Royal Mail's fake crisis

[goinpostal]

Tory business secretary says they need to privatise Royal Mail because...its so profitable!

""The fact that it is profitable makes it more urgent, actually, to seize the opportunity and to put it onto a long-term sustainable basis"

Yet its always been a profitable sector, its just that whole bits of it were taken off Royal Mail.

Royal Mail’s fake crisis removed

Two decades of government policy made Royal Mail fail

The Tories aim to succeed in privatising Royal Mailwhere Labour failed. To do that they have had to reverse New Labour’s policy of using regulation to batter Royal Mail, in order to restore it to profitability. The crisis in Royal Mail has always been to a large degree artificial, manufactured by the government to restructure the company for the needs of big business, and prepare it for a selll-off.

1. The DSA swindle

Royal Mail wasn’t in crisis until the postal market was fully opened up to private companies in 2006 – – years before it was required to by EU legislation that the Blair government itself had pushed for – and competition rigged by Labour’s neoliberal regulator, Postcomm. The proof are Royal Mail’s 2005 profit figures, £537million, higher than any year since including this year’s bumper figure, more than halved already by the following year.

With the “downstream access” system (DSA), private multinationals like TNT and UKMail cherrypicked the profitable contracts to collect and sort bulk mail from banks, big companies, councils and government agencies worth billions, before shovelling it into Royal Mail’s delivery network for the “final mile”. Royal Mail was left the unprofitable social mail and huge costs of actually delivering the mail, with rigged prices set by the regulator that ensured it made a loss, forcing it into crisis and restructuring. The losers were the workers and the public, while Royal Mail managers made fat bonuses off of cuts and TNT & Co. cherry-picked the lucrative business and government bulk mail contracts that had previously been collected and sorted by Royal Mail.

Under the Coalition the new regulator Ofcom changed regulations to allow Royal Mail to hike stamp and parcel prices for consumers, and charge more for DSA – now it’s made £80 million off DSA in 2011-12.

2. The pension holiday

The Postal Services Act of EU gave the green light last March, the government took over the company’s pension scheme with its £10 billion deficit. The roots of the deficit in previous governments taking a thirteen year “holiday” from paying into the scheme from 1990-2003. In 2004 the deficit already stood at £2.5 bilion, and the 2008 financial crisis and stock market meltdown did the rest. Debts on this scale made the company unsellable, and the nationalisation of the scheme saves Royal Mail £300 million of contributions a year – a big chunk of the “success” of Royal Mail bosses in supposedly boosting profitability last year. The Tories in the process got to spin a reduction in public sector borrowing, with nearly all the reduction on the previous year due to the transfer of the £28bn in assets of the pension fund to the Treasury.

The Coalition’s “change of heart” on pensions and prices was solely to remove these obstacles to privatisation.

3. Price hikes and closures

Consumers have fared worse under either regime, with thousands of post offices closed, the loss of the second daily delivery, and now huge hikes to stamp price and parcel rates. Ofom lifted restrictions on price hikes, and First class stamps went up 30 percent to 60p and second class up 39 percent to 50p, helping to kill off the unprofitable letters business while slightly increasing revenue. Overall stamp prices have risen by over 100 percent since 2000, when a second class stamp was 19p and first class 26p.

4. The internet means the end of postal services?

Economists, politicians and Royal Mail managers justify the need for efficiency measures like flexibility and cuts to jobs by pointing to falling letter volumes, due to the rise of mobile phones and email. There are three arguments against this. Internet buying has led to parcel traffic rapidly rising, largely offsetting the fall in letters. Even if total mail volumes were falling, the Socialist answer would be to share out the work with no loss of pay – as it is the CWU’s historic policy of the 35 hour work week would mop up any fall in volumes so that it benefit workers not bosses. But the killer argument is the most obvious: TNT and UKMail have been doing just fine, with all the mail contracts they stole from Royal Mail via the DSA system! If Royal Mail had them back it would be immensely profitable, money it could use to lower prices and expand services rather than pay some City of London parasite. More importantly, the economies of scale of a single postal system would be far more efficient than a fragmented mail market like Holland already has, where up to four postal workers in different uniforms visit your house every day to post letters! What to every ordinary person is clearly an example of the “madness of the market” is just “healthy competition” to the thinktank gurus of the free market, their disciples in all three mainstream parties and of course the capitalists who make a pretty penny off it.

