Time to evaluate the privatisation of Royal Mail

The privatisation of Royal Mail was mooted by all the main political parties and finally happened under the last government.

Like a lot of the public sector, our postal service suffered from years of underinvestment and a failure to modernise.

The political consensus in the Thatcher years, and beyond, became public equals bad, private equals good.

Our party got wrapped up in this to some extent and a policy of part-privatisation of Royal Mail was adopted prior to the 2010 General Election.

Not a member at the time, I was somewhat surprised at this move because I had always thought of the Lib Dems as defenders of a public post office, particulary in relation to campaigning for the retention of a strong retail arm.

However, being in coalition put our ministers in charge of the sell-off and a private Royal Mail is now a reality.

So how are things going?

First of all, it seems hard to argue that the shares weren’t sold too cheaply at 330p, when they have traded well above that and currently stand at around 460p.

Secondly, services are suffering, delivery times are even more inconsistent than before and collection time changes are due to be introduced that will adversely affect customer service.

The regulator seems incapable of squaring the circle of encouraging competition whilst at the same time protecting the Universal Service Obligation (USO).

Senior management in the company are like rabbits caught in the headlights as they struggle to find more areas to cut and ponder why productivity is poor.

In the retail arm, which remains in state hands, closures have continued and if my local office is anything to go by, the queues get longer and longer.

It really is time to evaluate.

We can’t turn the clock back. The reality is that Royal Mail will now remain in the private sector, but we do need a well thought-out policy on postal services going forward.

Public or private, we are still talking about an important part of our nation’s social fabric.

* David is a member of Horsham and Crawley Liberal Democrats

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18 Comments

  • Paul Kennedy 28th Sep '15 - 11:41am

    It is ironic that Vince Cable got slated for the pricing of the sale, which was handled by junior minister Michael Fallon. And Fallon got promoted to Defence Secretary, presumably as a reward for selling shares to Cameron’s mates at undervalue.

  • Out of interest, where’s the evidence the service is any worse now?

  • Andrew McCaig 28th Sep '15 - 12:37pm

    The big problem for Royal Mail is that both before and after privatisation the government has tied its hands by simultaneously insisting on the universal service and obliging Royal Mail to carry parcels from other providers to out-of-the-way addresses without being able to charge what they want for it. Some aspects of the USO (like letters every day to places in the middle of nowhere) are a bit daft in my opinion.

    The part of the economy that the Post Office (and behind it Royal Mail) really does support are small volume e-businesses. Meanwhile the private providers focus on huge volume business like Amazon, giving them extremely favourable rates on the back of being able to use Royal Mail when it suited them. Closure of Post Offices, big queues, and hidden subsidies to big business (not least failing to make them pay taxes!) all hurt these microbusinesses, of which there are hundreds of thousands in the UK.

    I am not sure if the service is worse now, but it is certainly much more expensive than 5 years ago!

  • Now is indeed a much better time to start the evaluation process (rather than those who wanted to evaluate straight away). It was a bad price that was obtained, and we should consider whether the model of sale that has not really evolved since the 1980s is right or whether the government should be taking more innovative approach.

    The terms under which royal mail operates is a bit of a separate issue but worth considering, just I would suggest separately.

  • Julian Tisi 28th Sep '15 - 2:12pm

    The supposed underpricing of Royal Mail was one of the biggest sticks used to beat us in government despite the weight of evidence pointing to the sale having been handled exceptionally, as confirmed not just by the Audit Commission but even by (Labour) peer Paul Myners. Yes, the share price rose. But hindsight and future share price rises are things that were not available at the time of the sale. IPO valuations are notoriously unpredictable, but people forget just how volatile Royal Mail was – or indeed how much was wiped off the value of shares when the unions called a strike. The sale was made at the top end of serious valuations and compared to many sell-offs under Labour, the subsequent rise was moderate.

  • Dave Orbison 28th Sep '15 - 2:27pm

    It’s not improved round my way. There are fewer collections and fewer post boxes. The post costs more of course. The ‘benefits’ of privatisation mean that parcels get delivered (well I should say a card gets put through the door) and then you have to travel all sorts of distances to pick up the deliveries from various companies. The consumer has no control over this, they get little, if any, information as to who will provide the delivery service.

    As for the great sell off swindle. The taxpayer picked up the tab for the pension liabilities. What sort of going concern would sell off the revenue part below price and hang on to the liabilities? Ah the last Government.

  • I think the service is no worse here, and missing items seem far fewer than before. The price of postage of course is high, and we have the nonsense of the ‘large’ letter rate (which means, handily for them, I always have to pay an extra £1.20 in underpaid postage dues whenever I pick up cards from mum) – surely no other country permits that scam. There are no collections between 5pm on a Friday and 5pm on a Monday, which is rubbish really. On the whole, though, this isn’t a privatisation I can get excited about reversing, the old GPO was an inefficient, often discourteous and inadequate mess!

