Later today ministers will announce the final details of plans for the privatisation of Royal Mail.
Later today ministers will announce the final details of plans for the privatisation of Royal Mail.
The government is looking to move quickly on the sale, with shares expected to be floated by the autumn.
There are many things which this government is doing that warrant criticism, but I am convinced that in years to come the sell off of the Royal Mail will be considered one of the most execrable decisions made by the coalition.
Here are five reasons why.
1. Royal Mail is a profitable business. Far better, then, to keep the Royal Mail public and plow the profits back into the service rather than allow them to be siphoned off to shareholders. The company made £440 million last year. The fact that the Tories still want to privatise what is an increasingly successful business smacks of public bad/private good fanaticism.
2. The cost-cutting that will likely follow a sell-off will place a huge question mark over the universal service. This isn’t left-wing propaganda as some on the right will undoubtedly claim. The Bow Group, the oldest conservative think-tank in Britain, has warned that privatisation could see the price of a stamp increase and Post Offices in rural areas close.
3. Privatisation doesn’t solve all problems. It ought to cause alarm that this point even has to be made, but such is the view of public services in the conservative mind.
Privatisation has been disastrous for our railways and has resulted in even higher subsidies for the rail operator than under public ownership. In 2010/11 Network Rail was subsidised by the taxpayer to the tune of £3.96 billion. This compares with an average of £1.4billion over the 10 years leading up to privatisation.
4. Stamp prices could hit £1. The price regulation of stamps has been scrapped to increase the attractiveness of Royal Mail to investors. This brings with it the possibility that stamp prices could hit £1 shortly after privatisation. A private business exists to maximise profits for its shareholders, after all.
Again it’s worth looking at train fares. Since privatisation ten years of above-inflation rail price increases mean that some in the south-east of England now spend 15 per cent of their salary on rail travel.
5. The Royal Mail is part of the fabric of the nation. This probably sounds a bit wet, but institutions do matter. There are certain things which have come to be associated with Britain. The NHS, cricket, red phone boxes and yes, the Royal Mail.
It is hard to overstate the respect the British public has for posties. The sight of a postie on his or her rounds early (or not so early these days) in the morning is a fundamental part of British culture (yes it does exist), and not everything can simply be reduced to its monetary value.
51 Responses to “Five reasons the privatisation of Royal Mail is bad policy”
tangentreality
In answer to your points:
1. Royal Mail is a profitable business. Therefore privatisation will see those profits distributed to shareholders. The biggest shareholders in the UK are pension funds, which are owned by just about everyone. Indeed, they are set to be owned by a lot more, following the introduction of compulsory pension contributions. So virtually everyone in the UK will benefit from that distribution of profits, which is far better than it being wasted by the Government
2. Post Offices in rural areas will not close, because the Post Office is a separate concern which isn’t being privatised. This is simply scare-mongering. The price of a stamp will likely rise, but it should – the real cost of sending a letter from John O’Groats to Lands End is far higher than the cost of sending a letter from Nottingham to Derby. Some prices would likely rise, some would fall
3. Privatisation does not solve all problems, but your use of the railways as an analogy is flawed. The privatisation of the railways was disastrous because the Government privatised the TRACKS as well. This is ridiculous. If the State owned a bus company and wanted to privatise it, should it also privatise the roads that the buses run on? No, and yet that’s what happened with the railways. The infrastructure should remain in public ownership, and in the case of Royal Mail, it will – the Post Offices are not being sold off as they are a separate concern.
4. Stamp prices could well hit £1. However, the reason they stayed so low for so long is because of public subsidy. People who weren’t using the service were thereby forced to pay for it. This is fundamentally unfair. Far better that the people who actually USE the postal service should pay for it. Additionally, although the nominal price of sending a letter will increase, most people communicate by other media these days, so it is unlikely to have a hugely adverse effect. In fact, given that the postal industry would be opened up to greater competition, prices may actually fall.
5. This is the one point I actually agree with, given that I share its emotive connotations. Yes, we are used to certain things being provided by the State, and I suspect that most people will be opposed to privatisation solely on those grounds – that we are used to it. However, we accepted the privatisation of British Gas, BT, aerospace – there’s no reason to suspect we wouldn’t get used to a privatised mail service either.
Ronnie Murphy
Royal Mail is only a profitable business when it comes to handling business only mail. It makes a loss on the Universal Service and would be more than happy to see the back of it.
Any recent investment in machinery at Royal Mail has actually been to the benefit of it’s competitors who use the Downstream access or final mile delivery. In truth the sorting machines in mail centres sort more competitors mail than that collected by Royal Mail itself. These “publicly subsidised” machines have went on to create private profit for TNT and UKMail who are the biggest users of downstream access.
Both TNT and UKMail are competitors only in the business post. They know handling, sorting and delivering mail to all of Britain and dealing with public mail is both impractical and loss-making.
This is why in the 13 years since the British postal service was opened to competition they have not opened one post office or provided an end to end service for the same price as a stamp to the public.
Isn’t competition about choice? Where is that choice for the British public?
DAVID
Some things in life should be kept in the same…so traditions and history are kept to honour and stands for who and what they are.unfortunately we live in a money greed world and have to talk politics to do corruption and fraud legally indirectly.now Britain are behind in a lot of areas compared to other country’s which will only increase,we as a nation (public) should not only have a say and opinions to be heard but if majority are against/for something then action must be taken.royal mail will be a good example for other big company’s not to go private and if you think different then wait and see how royal mail will change for the worse in the next 6-8 years.
blarg1987
To challange point 1, it would not really benefit shareholders more likely CEO’s and hedge fund managers who skim of a %.
Also of note when several companies where state trun they used the profitable parts to subsidise the less profitable parts to provide national coverage, now we have a situation where something that is unprofitable the priavte company goes running to the tax payer for the money to providde that service (overall costing us more not less).
Add to that the falls in economies of scale, which also increases prices then in real terms the competition model greatly increases prices per unit then decreases them.
Trish
How can my post be guaranteed to be delivered, as per the Royal Charter in the name, when it is owned by foreigners? No, I am not xenophobic, but a National Service like the PO should remain in the hands of the government. Not us hoi poloi!