The conclusion is clear. Price hikes, nationalising the pension deficit, freeing up Royal Mail’s price – just as Royal Mail’s crisis was manufactured by the government, so correcting these policies – purely to allow privatisation – has removed the company’s artificially created “crisis”.

[UnhappyGremlin]

RM has never been in crisis. Not saying it has been in a perfect financial position, but it's never been as bad as they've made out.
The figures have just been presented in the most appropriate way for the board and the Government to get what they want.
It's been happening for years.
Take the DSA issue, within the last 6 or 9 months, the union threatened a boycott.
And what do you know, within weeks it's was announced it's making a profit, but after certain exceptions and conditions.

[borders]

excellent article , sad though it is to read it. ..... its a great stitch up job.....

[Brain Fury]

Great article, RM has been shafted by a succession of Governments to get us to where we are now. In large part it has been political dogma but I also think that they were fed up with being in the firing line whenever the CWU called another strike. Introducing competition and eventually privatisation is their way of getting out from under that load.

However, even though the article is 100% correct, the crises for RM, though manufactured is real. Privatisation has been long in the making but IMO it's too late to stop it now. 2006 was the final nail in the coffin for a publicly owned mail business.

[UnhappyGremlin]

Great article, RM has been shafted by a succession of Governments to get us to where we are now. In large part it has been political dogma but I also think that they were fed up with being in the firing line whenever the CWU called another strike. Introducing competition and eventually privatisation is their way of getting out from under that load.

However, even though the article is 100% correct, the crises for RM, though manufactured is real. Privatisation has been long in the making but IMO it's too late to stop it now. 2006 was the final nail in the coffin for a publicly owned mail business.

You appear to be promoting more propaganda than RM.
The crisis is totally manufactured, but it's not as real as they'd have you/us and the public think. The profits announced are just that, there are more in hiding.

And it isn't too late to stop privatisation at all, if it was, the RM propaganda machine wouldn't be in overdrive like it is, and RM and the Government wouldn't be trying to persuade us and the public otherwise, nor would they be repeatedly trying to bribe us into accepting it, and attempting to bribe us not to strike.
As I said in another thread, I'm not saying the company is in brilliant financial condition, but it is nowhere near as bad as they make out.

I do wonder if it's us and the public RM/the Government are trying to convince, or themselves. Are they trying to convince themselves that it is the right and necessary thing to do? Just so they can sleep at night?

[Brain Fury]

Great article, RM has been shafted by a succession of Governments to get us to where we are now. In large part it has been political dogma but I also think that they were fed up with being in the firing line whenever the CWU called another strike. Introducing competition and eventually privatisation is their way of getting out from under that load.

However, even though the article is 100% correct, the crises for RM, though manufactured is real. Privatisation has been long in the making but IMO it's too late to stop it now. 2006 was the final nail in the coffin for a publicly owned mail business.

You appear to be promoting more propaganda than RM.
The crisis is totally manufactured, but it's not as real as they'd have you/us and the public think. The profits announced are just that, there are more in hiding.

And it isn't too late to stop privatisation at all, if it was, the RM propaganda machine wouldn't be in overdrive like it is, and RM and the Government wouldn't be trying to persuade us and the public otherwise, nor would they be repeatedly trying to bribe us into accepting it, and attempting to bribe us not to strike.
As I said in another thread, I'm not saying the company is in brilliant financial condition, but it is nowhere near as bad as they make out.

I do wonder if it's us and the public RM/the Government are trying to convince, or themselves. Are they trying to convince themselves that it is the right and necessary thing to do? Just so they can sleep at night?

There are more profits in hiding? What under the mattress? What's you evidence for that?

Of course RM (and the Government) doesn't want the CWU to strike and of course the pay offer (which is probably more than they wanted to offer) was a bribe to prevent it.

The question is what's the alternative to privatisation? I've asked questions about the CWU's alternative business model elsewhere. Personally I don't think it's a goer but it does at least recognise that the status quo isn't an option. Do you? To me status quo just means a slow death through reintroduced regulation and lack of investment.

