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.
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.
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