A Royal Mail worker speaks out about privatisation

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I started working for the Royal Mail sometime after the turn of the Millennium. It was a job I had always wanted. Healthy, out in the fresh air, involving at least four hours a day of intense exercise, and a degree of autonomy, with no managers looking over my shoulder – at least while I was out on my round – it was the perfect job. Still is in many ways.

The basics of the job haven’t changed. I still walk from one address to the next sticking letters through letter boxes. What can possibly go wrong? Well a lot actually. They can destroy the industry by undermining the pension, introducing a form of fake competition, and then privatising it. Competition was introduced in the wake of the third EU Postal Services Directive of 2008, which required all postal markets to be opened up to other companies.

I say ‘fake competition’ because how can you introduce real competition into what is, in its essence, a natural monopoly?

From the We Own It website. You can read more here: https://weownit.org.uk/blog/royal-mail-worker-speaks-out-about-privatisation

The Year They Privatised Christmas

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Like modern day Father Christmases delivering presents to your door

I started working for the Royal Mail sometime after the turn of the Millennium.

It was a job I had always wanted. Healthy, out in the fresh air, involving at least four hours a day of intense exercise, and a degree of autonomy, with no managers looking over my shoulder – at least while I was out on my round – it was the perfect job. Still is in many ways.

The basics of the job haven’t changed. I still walk from one address to the next sticking letters through letter boxes. What can possibly go wrong?

Well a lot actually. They can destroy the industry by undermining the pension, introducing a form of fake competition, and then privatising it.

The pension was undermined between 1990 and 2003 when the company took a pensions holiday, failing to pay its share into the pension pot. They could not possibly have done this without the agreement of the government. This left an £8bn pension deficit, later rising to £10bn, which the government used as a way to begin the privatisation narrative. Look, the Royal Mail is failing, they said: we need to privatise it. It nationalised the liability – taking the pension deficit in-house – while beginning the process of selling off the assets on the cheap to its mates in the private sector.

Competition was introduced in the wake of the third EU Postal Services Directive of 2008, which required all postal markets to be opened up to other companies.

I say ‘fake competition’ because how can you introduce real competition into what is, in its essence, a natural monopoly?

The Royal Mail – or Post Office as it was more commonly known – had only ever been in the public sector during its entire 500 year history. It had created the whole distribution network – the systems, the methods, the procedures – as a seamless unity. Indeed, there’s a good argument to say that the Royal Mail is responsible for the creation of our modern-day nation. It brought together the different parts of the country by giving everyone an address and a post code, accessible to all for the price of a single stamp.

How can there be real competition when one company, and one company alone, is required, under the Universal Service Obligation (USO) to deliver to every address, no matter how remote, in the whole of the United Kingdom: not only from Land’s End to John o’Groats, but from the Scilly Isles to the Outer Hebrides, from the Isle of Wight to the Isle of Man?

It’s easy to make a profit delivering from city to city, from London to Manchester to Glasgow, or from district to district inside the same city: much harder if you take in all the towns and villages as well; almost impossible if you include every isolated cottage, croft or farmstead in between. Only the Royal Mail is obliged to deliver to all of these.

The way they engineered the competition was through a process called ‘downstream access’. Previous privatisations gave access to the industry network – the electricity grid, the water pipes or the gas pipes – to all the rival companies on an equal basis.

In the case of the postal industry the equivalent of this was us: the postal workers on our rounds.

So the Royal Mail’s rivals were allowed to bid for the bulk mail and city-to-city contracts of all the main services – the banks, the utilities, the NHS, Amazon, eBay and all the rest – and then expect us to deliver it for them.

In other words, in this industry, me and my labour – my living, breathing, heart-pumping, energetic body – is viewed as the equivalent of the tangles of copper wires or the networks of underground pipes that serve as the infrastructure in other parts of the economy.

Even then the other companies would have been unable to make a mark. The Royal Mail was too big and too well-established. It could have crushed the other companies underfoot. So the government introduced a principle called ‘headroom’. When the Royal Mail charged the other companies for its downstream access services, it was obliged to leave financial space for them to make a profit.

So there was never a ‘free market’. It was a highly regulated market from the outset: that is, the Royal Mail was regulated in order to allow the other companies the freedom to compete with each other.

And then there was privatisation, which took place in October 2013, as I’m sure you all remember.

Part of the justification for this was that people’s habits were changing. People didn’t send letters any more: they sent emails and texts instead.

If you listen to the Royal Mail, they will tell you that there has been a 40% drop in mail volumes in the last ten years. This might be true, although there does seem to be a marked increase in advertising mail at the same time. But the one thing they failed to mention was the increase in packets. The same technology that has effaced the ancient and noble art of letter-writing – never something the majority of the population engaged in anyway – has also, at the same time, allowed us to buy our goods online.

This has been by far the greatest shift in the industry since the onset of the digital revolution: the sheer number of packets we carry, a much more profitable enterprise.

I can’t believe the government hadn’t predicted this when they decided to sell off the Royal Mail, or that experts in the industry weren’t already aware of it.

In other words, it’s been one giant-sized con from beginning to end.

The other element that comes into this has been the separation of the Post Office from the Royal Mail.

The Post Office has always made a loss. The Royal Mail has always made a profit. By retaining the Post Office in public hands, while selling off the Royal Mail, they’ve ensured ever increasing profits for the private sector, and ever increasing burdens for the public.

