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The Sale of the Royal Mail and the Birth of the New Feudalism

October 19, 2013 6 comments

Universal Service

The Royal Mail is approaching 500 years old – 497 to be exact. It was established in 1516 by Henry VIII. It has always been in public hands. Unlike other privatisations, where, perhaps, there might be some argument for saying that they were originally established as private companies and that privatisation means a return to some sort of “natural order”, the Royal Mail has always been owned by the government, having been part of the civil service originally, and afterwards treated as a public service.

There’s a good case to argue that the Royal Mail is one of the forces which helped to create the British Nation. The USO (universal service obligation) by which a letter between the Scilly Isles and the Outer Hebrides costs the same as a letter from the City of London to Westminster, helped bind the nation together. Would this have been done if the company had been privately owned? Certainly not. The aim of private companies is to maximise returns for their shareholders. A private company would have created a postal service which ran between the big cities but would never have included any of the remote and rural areas, which are always going to make a loss.

Historically the profitable parts of the Royal Mail were used to subsidise the unprofitable parts in order to create a unified service. But, in order to make the Royal Mail profitable, in order to sell it, the government has had to retain the Post Office in public hands. Until two years ago they were the same company. The Post Office has always made a loss and has always been subsidised by the Royal Mail. From now on it will be subsidised by the taxpayer instead.

It’s privatisation of profit, socialisation of cost. We, the taxpayer, pay for the unprofitable parts, while the sovereign wealth funds, the hedge funds and the City wiz-kids take a nice cut of the privatised cake.

It was us, the taxpayer who invested in the postal industry, not the people who are currently making a quick buck from its gross misselling. It was us, the nation, who generated the company. We are the investors. Everything has been created in public hands. All the infrastructure, the network, the systems, all of this has been built at public expense over those 500 years of history. Plus all of the political, social and economic engineering that has gone on since the privatisation of the Royal Mail was first mooted by Richard Hooper in 2008 – the modernisation programme, the restructuring of the industry, the investment in new equipment – all of it has been done by us, in order to sweeten the privatisation, in order pay dividends to the large investors, to the Emir of Kuwait and his family. It’s a form of asset stripping in disguise.

The Emir of Kuwait is the absolute ruler of a medieval, feudal state, fabulously wealthy because he has claimed the assets of his nation for himself. And this is the real basis of this, and all other, privatisations: the mining of public assets for private consumption. Future profits will be generated by lessening the pay and conditions of the workers. Moya Greene has already said that there will be further job cuts. That can only mean that us postal workers will be expected to work harder. We will be expected to work harder so that the Emir of Kuwait can take home even larger dividends.

Natural monopoly

Since the privatisation people have congratulated me on the profit I’ve made from the increased value of the shares which have been promised. I haven’t even seen them yet. This just makes me angry: firstly because I know that it was a bribe, and secondly that it is the investment firms who will be taking the profits, while we, the workers, will be paying the costs in terms of our health and well-being. We’re not even allowed to sell our shares for three years, by which time who knows what they will be worth?

The cost of water has increased by 245% since privatisation. The argument was that privatisation would lead to investment. In fact it hasn’t. Investment in the maintenance of the water supply has decreased since privatisation, and there is a very strong case for re-nationalisation. It was also argued that privatisation would lead to competition, but in the case of water there can only be one water supply at a time, so there is no competition. It is a natural monopoly, which means we’ve replaced a publicly owned and publicly accountable monopoly, with a private monopoly.

The Royal Mail is also a natural monopoly. What competition there is, is rigged through various regulatory mechanisms. In a truly free market, none of them would survive. The Royal Mail, too, will remain effectively a private monopoly.

Another argument for privatisation is that it saves on public subsidy and is more efficient, but in the case of the rail industry – another botched privatisation exercise – we’ve seen subsidies increase fourfold, while the one publicly owned rail company which still exists – East Coast – is actually the most efficient, and takes the least subsidies.

The term “wealth creator” – which is often applied to the entrepreneurs who will be investing in the company  – is a piece of self-generated propaganda. The wealthy grow wealthier, and then say, “look, we’ve created this wealth.” But as they grow wealthier, so we grow poorer. There’s a direct correlation between the two. What is really happening is a form of wealth redistribution: from the public to the private, from the less well off to the wealthy. It’s communism for the rich. One group, the 1% with wealth and power and access to government, enrich themselves at the expense of the majority. They are the new robber barons and what we are watching is the growth of a new feudalism, in which a corporate elite lord it over us using debt as a form of rent.

We have to think more deeply about what creates wealth, and what wealth actually is. Vast sections of the world’s population live in abject poverty, while an elite few can ride around in private jets and own property in several nations. That’s not wealth by my definition. That’s not wealth by any definition. That’s poverty, on a grand scale.

That’s feudalism.

