The privatisation of Royal Mail: a fire sale to dig Osborne out of a hole

Ministers are motivated by the desire to make a quick buck, not by what is best for the taxpayer in the long-term.

As a result of George Osborne’s failed economic experiment, the government is set to borrow £245bn more than it planned. So ministers are now desperately scrabbling around for ways to make a quick buck and dig themselves out of the hole they have created.

Amid reports that the government is considering selling off public stakes in the banks at a knockdown price, ministers have confirmed they are pressing ahead with a fire sale of Royal Mail this autumn. The timing of the sale is curious and seems entirely dictated by what is politically expedient for the Tory-led government in the short-term, not by what is best for the taxpayer in the long-term. In effect, David Cameron and George Osborne are playing politics with the postage stamp.

We opposed full privatisation when the government proposed it early in this parliament because we believe that maintaining the Royal Mail in public ownership gives the taxpayer an ongoing interest in the maintenance of universal postal services. It also gives us an interest in the all-important agreement the Royal Mail has with the Post Office, under which the Post Office provides Royal Mail products and services – crucial to the Post Office in the long term. Public ownership helps ensure the taxpayer shares in the upside of any modernisation and future profit that the Royal Mail delivers too.

Despite all this, the government is pressing ahead with its plans to sell off this 372-year-old institution. In so doing, it has failed to demonstrate why this is the best time to sell and why a sale this year will deliver best value for the taxpayer. Instead they are rushing headlong into privatisation without addressing fundamental outstanding issues for consumers and, in particular, the many small businesses that rely on Royal Mail services. 

Legitimate concerns have been raised regarding the competition posed to Royal Mail by other postal service operators: questions regarding the fairness of the competition and whether it delivers a good outcome for consumers, given other postal service operators are not subject by the regulator to the same high performance and service quality standards as the Royal Mail. 

These different service requirements arguably put the Royal Mail at a competitive disadvantage as compared to its competitors. This was laid bare in shocking detail in last week’s "Secrets of Your Missing Mail" Dispatches documentary on Channel 4, in which mail and parcels were filmed undercover being recklessly thrown around at a private postal operator’s depot. This state of affairs has not been addressed by the government and, as things stand, will surely compromise any price they can secure for Royal Mail for the taxpayer from potential investors.

Most people access a sorting office or Royal Mail office in reasonably close proximity to their home or business. But there is no guarantee that a privately=owned Royal Mail won’t sell off delivery offices - particularly those occupying urban sites where land values are higher - and replace them with distant, out-of-town locations, meaning individuals and small businesses would have to further go to pick up parcels and mail. What safeguards does the government intend to put in place to ensure easy access to Royal Mail locations following the sale? We do not know.

Then there is the future of the Post Office. Royal Mail customers currently rely on being able to access many Royal Mail services through the Post Office under a ten-year agreement between the two companies. This is convenient for many businesses and families. However, a privatised Royal Mail may well have very different management with different priorities. If ministers press ahead with the privatisation, there is no guarantee that Royal Mail under private ownership would continue providing services through the Post Office in the long term. 

We do not yet know of ministers' concrete plans for the Post Office.  What we do know is that they have made noises about fully mutualising it and are consulting on employee-owned models in that regard, among others. If they are considering turning the Post Office into a employee-owned mutual, why are they only giving Royal Mail employees a 10 per cent stake on the sale of shares in their employer? Again, no answers.

Finally, ministers have repeatedly argued that turning the Royal Mail into a wholly privately-owned business is essential to attract new investment. But they haven’t said how much capital they envisage the business being able to raise after privatisation. We are told the Royal Mail needs capital investment in the region of £2bn over the next five years. It is not at all clear - if the government rushes to sell now - that a privatised Royal Mail will be able to raise those sums. In part, this is because it depends on its future earnings.

Back in 2011, when ministers put through the Postal Services Act to pave the way for the privatisation of Royal Mail, the earnings of the business were poor. Two years on, the balance sheet of the business has improved significantly. Royal Mail’s historic pension deficit has been transferred to the government, agreement between trade unions and management has been reached, helping speed up modernisation, and the current CEO, Moya Greene, has proved highly effective. Consequently, operating profits increased from £39m to £120m last year. If the government is intent on privatisation, why not allow more time for the balance sheet to improve, so a higher price can be secured in the future instead of selling the Royal Mail on the cheap in the coming months?

Many questions, very few answers and so far little justification for doing a fire sale now. But there have been successful privatisations in times past which have delivered for the British people, ministers cry. Yes, there have also been examples, in rail and energy under the last Conservative government, where badly executed privatisations resulted in substandard services that were poorly co-ordinated, complex to navigate and have since resulted in people being ripped off. That is why any government intent on a sell off should proceed in a considered way, and exercise care, rather than dashing to sell for short-term political considerations.

This privatisation has the strong whiff of desperation from a government eager to dig itself out of a £245bn hole at any price. It is the taxpayer who will lose out.

George Osborne delivers a speech at media company Unruly, on April 25, 2013 in London. Photograph: Getty Images.

Chuka Umunna is Labour MP for Streatham and Chair of the All Party Parliamentary Group on Social Integration.

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How the Lib Dems learned to love all-women shortlists

Yes, the sitting Lib Dem MPs are mostly white, middle-aged middle class men. But the party's not taking any chances. 

I can’t tell you who’ll be the Lib Dem candidate in Southport on 8 June, but I do know one thing about them. As they’re replacing a sitting Lib Dem (John Pugh is retiring) - they’ll be female.

The same is true in many of our top 20 target seats, including places like Lewes (Kelly-Marie Blundell), Yeovil (Daisy Benson), Thornbury and Yate (Clare Young), and Sutton and Cheam (Amna Ahmad). There was air punching in Lib Dem offices all over the country on Tuesday when it was announced Jo Swinson was standing again in East Dunbartonshire.

And while every current Lib Dem constituency MP will get showered with love and attention in the campaign, one will get rather more attention than most - it’s no coincidence that Tim Farron’s first stop of the campaign was in Richmond Park, standing side by side with Sarah Olney.

How so?

Because the party membership took a long look at itself after the 2015 election - and a rather longer look at the eight white, middle-aged middle class men (sorry chaps) who now formed the Parliamentary party and said - "we’ve really got to sort this out".

And so after decades of prevarication, we put a policy in place to deliberately increase the diversity of candidates.

Quietly, over the last two years, the Liberal Democrats have been putting candidates into place in key target constituencies . There were more than 300 in total before this week’s general election call, and many of them have been there for a year or more. And they’ve been selected under new procedures adopted at Lib Dem Spring Conference in 2016, designed to deliberately promote the diversity of candidates in winnable seats

This includes mandating all-women shortlists when selecting candidates who are replacing sitting MPs, similar rules in our strongest electoral regions. In our top 10 per cent of constituencies, there is a requirement that at least two candidates are shortlisted from underrepresented groups on every list. We became the first party to reserve spaces on the shortlists of winnable seats for underrepresented candidates including women, BAME, LGBT+ and disabled candidates

It’s not going to be perfect - the hugely welcome return of Lib Dem grandees like Vince Cable, Ed Davey and Julian Huppert to their old stomping grounds will strengthen the party but not our gender imbalance. But excluding those former MPs coming back to the fray, every top 20 target constituency bar one has to date selected a female candidate.

Equality (together with liberty and community) is one of the three key values framed in the preamble to the Lib Dem constitution. It’s a relief that after this election, the Liberal Democratic party in the Commons will reflect that aspiration rather better than it has done in the past.

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

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