There’s been extraordinary pressure on Post Office Ltd, the government owned company that runs the counters that sell you your stamps, to cut costs and make efficiency savings. What this has meant is that post offices are being franchised out into supermarkets, where the staff are paid at retail trade rates under minimum hours contracts, rather than the well-paid and secure jobs that skilled post office workers used to command. The Post Office is no more than a minor adjunct of the retail industry these days.

Most post offices are also grossly understaffed, which has meant massive queues this Christmas… and for all Christmases to come, unless the industry is brought back together again.

I’ve called this piece ‘The Year They Privatised Christmas’. That’s because the Royal Mail was always an integral part of the Christmas story.

Still is. We deliver all your Christmas cards and most of your parcels. All holiday rights are cancelled for the season, and most postal workers – at least in the past – were willing to go into serious levels of overtime to get the job done. Our MP always comes down to the office to congratulate us on our work. We are like modern day Father Christmases in our red vans, wrapped up against the cold in our red fleeces, delivering presents to your door.

By privatising the Royal Mail the government has effectively privatised Christmas.

It has turned me into a mere utility: an overground delivery system without a will of my own.

The management may not be looking directly over my shoulder, but they make me carry a PDA – a ‘postal delivery assistant’: effectively a tracking device – which tells them where I am and where and am heading every minute of the day.

They make me work harder and faster for the same basic wage. They are constantly ratcheting up the pace and the work load, to make sure I do more work in the same number of hours. They have degraded me and degraded my job in order to squeeze out more profits for their shareholders.

So you won’t be surprised to hear that most of the good will is gone. Postal workers are less and less likely to go into overtime. We are less and less likely to want to do management any favours.

That’s why we voted so overwhelmingly to strike in October – 89.1 per cent in favour on a turnout of 73.7 per cent – not only to secure our pensions and our jobs, but also to secure the future of the Royal Mail – and Christmas! – for all.

http://www.intimeforxmas.com/

http://www.morningstaronline.co.uk/article/year-they-privatised-christmas

Royal Mail managers – bureaucrats not businessmen

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Annual leave

I had an interesting conversation the other day with the manager who allocates the annual leave. They’ve just brought in a new system. You have to specify the date in one box, and then the day in another box, two boxes for each day, on one half of the sheet; and then do the whole thing again on the second half of the sheet, which they return to you if your request is denied. Meanwhile they allocate dates for you which you haven’t requested, which you then have to ask to be removed: again two boxes for each day, on two halves of the same sheet. The whole sheet is a maze of boxes and dates and days which you have to negotiate your way through. If you fail to fill it in correctly your request will be denied.

In the old days you just asked for the days you wanted and, if certain days were over subscribed, you would have a conversation about it. Sitting in the office with the Line Manager talking about your annual leave was one of the pleasures of the job for both parties.

So I complained about the fact that my last lot of requests hadn’t been given and that I was still being landed with a holiday in February which I didn’t ask for and didn’t want.

The manager was being particularly obstreperous about it. It was obvious that he enjoyed the power he had over me. He said, “we’re not here to please you. This is a business now. It’s the interests of the business that come first.”

The joke here is that neither this manager, nor the management of the Royal Mail as a whole, are businessmen. They are bureaucrats. Very few, if any, of them have ever had any experience outside the Royal Mail. They learnt their trade in a 500 year old state owned industry, not in the cut and thrust of the business world. The basic requirement since privatisation, to cut costs in order to increase profits, is the perfect excuse for them to become even more belligerently awkward than they already were.

War of attrition

Recently there’s been a war of attrition going on in our office. I imagine that it has been repeated in offices up and down the country. We are allowed 40 minutes break in total. We have to take 20 minutes indoors early on in the shift but, according to our national agreement, we are allowed the take the second 20 minutes at the end of the shift, which in the past meant we would go home early. Then management started making people stay in the office for this last 20 minutes which meant that people who had previously had time to pick up their kids from school were no longer able to do so.

How this is in the interests of the business is anyone’s guess.

This is on top of negotiations currently taking place with the CWU over changes to our pension plan, with the union threatening to take a ballot on industrial action if the current defined-benefit pension scheme is closed, as the company proposes, next year.

There are also proposed changes to our working practices, with rumours flying around about what this will mean. There’s talk of a six hour delivery span, of longer and shorter days, of longer hours in the Winter and shorter hours in the Summer, of working in teams and of having our dedicated rounds taken away from us: a whole raft of possible changes which will make the job unrecognisable from what it was.

Most posties took the job because they liked the early hours: but the hours are getting later and later, and the new proposals want to put them back even more.

Most posties took the job because they like working on their own, but new delivery methods sees us working in pairs, and the new proposals want to bring in even larger teams in order to cover sick leave, annual leave and rest days without overtime.

The job is arduous as it is, involving four to four and a half hours of intense activity, walking and carrying weight. A six hour delivery span will be impossible for all but the youngest and most fit members of staff.

And now they want to take our pensions away from us as well.

Is it any wonder that relationships between management and the work force are at an all time low?

Responsibility

As for how all these changes will affect you, the public, I’ll just give one illustration.

In fact, for all the fact that postal work is a menial job, it does involve a high degree of responsibility. We get very close to our customers: intimate even. We know when you are at home and when you are away. We know when marriages are breaking down or when the kids are leaving home. We handle your credit cards and your bank statements. We deliver your birthday and Christmas cards, which can contain cash or gift vouchers. Occasionally thieves will pass through the office, opening your mail in the hope of finding goodies; but they invariably get caught, because customers soon begin to notice their mail is being tampered with, and at the moment it’s easy to locate by whom.