The privatisation argument goes back to the eighties, when deregulation, privatisation, supply side economics and the neoliberal agenda was first put into practice, first of all by Pinochet in Chile, and then by Thatcher in the UK. It was an experiment back then, but now we can see the results. And the results are economic devastation, impoverishment, economic collapse, indebtedness, austerity and an exponential growth in the wealth of the world’s elites.

Exponential growth is always unsustainable. The collapse of 2008 was only the beginning.

Who knows what the future will bring?

If you don’t like the 60p stamp, wait till you see Royal Mail privatisation

March 29, 2012 Leave a comment
Image

‘Sixty pence to deliver a first-class letter from the Outer Hebrides to the Scilly Isles: it’s still a bargain by anyone’s reckoning.’ Photograph: Kevin Foy/Rex Features

Royal Mail may be viewed with a high level of affection by the public now, but will that still be the case after it’s privatised?

From the Guardian Comment is free

The inevitable has happened. The government has announced its schedule for the privatisation of the Royal Mail, due to begin in 2013.

It’s not clear yet whether it will be full privatisation or part-privatisation, whether it will be sold off to another mail company or to a private equity firm, or whether it will be floated on the stock market as an IPO (initial public offering) and advertised to the public in the manner of the “Tell Sid” campaign for the sale of British Gas way back in 1986. “We see no reason why this company should not be IPO-able,” said one senior figure. “Royal Mail is viewed with a high level of affection by the public.”

The reasons given for the privatisation were outlined in the Hooper report in 2010.

They are as follows:

1) Falling volumes of mail due to competition from electronic media such as email and texts.

2) The inefficiency of the Royal Mail compared with its competitors.

3) The need for modernisation and the private investment to complete this.

4) The pensions deficit, the headline figure for which seems to rise on a yearly basis. It currently stands at £9bn according to some reports, less according to others.

Hooper consulted widely throughout the industry. However, he has never, as far as I know, spoken to any postal workers.

What we would have told him is that while it may be true that mail volumes have fallen, staff numbers have been falling at a faster rate. Up to 50,000 job losses since 2002.

In other words, the weight of mail for the average postal worker has been increasing. We are carrying more mail, to greater numbers of people, on larger rounds than ever. Our sacks are heavier. We work longer hours, and we’ve taken an effective pay cut since the postal agreement of 2010 in which door-to-door (junk mail) – which we were previously paid for separately – has now been incorporated into our workload. In other words, falling mail volumes have been more than compensated for by staff efficiencies.

We would also have told him that the so-called inefficiency of the Royal Mail is due as much to market liberalisation as it is to anything inherent in the company.

Private mail companies have access to the Royal Mail network through a mechanism known as downstream access. They bid for the most lucrative contracts from corporate customers, but have no obligation to deliver the letters. They leave that up to the Royal Mail, dropping it off on our doorstep for final-mile delivery. In other words, our so-called competitors have a peculiar market advantage. They take a cut of the profits, while we do the actual work.

As for modernisation, that is being subsidised by the taxpayer. The government has already loaned the company £1.7bn and is proposing to write off £1bn of that.

Which brings us to the pension deficit, which has already been taken into government hands. Even then it was never as great a problem as has been made out. The deficit currently stands at £9bn but the assets stand at £28bn. That’s three times as much. The deficit only becomes a problem if all Royal Mail workers cash in their pensions immediately, something that is not going to happen.

These are just some of the ways in which the argument for privatisation has been skewed.

Meanwhile, in preparation for the event, the new regulator, Ofcom, has announced a lifting of the cap on how much the company can charge for first-class mail. The public are hardly likely to enjoy that. Nor is this going to increase public affection for the company.

However, here’s the problem. The cost of mail delivery has been way too cheap for way too long. Sixty pence to deliver a first-class letter from the Outer Hebrides to the Scilly Isles: it’s still a bargain by anyone’s reckoning.

Traditionally the profitable parts of the company were used to supplement the unprofitable parts. This is the means by which the Royal Mail has been able to deliver the universal service obligation (USO).

It is the breaking up of the company that has lead to the threat to the USO, one of the reasons Hooper gives for the need for privatisation. (Indeed, his report is called “Saving the Royal Mail’s universal postal service in the digital age”.) The irony here is that the USO might be dropped in order to sweeten any future deal.

Anyone who wants to know what privatisation means for staff only needs to look at the Dutch model, where postal rounds have been franchised out to home workers in a system known as “sort and deliver”. Boxes of mail are dropped on a home-worker’s doorstep, who then has to sort the mail and deliver it on an agreed day. The worker is paid per item, not by the hour.

The trick here is that there is often a gross underestimation of the time it takes to do the work. Casual workers get no sick pay, no holiday pay, no health insurance, no pension and – depending on how long the round takes – often end up being paid below the minimum wage.

All of which is likely to erode that “high level of affection” felt by the public for the Royal Mail.

