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Privatising Royal Mail

February 24, 2009

The government is trying to defuse anger over its plans to part-privatise Royal Mail. Postal workers are protesting in Westminster after it was announced that 30 percent of the company is to be sold off. Meanwhile, Prime Minister Gordon Brown faces a large backbench rebellion as 145 MPs – more than a fifth of all members of the House of Commons – sign a motion rejecting the move.

Ministers argue that Royal Mail simply cannot survive in its current state and must be part-privatised to fund modernisation and fight a growing pensions deficit which, the Royal Mail pension scheme trustees have warned, could be “significantly larger” than the 5.9 billion pounds estimated last year.

Royal Mail Chief Executive Adam Crozier told MPs he expected the deficit to grow to between eight and 9 billion pounds when it is revalued. Crozier also pointed towards a “rapidly declining” number of letters posted, with an 8 percent drop predicted next year.

But one Labour MP has said that it would be “political suicide” for the party to effectively go back on its election pledge to keep the Royal Mail in public hands. Unions are also against the plan, saying it could lead to job losses and open the door to full privatisation.

Opponents have also argued that the Royal Mail made a significant profit of 255 million pounds in the last nine months of 2008 and, as the government has agreed to take on the pensions deficit, it would be foolish to give away the part of the business that is actually turning a profit. MP Michael Connarty described the move as political suicide and warned that it would split the Labour party down the middle dangerously close to a general election.

The bill is due to be introduced to Parliament on Thursday. Do you think this is something the government should press ahead with or is there a more worthwhile solution? Can you stand the thought of parts of Royal Mail being sold off or is this only going to lead to further privatisation of a national institution?

Comments

Bankrupt Country sells its only asset it has nothing else.

Posted by John MacDonald | Report as abusive
 

1. If the govt are going to take on the pension deficit why is there then a need to allow a third party (TNT)to have control of 30% of the company? RM will make a profit this year, and any future profits will be for RM to invest – not have a proportion given to a foreign operation.

2. Postcomm and the Govt embraced liberalisation of the postal system (unlike other European operators), and allowed other postal operators into the market to cherry pick the best bits. They in effect opened the market to other operators and closed it to RM.

3. Letter prices in the UK are way under the European average, a 1st class letter in Germany costs about .70p to post, here from the 6th April it will still only be .39p. There is enough room for increases in my view.

4. Finally I agree that the letter from the pension trustees is being used as a scare tactic, and not a very subtle one at that.

 

It is a sad reflection on the government when it can’t even manage an essential piece of national infrastructure such as the mail service. Will the Army be the next institution to be privatised to get away from government incompetence?

It is probably a good thing that the Royal Mail is privatised. I just hope that it will be done with a proviso that the private owner is required to preserve its name and national character.

As for the plan being “political suicide” for Labour, they’re already dead so have nothing to lose. All the effort now is being put into leaving scorched earth for the Conservatives.

Posted by Peter | Report as abusive
 

Just what part of the word “no” does this government not understand? We have made our wishes patently clear in the public – we do NOT want Royal Mail privatised. We are not interested in what the government may say on this matter – the answer is “NO”! There are already many different carriers in the market and I do not see “prices falling” / “efficiency bonus” or any of the other epithets usually trotted out in support of privatisation. All I see is a decimation of the market place, and who benefits – the usual greedy little capitalists who want to own and control everything in the whole world! Well, the world is not for sale, neither is Royal Mail. This is a public asset which should be properly run for the benefit of everyone, personal and business, alike. The government should put in place executives to run Royal Mail as a viable business: after all, what is wrong with an element of profit going to “UK plc” – it can only be for general good. These people should be chosen for their ability and not because of their patronage. It is very telling that Brown’s team still want to sell this public asset in spite of fierce opposition – could it be they are unable to make a decision over the right person(s) for the job – after all this does call for competitive selection just like we all face in the outer world! On the other hand maybe this run down government does not have the talent to interview and select people for key jobs – they seem to give most of these positions to people based upon utterly ludicrous and irrelevant criteria such as sex, race, belief, perceived wealth, stardom, and if they are members of New Labour…..

Posted by Larry | Report as abusive
 

Im not a UK citizen, but i strongly feel privatising Royal Mail is wrong. I believe its more like a tradition in its function.

Posted by tarun lakhani | Report as abusive
 

There must come a limit to the sale of public assets. Some previous disposals such as utilities were entirely appropriate because it was inappropriate for the government to control them. The Royal Mail is a wholly different matter. First, as is clear from its “Royal” title, it serves the Nation as does the Inland Revenue. The latter has been vastly improved by improved management and the use of modern communications systems. It is manifestly obvious that the great majority of the population wishes The Royal Mail to be retained. With appropriate high quality management in place and the removal of absurd financial constraints it could be run efficiently. Are you listening Gordon? I thought not. Probably too busy making up ridiculous justifications for selling our asset to some flashy international company instead of getting the right people to run it.

Posted by Margaret | Report as abusive
 

You should keep the Royal Mail I agree, but only because your mailboxes are so quaint and charming, so when I visit i can take pictures of them.

What do I care, I’m not paying the postage.
However, Larry – - “There are already many different carriers in the market and I do not see “prices falling” / “efficiency bonus” or any of the other epithets usually trotted out in support of privatisation.”

That is the silliest argument.
Just like in the US; the post office fixes prices. Why would a private company undercut the artificial floor created by government price fixing. UPS and Fedex compete on service and not with the PO. Actual competition would reduce prices, but hey I like those shiny red boxes, so carry on…

Posted by Boston | Report as abusive
 

The solution to Royal Mail’s problems are simple:
1. Permit RM to charge a realistic price when delivering letters on behalf of their private sector competitors
2. Solve the pension fund deficit by government replaying the thirteen year of pension contributions they pocketed during the long pension holiday – now worth approx £4 billion.

Posted by Graham | Report as abusive
 

For thirteen years Royal Mail did not pay its contribtions into the RM Pension Fund on the directive of the DTI/ Board of Trade. The government and Royal Mail gave written assurances that ANY DEFICIT IN THE FUND WOULD BE COVERED.
The current value of those missing contributions is £4 billion.
Where is it?

Posted by graham bate | Report as abusive
 

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