Poor value for money is not the only reason to lament the passing of Royal Mail into private hands.
It’s been reported today that in the government’s rush to push through the privatisation of Royal Mail the taxpayer was shortchanged.
The National Audit Office has claimed that too much emphasis was put on completing the sale within this parliament rather than achieving value for money. As a result, shares in the company are now more than 70 per cent higher than the original sale price of 330p in October 2013.
But poor value for money is not the only reason to lament the passing of Royal Mail into private hands. There are several other reasons to worry.
1. The Royal Mail was profitable. Surely better to keep the company public and plow the profits back into the service instead of handing them to shareholders. The Royal Mail made £440 million last year. The fact that the Tories were still desperate to privatise what was an increasingly successful business smacked of fanaticism.
2. Cost-cutting will place a huge question mark over the universal service. This isn’t left-wing propaganda as some on the right claim. The Bow Group, the oldest conservative think-tank in Britain, warned last year that privatisation could see the price of a stamp increase and Post Offices in rural areas close.
3. The taxpayer was shortchanged by the sale. Royal Mail shares are more than 70 per cent higher than the original sale price of 330p in October 2013. Business minister Michael Fallon last year stated “categorically that we have no intention of selling off Royal Mail cheaply”. But the sale price set by the government has now been branded “too cautious” by the National Audit Office.
The taxpayer made around £2bn from the sale of Royal Mail. However if the shares had been sold at 610p, which is where Goldman Sachs believes the price will eventually settle at, the chancellor, and by extension the taxpayer, would have brought in around £3.66bn.
4. Stamp prices could eventually reach £1. The price regulation of stamps was scrapped by the coalition prior to privatisation to increase the attractiveness of Royal Mail to investors. That brought with it the possibility that stamp prices could eventually hit £1. The first price increases come into force today, with first class increasing by 2p to 62p and second class by 3p to 53p.
To get a glipse of the future 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 was a 500-year-old institution and part of the fabric of Britain. Institutions matter, and there are certain things which are associated with Britain, such as the NHS, cricket, red phone boxes and yes, the Royal Mail.
Strangely, conservatives are supposed to understand a bit about tradition. Yet the current government appears to believe that everything can be reduced to its monetary value.
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24 Responses to “Five reasons the Royal Mail should never have been privatised”
james
labour party re-nationalise?
Henry Page
It is obvious from the 24x oversubscription, the 70% increase in share price and the fact that it was a bank that advised the sale price that we were ripped off yet again. If the jobless had cost this country £1.66bn through some kind of action this government would be screaming its head off but when the city does it … “that’s the way it is, we would have scared the investors off if we’d made the price higher” … Scared them off? … they were falling over each other to get their greedy snouts in the trough. Why this country has prostituted itself to unbridled capitalism baffles me. Look at rail and energy companies if you want to see how the rich give us a good kicking.
Henry Page
So let’s sell off the Royal Family then, let’s privatise that bunch of live-in-luxury spongers.
Richard
Don’t put up pictures of your ballot paper, there’s all sorts of confidential information on the envelope.
Nan Parkinson
Henry Page – thanks for a great re[ply. You are spot on.