Part-privatising the Royal Mail (RM) was never going to be a popular decision. But credit should go to the UK government for pressing ahead this week with a bill to enable a private-sector operator to buy a 30% stake, says the FT. The bill was opposed by more than 140 Labour MPs, noted Patrick Wintour in The Guardian, so the business secretary, Lord Mandelson, chose to launch the bill in the Lords to “prevent a full-scale backbench revolt in the Commons”. The Dutch logistics firm TNT has expressed interest in taking a minority stake and the Danish and Swedish post offices are also said to be interested in a joint bid.
Notwithstanding Labour’s manifesto commitment in 2005 to keep RM in public hands, things cannot continue as they are, says Jean Eaglesham in the FT. Although the firm reported record profits of £255m last month, it is technically bankrupt. That’s due to a pensions deficit that could rise to £8bn-£9bn by the summer.
Mail volumes are also falling as the use of electronic communication accelerates and high costs make it 40% less efficient than its most fleet-footed rival. The RM is “chronically inefficient”, agrees Christine Buckley in The Times, but the government is in part responsible – it allowed private-sector firms to compete in the business mail market in 2006. This meant the RM lost some of its most lucrative work, while retaining its costly statutory obligation to deliver a letter to “the furthest outpost of the British Isles for the price of a single stamp”.
But that’s not the main cause of its current woes, says the Daily Mail. Due to “appalling mismanagement, trade union bloody-mindedness and political pusillanimity”, it has failed to modernise in the face of growing competition. So part-privatisation is the only answer, much as it will “stick in taxpayers’ throats to have to meet the pension liabilities (under the deal, the UK government will take on the pension deficit), while shareholders reap such profits as they can”.
The government had to take on the deficit, says Eaglesham. Had it not, the chances of finding a private-sector partner would be “practically non-existent”. In any case, the state will still own 70%, points out Adam Crozier, chief executive of Royal Mail – and “70% of a large, successful organisation [is] better than 100% of a small, unsuccessful one”.
Who says it has to be unsuccessful? asks John Harris in The Guardian. The government suggests that the only options are its “vision of modernisation and a redundant status quo”, but this is not the case. RM is actually making a profit and there is some “imaginative opposition” to Mandelson’s plan. Driven by the Labour-aligned pressure group Compass, proposals are taking shape for a complete reinvention of RM and the Post Office.
The result would be an “arm’s length public institution able to go into joint commercial ventures” and to raise its own finance. Throw in the “rapidly advancing idea of a new people’s bank to be run at the Post Office”, and it is clear that a sell-off is not the only option.