Read more here.

Ofcom offers little hope to Royal Mail

October 30, 2011 Leave a comment

Under Ofcom’s proposals, ‘Royal Mail has a monopoly of the work, while other companies get a share of the profits’. Photograph: Adrian Dennis/AFP/Getty Images

Royal Mail has a new regulator, but its proposals fail to protect the service from privatisation and unfair competition

From the Guardian, Comment is free

Friday 28 October 2011 08.00 BST

The Royal Mail now has a new regulator, Ofcom, which took over the role from Postcomm on 1 October. Ofcom has already issued a report in which a number of changes are proposed. There is a public consultation under way, which closes on 5 January 2012.

The most contentious of the proposals is the one to lift the cap on what the Royal Mail can charge for its principal service. According to some reports this could mean the price of a first-class stamp going up to £1. Less well recognised, but equally important, is the proposal to lift the cap on the price of bulk mail and business mail, which could also have an impact on customers further down the line.

The move to Ofcom follows on from proposals made in the Hooper report, which has been the basis of policy for successive governments since it was first published in 2008. It was updated at the request of the current government in 2010.

Hooper makes a number of recommendations, of which the change of regulators is just one. Other recommendations include the introduction of private capital through a “strategic partnership with a company with corporate experience of modernisation” – privatisation – and the removal of the pension deficit to the public purse, thus lifting the burden from any future buyer. In March 2010 the deficit stood at £8bn. Hooper states that his proposals must be taken as a package, which implies that privatisation is not far off.

The stated aim of both the Hooper report and the Ofcom proposals is the protection of the Universal Service Obligation (USO) by which the Royal Mail is required to collect and deliver letters six days a week at an affordable and uniform price across the UK. None of the other mail companies has this obligation. It is interesting to note that these proposals come on the eve of privatisation. They allow any future buyer the freedom, not allowed to the Royal Mail for the past few years, to set a price in line with actual costs.

Meanwhile Ofcom also offers safeguards to protect vulnerable consumers from onerous price rises by placing a cap on the price of second-class stamps of between 45-55p. It also, very significantly, promises “to require Royal Mail to continue to provide competitors with access to its delivery network”.

It’s at this point that we enter the bizarre world of “downstream access”. Hooper explains the term in his report, in a footnote on page 12:

“Royal Mail delivers 99% of all letters downstream. Royal Mail is required by the regulator … under the terms of its licence to deliver letters for competitors who collect and sort upstream in competition with Royal Mail. This is called the access regime or downstream access regime. Competition in physical mail happens upstream whereas downstream delivery of physical mail has the characteristics of a monopoly.”

Do you get that folks? “Competition in physical mail” – that is competition for profits – “happens upstream”, while “downstream delivery of physical mail” – that is, the actual work – “has the characteristics of a monopoly”. Royal Mail has a monopoly of the work, while the other companies get a share of the profits. And you wonder why the USO is under threat?

The Ofcom proposals continue: “Royal Mail would have the freedom to set the ‘wholesale price’ for access to its network but would be subject to rules regarding the allowed margin between the wholesale and retail prices. This would help ensure that efficient competitors can compete effectively with Royal Mail.” This is known in the business as “headroom”. It is the difference between what the Royal Mail is allowed to charge, and what the “competitors” – who don’t, in any recognisable sense of the word, actually compete – require in order to continue to generate profits for themselves.

Ofcom makes a sort of nod of recognition to the absurdity of the situation when it promises, in the next sentence, “to assess on a case-by-case basis any interest in providing so-called ‘end-to-end competition’ in the UK, where a postal operator receives the letter and delivers to an address without using Royal Mail’s network.” It is interesting to speculate what this might mean. Are we going to see rival pillar boxes on our street corners, and rival posties with different coloured uniforms vying with each other to get to the letter box first? Will there be a kind of postal workers’ turf-war going on, in which I meet my rival at the gate and have to fight him off for access to your letter box?

Of course not. The rival companies will only consider an end-to-end service if there is profit to be made, which means they won’t be in the slightest bit interested in the USO. If such a thing happens at all it will be delivery within one city, or between cities, no more. Rural and remote areas of Britain will never be graced by any but the Royal Mail’s characteristic uniform. Whatever else happens, the Universal Service Obligation will remain the obligation of one company alone. Which is the reason why the Royal Mail will always remain a special case.

Read more here

Junk mail – the facts

July 7, 2011 Leave a comment

A Panorama programme on postal junk was compelling, but didn’t mention that the market is skewed against Royal Mail

Junk mail. We all hate it don’t we?

Postal workers probably hate it more than anyone else, as we see more of it than anyone else. You only have a few items a week to deal with, we have hundreds of items a day. Sometimes we have as many as six separate items per household to load into our frames. That could be well in excess of 3,000 items a week. You can’t imagine how tedious this is.

