As a prelude to its privatisation, the announcement this week that Royal Mail made £440m profit for the year ending March 2013 was certainly an eye opener.
As a prelude to its privatisation, the announcement yesterday that Royal Mail made £440m profit for the year ending March 2013 was certainly an eye opener.
A combination of rising stamp prices, increased parcel volumes and a proliferation of direct (junk) mail have seen profits surge as revenues hit a record £9.3bn.
Perhaps in a different era ministers might claim this is a public sector success story, a business that is generating enough profits to finance modernisation in the face of competition from private carriers and electronic communication.
Sadly for the taxpayer, small businesses and rural communities, that is not what ministers are saying.
Instead we are told that the one and only way Royal Mail can survive is for it to be sold off. What’s more, ministers threaten that if anyone takes serious steps to oppose a public sale, then the business will be flogged off to one of those nasty private equity funds or an overseas postal administration.
Certainly those kind of profit levels will attract a lot of City interest. The government remains vague about how much of Royal Mail it wants to sell and to whom, but independent valuations appear to have settled on a figure of between two and three billion pounds.
So £440m profit on a £3bn investment is a pretty good bet, even when it is adjusted to reflect that might not equate to 100 per cent of the value of the business. Inevitably investors’ gains must come at cost to someone, and that is where the taxpayer and consumer come in.
As the owner of Royal Mail, the taxpayer might reasonably expect the government to seek the maximum value it can achieve for the business if it is to sell it. However, there is little indication ministers are doing so. The whole process is opaque. A proposed sale is just a few months away yet there is no clear picture of what the government thinks Royal Mail is worth, how much of it should be sold and whom should be allowed to buy it.
The reality is for this privatisation to be a political success it has to be a taxpayers’ failure. No doubt when the time comes ministers will boast of a market eager to snap up Royal Mail, neglecting to mention that the reason is because it is being sold off on the cheap.
In every debate about the future of Royal Mail ministers say privatisation is the only option. The argument is that the business is unable to raise private money as a publicly owned company because its borrowing will increase public debt thus depriving schools and hospitals of cash.
But that fox has now been shot. Clearly Royal Mail is able to raise significant revenues to invest in its modernisation programme. This is the best solution for taxpayers and consumers who face the prospect of a business being sold off on the cheap, prices to escalate unchecked, and services, particularly to rural areas to slowly but surely disappear.
This is a well trodden path for the taxpayer and consumer. Those who look forlornly at their energy bills might question just how privatisation and competition has helped them.
Similarly those taking out a mortgage in order to travel on the rail network will be equally non-plussed about the merits of private ownership.
Royal Mail is now at a crossroads. Privatisation is a very real prospect. So far ministers have been singularly unwilling to debate the merits of their policy. There is no mechanism for Parliamentary debate about this privatisation and Conservative MPs are distracted by other political issues.
However, consumers can be protected from rising prices and service cuts. It is precisely those members of Parliament who need to understand the public strength of feeling about the sale.
So please visit our website SaveOurRoyalMail.org, there you can send a letter to your MP and sign our petition.
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17 Responses to “Royal mail privatisation – taxpayer, prepare to be ripped off (again)!”
OldLb
Ripped off by whom?
So the postal workers get to produce a crap product. They don’t generate enough money to pay their own pensions so they shaft the tax payer with the cost. That disappears into the black hole of government pensions. Never to be reported. 35 bn of debt added to the mugs who aren’t told.
So why don’t we tax their turn over? Great idea. They work in the UK, so they aren’t like Google. Forget profits its the greedy capitalists in the post office who dumped their losses like the retail banks on the rest of us. Not pay tax. Not paying their pensions.
Ah yes. It’s the state, and you can’t have a go at them can you.
OldLb
This is a well trodden path for the taxpayer and consumer. Those who look forlornly at their energy bills might question just how privatisation and competition has helped them
=============
What do you mean? Like the Green subsidy. You have to pay for all these wind farms and mad cap green schemes. They cost way more than other sources. You must be a real plonker if you didn’t realise that going green means whacking increases on bills. But that’s the state for you
Ash
You what? Royal Mail *does* pay tax. And you raise a very good point when you imply that we’re in a position to make sure they don’t avoid tax, in a way we’re not in the case of a private companies (especially international ones like Google). Plus any profits they make that *aren’t* paid in tax stay in public hands anyway.
Yes, you’ve convinced me – the best way to make sure the Royal Mail pays its way, compensating us for the pension liabilities the state has taken on, is to keep it in public hands. The taxpayer would be getting a raw deal if a privatised Royal Mail, however profitable, ended up making a smaller net contribution to the state than its publicly-owned predecessor because of things like tax avoidance.
OldLb
So why have they dumped a 35 bn pound liability on the tax payer, if they are profitable?
Ash
It’s the oldest trick in the book: privatise the profits (/assets) and socialise the losses (/liabilities). In this case, the state (and therefore the taxpayer) has been made liable for pensions but is being denied future profits – and plausibly, because of the possibility of increased tax avoidance, even much of the tax revenue from those profits. Conversely, the private buyer gets a profitable business at a knock-down price while the taxpayer foots his pension bill for him.
Ah yes, it’s the private sector, and you can’t have a go at them can you.