Royal Mail - a privatisation too far?

[TrueBlueTerrier]

http://www.thefirstpost.co.uk/46807,fea ... ep-too-far" onclick="window.open(this.href);return false;

Royal Mail has been in state hands ever since Charles II set up a national postal delivery service. Now Labour wants to privatise it

Did Thatcher try to do so, too?
No, even she balked at the idea of interfering with such an entrenched part of our social infrastructure. In the 19th century, the British postal service - thanks to Sir Roland Hill's invention of the penny post and Anthony Trollope's development of the pillar box - played a historic role in pioneering the concept of a universal postal service. Today the same priced stamp still takes your letter to any address in the country; delivery still takes place six days a week. When John Major did try to privatise Royal Mail, in the early 1990s, he soon ditched the plan after opposition from his MPs.

Why is this government risking it?
Because Royal Mail now operates in a quite different world. Email, texting and other forms of social networking have slashed the volume of mail: Royal Mail delivers five million fewer letters a day than it did two years ago, at a cost of £500m a year in lost profits. Today a mere 14 per cent of letters handled each year are sent from households, and a lot of those are Christmas cards. The remaining 86 per cent are sent by businesses, much of it junk mail. So while Royal Mail started out as a public utility, it is now a service primarily for business.

Is that side of its operations also being eroded?
Yes. The EU's postal services directive requires the gradual liberal-isation of those services (with full liberalisation by 2012). Eager to oblige, Britain in 2006 (unlike, say, Holland) gave private-sector companies full rein to compete in the business mail market. Royal Mail thereby lost some of its most profitable work, while retaining its costly statutory obligation to deliver mail anywhere in the British Isles for the price of a single stamp. Even the most astute management would struggle in the face of such changes.

So why assume privatising it would make any difference?
Because according to the recently published Hooper Report, aptly entitled Modernise or Decline, Royal Mail is burdened not just by a radically altered business environment, but by huge inefficiencies and by its massive pension fund deficit of £8bn-£9bn. (Between 1990 to 2003, successive governments gave employees a holiday from having to make any contributions at all.) True, it still makes a notional profit – £255m in the first nine months of this financial year – but in reality it's insolvent. The Government, following the recommendations of the Hooper Report, is prepared to let the taxpayer bail out the pension fund, but only if Royal Mail agrees that a private company, such as Dutch operator TNT, can take a third of the business and help clean up its act.

Has part-privatisation worked elsewhere?
The model that the regulator, Postcomm, wants to emulate isDenmark's postal service, Post Danmark, 22 per cent of which was bought by the UK private-equity firm CVC in 2005. The part-private company went on to buy a big stake in the Belgian post office and to merge with Sweden’s post office. In each case CVC is said to have played a key role in scrapping the sort of inefficiencies said to plague Royal Mail.

What sort of inefficiencies?
Royal Mail, says the Hooper Report, is hobbled by restrictive practices and the militancy of its workforce, which is often on strike. The report claims that despite a big injection of public money, it is 40 per cent less efficient than its European competitors, yet pays its staff 25 per cent more. In other European postal companies 85 per cent of the mail is sorted by machine in "walk order" – for each postie to deliver on his rounds. Royal Mail still does it entirely by hand. Postcomm says Royal Mail failed to make some £1bn of promised efficiency savings last year, but still paid out £600m to staff in productivity bonuses.

And are these comparisons entirely fair?
No. Royal Mail is overwhelmingly a postal service; a company like the much-praised German operator Deutsche Post (DP) may be more profitable, but that's because it owns lucrative services, such as the courier company DHL; its mail division accounts for only 24 per cent of its revenues. Besides, 88 per cent of Royal Mail's income is price-controlled, while only 37 per cent of DP's is - Germany's mail services are far more expensive than Britain's. Moreover Royal Mail is barred from borrowing more than £25m on capital markets, which severely limits access to private-sector money and expertise. In this and many other ways, say Postcomm's critics, Royal Mail's competitors have been given an unfair advantage.

What are some of those other ways?
In the process of "liberalising" the service, the Government has enabled Royal Mail's 22 licensed competitors to "cherry-pick" the lucrative urban market, allowing them to collect and sort business mail, then hand it over to Royal Mail for the costly "final mile" from delivery office to recipient. Royal Mail’s charge for doing so is capped at 13p per item (as part of its "universal service obligation"), so that, in effect, it is subsidising its competitors. By contrast, the Dutch government insists that 50 per cent of local postal services are kept as a monopoly for its national operator, TNT (the firm keen to buy a stake in Royal Mail), until such a time as Britain and Germany "make their markets more accessible".