IMO the only way that RM can remain in public ownership is if the Government repeals the 2006 legislation that allows competition in the postal market, withdraws all the licences that have been granted to other operators and subsidises RM part of the public sector. Do you think that is at all likely?

[UnhappyGremlin]

Great article, RM has been shafted by a succession of Governments to get us to where we are now. In large part it has been political dogma but I also think that they were fed up with being in the firing line whenever the CWU called another strike. Introducing competition and eventually privatisation is their way of getting out from under that load.

However, even though the article is 100% correct, the crises for RM, though manufactured is real. Privatisation has been long in the making but IMO it's too late to stop it now. 2006 was the final nail in the coffin for a publicly owned mail business.

You appear to be promoting more propaganda than RM.
The crisis is totally manufactured, but it's not as real as they'd have you/us and the public think. The profits announced are just that, there are more in hiding.

And it isn't too late to stop privatisation at all, if it was, the RM propaganda machine wouldn't be in overdrive like it is, and RM and the Government wouldn't be trying to persuade us and the public otherwise, nor would they be repeatedly trying to bribe us into accepting it, and attempting to bribe us not to strike.
As I said in another thread, I'm not saying the company is in brilliant financial condition, but it is nowhere near as bad as they make out.

I do wonder if it's us and the public RM/the Government are trying to convince, or themselves. Are they trying to convince themselves that it is the right and necessary thing to do? Just so they can sleep at night?

There are more profits in hiding? What under the mattress? What's you evidence for that?

Of course RM (and the Government) doesn't want the CWU to strike and of course the pay offer (which is probably more than they wanted to offer) was a bribe to prevent it.

The question is what's the alternative to privatisation? I've asked questions about the CWU's alternative business model elsewhere. Personally I don't think it's a goer but it does at least recognise that the status quo isn't an option. Do you? To me status quo just means a slow death through reintroduced regulation and lack of investment.

IMO the only way that RM can remain in public ownership is if the Government repeals the 2006 legislation that allows competition in the postal market, withdraws all the licences that have been granted to other operators and subsidises RM part of the public sector. Do you think that is at all likely?

The profits they announced are after exceptional costs or some such crap. The accountants have been moving money about to present the view they want for years making investments to show a loss. Like replacing vans every 18 months just to waste money, which they did for a few years in my area. We now keep them for between 7 and 10 years.

There are many alternatives to privatisation, but you, and RM, and the Government seem to have tunnel vision. They've chosen a course and are unwilling to consider others, and I have to ask why? Is it because it is the only answer? I don't think so. It's because there bloody mates will asset strip the company and cream the profits like they have always done.

If RM can be made to make continuous profits, year in, year out, there is no reason that this couldn't happen under Government hands. A profitable company is a profitable company, irrelevant of ownership. Difference is, if it remains in Government hands, they can take the profit and use it to fund part of Government expenditure.

As for your last sentence, no, I don't think any of it is likely, but we are still making money even with all these competitors, and if RM were allowed to scrap the access headroom crap and charge a decent amount for their services, rather than in effect writing them all a check every year which may have saved time, then again RM would be in a much better financial position.

As far as I'm concerned, RM's problems stem from the EU and its own stupidity. We had one of the cheapest, most efficient postal services in the world, even though it was a monopoly, it is only since the markets were opened up that prices have continuously risen whilst the service has got steadily worse.

I don't think many of us here have actually said that the status quo should remain, and to hell with it. But what I'm saying is, we are not in as bad a condition as they are claiming, and there are alternatives, but they are not in the slightest bit interested in them, as they have a plan and are going to stick to it. Pretty sure it involves making sure the rich getting richer whilst many posties end up in the dole queue.

I don't profess to know the answer, but I don't think privatisation is it.

[Brain Fury]

Great article, RM has been shafted by a succession of Governments to get us to where we are now. In large part it has been political dogma but I also think that they were fed up with being in the firing line whenever the CWU called another strike. Introducing competition and eventually privatisation is their way of getting out from under that load.

However, even though the article is 100% correct, the crises for RM, though manufactured is real. Privatisation has been long in the making but IMO it's too late to stop it now. 2006 was the final nail in the coffin for a publicly owned mail business.

