled by a Soviet-style spin machine. One minute, Royal Mail was a basket case about to collapse, the next it has reinvented itself as Britain’s biggest e-commerce company. People are wary of change — but a complete reinvention? A £3 billion stock market flotation is the preferred option, ahead of a private equity firm or rival delivery group buying shares.

Royal Mail has had plenty of help to get this far. Most customers only got wind something was afoot when stamp prices skyrocketed a year ago. A first-class stamp now costs 60p, up from 46p as price controls were pared back. Ministers want to give Royal Mail a fighting chance of coping with its shrinking postbag in the age of email.

That makes it a fast-track privatisation all right. Usually consumers feel it in their wallets afterwards. Witness the energy markets, where the state is a bystander now, and gas bills defy gravity even when wholesale prices are falling. And then there are the railways, where weary commuters have become used to above-inflation ticket price rises.

In truth, getting Royal Mail this far has been anything but fast. This privatisation has foxed some of the biggest beasts in the Westminster jungle, including former trade ministers Lords Mandelson and Heseltine.

For the Coalition, shifting Royal Mail into the private sector has become totemic of progress, and not just because the monarch’s image graces its products and it plays a central role in British life.

Ministers argue that privatisation is the only way to preserve the six-day-a-week obligation for universal service that means a letter can be sent to the Highlands of Scotland for the same price as crossing London. And it’s the only way to get new capital into a business that would otherwise be queueing up for state money behind schools and hospitals.

I think the first part of that argument is bogus. The only reason six days has been enshrined in the Postal Services Act is that no politician would back a vote-losing plan to reduce it. In reality, most post — bills, circulars, junk mail — isn’t time-sensitive. If Amazon and its customers want something to arrive pronto, they could pay extra for it. A company that had to deliver only four days a week would be far more valuable, if extracting the top price for the taxpayer is the name of the game.

And then there is the point about capital. Fallon insists that every pound Royal Mail borrows to modernise while it is state hands is another pound on the public sector debt mountain.

Well, yes, but Royal Mail has already piled enough liabilities onto the taxpayer to last a lifetime. To make it saleable, its giant £10 billion pension deficit has been transferred to the state, at a cost of £1.3 billion in the first year alone. The fund was draining £300 million a year from Royal Mail, one of the reasons, along with higher stamp prices, that the company is now profitable. How much will that pension cost the taxpayer in the future?

Meanwhile, what Royal Mail boss Moya Greene must still demonstrate is that she can inject greater private sector discipline into the workforce. The posties’ main staff body, the Communication Workers Union (CWU), is implacably against the privatisation and could walk out in protest. It fears deeper staff cuts and poorer wages.

What is striking is the dogmatism with which this privatisation is being pursued. It is strange to behold, and probably should be encouraged, but is also sadly missing from efforts to tune up and shrink the rest of the public sector.

The CWU makes the very good point that if this turnaround has so far been effected in state hands, why privatise at all? Such is the momentum behind making this privatisation work, I think it’s an argument the union won’t win, regardless of whether a shares windfall quietens staff.

On balance, if an asset can exist in the private sector, it should. But I wonder if Royal Mail can really face hard commercial realities after all the help it has been given. By all means sell it, but dressing up its sale as a victory for all is misplaced.

Better that it is used as a template for an enlightened approach to modernisation elsewhere. If the Civil Service pen pushers in HR, IT, and those administering welfare payments and council tax are the next to be shaped up for the commercial world, that would make this transaction a worthwhile delivery.

[UnhappyGremlin]

No.

It will die a slow death, while being asset stripped, and when there is no silver left to sell, RM will either be brought back into Government hands, or will require to be heavily subsidised by the tax payer.

[britwrit]

This is David Cameron admitting that he won't be Prime Minister after May 2015.

[pants123]

This is David Cameron admitting that he won't be Prime Minister after May 2015.

well said,,, i agree, what a horrible bloke he is.... not a man for the people, just his rich crones..

[TrueBlueTerrier]

This is David Cameron admitting that he won't be Prime Minister after May 2015.

With the kicking he is getting on the Local elections he may not even last that long

However, as there is no real contender to take over from him I cant see any rebellion ousting him.

IDS - is too toxic and even the far right won't want him in no 10.
Gideon has too much to hide and will want to stay at no 11.
The only real contender I think is Theresa May but she is trying to get Abu Qutada deported and will want to use that as a campaigning tool and will wait a bit longer.
All the rest are lightweights and don't have support of the full party from what I can see.