How do British and German markets restrict competition?
Unlike its competitors, Britain's Royal Mail is exempt from VAT and from parking restrictions; it can force ships or aircraft to carry its mailbags; it enjoys fast clearance of overseas mail by Customs. As for Germany, TNT has spent a year in Brussels contesting Angela Merkel’s intro-duction of a minimum wage for all postal workers. And that, of course, is partly why the CWU - the main postal workers' union and a leading funder of the Labour Party - is so deeply opposed to the privatisation plan.

[rockytony67]

So why assume privatising it would make any difference?
Because according to the recently published Hooper Report, aptly entitled Modernise or Decline, Royal Mail is burdened not just by a radically altered business environment, but by huge inefficiencies and by its massive pension fund deficit of £8bn-£9bn. (Between 1990 to 2003, successive governments gave employees a holiday from having to make any contributions at all.)

More clueless journalism, I wish I didn't have to pay into the scheme, it would have saved me £20 a week

[luft1957]

by its massive pension fund deficit of £8bn-£9bn. (Between 1990 to 2003, successive governments gave employees a holiday from having to make any contributions at all.) [/quote]


good to see that the press are as well informed as ever

[Stormproof]

by its massive pension fund deficit of £8bn-£9bn. (Between 1990 to 2003, successive governments gave employees a holiday from having to make any contributions at all.)


good to see that the press are as well informed as ever

I left a comment, (yet to be authorised) stating the facts!............trying to make us look bad, bloody idiots

[johnsouthwales]

germany wants to bring in by law the minimum wage for postal workers (around 8.5 euro if i remember my previous post...cant find it at he moment lol). denmark had to sell its interests in belgium to join sweden in their curious partnership..

if people werent texting, theyd be ringing each other up anyway, and as texting is part of the phone, its an extention of the phone, so sms messages is a bi-product of telex and telegrams, which cannot really be blamed for the demise as such. it would have cost a small fortune to ring in those days, so that isnt really the answer. having a home telephone was expensive, and still is in some respects. the older generation were more used to letter communication. and as habits change and cheaper accessabilty came around later on, which has resulted in greater options in communication than ever..only, if only someone could have imagined before 1984 how things would be...BT was part of postoffice.. bt telephones... BT some time later had their network in partnership with cellnet, sold it to who became o2, then BT mad a bit of a bit of a comeback trading under their own name, but never really taking off. BT had a partnership with yahoo..

letter writing was always a popular social event in people's lives. people communicated better in the old days. letter writing started to phase out as a pastime probably before the mid ninties. social habits change. mobile phones were introduced around 1989 and didnt really take off until 1996, and then we had the texting boom of 2000.

most mail received say in the 70's were mainly from business. had the rentbooks then, so council tax wasnt sent out by mail as they just handed out a new card for the next year.. there wasnt so much of monthly bank statements then or building society, as everything was written down in bank books..
i remember 50 pences were put into the meter, so there wasnt a paper bill sent through the post.. and i cannot remember how the electric bill was paid. i think that did come through the post. voting cards came through the post. zetters or littlewoods pools came once a month. or someone had a catalogue delivery..
things came through the post then just as they would now. oh, and the letters from aunties and goodness knows who else.. kids in the 70s had penpals or stamp collector monthly approvals posted.. football programmes..but people do grow out of those things. birthday cards get sent.. or people deliver them personally.

think of all the things what people in the 70s sent through the post.. it seems to me that more business post was sent in the 80s and 90s.. then it took a downward turn when people have online statements, which more or less takes it back to how it was in the first place.. online shopping creates business as we all knows it has to be sent out. so in one sense, technology has created business for royal mail, whereas the purchaser would have just made a journey.

[Stormproof]

by its massive pension fund deficit of £8bn-£9bn. (Between 1990 to 2003, successive governments gave employees a holiday from having to make any contributions at all.)


good to see that the press are as well informed as ever

I left a comment, (yet to be authorised) stating the facts!............trying to make us look bad, bloody idiots

Got an email back from them

Dear *****,



Thank you for pointing out our error in the article about the proposed part-privatisation of the Royal Mail. We’ll make the change



Best wishes,



Harry Underwood.

[TrueBlueTerrier]

by its massive pension fund deficit of £8bn-£9bn. (Between 1990 to 2003, successive governments gave employees a holiday from having to make any contributions at all.)

good to see that the press are as well informed as ever

I left a comment, (yet to be authorised) stating the facts!............trying to make us look bad, bloody idiots

Got an email back from them

Dear *****,
Thank you for pointing out our error in the article about the proposed part-privatisation of the Royal Mail. We’ll make the change

Best wishes,


Harry Underwood.