Larger teams will make this increasingly difficult. The lack of a dedicated round will remove the trust from the relationship between posties and their customers. It’s already true on some rounds that you don’t know from day to day who will be walking up your garden path and looking in through your front window: if these changes take place then this will become true of all rounds.

The future is looking increasingly bleak in the postal industry.

The privatised Royal Mail will get a Christmas bonanza – but not us posties

Goodwill among delivery workers is in short supply. After years of being sidelined and ignored, I’m refusing to put in overtime

From the Guardian, Comment is free: Wednesday 18 December 2013 11.10 GMT

A postal worker sorts parcels: ‘no matter how good technology gets, it will never be possible to send a parcel by email’. Photograph: Peter Macdiarmid/Getty Images

Christmas arrived for us posties on Wednesday the 4th of December this year. The start of the week had been quiet, with just a trickle of festive mail, but on the Wednesday there was suddenly an avalanche of post falling on top of us: thousands of cards and hundreds of parcels, as well as all the usual advertising, Christmas catalogues and charity begging letters. It’s been like that ever since.

I must admit I don’t deliver all of it. I sort it, bag it up, and deliver some of it. The rest I pass on to one of my colleagues to deal with. For the first time since I started working for the Royal Mail over 10 years ago, I “cut off” on my round: that is I work my hours and refuse to go into overtime.

In fact, if it wasn’t for the influx of temporary staff, or the army of casual workers on rolling contracts, the Christmas mail would never get delivered. It always used to be a matter of pride to me that I would finish the job, no matter how hard it got. Not any more. There are a number of reasons for this. First, they got rid of our bikes and replaced them with trolleys, meaning that mail delivery now involves four hours or more of relentless walking, a much more tiring activity than cycling.

Second, they moved our delivery office to the nearest city, several miles away. I now have a half-hour commute to get to work in the mornings, a half-hour drive to get to my round, another half-hour to get back to the office and yet another half-hour drive home again. I used to cycle into work and then cycle to my round. I was far more inclined to do overtime when it took place 10 minutes from home. It is much less appealing when it means driving home late, tired and in the dark.

Third, all the goodwill I used to have has gone. I no longer feel any loyalty towards the company I work for. Years of being sidelined and ignored, of a failure to consult over the most fundamental aspects of my working life, has left me feeling estranged. I used to love my work. These days it’s “just a job”: something I do because I have to, not because it gives my life any meaning any more.

I’m not the only one who feels this way. Privatisation has merely intensified the mood. Of course, if you were to believe Vince Cable or his advisers, you’d think that without privatisation the Royal Mail would be finished by now. Figures are down, they used to tell us. People are using email and text these days, they don’t need a postal service any more.

Christmas is a reminder that this was always nonsense. People don’t send Christmas texts instead of cards, and no matter how good the technology gets, it will never be possible to send a parcel by email.

Indeed, this is the distinguishing characteristic of this year’s Christmas mail: the sheer number of parcels we have to deliver. I’ve never seen so many. The great skill of our job these days is in keeping a track of them, in knowing how to incorporate them into the rest of the mail.

The very technology they claimed spelled doom for the postal service allows people to go online at any time of the day or night, buying stuff on eBay and Amazon, most of which gets sent through the post. These could be the boom years for the Royal Mail as the margin of profit on parcels is much greater than it is on letters.

Even before privatisation profits were increasing. Pre-tax profits were £233m for the six months to 29 September, up from £94m a year earlier. This was all within the public sphere, so no one can pretend that privatisation had anything to do with it. In other words, everyone knew that there was a bonanza on its way. The real point of privatisation, it seems, has been to allow the private sector to cash in on it.

http://www.theguardian.com/commentisfree/2013/dec/18/privatised-royal-mail-christmas-posties-delivery-overtime

For Sale: from the LRB blog

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Something that hasn’t been mentioned much in the post-privatisation analysis is the amount of money the Royal Mail stands to make out of its immense property holdings. One building alone in the company’s portfolio of disused offices in London – the mail centre in Nine Elms Lane – has been valued at half a billion pounds. That’s one-sixth of what the government sold the whole company for.

The office was closed in 2012, more than a year before the sell-off. And it’s not the only one. Dozens of delivery offices up and down the country, including mine, were closed in the run up to privatisation. Several of them remain unsold.

Could the offices have been kept empty on purpose? Royal Mail bosses now stand to make a lot of money out of the company they once used merely to manage.

– See more at: http://www.lrb.co.uk/blog/2013/12/17/roy-mayall/for-sale/#sthash.wrtLm9Fi.dpuf

Royal Mail’s latest ad: the hypocrisy of capitalism in one minute

“We love parcels…”

Royal Mail’s management don’t regard you as customers but recipients, simply a way to deliver returns to their investors.

From the Guardian, Comment is free.

The first TV advert from the Royal Mail since privatisation was shown over the weekend, during the X Factor, and Downton Abbey.

The advert features the Royal Mail Choir, singing their version of the Beatles’ All You Need Is Love, while postmen and women deliver parcels to their appreciative customers.

