Labour's critical mess

The leader of the Communications Worker Union, Billy Hayes, explains why he believes privatising Roy

In December last year, the Government announced its proposal to privatise Royal Mail, with up to 50 per cent being sold to a “strategic partner”.

This policy flew in the face of the 2005 General Election Manifesto, the Second Warwick Agreement, and the decisions of the 2008 Labour Party Conference. But apparently Royal Mail was in such frail health that private sector surgery was required.

This week, first quarter results were published by a number of European privatised postal operators. TNT saw a year on year drop of 58 per cent in operating profits. Posten (Sweden) suffered a drop of nearly 50 per cent in operating earnings. Post Danmark saw its profits drop by 52 per cent. Deutsche Post has yet to publish its first quarter results, but in the last quarter of 2008 it reported a 3.16 billion Euro loss.

By comparison, Royal Mail has increased its profits in both quarters and is expected to roughly double its profits for the full year.

At the moment, the Government appears ready to brazen out the counter-evidence and critics. The House of Commons cross party Business and Enterprise Committee published its verdict on the Postal Services Bill on 1st April. They wrote “We agree with two key aspects of the proposals. First, that the Government should take responsibility for the historic pensions deficit. Most of its liabilities stem from Royal Mail’s time as a monopoly provider. It needs to be freed from them, as many of its European counterparts have already been freed. Moreover pension fund members deserve to know that their pensions are secure. Second, we also agree that a new regulatory framework, in which postal services are viewed as part of a wider communications market, is entirely appropriate.

"However, we do not consider either the independent review or the Government has properly made the case that these two reforms, about which there is a broad consensus, can only be made as part of a package which includes the third reform – the involvement of a private sector equity partner in Royal Mail. Similarly we are not persuaded that the provisions contained in the Bill allowing such a partnership are necessary or desirable.”

To date the Government has not responded to this report.

The situation is becoming critical. The Bill will come back to Parliament some time after 1 June. Strength of opposition in the PLP is great enough to force the Government into reliance on Tory votes to get the Bill carried.

So far the Tories have played ball, supporting the Bill and seeking to push it faster and further. But it must be very tempting to create a defeat for the Government by turning a vote against the Conservative amendment into an excuse to vote down the Bill. Either of these scenarios spells catastrophe for the Labour movement and the Government.

Fortunately, there is a way out for the Government. The publication of Compass’ pamphlet “Modernisation by Consent” raises the possibility of transforming Royal Mail in the public sector. The pamphlet examines a number of “not-for-profit” options for the company. Any one of these could solve the Government’s problems.

Certainly there is no financial need to privatise Royal Mail. The Government is committed to removing its pensions deficit. That gives Royal Mail an additional £280 million capital per year for the next 15 years. Further, if the Regulator ends the subsidy Royal Mail has given to private competitors in access arrangements then a further £100 million capital per year is available. Such figures would allow Royal Mail to offer the most up to date range of services to customers.

An agreement was reached within 24 hours between Royal Mail and the CWU on the delivery of government leaflets on swine flu to every household in the UK. TNT are not able to do this.

It is not too late for the Government to amend the Postal Services Bill into a progressive Act. Those of us who want a fourth term for Labour must act now.

Billy Hayes is general secretary of the CWU