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 biggest divide in politics is not left against right, but liberals against authoritarians

My week, including a Lib Dem membership rise, The Avalanches, and why I'm putting pressure on Theresa May over child refugees.

It is a boost for us that Nick Clegg has agreed to return to the front line and be our Brexit spokesperson. I hadn’t even had a chance at our meeting to make him the offer when he said: “Before we start, I’ve been thinking about this and want to take on the fight over Europe.”

With Labour apparently willing to give the Tories a free pass to take us out of Europe, the Liberal Democrats are the only UK-wide party that will go into the next election campaigning to maintain our membership of the EU. The stage is remarkably clear for us to remind Theresa May precisely what she would be risking if we abandon free trade, free movement, environmental protection, workers’ rights and cross-border security co-operation. More than a month on from the referendum, all we have heard from the Tories is that “Brexit means Brexit” – but they have given us no clue that they understand what that means.

 

Premature obituaries

Not long ago, the received wisdom was that all political parties were dying – but lately the supposed corpses have twitched into life. True, many who have joined Labour’s ranks are so hard left that they don’t see winning elections as a primary (or even a desirable) purpose of a party, and opening up Labour to those with a very different agenda could ultimately destroy it.

Our experience has been happier: 20,000 people joined the Liberal Democrat fightback in the wake of the 2015 general election result, and 17,000 more have joined since the referendum. We now have more members than at any time this century.

 

Breaking up is hard to do

Journalists have been asking repeatedly if I want to see the break-up of the Labour Party, with moderates defecting to the Liberal Democrats. I have been clear that I am not a home-wrecker and it is for Labour to determine its own future, just as I focus on advancing the Liberal Democrat cause. Yet I have also been clear that I am happy for my party to be a home for liberals of whatever hue. I enjoyed campaigning in the referendum with a variety of progressive figures, just as moderates from different parties shared platforms in 1975. It struck me that far more unites us than divides us.

That said, not all “moderate” Labour figures could be described as “liberal”, as John Reid demonstrated as Labour home secretary. The modern political divide is less left v right than authoritarian v liberal. Both left and right are looking increasingly authoritarian and outright nasty, with fewer voices prepared to stand up for liberal values.

 

What I did on my holidays

Time off has been virtually non-existent, but I am reading A Wilderness of Mirrors by Mark Meynell (about loss of trust in politics, the media and just about everything). I’m also obsessively listening to Wildflower by the Avalanches, their second album, 16 years after their first. It’s outstanding – almost 60 minutes of intelligently crafted dialogue, samples and epic production.

During the political maelstrom, I have been thinking back to the idyllic few days I spent over half-term on the Scottish island of Colonsay: swimming in the sea with the kids (very cold but strangely exhilarating ­after a decent jog), running and walking. An added bonus is that Colonsay is the smallest island in the world to have its own brewery. I can now heartily recommend it.

 

Preparing for the next fight

The odds are weirdly long on an early general election, but I refuse to be complacent – and not merely because the bookies were so wrong about Brexit. If we have learned one truth about Theresa May as Prime Minister so far, it is that she is utterly ruthless. After her savage cabinet sackings, this is, in effect, a new government. She has refused to go to the country, even though she lectured Gordon Brown on the need to gain the endorsement of the electorate when he replaced Tony Blair. Perhaps she doesn’t care much about legitimacy, but she cares about power.

You can be sure that she will be keeping half an eye on Labour’s leadership election. With Jeremy Corbyn potentially reconfirmed as leader in September against the wishes of three-quarters of his MPs, Mrs May might conclude that she will never have a better chance to increase her narrow majority. Throw in the possibility that the economy worsens next year as Brexit starts to bite, and I rule nothing out.

So, we are already selecting candidates. It is vital that they dig in early. As we are the only party prepared to make the positive case for Europe, such an election would present us with an amazing opportunity.

 

Sitting Priti

David Cameron pledged to take an unspecified number of unaccompanied children from camps across the Continent. I am putting pressure on Theresa May to turn that vague commitment into a proper plan. Having visited such camps, I have been fighting for Britain to give sanctuary to a minimum of 3,000 unaccompanied children, who are currently open to the worst kinds of exploitation. We have heard nothing but silence from the government, with underfunded councils reporting that they are not receiving the help they need from Whitehall.

Meanwhile, it remains government policy to send refugees to Turkey – whose increasingly authoritarian government has just suspended human rights protection.

As if all of this were not grim enough, we have a new Secretary of State for International Development, Priti Patel, who has said that she thinks aid should be used largely to promote trade. As someone who wants our country to be respected around the world, I find this plain embarrassing. Actually, it’s worse. It’s shaming. As with Europe, so with the world: the ­Conservative government is hauling up the drawbridge just when we need more than ever to engage with people beyond our shores.

Tim Farron is the leader of the Liberal Democrats. To join the party, visit: libdems.org.uk/join

Tim Farron is leader of the Liberal Democrats.

This article first appeared in the 28 July 2016 issue of the New Statesman, Summer Double Issue