Here’s a summary of the whole advert, in one paragraph:

There’s a Sikh postie walking along a corridor; a little girl placing stamps upon a parcel; a pen drawing hearts in red ink upon a sheet of paper; a man paying for his parcel delivery on-line using a tablet computer; a shot within a parcel depot featuring parcels running on a conveyor belt with lasers reading the addresses; delivery to a café (the café owner opens his arms as if he’s about to embrace the postie) followed by a series of other deliveries in quick succession: to a stately home, to a garage complete with garage-band, to a little girl’s birthday party; a Muslim postie walking passed a training centre with the words “For Hire” painted on the wall; delivery to a factory; a black female postie smiling (the only woman postal worker in the advert); delivery to an upmarket London townhouse; two rain soaked posties; another Royal Mail parcel depot featuring brand new, sparkling-clean Royal Mail lorries; a Royal Mail lorry driving passed a remote rural village; a little girl opening up a letter box in anticipation of a delivery (an intense light bursts from the letter box like a mystical sign); that Sikh postie again, in a massive block of flats (an Indian woman answers the door wearing rubber gloves); another postie dwarfed by another huge, semi-circular block of flats, followed by the slogan, “We deliver one billion parcels a year”; a shot of a postal worker raising his arms in apparent blessing of the contents of a Royal Mail van (he’s like Jesus blessing the loaves and the fishes) ending with the words, “We love parcels.”

Everyone is smiling.

All of that to the words of All You Need Is Love:

Love, love, love
Love, love, love
Love, love, love

There’s nothing you can do that can’t be done
Nothing you can sing that can’t be sung
Nothing you can say but you can learn how to play the game
It’s easy

All you need is love
All you need is love
All you need is love, love
Love is all you need.

And there you have it: the hypocrisy of advanced capitalism in precisely one minute.

The Royal Mail delivers none of that. It doesn’t deliver love. It doesn’t deliver diversity. It doesn’t deliver a welcoming smile. It doesn’t deliver to stately homes, to garages or to birthday parties. It doesn’t deliver hope and anticipation. It doesn’t deliver mail to remote communities. It doesn’t deliver friendliness in the rain. It doesn’t even deliver parcels. We do all of that: the men and women of all backgrounds and ethnicities who work for the Royal Mail. That’s our job.

Now that it is privatised, the Royal Mail’s job is simply to deliver returns to its investors.

For a long time now the Royal Mail has been divided, between management and postal workers, between those who see it as a business, and those who see it as a service. The people who commissioned that advert are the former rather than the latter. It’s not a service to them, it’s a way of making money.

We were told this many years ago: “Granny Smith doesn’t matter any more.”

Granny Smith” is the postal worker’s affectionate nickname for you, the customer. Or rather, for the people that we regard as our customers, the people we meet on the doorstep everyday. But the Royal Mail management doesn’t regard you as their customers. They don’t meet you but once in a lifetime. You are merely the recipients of the mail. Their customers are the people who send the mail in large quantities: the utility companies, the banks, the advertisers, the bulk deliverers, the people who churn letters out by the tonne using advanced computer systems, the mail-shot companies using lists they’ve purchased from other advertisers, the conveyors of junk mail and other unwanted material, the people who fill up your halls and your bins with garbage, the landfill merchants. Those are the Royal Mail’s customers, not you. The people they make the money off.

See: that’s the hypocrisy of that advert. They know that postal workers are held in high regard by the public. They know that most of us will go out of our way to look after our customers, that we will do our best even in adverse circumstances, that we will give that cheery smile in the rain. That was always the case in the past, though it’s getting rarer and rarer as time goes by.

In the old days, we loved our job. It was great getting out and about, on the streets of our towns, delivering the service we knew you wanted. The work was energetic but satisfying. It brought us face to face with our neighbours. And we had a little time to spare back then. There were enough of us doing the job to get the work done and still have enough time left over to lead lives of our own.

Fifteen years ago, the average delivery span was two and a half hours. That’s two and a half hours of high-octane energy expenditure: a workout by any other name. It kept us fit, it kept us happy, it kept the endorphins flowing to our brains. It kept us smiling.

We would get up early to greet the dawn and have the mail on your doorstep by breakfast.

That’s not the case any more.

Ten years ago the delivery spans were increased to three and a half hours.

These days the average delivery span is four to four and a half hours. After two and a half hours of intense work the endorphins cease flowing and the pain starts to kick in. We walk till we ache. We no longer have time for our customers and we’re so dog-tired at the end of the day that we don’t even have time for ourselves. We eat, we sleep, we work, that’s all. There’s no energy left for anything else.

This is called “productivity”. Less posties doing more work, at a faster rate. In the past decade the company has lost 50,000 jobs, with more job losses promised now that it has been privatised.

Less jobs means more work for me. More hours on my feet. More weight in my trolley. More gates, more doorsteps, more letter boxes. More endless miles of trudging drudgery on the streets of my town.

The choice of the X Factor and Downton Abbey to air the advert was very telling.

The X Factor represents the illusion of capitalism, that we may find a way out of its servitude one day: that some of us, at least, through good luck or talent, will be given the keys to escape. Downton Abbey represents the reality: a servant class serving a privileged elite.

As a public service our service was to you, the public. As a privatised monopoly our service will be to the shareholders from now on.

http://www.theguardian.com/commentisfree/2013/nov/04/royal-mail-ad-management-customers

Magical Thinking

From the LRB blog.

One of my neighbours came over to say hello the day the Royal Mail was privatised.

‘I expect you’re looking forward to getting your hands on all that money you’ve just made,’ he said. The shares allocated to me as a member of staff had gone up by almost 40 per cent in a day. The government had brought forward the date of the IPO in order to beat a strike ballot by the Communication Workers’ Union. Most of us, like most people, were against the privatisation. It felt like my neighbour was congratulating me on taking a bribe.

I lost my temper, and told him what I really thought about the privatisation. I pointed out the contradictions: that the state has spent billions of pounds of public money to subsidise the bargain basement sell-off; that the pension fund was nationalised to sweeten the deal; that the loss-making Post Office was decoupled from its more successful partner and retained in public hands; that pricing restrictions were lifted in anticipation of privatisation, allowing the company to increase its profits.

