A private Royal Mail is the wrong move

22 Sep

Photo by Elliott Brown, via Flickr

Photo by Elliott Brown, via Flickr

In many ways the Royal Mail’s relationship with privatisation has been similar to that of James Bond’s relationship with a super villain. No matter how many times it seems like privatisation is going to win the Royal Mail clings on to public ownership.

‘Do you expect me to talk?’ says the postman strapped to the table as the laser beam works its way towards his torso.

‘No, I expect you to be floated on the stock exchange’ is the reply. Well, something like that anyway.

This time, however, it looks like even a postal worker’s strike won’t stop the coalition government privatising the Royal Mail.

Ironically, just as the chances of the public sell off are at their highest, the excuses for privatisation seem to be at their weakest. The old argument about our public postal service making a heavy loss has been dismissed, with profits for the year ending in March 2013 at more than £400 million. The rational for the current privatisation effort seems to rest on a purported need for investment and improved efficiency.

In a piece declaring his general opposition to privatisation, former labour minister Brian Wilson conceded that Royal Mail did need huge investment to compete with ‘expansionist’ postal companies from elsewhere – in particular Wilson singled out Germany and the Netherlands. Wilson is right to oppose this privatisation, but given the £400 million profit, double that of the previous year, the Royal Mail already seems to be competing fairly well. Meanwhile, as Will Hutton points out, when it comes to major investment projects private owners often require significant financial guarantees from government. The plan to achieve universal broadband coverage in the UK has seen a government capital investment of £1.2 billion, along with significantly less from the privatised British Telecom.

The issue of postal companies from Europe seems to be the point on which the current privatisation effort is hinged. It is true that both Germany and the Netherlands have privatised postal services. Unfortunately neither of them can be considered an argument for the Royal Mail to follow suit. Allow me to take a brief detour as I try to present a rough guide to the Dutch postal service.

In 2012 PostNL, the company with a near monopoly on the Dutch postal system, saw a turnover of over €4 billion. In February it announced its intention to cut more jobs in an effort to save a further €70 million and eventually start paying dividends to its shareholders again. This effort has also seen a ‘reorganisation’ involving the closure of local sorting centres in a centralisation exercise that will likely end in the gloomily predictable result of poorer service and overworked and underpaid workers.

Unfortunately you are unlikely to hear about this on the six o’clock news here in the UK. Many media outlets are too busy holding up the Netherlands (along with Germany) as examples of why the near 500 year old Royal Mail needs to be privatised pronto.  No one has achieved this better than Alex Massie of the Spectator, who masterfully points out ‘if Germany and the Netherlands can privatise their postal services – and make them work – there’s little reason to suppose that doing so in Britain is simply a question of crazy free market ideologues running amok’. Ironically, the sword Massie uses to slay his straw man argument about the rampant free market is weaker than the point his is trying to dismiss.

Of course there is the question of the German postal service, which has been privatised almost as long as its Dutch counterpart. But Deutsche Post DHL and its competitors in Germany are regulated by an entire Act passed by the German parliament to ensure a quality of service. Thanks in part to this regulation Deutsche Post behaves fairly and responsibly to its employees in Germany and Europe, even agreeing to a pay rise for more than 130,000 workers. Britain has a different attitude to industrial relations. It is unlikely similar protection will be afforded to a privatised Royal Mail and the Universal Service Obligation, which ensures letter delivery six days a week and a uniformity of price regardless of geography, will likely become a casualty of the private sectors need for profit.

Outside Europe, the German postal giant has reportedly behaved less fairly. A 2012 international report claims Deutsche Post DHL ‘systematically aims to limit freedom of association, collective bargaining and the presence of a union within its workforce’.

While the Royal Mail is currently making profits in excess of £400 million, a constant excuse for its privatisation over the years has been its inability to make money. This deeply mistakes the point of a public service. The profit provided by a public service is not economic, but social: being able to send a letter six days a week to every address in the country; having an affordable bus service which can get you to work on time even if you live on an unprofitable route.

If Royal Mail is privatised it will follow the same model as all such former public services: financial profits will be privatised and any need for risk or major investment will be shouldered by the state, or not at all. I don’t pretend that I can see into the future but  this has happened too many times before for me to expect a different result.


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