And whereas in the past we were paid separately for it, as a supplement to our wages (which compensated us for it somewhat) these days it is part of our workload; and whereas the general estimate for the number of houses we cover on a daily basis is about 85%, for junk mail it is 100%, meaning it takes longer to deliver than ordinary mail.

Now a Panorama programme has been aired all about junk mail. It seems as if the Royal Mail is addicted to it – at least if you believe Richard Hooper, author of the Hooper report into the future of our postal services.

As he said in the programme: “There is absolutely no question that advertising mail, which the critics describe as junk mail, is central to the viability of the Royal Mail in the 21st century.” As proof of this he gave us some fairly compelling figures: about a quarter of the total letters market, of around £5.4bn, is advertising mail. Or as Tom Heap, the reporter, summarised it: “On the face of it, it seems the best way of ensuring the survival of our beloved postal system is to sign up to as much junk mail as you possibly can.”

Unfortunately, as the programme also pointed out, there are some pretty serious consequences to this, not least in the cost of disposing of the stuff once it comes through our doors, and – almost immediately – is chucked into the bin. Millions of pounds a year is spent by councils around the country, either in recycling the material, or in shovelling it into landfill sites.

It seems we are stuck with junk mail. Or are we?

The problem is that we were not given all the facts. There are a number of issues that Hooper – the acknowledged expert in the field – omitted to inform you about.

Central to this is something known as downstream access (DSA). This is the means by which rival companies are allowed access to the Royal Mail’s delivery network, at a loss to the Royal Mail. According to Royal Mail’s chief executive Moya Greene in December last year, this is in the region of 2.5p for every item of DSA mail we deliver. Some price changes have since been introduced by the regulator and the extent of subsidy and loss since the changes is as yet unclear [see footnote].

Yes, that’s right: we deliver our own rivals’ mail for them, and then we take a loss on it. By law. Or, to put it another way: we postal workers, and you members of the public, are made to pay so that rival companies to the Royal Mail can make a nice profit. This is what Hooper refers to as “modernisation”. It is the real drain on the Royal Mail’s revenues, and the reason why it is now so dependent on junk mail to survive. Sometimes we are made to deliver our own competitors’ junk mail.

It is achieved through a process known as headroom. What this means is that the price the Royal Mail is allowed to charge for bulk mail delivery – the bills and statements sent out by banks and utility companies, which is the prime source of all revenue in the letters market – always has to allow headroom for its rivals to make a profit.

Without this artificial skewing of the market – in the name of the so-called “free market” – the company would not be anywhere near as dependent on junk mail for its future survival.

Actually, the Panorama programme was effectively two stories in one. Only the first part was about junk mail, the second part was about scam mail. What the programme failed to come up with was a solution to this particular problem, but I can provide that: allow postal workers to identify scam mail and to report it, and then allow the Royal Mail the legal means to stop it at its source.

There’s one old lady on my round who has been receiving scam mail. Day after day she gets a pile of letters from someone who is described on the envelope as “the world’s most trusted psychic”. The envelopes are always the same, but the return addresses are from all over the world. Sometimes I’m delivering 10 or 15 of these letters a day. I reported it to my manager and asked if we could stop delivering them, but he told me we couldn’t. It is paid-for mail and we are obliged to deliver it.

This is a perfect example of what I have been suggesting over and over again: the company should learn to trust its own workers. Because unlike the high-tech machines which are being introduced in the much heralded modernisation programme, us postal workers actually know our customers. We can tell the difference between scam mail and real mail. We know who is vulnerable and who is not, and we can alert our managers when a vulnerable person is being targeted.

I’m certain that every postal worker would recognise this material. If there was a system by which we could report it, and a legal means of stopping it, we could get rid of it overnight.

• This footnote was appended on 7 July 2011. TNT contacted the Guardian after publication of the piece to say the reference to the DSA agreement is not applicable in the context mentioned. “In fact there has been a 22 percent price increase in charges by Royal Mail this year alone which renders this argument obsolete”, a company representative said.

From the Guardian Comment is free

Read more here

The mood in the Royal Mail sorting office

September 16, 2010 3 comments

Vince Cable has spoken: Royal Mail is to be privatised. My colleagues wonder whether things can possibly get any worse…

From the Guardian.

Read the rest of the article here.

Royal Mail part-privatisation is a lose-lose situation

May 25, 2010 Leave a comment

Vince Cable’s proposal will mean a loss of public control, a loss of profits and a new tier of costly management…

From the Guardian.

Read more here.

A letter to Vince Cable

May 19, 2010 Leave a comment

Vince Cable: able to listen?

 

Visit our delivery offices, Mr Cable, and you’ll see how Royal Mail ‘modernisation’ is a disaster but there’s much worth saving here.

From the Guardian.

Read the rest of the article here

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