None of this has got anything to do with the free market. This is direct government intervention to create a rigged market. If the price restrictions had been lifted ten years ago, the entire argument for privatisation would have disappeared overnight.

My neighbour said that governments shouldn’t be involved in the business of running companies. He said that privatisation would allow the company access to future investment. He said that previous privatisations had been a great success, and cited British Telecom and British Airways as examples. He said that taxpayers were fed up with subsidising the Royal Mail.

The argument went on for a while. Every time I was about to get in my car he’d say something that I had to contradict. I finally lost patience and drove away when he talked about the investors who were going to help the company become a big success: ‘They are wealth creators. They build the factories so that we can have jobs.’

You hear that phrase ‘wealth creators’ a lot. It is a commonly used justification for the privatisation agenda, the idea that these individuals generate wealth by their investment. They are the ‘wealth creators’, and we are the beneficiaries of that wealth. It’s a form of magical thinking, like the pharaohs believing that their rituals were responsible for the flooding of the Nile, a post hoc fallacy: because they have invested in the company and increased their wealth, their investment somehow ‘created’ the wealth. The actual wealth creation, the work that my colleagues and I do, in this version of reality, is an accidental by-product of the process, a privilege I am allowed by the goodwill of these magically endowed individuals.

Moya Greene, the chief executive of Royal Mail, has already told us to expect job losses. Very soon I expect to be begging for the privilege of working longer hours for less money.

– See more at: http://www.lrb.co.uk/blog/2013/10/24/roy-mayall/magical-thinking/#sthash.c9opEVX8.dpuf

It’s one law for the banks, another for the rest of us

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Locust

Vince Cable’s efforts to keep the Royal Mail in the hands of “blue chip investors” and away from “spivs and speculators” was delivered a blow this week when it emerged that the Children’s Investment Fund has taken a 5.8 per cent stake in the company following its privatisation earlier in the month.

The fund was founded by Chris Hohn, described as a “locust” by German politicians, and damned by the former CEO of Deutsche Börse, Werner Seifert, for his part in scuppering a previous business deal.

The London-based hedge fund has bought 58.2m shares or 5.8pc of Royal Mail. Under stock exchange rules, TCI had to declare its stake when it reached 5pc of the company. The threshold was reached on Friday.

Mr Cable has often criticised hedge funds for being short term investors and has repeatedly insisted that Royal Mail would be sold only to “long-term, blue chip” institutional investors.

Meanwhile Chancellor of the Exchequer George Osborne has responded to criticism that the government had sold off the Royal Mail too cheaply.

At a Thomson Reuters Newsmaker event on Tuesday, he told his audience that initial public offers are routinely offered at a discount and the government had followed advice from its bankers on details of the sale.

“On all fronts it has been a great success,” he said.

Bargain basement

And in the House of Lords, Labour peer Lord Sugar, star of TVs The Apprentice, questioned the expertise of the banks which had been advising the government on the sale.

He demanded: “Why did these so called experts sell the stock at such low levels and get it totally wrong to such an extent that the stock rose by 33 per cent the day afterwards and since then 54% on the issue price?

“Bearing in mind other reputable banks had come on record giving a valuation of £5 billion, why were these banks ignored and what will you be doing by way of an inquiry in finding out who the lucky institutions were that underwrote this bargain basement sale?”

Government spokesman Lord Popat said the key objective had been to “secure value for money for the taxpayer”.

Pressed by Labour’s Lord Donoughue on the level of fees paid to the banks, Lord Popat said: “The underwriting banks will share a maximum fee of 1.2 per cent of the IPO receipts or £16.9 million. This maximum includes a potential discretionary fee of £4.2 million. The actual fee will be finalised shortly. Lazards will receive £1.5 million as the Government’s independent adviser.”

For those of you without a calculator, it means that three banks, UBS, Lazards and Goldman Sachs, share £18.4 million between them.

Markets

Of course, the usual reasoning behind the sale of the company, is that it would allow the Royal Mail access to the financial markets; but, you have to ask, what would have stopped the Royal Mail accessing the markets as a publicly owned company? The answer, it seems, is “very little.”

According to a letter in the Guardian prior to the Royal Mail’s flotation it “is purely the Treasury’s insistence on keeping to the UK’s unique borrowing rules, which are not followed by any other country.” The government-owned French energy company EDF, and the German transport company Arriva, have no such limitations, and operate freely in the UK. The Royal Mail was already classified by the Office of National Statistics as a public corporation and could have enjoyed the same freedoms as state-owned companies elsewhere in Europe. All that was needed was for the Treasury to adopt the same rules as other countries have had for decades.

The writer, John Perry, adds: “It continually surprises me that opponents of Royal Mail privatisation have not pursued this argument, especially as it addresses one of the government’s main arguments in favour of selling it off. Given that the government have already made a similar rule change in favour of the publicly rescued banks, there is a clear precedent for such a change in favour of Royal Mail.” This would  have rendered privatisation unnecessary, he says.

In other words, it’s one law for the banks, and another for the Royal Mail.

Shafted: the great Royal Mail rip-off

Chuka Umunna: “Royal Mail is being sold off on the cheap”

The price of Royal Mail shares has increased by almost 50%, from 330p to over 500p.

Thousands of investors have made huge profits just days after their initial investment.

Almost 700,000 small investors purchased £750 worth of shares and have witnessed an instantaneous increase in their value.

The government are under scrutiny for having undervalued the price of the Royal Mail.

It is the taxpayer who is set to pay the price for the government’s mistake as investors, large and small, are set to continue to benefit.

