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.

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The BBC's Question Time shows how narrow our establishment really is

 35 per cent of all panellists in the show's history attended Oxford or Cambridge.

In February the Sutton Trust published a report digging into the backgrounds of professionals across a wide range of industries and the findings pointed to one unambiguous conclusion: in the upper echelons of society, the privileged still dominate, with wildly disproportionate numbers attending private schools and Oxford or Cambridge University.

But how does this actually manifest itself? We have spent some time crunching the data on what we think is an indicative snapshot of the establishment: the BBC’s Question Time.

Each week, David Dimbleby is joined by politicians, journalists and other opinion formers, who together represent the spectrum of opinions it is acceptable to have in public life. Looking at this pool of people is better than analysing something as narrow as, say, Members of Parliament because it encompasses a wider subset of people who make up the ‘establishment’ - politicians, journalists, activists, business leaders and cultural figures too. But is this establishment truly representative? Does the panel truly reflect Britain at large?

The short answer is “no”.

And this is clear simply by looking at the gender split on the panel: Throughout the show’s history only 35 per cent of panellists have been women - though of the shows broadcast in 2015, this rose to a slightly less dire 42 per cent. And when women have appeared on the programme, producers have been drawing from a smaller pool - with women more likely to put in repeat performances. Shirley Williams is the most ubiquitous panellist, having put in 55 appearances on the show.

But the real meat of our digging comes from research into universities.

To find this out, we took the data on appearances on the show since it began in 1979, and matched each panellist with the universities they attended. For the approximately 1500 panellists, we relied on publicly available information, and we were able to find data on around 85 per cent of panellists. Some of the data we used will almost certainly contain errors - but we’re broadly confident that our findings hold up. Even if the following numbers are not precise, they certainly represent the magnitude of the figures involved.

In an echo of the Sutton Trust’s findings, Oxford and Cambridge are massively over-represented. 35 per cent of all panellists since 1979 attended Oxbridge - and if you count it by the number of appearances, as a measure of who is sat around the panel on each show, 42 per cent of the seats in the show’s history have been occupied by Oxbridge graduates (and this doesn’t count Christ Church, Oxford, alumnus David Dimbleby, nor his Oxford predecessors Robin Day or Peter Sissons in the host’s seat).

Graduates of “Post-92” institutions, the so-called “New Universities” make up just 3 per cent of panellists.

93 per cent of every episode of Question Time ever broadcast have included an Oxbridge graduate. And amazingly, this got worse in 2015, where not a single episode was broadcast without Oxbridge representation. Our hypothesis is that any attempts at positive discrimination are cancelled out by the professionalisation of the political classes, as many non-university attendees early in the show’s history were people from a trade union background. One trend over the course of the show is the decline in the number of guests who haven’t been to university at all (and yes, that’s despite Nigel Farage appearing what feels like almost every damn week).

Of the top 20 most recurring panellists, half went to Oxbridge. By comparison, less than 1 per cent of the UK population went to Oxford or Cambridge.

Measuring which institutions get the most graduates onto Question Time also enables us to build a new league table. The best represented institution over the show’s history is women-only Newnham College, Cambridge - with graduates like Diane Abbott, Patricia Hewitt and Mary Beard, 76 of its alumnae have made it on to the Question Time stage.

What’s particularly amazing about this is that Newnham only takes on about 500 students per year. Second in the list is the LSE - with 54 different alumni appearances. And this is despite LSE taking in 10,000 new students every year. The best-represented post-92 institution is Middlesex University, with just 5 panellists over 36 years, despite taking on 23,000 students every year.

This makes for distressing reading - not least because both of us attended post-92 institutions. Was our hard work for nothing? Does Question Time suggest that the gates to the establishment forever remain firmly bolted shut to us?

To be clear, we don’t entirely blame BBC for these findings - nor would we want these figures to be used to make foolish allegations about “BBC bias”. The BBC is more worried about party political representation - and as our findings make clear, the producers of Question Time are clearly drawing from a pool of people who are already overwhelmingly dominated by Oxbridge.

Whether Oxbridge’s dominance is a symptom or a cause is up for debate. Looking at a year-by-year comparison since 1979, what’s most striking is how little has changed. Though we like to believe that society is more progressive now than it was in the dark old days, Oxford and Cambridge still dominate the upper echelons of public life.

More than 1500 panellists have appeared on Question Time over the last 36 years. They were selected due to their role in forming or reflecting the opinions held by the nation on some of the most important issues we have and will face. Is it really right that the less than 1 per cent of the population who attended Oxford or Cambridge Universities should have such a loud voice?

James O’Malley tweets as @Psythor, Blakeley Nixon tweets as @BlakeleyNixon.