Speech to the Parliamentary Briefing, 2nd reading of the Pos

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Speech to the Parliamentary Briefing, 2nd reading of the Postal Services Bill, 27th October 2010

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Today marks a new stage in the Coalition Government’s gamble in the future of Royal Mail. The second reading means that the Government is going to face down public opinion, including amongst its own supporters. Not only does the majority of public opinion oppose privatisation – but the most recent You Gov Poll on the 1st October, showed more Tories and Liberals opposing privatisation than supporting it. Equally, a majority of Tories and Lib Dem supporters thought services would get worse after privatisation. And as for the issue of value for money – 67% of Tories thought prices would rise, while only 6% thought they would decrease. 76% of Lib Dems thought prices would rise, while only 11% thought they would decrease.

Well the CWU agrees with Tory and Lib Dem voters. After privatisation, services will deteriorate and prices will rise.

So now we must turn the good sense of these Coalition voters into a real pressure upon their own Government. This will not be easy. The Government feels it has the wind in its sails. It has secured nearly 60% of the vote – it has a Parliamentary majority of 82 – and it has nearly a full Parliamentary turn in front of it.

So – on the face of it – we have a mountain to climb.

But that task is very manageable. Because the fact is that the more the debate on privatisation has opened out, the more it becomes clear that there is nothing to recommend it. Let us start from the Bill being debated to day. The biggest innovation of the Bill – certainly in terms of the number of written pages – is the introduction of bankruptcy powers. Yes – under privatisation – for the first time – Royal Mail will be allowed to go bankrupt. We have just gotten over a chairman of Royal Mail claiming it was bankrupt. Now the Coalition Government is introducing provisions which permit this happen. This shows that this Bill is really a gamble with the future. Of course, should a privatised Royal Mail go bankrupt, the universal service will still need to be provided.

So the Bill goes into detail as to how the Secretary of State will ensure this happens. You will be relieved to hear it, that if a privatised Royal Mail goes bankrupt, the Secretary of State is able to make loans and grants to bail it out. Wonderful logic. Privatise Royal Mail – legislate for the possibility of bankruptcy – guarantee that the taxpayer will bail it out of bankruptcy. Another innovation of the legislation also relies upon eccentric logic. For the first time, there is to be allowed more than one universal service provider. And, for the first time, a provider can deliver a universal service to a part of the country.

Presumably, some one in Government is anxious to reassure Royal Mail’s competitors. These competitors don’t have the network, or staff, to compete with Royal Mail on delivery. Royal Mail is still delivering 99% of previously reserved mail. But, a glimmer of hope is offered to them. They may not be able to provide a whole universal service – a really universal, universal service. But perhaps you may be able to provide a bit of a universal service? Some where nice and easy – say a city like Birmingham – relatively small geographic area, very concentrated population levels. Hence the possibility of making a profit from the bit of the universal service obligation you get given. Never mind what this does to the costs of the universal service provider for the countryside around Birmingham.

Not everything in the Bill lacks logic. Some of it is a definite concession to public concerns about privatisation. For example, the Coalition is making much about the safeguards offered for the universal service in the legislation. This is undoubtedly a response to the leaking of the letter from Vince Cable to the Chancellor, which talked of reducing the minimum standards in the universal service. So, the Bill restates the existing universal service obligations, albeit in different words from the Postal Services Act of 2000. Before trumpeting this too much, the Government should make clear as to why the legislation obliges OFCOM to review the standards in the universal service within 18 months of the legislation becoming law. Isn’t this a case of getting someone else to recommend your dirty work for you?

And why, for the first time in the legislation, does the USO have to be considered as ‘financially sustainable’ and ‘efficient’. Aren’t these innovations just excuses to justify a future reduction in the universal services obligation?

The Coalition Government has also tried to calm the widespread fears that privatisation will damage the Post Office Networks – by keeping it wholly publicly owned. This is a back-handed compliment of course – as public ownership is of course reassuring to the public. But the public is being made to pay for this. After all, POL is losing money – so you keep it public. Royal Mail is profitable – so you sell it to your mates in the city. Indeed, the Government wants to burnish its radical credentials by offering the possibility that POL may be turned into a mutual. The fact that this may simply be a case of mutualising the debt – whilst privatising the profit, will of course be silently passed over by the Government. But the fact remains that POL is vulnerable and dependant upon Royal Mail transfers and custom in order to survive. Once you separate the two, why will a privatised Royal Mail want to associate itself with a loss making public retail network? Wouldn’t a privatised Royal Mail want to use other, privately owned retail networks?

POL is very vulnerable. In 2009/10 POL received 343 million pounds in revenue directly from Royal Mail. In fact POL has become increasingly reliant upon Royal Mail, as Government business going through the Post Office has declined. In 2003/4 revenue from Royal Mail was 27.5% of POL’s income. By 2009 this had risen to 35%. In the same period revenue from Government services fell from 43.1% to 24%. POL is already dependent upon the Government for a direct subsidy to maintain its network of Post Offices. This is currently running at 150 million pounds a year, and will rise to 180 million pounds from 2011/12. POL still had a total recognised loss of 130 million pounds in 2009/10.

There is also a long running dispute between POL and Royal Mail management concerning the correct pricing of services used. Royal Mail management believes that it overpays POL, while POL management believes it is underpaid. On central services provided to POL by Royal Mail, there is an assumption of around 150 million pound subsidy to POL. The dynamic of separation is then clear. POL will be dramatically weakened. Despite all the Government flannel, it is inevitable there will be massive numbers of Post Office closures in the near future.

Dave Ward will explain to you some of the issues concerning pensions and the significance of modernisation agreement for the future of Royal Mail. But for the reasons that I have given the CWU is committed to a campaign against the Bill and we are seeking the broadest possible support for that campaign. We know that the Shadow Cabinet and Parliamentary Labour Party will oppose. We also know that the minority parties outside of the Coalition will also oppose. But the support is much broader.

Recently the Women’s Institute pledged its support for the campaign to Keep the Post Public. It is then vital that we turn our attention to persuading Coalition MPs that this Bill is a serious mistake and must be withdrawn.

We have identified 71 constituencies where the Coalition has a majority of 10% or less. We are urging our Branches and all supportive organisations to concentrate on those constituencies by organising broad-based local campaigns to Keep the Post Public.

It is vital that everyone who values the public postal service to lend their support to this campaign. The CWU will provide every assistance to those who commit themselves to this campaign.

Thanks for listening.