In the past few days the Royal Mail’s market value has soared to over £5 billion representing a £1.7 billion increase.

Chuka Umunna, Labour’s shadow business secretary, said: “Royal Mail is being sold off on the cheap with taxpayers being short-changed to the tune of hundreds of millions of pounds. Yet out of touch ministers have ploughed on regardless and claimed this is a ‘triumph’. Increasingly this privatisation is looking like a botched job from an out-of-touch government that puts the wrong people first.”

The Secretary of State for Business Vince Cable has responded by branding the share price increase as “froth” and has encouraged people to focus on the long term implications of the sale.

However, Stockbrokers Peel Hunt responded by saying: “This is not ‘froth’; it’s real people buying, selling, averaging down.”

It is thought over 100 million shares were purchased in the first hour of trading and an estimated 700,000 people were given 227 shares worth £750.

The unusually high demand has lead some commentators to question why so many people are investing in them and whether the government did in fact completely undervalue the business.

Cable has asked people to think about the long term future of the Royal Mail, and has indicated that he has attempted to keep the company in the right hands.

Almost 40,000 people who tried to acquire more than £10,000 worth of shares were denied any form of sale.

It is also thought that government denied a number of city investors and hedge funds in a bid to keep the business out of their hands, although 70% of the shares did, in fact, go to large investors.

Cable said that demand across the country was so large that the government was able to stop shares being sold to “spivs and speculators” and instead could focus on sales to “responsible long-term institutional investors”.

Meanwhile, the National Audit Office will launch an inquiry into the allegations that the business was undervalued.

– See more at: http://www.moneyexpert.com/news/shafted-taxpayers-suffer-royal-mail-shares-soar/800582360

Royal Mail privatisation will hurt rural communities, says vicar

The Rev John Owen, vicar of Froxfield, Privett and Steep, with Royal Mail postman John Luker at the post box opposite Froxfield Church

Originally published here.

A vicar of three Hampshire villages fears the privatisation of Royal Mail will hurt rural communities.

The Reverend John Owen is vicar of the villages of Froxfield, Steep and Privett, near Petersfield.

He praised his local postman, John Luker, who has collected and delivered letters in the villages between Petersfield and Alton for 32 years.

“John knows the local roads like the back of his hand. He doesn’t use a SatNav, never gets lost, and knows a good many of the 800 inhabitants of Froxfield and Privett by name,” said Mr Owen.

“If something is amiss, John is likely to notice it on his delivery round and will raise the alarm.

“We wonder how economically viable his job will be when the flotation of the Royal Mail takes place.”

Mr Owen said villagers were sceptical about official assurances of a continued daily collection and delivery in the hamlets. Most predict a weekly collection, which will mean villagers have to drive to larger towns nearby to post urgent items.

“John Luker represents that bit of community capital and cohesion which does so much for the well-being of the rural community,” said Mr Owen.

“He’s not unlike the landlord of the local pub and the people who have been running the village shop for years. They help to bind the community together.”

The vicar said rural communities would be poorer, emptier and less attractive as a place to live without the postal service.

“As Christians, we are aware that life can’t be quantified in a balance sheet,” he said.

“Our church members will be challenging this thinking and finding new ways to serve their rural communities – churches hosting post offices is just one way they are already helping.

“But my plea would be for us to hold back from privatisation of the Royal Mail until these issues have been thought through properly.”

Mr Luker added: “I have 283 calls to do, and drive about 36 miles a day from our office in Petersfield. I know any private firm wouldn’t have the same kind of local knowledge that I have. I love these villages and I know about 90 per cent of the people who live here, by sight or by their Christian names. It will be hard to replace that.”

How popular is the sale of Royal Mail?

Not very popular with these guys

David Cameron calls it ‘popular capitalism‘. He is referring to the fact that the flotation of the Royal Mail was oversubscribed many times. On the back of this he is planning even more sell-offs. But how many people could actually afford the £750 required to buy the minimum amount of shares in the company? Very few, I would think. Only the well off have that sort of money to spare these days.

As for us employees, well we had the right to buy shares at a reduced rate, as well as the shares that we were given. I don’t know about you, but I don’t have any spare money either, and I can’t imagine that many employees would have taken up the offer. Except on the highest level of management, that is, where, once again, certain people, including chief executive Moya Greene, have done extremely well.

Eleven directors have between them more than 35,000 shares in the firm. Those shares started off being worth around £115,500 but are now worth more than £168,000.

Moya Greene has 3,643 shares in the company. They started off being worth just over £12,000 but were worth £17,300 within less than a week.

Ms Greene’s basic salary is £498,000, but other benefits mean her total package is around £1.1m.

Meanwhile Peter Davies, a member of management committee for Lansdowne Partners, and a close friend of George Osborne, saw the value of his company’s shares rise by £18 million after just one day’s trading.

In fact 67% of the British public were against the privatisation. Only 4% were ’strongly’ in favor. 96% of Royal Mail employees were against the sale.

In other words, what Cameron really means when he refers to the popularity of the sale is that it is popular with investors and with higher management. With his friends, in other words. They’re obviously the only ones that Cameron thinks are important.

