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Royal Mail privatisation will not affect postal delivery – Vince Cable Royal Mail privatisation will not affect postal delivery – Vince Cable
(about 3 hours later)
The Royal Mail's duty to deliver to all 29 million homes in the UK will survive privatisation, the government has said, as it unveiled plans for the most significant state sell-off since the railways in the 1990s. .The Royal Mail's duty to deliver to all 29 million homes in the UK will survive privatisation, the government has said, as it unveiled plans for the most significant state sell-off since the railways in the 1990s. .
The pledge came as business secretary Vince Cable announced long-awaited plans to float part of the Royal Mail on the London Stock Exchange this year, and confirmed that postmen and women would be entitled to free shares. The pledge came as business secretary Vince Cable announced long-awaited plans to float the Royal Mail on the London Stock Exchange this year, and confirmed that postmen and women would be entitled to free shares in the business.
Critics argued that the privatisation of an institution first opened to the public 378 years ago would mean post office closures, the erosion of six-day delivery in rural areas and worse pay and conditions for postal workers.
Speaking in the House of Commons, Cable said privatisation was "an irreversible course" that would secure the future of Royal Mail in the face of rising competition. "The government's decision on the sale is practical, it is logical, it is a commercial decision designed to put Royal Mail's future on a long-term sustainable business. It is consistent with developments elsewhere in Europe where privatised operators in Austria, Germany and Belgium produce profit margins far higher than the Royal Mail but have continued to provide high-quality and expanding services," he said. "Now the time has come for government to step back from Royal Mail, and allow its management to focus wholeheartedly on growing the business."Speaking in the House of Commons, Cable said privatisation was "an irreversible course" that would secure the future of Royal Mail in the face of rising competition. "The government's decision on the sale is practical, it is logical, it is a commercial decision designed to put Royal Mail's future on a long-term sustainable business. It is consistent with developments elsewhere in Europe where privatised operators in Austria, Germany and Belgium produce profit margins far higher than the Royal Mail but have continued to provide high-quality and expanding services," he said. "Now the time has come for government to step back from Royal Mail, and allow its management to focus wholeheartedly on growing the business."
The Communication Workers Union (CWU), which represents two-thirds of the Royal Mail's 150,000 workforce, vowed to fight the sell-off with strikes and accused the government of ignoring the views of the British public.The Communication Workers Union (CWU), which represents two-thirds of the Royal Mail's 150,000 workforce, vowed to fight the sell-off with strikes and accused the government of ignoring the views of the British public.
The Labour party, which attempted to part-privatise the service in 2009, accused ministers of pushing ahead with the sale to dig the chancellor out of a financial hole caused by a rise in government borrowing. Market analysts expect Royal Mail will be valued at £3bn when it floats later this year. All members of the public will be able to apply for shares, although Post Office workers will be allowed first in the queue if they want extra shares. The Labour party, which attempted to part-privatise the service in 2009, accused ministers of pushing ahead with the sale to dig the chancellor out of a financial hole caused by a rise in government borrowing. Market analysts expect Royal Mail will be valued at £3bn when it floats later this year. All members of the public will be able to apply for shares, although Royal Mail workers will be allowed first in the queue if they want extra shares on top of the 10% share guaranteed to them.
Cable said the "overarching objective" of privatisation was to secure the universal service obligation – to deliver mail to all UK homes six days a week, something threatened by a slump in profits in the wake of a 25% decline in letters over the last decade. Only a parliamentary vote could erase the universal service obligation to deliver letters to every home in the country, he said, while the Post Office regulator Ofcom would be obliged to prioritise this ahead of a duty to promote competition. The national network of 11,780 Post Offices, a separate company from Royal Mail, will remain in public hands. Cable said the "overarching objective" of privatisation was to secure the universal service obligation that requires mail deliveries to any UK home six days a week, which has been threatened by a slump in profits in the wake of a 25% decline in letters over the last decade. Accusing critics of peddling myths about the end of the universal service, Cable said that only a parliamentary vote could erase this duty, while the Post Office regulator Ofcom would be obliged to prioritise this ahead of promoting competition.