  • The EU is responsible for postal services. It created the single European Postal Market. This involved removing all subsidies to create a level playing field so that companies from all EU countries could compete for business. The Royal Mail lost the lucrative B2B (franked mail) market but retained the declining consumer market that uses postage stamps. The EU companies, (there are a couple of dozen or so) collect and sort bags of business mail and the Royal mail delivers it for a small fee per item.

    In addition to mail there is also the increasing parcels business which is a growth area due to internet shopping. This is shared by all EU companies.

    As always, our government never actually mentions that the EU is in charge so that people don’t realise it.

    The EU legislation is here: http://ec.europa.eu/growth/sectors/postal-services/legislation/index_en.htm

  • David Warren 28th Sep '15 - 6:15pm

    Thanks for the comments.

    It is difficult to get clear evidence that the service has got worse because Royal Mail don’t keep very accurate records and the regulator isn’t effective at monitoring.

    What I do know is I don’t get a delivery every day and that the company are ripping out collections.

    I speak to others who have similar stories.

    In my area I have seen postman delivering at 4pm or later!

    The USO does not need to be examined because it is unsustainable.

    Instead we have a senior management team who cling to it like a comfort blanket, blaming its existence on their failures.

    The workforce is totally demotivated and without some radical changes of policy the future of our Royal Mail is bleak.

  • It would be interesting to know whether any research has been done on how many, if any, votes were lost in Twickenham following Vince’s privatisation of Royal Mail. He lost by 3.3% – and the Labour vote increased by 3.8%.

    Does anyone from Twickenham know ?

  • David Warren 29th Sep '15 - 10:14am

    The CWU campaign against Vince was pretty vociferous.

    Not sure if they did anything practical to assist Labour in Twickenham though.

    I think we lost Labour tactical voters in lots of constituencies simply through being in coalition with the Tories.

  • “The EU is responsible for postal services. It created the single European Postal Market. ”

    Well here is an example of all that was wrong with the Post Office/Royal Mail when it was in government hands. Back in the early 1990’s there was a getting together of a consortium of interested parties, to create a pan-EU postal/parcels/small packages service unfortunately due to UK government indecisiveness, The Post Office was unable to participate, thus having its activities largely restricted to the UK and forcing the leading logistic organisation in the consortium to find another partner. Hence to my mind it was good that the politicians finally got out of Royal Mail, but unfortunately the Royal Mail they sold was only a shadow of what it could of been…

    So it would seem Royal Mail was under priced and the taxpayer (through their taxes) did pick up the ‘full’ tab for the pension liabilities. However, given how much of a cash cow Royal Mail has been to the treasury, I think the liabilities are small beer, the real question being did Royal Mail use or squander the opportunities this largesse gave them?

    So here in we have an example of why governments are poor at running businesses: too much political interference and a view that nationalised industries are there simply to be run and to provide a utility service; resulting in too little freedom in the of exercise business acumen. With organisations such as Directly Operated Railways, we have seen where the politicians can be removed (to a safe distance), that it is possible for public/state companies to be highly commercial and return a level of profit (and hence revenues to the Treasury) that is as good as the best commercial operators and should shame those who think things were so much better under the old state-union duopoly control; or who think things will be much better if the state was totally removed from the equation… So I’m in full agreement with Simon Shaw, where in the context of the railways he says “I personally favour the soggy middle way of having both private and public provision, “; the only challenge is getting the mix right.

  • @ Frank Little

    You are (for the time being, perhaps) very fortunate. My deliveries arrive at random times (early morning one day, late afternoon another), The post box at the corner of my street, which used to be emptied at, or just after, 5.00 p.m , is now due to be emptied at or just after 9.00 a.m. So it is now virtually impossible to receive something by mail and post the response the same day.

    Royal Mail managers are constantly citing the growth of electronic mail as a main reason for the decline in posted letters, but their own decisions are encouraging that trend.

  • I haved lived in a place where there was no home mail delivery.People used post office boxes. Local letters took about three weeks to get delivered. No one wrote letters,they used telephones.
    Somaliland doesn’t have a postal service at all although its government is talking about launching one.
    .

  • David Warren 30th Sep '15 - 12:07pm

    @Roland

    Interesting comments, the problem with the privatised Royal Mail is that it is still being run by the management who were there prior to the sell off.

    They haven’t got a clue how to operate in a new marketplace.

    @RH

    Thanks for highlighting the collection changes that will affect a high proportion of boxes across the country.

    Another example of cost cutting that will lead to a worse service.

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