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Royal Mail privatisation: don't tell Sid – warn him Royal Mail privatisation: don't tell Sid – warn him
(2 months later)
A household name put up for sale. An age-old public utility to be floated on the stock market. Ordinary punters to be allowed a piece of the action. Many tens of thousands of jobs to be affected. Throughout Vince Cable's outlining on Wednesday of his plans to privatise Royal Mail there was a tang of the old Thatcherism. The business secretary acknowledged as much in parliament in his adroit references to "the biggest employee share scheme for nearly 30 years". But for all the hints at a share-owning democracy, this was not the Iron Lady stageshow of old.A household name put up for sale. An age-old public utility to be floated on the stock market. Ordinary punters to be allowed a piece of the action. Many tens of thousands of jobs to be affected. Throughout Vince Cable's outlining on Wednesday of his plans to privatise Royal Mail there was a tang of the old Thatcherism. The business secretary acknowledged as much in parliament in his adroit references to "the biggest employee share scheme for nearly 30 years". But for all the hints at a share-owning democracy, this was not the Iron Lady stageshow of old.
The cast has changed radically for a start: no Conservative government with a solid majority, but a coalition that may be prised apart after the next election. Accordingly, details of the flotation were presented by a Lib Dem, whose party went into the last general election pledging to sell only a minority stake in the service. Second, there is unlikely to be that vaunted "Tell Sid" campaign to get the public buying shares. Finally, just as John Major's boneheaded sale of the railways always appeared to be a privatisation too far, so the flogging of Britain's mail-delivery services has already proved to be the opposite of plucking low-hanging fruit.The cast has changed radically for a start: no Conservative government with a solid majority, but a coalition that may be prised apart after the next election. Accordingly, details of the flotation were presented by a Lib Dem, whose party went into the last general election pledging to sell only a minority stake in the service. Second, there is unlikely to be that vaunted "Tell Sid" campaign to get the public buying shares. Finally, just as John Major's boneheaded sale of the railways always appeared to be a privatisation too far, so the flogging of Britain's mail-delivery services has already proved to be the opposite of plucking low-hanging fruit.
As the details of the Royal Mail privatisation become clearer, the reasons for its sale recede further into fuzziness. Is it a financial basket case – the grim picture painted by Richard Hooper's reviews? Actually, no. As the government's own document stated on Wednesday: "Royal Mail's results for the financial year ending 31 March 2013 were strong." Indeed: operating profit grew from £152m the year before to £403m. That makes a margin of 4.4%, which isn't bad for a utility mandated to deliver post from Land's End to John O'Groats six days a week at one uniform price. Is the company broken-backed with financial obligations that should be passed on to suckers in the private sector? Not since the government took over the £40bn pension liabilities, lumbering taxpayers with a £12bn deficit but letting investors off the hook. Mr Cable trotted out the line about how privatisation would bring in more capital to the business: but the sovereign state can get credit more cheaply than any private borrower.As the details of the Royal Mail privatisation become clearer, the reasons for its sale recede further into fuzziness. Is it a financial basket case – the grim picture painted by Richard Hooper's reviews? Actually, no. As the government's own document stated on Wednesday: "Royal Mail's results for the financial year ending 31 March 2013 were strong." Indeed: operating profit grew from £152m the year before to £403m. That makes a margin of 4.4%, which isn't bad for a utility mandated to deliver post from Land's End to John O'Groats six days a week at one uniform price. Is the company broken-backed with financial obligations that should be passed on to suckers in the private sector? Not since the government took over the £40bn pension liabilities, lumbering taxpayers with a £12bn deficit but letting investors off the hook. Mr Cable trotted out the line about how privatisation would bring in more capital to the business: but the sovereign state can get credit more cheaply than any private borrower.
The most likely scenario resulting from a privatisation of the postal-delivery service is surely this: sale of part or even all of the Royal Mail will be effected by next March; ministers will take a price multiples lower than the one they could have got, even while Goldman Sachs, Barclays and all the other banks involved in the flotation will walk away with fat fees. Over the longer run, it's a fair bet that the new managers of a privately held Royal Mail, still keeping to the universal service obligation, will drive up their margins by forcing lay-offs and worse conditions on 150,000 employees, many already on modest wages. Further out still, the universal postal service will surely come under pressure. Operators will lobby to replace the commitment to uniform prices for six days a week delivery with the looser obligation under European law for a merely "affordable" service five days a week.The most likely scenario resulting from a privatisation of the postal-delivery service is surely this: sale of part or even all of the Royal Mail will be effected by next March; ministers will take a price multiples lower than the one they could have got, even while Goldman Sachs, Barclays and all the other banks involved in the flotation will walk away with fat fees. Over the longer run, it's a fair bet that the new managers of a privately held Royal Mail, still keeping to the universal service obligation, will drive up their margins by forcing lay-offs and worse conditions on 150,000 employees, many already on modest wages. Further out still, the universal postal service will surely come under pressure. Operators will lobby to replace the commitment to uniform prices for six days a week delivery with the looser obligation under European law for a merely "affordable" service five days a week.
Advocates of privatisation normally hold up telecoms as their exhibit A. That is indeed a remarkable story, but it is largely one of technological advance. In other respects, such as the rollout of broadband to rural areas, the record is much more mixed, as last week's report from the National Audit Office reminds us. But a better comparator for postal privatisation is surely rail: another service that is a natural monopoly but which was instead divided between a bunch of operators paying track access fees. As research from Manchester University's Centre for Research on Socio-Culture Change shows, the result is an industry reliant on tens of billions in hidden subsidies from the taxpayer, and where private investment has been "negligible". At worst, the coalition threatens to replicate that abysmal experience: to thrust another bit of the public realm into private hands at a bargain price. And as rail demonstrates, once it's gone, it's gone.Advocates of privatisation normally hold up telecoms as their exhibit A. That is indeed a remarkable story, but it is largely one of technological advance. In other respects, such as the rollout of broadband to rural areas, the record is much more mixed, as last week's report from the National Audit Office reminds us. But a better comparator for postal privatisation is surely rail: another service that is a natural monopoly but which was instead divided between a bunch of operators paying track access fees. As research from Manchester University's Centre for Research on Socio-Culture Change shows, the result is an industry reliant on tens of billions in hidden subsidies from the taxpayer, and where private investment has been "negligible". At worst, the coalition threatens to replicate that abysmal experience: to thrust another bit of the public realm into private hands at a bargain price. And as rail demonstrates, once it's gone, it's gone.
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