I did the same and got the same reply

[johnsouthwales]

At the end of 2007, the German parliament (Bundestag) passed a law introducing a minimum wage for postal workers. Postal delivery employees are to be guaranteed a minimum of €9 in the east of the country (former East Germany) and €9.80 in the west, letter sorters €8 in the east and €8.40 in the west.

The issue is highly contentious, and the plans for such a minimum wage were vigorously opposed by the Christian Democratic Union(CDU) and Christian Social Union (CSU) and, in particular, by Chancellor Angela Merkel (CDU) and her economics minister, Michael Glos (CSU). The current government in Germany consists of a grand coalition between the CDU-CSU and the Social Democratic Party (SPD).

Opposition also came from business groups and private postal companies, which advanced visions of the supposed horrific consequences of introducing a minimum wage. According to the chairman of the private postal company Pin Group, Günter Thiel, the introduction of the minimum wage threatened “billions worth of investments and tens of thousands of jobs in private postal companies in Germany.” The Pin Group is the leading competitor of Germany’s main postal company, the formerly state-run Deutsche Post (DP).

The recent controversy over a minimum wage, however, cannot hide the fact that the slashing of postal jobs and wages and deteriorating working conditions are all a result of the privatisation of postal services. At the expense of its workforce, DP has been transformed from a former state-run enterprise into a company making huge profits, which rewards its major shareholders with massive dividends. In 2006, DP made a profit of €3.87 billion based on a turnover of €60.5 billion. In the first half of 2007, its profits rose by a further 9 percent.

The Dutch postal company TNT, Deutsche Post’s second largest competitor, has declared the German minimum wage a means of artificially maintaining the former monopoly position of Deutsche Post. TNT announced its intention of withdrawing its interests in the German postal market.

In 2007, the company shelled out more than €900 million in the form of dividends to its major shareholders. Dividends were also paid to the German state, which is a minority shareholder. Top managers were rewarded with sumptuous bonuses on top of their generous base salaries. Following the passing of the decree for a minimum wage, the share value of Deutsche Post ro se, and its chairman Klaus Zumwinkel used the opportunity to sell off some of his shares in the company—picking up €2.24 million in the deal.

While the demand for postal service has grown and continues to grow, the former 140,000 full-time jobs at state-run Deutsche Post have been replaced most of which are part-time. The increased demand for postal services means that the average workweek of 38.5 hours can be rapidly expanded to 70 hours, but due to the looming threat of unemployment, much of this work is carried out without pay. Many workers do not dare declare the real level of their overtime work for fear of losing their jobs.

January 10, 2008

Germany's minimum postal wage ruled illegal[de]
Published: Monday 10 March 2008
The introduction by the German government of a minimum wage of €9.80 an hour for all postal workers has been ruled illegal by a Berlin court, marking a victory for foreign operators wishing to enter the country's recently opened postal market.

"The application of the minimum wage to the entire postal sector does not conform with the law," the Berlin Administrative Court stated on 7 March, arguing that the imposition of a €9.80 hourly rate violated the basic rights of the plaintiffs, Dutch and German postal services companies TNT and PIN.

But Dutch postal operator TNT, which currently pays its German workers €7.50 an hour, refused to comply with the rate. It accused Germany of attempting to shield its formerly state-owned mail monopoly Deutsche Post from any competition and lodged a lawsuit with a Berlin commercial court in a bid to have its alternative minimum wage declared valid.

But the public sector trade union Ver.di, which represents Deutsche Post, said the court's decision was "fully incomprehensible" and was likely to be struck down.

tnt wanted to remove deutsche post vat exempt postion - would they remove britain's?

The Dutch group is separately campaigning for an end to value added tax exemptions for Deutsche Post, which it says further skew the postal market.

[johnsouthwales]

http://www.boston.com/news/world/europe ... ker_hours/

http://www.dp-dhl.de/dp-dhl?lang=de_EN& ... 6222290561

[Lounge Lizard]

"How do British and German markets restrict competition?
Unlike its competitors, Britain's Royal Mail is exempt from VAT and from parking restrictions; it can force ships or aircraft to carry its mailbags; it enjoys fast clearance of overseas mail by Customs. As for Germany ..........."

Can someone please direct me to whereever on this forum there's a list of exemptions, privileges, etc. ( no VAT, police not searching vans, etc. etc. ) that the regulator accepts that Royal Mail enjoys for undertaking the Universal Service Obligation ? I think it was reviewed about six years ago and know it's on here somewhere but just can't find it. Many thanks.