In the run up to Christmas, while we’re all thinking of winding down, today is one of the busiest days of the year for postmen and women. While at one point many people thought the Internet meant the end of postal services, this year over a billion parcels are set to be delivered across the country.
The industry remains a key part of our national infrastructure – small businesses in particular cannot get by without it and in many places Post Offices have long been the last shop in the village. It is also a major source of jobs. With over 140,000 staff, Royal Mail alone is the fourth biggest private sector employer in the country. To put that in perspective the whole of the UK steel industry employs around 20,000 people in total.
All of this makes the approach that successive governments have taken to the industry – and Royal Mail in particular – all the more bizarre. Consider privatisation. The way the shares were sold was, to be blunt, a scandal. After the government was advised on the offer price by the very same city traders who were treated as preferential bidders, on the first day of trading the value of the shares jumped by 38%, from 330p to 455p. Within four months it had nearly doubled to reach 615p.
So for all government’s claims of getting value for the taxpayer, and for all its talk about the need for the poorest to tighten their belts to pay down the debt, we all lost out on billions of pounds when it sold Royal Mail on the cheap. On top of this, in its first two years since the privatisation process began, Royal Mail has paid out over £400m in dividends to shareholders.
But irrespective of the way privatisation was carried out, the complete loss of a public voice in a strategically important service is difficult to rationalise. Royal Mail currently makes a contribution of around £11bn per year to the economy as a whole – yet it is private equity firms (like Blackrock, with its 5.5% holding) and foreign governments (Singapore and Norway were early buyers), that will now dictate its future, not the public in this country.
The government of course first argued that privatization was necessary for Royal Mail to modernize – yet it went through a massive transformation programme in the public sector to meet the challenges it faces in the digital age. So the government then told the country that private ownership was necessary to allow Royal Mail to borrow to invest in its future – and we’re now in a good position to assess this claim. While Royal Mail has now borrowed 500 million Euros from the commercial markets, to be repaid in ten years’ time, it has already paid out more than this (about 520 million Euros worth) in dividends from its own profits in just two years of trading.
So it is hard to avoid the conclusion that privatisation was anything other than blind faith in the market and commercial ownership. The big problem that we now face is that this blind faith is not just reflected in the ownership of Royal Mail, but in the decisions being taken by Ofcom, the body in charge of regulating the industry.
For the past decade regulation has aimed at artificially creating competition by guaranteeing new operators a share of the market: Royal Mail has been forced to subsidise them by carrying their mail at a loss and they have been free to cherry-pick the most profitable work, with no obligation to cater to SMEs, rural areas or individual consumers. Again, we are now in a good position to assess the impact of this.
Firstly, competition in the letters market has catered exclusively to large bulk mailers – and the rest of us have borne the costs of this with reductions in services and price increases. Secondly, there have been repeated warnings over the sustainability of a national postal service, when competition is being pushed in an industry already facing massive challenges from the Internet (total mail volumes are now down by 40% over the past ten years). And thirdly, we have seen employment standards being put under severe pressure.
The major innovation we have seen from companies like Amazon (alongside its accounting model) in offering its own parcel deliveries, has been new forms of insecure employment, from zero hours, minimum wage contracts, to bogus self-employment. What is striking is that this trend is something Ofcom itself is actively encouraging, calling on Royal Mail to adopt “flexible” employment models and suppress pay. It is quite something when a regulator which is tasked with safeguarding an industry is pushing companies into a race to the bottom on employment standards.
What this all means is that the very things that underpin the value of the industry are at serious risk. The government and Ofcom are trusting the national interest will be served by commercial investors acting in their own, when the evidence shows this is not happening.
Today is National Postal Workers Day and, in the run-up to Christmas, one of the busiest posting days of the year – so it is an appropriate time to remind people of the importance of the service and Royal Mail to the country and the economy. The CWU’s People’s Post campaign is calling for a complete overhaul in the approach the government is taking to a strategically important service – see our petition here: www.supportthepeoplespost.co.uk.
We have seen what has happened in the steel industry. We have seen almost 5,000 people being made redundant from the collapse of City Link and Whistl’s delivery operations in the postal market in the past year. So when you receive your parcels and cards over Christmas, think of the people who delivered them, and join our campaign to make sure your next delivery doesn’t signal the last post for one of our great institutions.
Please sign our petition to force a debate on postal services in the UK at www.supportthepeoplespost.co.uk
Communication Workers Union