Ian Tonks of the Unite union, which represents 7,000 Royal Mail managers, insisted the sale meant the end of the universal service obligation. "The Royal Mail sell-off is nothing short of daylight robbery. The government is doing what even Margaret Thatcher didn't dare and is selling off the Queen's head to pay for George Osborne's economic failure." But Dave Ward, the CWU's deputy general secretary, said the business secretary was "off the pace" on the economic reality of the six-day universal service, which he predicted would not survive in rural areas and remote regions if privatisation went ahead.
Chuka Umunna, shadow business minister, said the "fire sale" was not in the interests of taxpayers, the consumers and small businesses that rely on the services of Royal Mail every day. Warning that privately-owned companies will seek a relaxation of the obligation if they offer their own doorstep delivery services around the UK, he said: "We are talking about an economic reality. These [delivery] companies will lobby against the six-day service. It simply will not make the money to secure their investment."
The recent rise in profits at Royal Mail also called into question the assumptions behind the sale, he said. "They now want to privatise the profits at the time it is making money. How can this policy make sense?" The national network of 11,780 Post Offices, a separate company from Royal Mail, will remain in public hands, a promise that failed to reassure the National Federation of SubPostmasters', who accused the government of taking "a reckless gamble" with the network that would lead to post office closures.
"If privatisation goes ahead, we have very real fears that the Royal Mail will rip up its the current agreement with Post Office Ltd [to provide Royal Mail products and services] in an aggressive bid to maximise profits for its shareholders," said NFSP general secretary George Thomson.
Chuka Umunna, shadow business minister, said the recent doubling in profits at Royal Mail to £403m also called into question the assumptions behind the "fire sale". "They now want to privatise the profits at the time it is making money. How can this policy make sense?"
Speaking in parliament, Cable countered that Umunna had refused to rule out privatisation, which Cable described as "an irreversible course". Cable added: "This is the longest fire sale in history. It has taken five years from the inception of this process under a Labour government."Speaking in parliament, Cable countered that Umunna had refused to rule out privatisation, which Cable described as "an irreversible course". Cable added: "This is the longest fire sale in history. It has taken five years from the inception of this process under a Labour government."
In a move to placate unions threatening strike action, Cable pledged that private ownership would not trigger any change in post office workers' terms and conditions. In a move to placate unions threatening strike action, Cable pledged that private ownership would not trigger any change in post office workers' terms and conditions, while the Royal Mail promised "a legally-binding and enforceable contract with the CWU" to enshrine these rights.
The CWU has warned that privatisation "threatened" the terms and conditions of postal workers and would "inevitably lead to strike action". Billy Hayes, CWU general secretary, said: "Royal Mail is thriving in public ownership, increasing its profits, providing good quality services and decent jobs. We want it to remain that way." Dave Ward at the CWU said Cable's guarantees "are not worth the paper they are written on", while existing agreements with Royal Mail were "completely inadequate". Strike action was "inevitable", he said.
But the government hopes that giving away shares to employees – the largest worker share offer in nearly 30 years – will soften opposition to the sale. Under the scheme, eligible employees would be entitled to free shares, but would be unable to sell them for at least three years.But the government hopes that giving away shares to employees – the largest worker share offer in nearly 30 years – will soften opposition to the sale. Under the scheme, eligible employees would be entitled to free shares, but would be unable to sell them for at least three years.
Moya Greene, Royal Mail's chief executive, said the sale would give employees "a meaningful stake in the company" and the public "the opportunity to invest in a great British institution". She added: "As we move into the private sector, the current legal position is that all terms and conditions that apply to Royal Mail employees would remain in place, on the same basis. To provide further reassurance, we will create a legally-binding and enforceable contract with the CWU. Pay and protections could not be changed for the period of the contract without CWU agreement." Moya Greene, Royal Mail's chief executive, who has been courting potential investors in the UK, North America and continental Europe, said the sale would give employees "a meaningful stake in the company" and the public "the opportunity to invest in a great British institution".
Adam Marshall, director of policy and external affairs at the British Chambers of Commerce, said it was vital for business that the universal service obligation was preserved. "Many services currently delivered by the public sector can be delivered effectively and efficiently by private companies. In the case of Royal Mail, the key is to ensure that privatisation delivers value-for-money to the taxpayer, and maintains the universal service obligation that sustains both businesses and individuals alike."
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