You appear to be promoting more propaganda than RM.
The crisis is totally manufactured, but it's not as real as they'd have you/us and the public think. The profits announced are just that, there are more in hiding.

And it isn't too late to stop privatisation at all, if it was, the RM propaganda machine wouldn't be in overdrive like it is, and RM and the Government wouldn't be trying to persuade us and the public otherwise, nor would they be repeatedly trying to bribe us into accepting it, and attempting to bribe us not to strike.
As I said in another thread, I'm not saying the company is in brilliant financial condition, but it is nowhere near as bad as they make out.

I do wonder if it's us and the public RM/the Government are trying to convince, or themselves. Are they trying to convince themselves that it is the right and necessary thing to do? Just so they can sleep at night?

There are more profits in hiding? What under the mattress? What's you evidence for that?

Of course RM (and the Government) doesn't want the CWU to strike and of course the pay offer (which is probably more than they wanted to offer) was a bribe to prevent it.

The question is what's the alternative to privatisation? I've asked questions about the CWU's alternative business model elsewhere. Personally I don't think it's a goer but it does at least recognise that the status quo isn't an option. Do you? To me status quo just means a slow death through reintroduced regulation and lack of investment.

IMO the only way that RM can remain in public ownership is if the Government repeals the 2006 legislation that allows competition in the postal market, withdraws all the licences that have been granted to other operators and subsidises RM part of the public sector. Do you think that is at all likely?

The profits they announced are after exceptional costs or some such crap. The accountants have been moving money about to present the view they want for years making investments to show a loss. Like replacing vans every 18 months just to waste money, which they did for a few years in my area. We now keep them for between 7 and 10 years.

There are many alternatives to privatisation, but you, and RM, and the Government seem to have tunnel vision. They've chosen a course and are unwilling to consider others, and I have to ask why? Is it because it is the only answer? I don't think so. It's because there bloody mates will asset strip the company and cream the profits like they have always done.

If RM can be made to make continuous profits, year in, year out, there is no reason that this couldn't happen under Government hands. A profitable company is a profitable company, irrelevant of ownership. Difference is, if it remains in Government hands, they can take the profit and use it to fund part of Government expenditure.

As for your last sentence, no, I don't think any of it is likely, but we are still making money even with all these competitors, and if RM were allowed to scrap the access headroom crap and charge a decent amount for their services, rather than in effect writing them all a check every year which may have saved time, then again RM would be in a much better financial position.

As far as I'm concerned, RM's problems stem from the EU and its own stupidity. We had one of the cheapest, most efficient postal services in the world, even though it was a monopoly, it is only since the markets were opened up that prices have continuously risen whilst the service has got steadily worse.

I don't think many of us here have actually said that the status quo should remain, and to hell with it. But what I'm saying is, we are not in as bad a condition as they are claiming, and there are alternatives, but they are not in the slightest bit interested in them, as they have a plan and are going to stick to it. Pretty sure it involves making sure the rich getting richer whilst many posties end up in the dole queue.

I don't profess to know the answer, but I don't think privatisation is it.

I don't like the idea of privatisation and was dead against it when proposed by the Tories back in to 80's and 90's. I am just taking a pragmatic view about where RM itself now. There's no need to falsify profitability etc when your owner controls the purse strings, legislation and the market regulator. RM has been manipulated so that public ownership is no longer an option.

Don't like the idea of our profits funding Government expenditure. It was that approach by Thatcher that led to the pension holiday and the total lack of investment. The temptation for a Government to milk RM for funds and sacrifice long term stability for short term gain will be too great to bear. Not sure exactly what you mean about "access headroom crap" but you realise that we are actually making a profit on DSA now the regulator has changes the terms of the agreement?

I agree that the Government are not interested in alternatives (not that I have heard a viable one yet). It's obviously part of Tory dogma to privatise everything. If they'll privatise the NHS then RM has no chance. They want the money that privatisation will raise but I also think that a big part of it is that they (in fact no government) wants to have any more responsibility for Royal Mail and the it's ongoing industrial relations problems.

IMO staying in public ownership is just a recipe for slow death through reintroduced regulation and limited investment. I am not saying that privatisation means the future is rosy but given the position RM has been put in I think it presents the best chance for a long term future by obtaining investment, modernising and favourable regulation.