Royal mail privatisation – taxpayer, prepare to be ripped off (again)!

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, 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)!”

  1. 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.

  2. 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

  3. 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.

  4. OldLb

    So why have they dumped a 35 bn pound liability on the tax payer, if they are profitable?

  5. 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.

  6. LB

    In the case of the banks, there aren’t any losses, there is a profit. Both on the interest charged, and on the taxes taken.

    In the case of the post office, you are right. Those that failed and created the losses, get the losses from their pensions socialised.

    However, thta’s not the real scam. The real scam is the states ponzi pensions.

    1. Not on the books.

    2. Massive. Current values 5,300 bn at a minimum (ONS)

    3. Given taxes of 550 bn and spending of 700 bn, they will never be honoured.

    4. For a median wage earner 26K, if they had invested their NI, a fund of 627,000 pounds. State pension cost? 152,000.

    5. Tax evasion – the illegal bit – is irrevant. No amount of tax rises in the UK can pay the state’s ponzi off.

    What should have happened is that the Post Office should have had to carry on paying its staff pensions. If it can’t, it goes bankrupt, and the normal rules apply. The business is sold, creditors paid from what is raised, and that includes the pensions. Then if they have been paying money into the Pension Protection Fund, then that kicks in. If not now payouts from the Fund.

    ie. Proper commercial behaviour, not the socialising of the losses like Labour, the Tories and the Lib Dems have enacted.

  7. blarg1987

    Where you get the 35 bn from? A detailed break down with links would be appreciated :).

  8. blarg1987

    Ok, so if the banks were not making a loss how do you explain tax payer bailouts of them? Add to that additional monies of banking institutions that tax payers have had to pay following “write downs of debt”.

    Also does the report you not keep preaching have a lower number then you claim and should you not reread it before preaching 5,300 bn?

  9. Cole

    Er, isn’t Osborne introducing subsidies for fracking, which is certainly not green.

  10. Cole

    LB usually makes his figures up.

  11. OldLb

    38 billion liabilties
    28 billion assets – sold off already to fund the deficit.

    Interesting isn’t it blarg and cole.

    I’ve never seen you post any numbers, just quibble about numbers you don’t like.

    Still waiting on you telling us how much the state owes for its pensions and why the ONS is speaking bollocks when it says the debts were 5,010 bn two years ago [Still and underestimate]

  12. OldLb

    They were bailed out with liquidity loans.

    Those loans have almost been repaid in full.

    The interest rate on those loans were penal.

    The government has made a profit on the deal.

    Where are the losses?

    What about the taxes taken from the banks? This includes those making losses because the treasury insisted they could not offset profits against losses for 10 years.

    As for the 5,300.

    The debt 2 years ago (its an old number) was 5,010 bn. Since then that debt has risen.

    It’s risen in two ways.

    First, the triple lock. That’s the maximum of wage inflation, price inflation or 2.5%. It’s been over 2.5%. Compound up the 2 years out of date number, and you will get the figure.

    That’s an underestimate. The second increase is demographics. More people are accruing rights, than pensioners are dying off.

    So clever clogs, tell us what the debt is and why the 5,300 bn is wrong? Post your numbers and why.

    Ah yes, you don’t do numbers do you.

  13. blarg1987

    “What about the taxes taken from the banks? This includes those making
    losses because the treasury insisted they could not offset profits
    against losses for 10 years.”

    So yoiu just have admitted some banks were making a loss.

    Also add to that you forgot to take into account pension reforms being brought through.

  14. blarg1987

    Hold on the article states that those assets have not been sold off, so you can’t say they have been.

    Also the royal mail pension scheme is a funded scheme so I think you may find its liabilities are less then that quoted on the Daily Mail, who bear in mind is not very reliable for factual information.

  15. OldLb

    You’re the one generalising.

    On the specific banks making a loss. Let them. Let them go to the wall. The shareholders pay, then its bankruptcy. That’s the way of dealing with loss making banks. Bailing them out with handouts is not the way.

    However, the bank bailout so far has been liquidity at penal rates of interest, which isn’t a handout.

    The exception being hand outs to nationalised banks. Brown paid over the top (should have let them go under), and then forked over money.

    However across all the banks, the net effect after interest, share losses [Brown], and tax is that the state is up on the deal. The customer is down by at least the same

    Also add to that you forgot to take into account pension reforms being brought through.

    Explain. please.

  16. lauralouise90

    Prices will end up rising and services will be cut which is a shame as we really do rely on Royal Mail. For bulk mail we can use mailing houses but what about singular letters and small volumes – it wouldn’t surprise me if next day delivery through Royal Mail became a thing of the past!

  17. Jamie Robinson

    Bulk Postage Rates continue to decline with more and more competition. Royal Mail is definitely out the picture for any businesses wanting a cost effective service

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