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.
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51 Responses to “Five reasons the privatisation of Royal Mail is bad policy”
Blazeaway
Nice thoughts. You’ll have to leave the EU to keep the Post Office in public hands.
Wake up! Tories, Lib Dems and Labour pretend it is a decision for them. They are lying.
Competition is an EU competence and the British govt has to respect that.
tangentreality
So the answer, then, is to also reform the ridiculously outdated postal regulation laws, not just keep things as they are.
The privatisation is still valid – but it also requires law reform to actually make the sector work properly.
tangentreality
That’s also ridiculous. The answer to that is to change the law so they can charge a fair rate, rather than what the Government deems appropriate. Otherwise, it’s just subsidising already profitable companies. Any self-respecting capitalist would disagree with that entirely. As I do.
tangentreality
Uncertainty is inherent in any system, including State-run companies. At the end of the day, a State-run company is still providing a service, and the demand for that service will fluctuate. So the idea of the State being able to ‘fix’ prices by using its scale is a fallacy.
When the USSR fell, the Russians sent a delegation over to London to look at the capitalist system and see how they could apply it to Russia. The first question they asked was, ‘who is in charge of the bread supply in London?’ The answer, of course, was ‘no one’. They couldn’t get their heads around it – the fact that no single organisation had overall control, and yet everyone in London STILL HAD ENOUGH BREAD.
They had tried a State-controlled system, tried to regulate the supply and fix the price of bread, and it didn’t work. Because demand changes constantly, and no single organisation, no matter how well-resourced, is capable of meeting the flexible needs of that fluctuation. THAT is why market systems are generally more efficient. Yes, they have an element of uncertainty, but that uncertainty is there regardless of the model you use. The advantage of markets is they acknowledge that it is there, instead of pretending that it can be regulated away.
OldLb
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.
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If you plow it back, its not making a profit.
If you sell it, you pay of a little of the debt, so we all benefit.
If its privatised, then the company has a choice about how much it invests (plows back), into the business.
In general Brown invested billions. How come you can’t tell us about the wonderful profits or savings (cuts) that those billions have generate?