Royal Mail Shares: Vince Cable Defends Goldman Sachs and UBS-Backed Offer Price

So guess who was behind the undervaluation of the Royal Mail? That’s right: it was Goldman Sachs, the “great vampire squid wrapped around the face of humanity”, as described by Matt Taibbi in Rolling Stone in 2009. According to Taibbi, not only was Goldman Sachs behind the financial collapse of 2008, but it has been heavily involved in every collapse since the Great Depression, engineering them in order to extract profits. It was Goldman Sachs who valued the Royal Mail at £3.30 a share, despite earlier valuations putting it much higher, at £5.00 a share, the current price. I wonder how many shares Goldman Sachs’ employees bought in advance of the sale in order to cash in on their gross underestimation of the price? Vince Cable talked disparagingly of “spivs and gamblers” in 2010, and yet here he is doing a deal with them, listening to their faulty advice.

http://www.ibtimes.co.uk/articles/515029/20131018/royal-mail-shares-price-vince-cable-goldman.htm

Labour accused over Royal Mail

Labour and Ed Miliband could have stopped the Royal Mail privatisation “dead in its tracks” if they had vowed to renationalise the service, an SNP MSP claimed.

James Dornan said if Labour had pledged to do this if it won the 2015 general election, no-one would have bought Royal Mail shares

The Glasgow Cathcart MSP hit out at the loss of the “valuable public service” after some 690,000 small investors bought stock in the highest-profile privatisation for years.

He told the SNP annual conference in Perth the sell-off had resulted in ” a billion pound bonus in 24 hours given in the main to those already seriously well off”.

He added: ” One of their saddest most disappointing aspects of this privatisation is that if Labour had the courage of this Scottish Government, if Ed Miliband had half the sense of social responsibility and decency that our First Minister has, he could have stopped it dead in its tracks.

“Who would have bought shares in the Royal Mail if Red Ed had come out and said Labour would renationalise it? No-one.”

http://www.irvineherald.co.uk/ayrshire-news/scottish-news/2013/10/19/labour-accused-over-royal-mail-75485-33963556/

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

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?

Privatisation of the Royal Mail

184029165

As I’m sure you are all aware, the Royal Mail was privatised on Friday 11th October 2013.

It was sold for £3.3 billion. Within a day the share price had risen by 38%, meaning that the company was seriously undervalued and some people made a quick profit.

Billy Hayes, General Secretary of the Communications Workers Union, said, ‘If you sold your house and the buyer sold it on the next day for 38% profit, you’d ask “what was the estate agent doing?”’

Actually it is even worse than this. If you remember, the government took on the company’s pension liability two years ago. That was at a cost to the exchequer of over £10 billion.

So in this case the government has spent three times the value of the property, in order to sell it at a significant loss, in order for the new buyer to then sell it on for a profit.

Meanwhile, the company has spent the last two years modernising the business. Postal workers have been provided with new vans, new trolleys, new walk-sequencing machines, new GPS devices, new bags, new shelving units, new uniforms, and a range of other equipment. Delivery offices have been closed all over the country and consolidated into larger units. Costs have been cut and door-to-door (junk mail) incorporated into the work load. New working methods have been introduced, and every round in the country has been extensively restructured.

All of this has been done at the taxpayers expense, of course.

The regulator has lifted pricing restrictions, which means that the company is now making a healthy profit. So, you have to ask, why couldn’t the regulator lift the restrictions earlier, in which case the company could have been earning a healthy profit for the taxpayer for years?

70% of the company has been sold to large investors: to banks, hedge funds, pension funds and sovereign wealth funds, including the one belonging to the Kuwaiti Royal Family. In other words, the British public have taken a significant loss so that this fabulously wealthy family can extract even more wealth for themselves.

The Kuwaiti Royal Family are the absolute rulers of a medieval feudal state. Not ‘wealth creators’. Wealth extractors. That means that postal workers in the future are going to be the servants of a feudal Lord. Serfs, in other words. Who says there’s no such thing as progress?

Moya Greene, the current CEO, has also said there will be further job losses, which can only mean that postal workers will be expected to work harder. She took £1.47 million in pay and bonuses last year. No doubt she will be given substantial share options too, now that the company is in private hands.

So what will this mean for you? Let’s make the comparison with previous privatisations.

Water charges have risen by 245% since the water boards were privatised. Subsidies to the rail industry have more than doubled, while fares have increased above the rate of inflation and standards have declined. And in the same week that the Royal Mail was floated on the stock exchange, the energy company SSE put up its prices by 8.2%. More price rises are expected to follow.

Our public utilities are now almost exclusively owned by foreign corporations.

Did you know that the origin of the word ‘idiot’ is from the Greek word meaning ‘private’? Or, to put it another way, the sale of Royal Mail has brought even more idiocy into our public life.

cropped-grannysmith-cover2.jpg

The Cost of Privatisation

A walk sequencing machine at work in a Royal Mail office

From the LRB Blog.

In the last year our delivery office has moved from working on bikes to working in vans.

There are two of us to a van, doing two rounds between us. We’ve also been given new trolleys so we can carry more weight, new bags to fit onto the new trolleys, and new tracking devices to show customers exactly where their post is. They also, coincidentally, show the Royal Mail exactly where its employees are.

We’ve been given new tools in the office too: a wheeled basket each, like an oversized shopping trolley (called a ‘mini-york’), for moving our bags about, and a new storage and shelving unit for keeping our equipment in.

Our rounds have been extensively restructured to take account of the new working methods. For the past year a union rep, a manager and a planner have been huddled together in a room working out every detail of every round: how long it takes to open every gate, to walk up every path, to deliver every letter.

Everything about the Royal Mail operation is being changed. There are very expensive new walk-sequencing machines in most offices, for sorting the post into the order in which it will be delivered, new regional mail centres, where the post is gathered together and then sifted and sorted for delivery to local offices, and new lorries for shifting it around the country. Meanwhile hundreds of local offices have been closed and consolidated into larger units serving several towns at a time.

