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.

Photo: Getty
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Rising crime and fewer police show the most damaging impacts of austerity

We need to protect those who protect us.

Today’s revelation that police-recorded crime has risen by 10 per cent across England and Wales shows one of the most damaging impacts of austerity. Behind the cold figures are countless stories of personal misery; 723 homicides, 466,018 crimes with violence resulting in injury, and 205,869 domestic burglaries to take just a few examples.

It is crucial that politicians of all parties seek to address this rising level of violence and offer solutions to halt the increase in violent crime. I challenge any Tory to defend the idea that their constituents are best served by a continued squeeze on police budgets, when the number of officers is already at the lowest level for more than 30 years.

This week saw the launch Chris Bryant's Protect The Protectors Private Member’s Bill, which aims to secure greater protections for emergency service workers. It carries on where my attempts in the last parliament left off, and could not come at a more important time. Cuts to the number of police officers on our streets have not only left our communities less safe, but officers themselves are now more vulnerable as well.

As an MP I work closely with the local neighbourhood policing teams in my constituency of Halifax. There is some outstanding work going on to address the underlying causes of crime, to tackle antisocial behaviour, and to build trust and engagement across communities. I am always amazed that neighbourhood police officers seem to know the name of every kid in their patch. However cuts to West Yorkshire Police, which have totalled more than £160m since 2010, have meant that the number of neighbourhood officers in my district has been cut by half in the last year, as the budget squeeze continues and more resources are drawn into counter-terrorism and other specialisms .

Overall, West Yorkshire Police have seen a loss of around 1,200 officers. West Yorkshire Police Federation chairman Nick Smart is clear about the result: "To say it’s had no effect on frontline policing is just a nonsense.” Yet for years the Conservatives have argued just this, with the Prime Minister recently telling MPs that crime was at a record low, and ministers frequently arguing that the changing nature of crime means that the number of officers is a poor measure of police effectiveness. These figures today completely debunk that myth.

Constituents are also increasingly coming to me with concerns that crimes are not investigated once they are reported. Where the police simply do not have the resources to follow-up and attend or investigate crimes, communities lose faith and the criminals grow in confidence.

A frequently overlooked part of this discussion is that the demands on police have increased hugely, often in some unexpected ways. A clear example of this is that cuts in our mental health services have resulted in police officers having to deal with mental health issues in the custody suite. While on shift with the police last year, I saw how an average night included a series of people detained under the Mental Health Act. Due to a lack of specialist beds, vulnerable patients were held in a police cell, or even in the back of a police car, for their own safety. We should all be concerned that the police are becoming a catch-all for the state’s failures.

While the politically charged campaign to restore police numbers is ongoing, Protect The Protectors is seeking to build cross-party support for measures that would offer greater protections to officers immediately. In February, the Police Federation of England and Wales released the results of its latest welfare survey data which suggest that there were more than two million unarmed physical assaults on officers over a 12-month period, and a further 302,842 assaults using a deadly weapon.

This is partly due to an increase in single crewing, which sees officers sent out on their own into often hostile circumstances. Morale in the police has suffered hugely in recent years and almost every front-line officer will be able to recall a time when they were recently assaulted.

If we want to tackle this undeniable rise in violent crime, then a large part of the solution is protecting those who protect us; strengthening the law to keep them from harm where possible, restoring morale by removing the pay cap, and most importantly, increasing their numbers.

Holly Lynch is the MP for Halifax. The Protect the Protectors bill will get its second reading on the Friday 20th October. 

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