So far the Royal Mail has invested £2.1 billion in its modernisation programme, buying around 36,000 new tracking devices, 30,000 new trolleys and 11,500 new vans, and building new mail centres around the country.

All of this is being done at public expense in advance of privatisation. When the Royal Mail is floated later this year, it is expected to fetch up to £3 billion.

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

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

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

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

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Royal Mail is not delivering

‘Millions more have been spent on a fleet of new vans to replace the bikes the Royal Mail intends to scrap.’ Photograph: Christopher Thomond for the Guardian

As profits dive, it’s clear this management isn’t modernising, it’s running the company into the ground – but why?

 

Royal Mail’s profits fell from £180m in 2009 to £39m in 2010, a drop of around 78%. That sounds pretty disastrous, and is one of the reasons given for the impending privatisation of the company.

However, when you start to look more closely at the figures you begin to realise that all is not what it seems. For a start, the company did still make a profit, which is unique among public services. We don’t expect the police to make a profit, or the fire service or the NHS, do we? And I suspect that most of the British public aren’t at all worried if the Royal Mail makes a profit or not, as long as they get their letters delivered on time.

Historically the Royal Mail’s profits were used to subsidise the Post Office which is also an important public service. All of that will change, of course, when the Royal Mail is privatised and the link between the Royal Mail and the Post Office is broken. Once the Royal Mail is privatised, the Post Office will have to go its own way, and don’t be at all surprised when more and more rural post offices start to close, and the post office counter service becomes a small adjunct of Tesco, squeezed between the deli, the electrical counter and the pharmacy.

This shows you the mechanism by which the privatisation agenda operates. It splits a unified service into its constituent parts, hiving off the profitable bits, while keeping the unprofitable bits in the public domain. This is in effect a form of public subsidy. That which can make a profit is given over to the spivs and profiteers of the private sector, while the rest of us carry the can for the bits of the economy that can’t make a profit, thus threatening not only the particular services involved, but also the cohesion and unity of society as a whole.

Many blame the breakdown in Royal Mail profits on the incursion of new technology into the communications market. Or, as the Daily Mirror put it: “Royal Mail profits smashed by competition and Facebook.

This is simply not true. Most of the letters that people sent are still being sent. We might send birthday greetings to people we don’t know very well via Facebook, but how many of you have replaced the Christmas card list with a Facebook list in the last few years? Very few, I would suggest; none but the very young.

When you look at the real reason why profits are down it has virtually nothing to do with Facebook. It has everything to do with the Royal Mail spending vast amounts of money on a so-called modernisationprogramme that simply doesn’t work. £400m was spent on new machinery that actually slows down delivery.

We have two mail deliveries these days, instead of one. One is first thing in the morning, the way it used to be. The second is at about 9.20am in our office, which means full-time workers are now forced to take a break to wait for the lorry. So how is this “modernisation” exactly? By what process is it decided that a new machine which is slower than an old machine is actually more modern, just because you bought it more recently, or that having workers sitting around eating sandwiches is more efficient than having them delivering mail?

Millions more have been spent on a fleet of new vans to replace the bikes the Royal Mail intends to scrap. How crazy is that? To replace the world’s most energy-efficient machine, bar none with the polluting, inefficient internal combustion engine dependent on oil from the war-torn Middle East. To replace a tried and tested method of delivery in use for over 100 years, with an untried and untested method, that, everywhere it has been brought in, has been disastrous, as I’m sure people in a number of towns will testify.

Something very strange is happening here. It takes a radical redefinition of the English language to describe any of this as “modernisation”.

Also we have brand new uniforms. Who on Earth thought of that? Every single postal worker in the UK is being issued with a brand new set of clothes. New shirts, new trousers, new jackets, new caps, new waterproofs. And how much, exactly, did this cost, the refitting of an entire workforce? In this time of austerity and cutbacks, it seems, the Royal Mail judges fashion sense a more important issue than getting the mail delivered on time.

Finally, it is closing down hundreds of local delivery offices all over the country and relocating them to major city centre sites.

All of this is being done in the name of savings. It will cost less to maintain a single centralised office than a number of smaller offices. That’s the theory at least. But is it actually true? I’ve had my calculator out again and I’ve been working it out.

There are 50 workers each in the two offices in our area that are due to close – 100 altogether. It will take about half an hour each way to drive to and from the city. All of this has to be done in work time of course. We’re not counting the journeys each postal worker has to make to get to work and back. So that’s an hour of Royal Mail time spent getting us to and from the start of our rounds. We earn £8.86 an hour, so it will cost the company £886 a day, which is £5,316 a week, or £276,432 a year. Knock off days off and holidays, and the figure still comes in at around £250,000 a year. That’s a quarter of a million pounds spent on just getting the workforce to the start of the round every day.

How is that a “saving” exactly?

What kind of accountant adds a quarter of a million pounds to your wages bill and then describes it as a saving?

This is not to speak of the extra pollution of having hundreds of vans spluttering about during the rush hour or the cost in maintenance, petrol, tax and insurance, of running a fleet of vans. It’s not to speak of the traffic chaos in the city or parking problems around the new joint delivery office. It’s not to speak of the inconvenience for customers of having to travel eight miles to pick up their undelivered mail. According to the Royal Mail’s own figures this will be in the region of 100 a day in each of the two offices. I will leave it up to you to work out the figures on that.

All of this can only lead to one of two conclusions: either Royal Mail management is grossly incompetent, or it is running down the company on purpose, for some end that the rest of us have yet to be informed about.

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