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Thursday, 20 May 2010

Cable plans to “privatise Royal Mail”

So says today’s Guardian, which reports that Business Secretary Vince Cable is determined to restructure Royal Mail, which he believes is currently uncompetitive, and sell off sections of the network to private operators.

The detail of Cable’s plan has not yet been confirmed but his aims are relatively easy to follow and are not as controversial as is being presented. Given the scale of Royal Mail’s pensions deficit and Royal Mail’s lack of competitiveness in a more liberalised postal market, certain changes will have to be made.

What the Liberal Democrats promoted in their manifesto was this: to sell 49 per cent of Royal Mail “to create funds for investment”. The other 51 per cent “will be divided between an employee trust and the government”. This is an attempt to ensure the long-term future of the Post Office and is a far cry from the Thatcherite sell-offs of the 1980s. In fact, for traditional liberals, there is more than a hint of Grimondite thinking in this approach.

The CWU union is likely to oppose any such move forward, and there has been the normal, tiresome reaction within sections of the media about the Lib Dems having “sold out” and reversed their position. Such complaints are not only unjustified but factually erroneous. The Lib Dems have historically promoted employee ownership (or part ownership) and have never been committed to 100 per cent state ownership of public services. Furthermore, what such complainants fail to observe is that a Conservative government would have “adopted a straightforward sell off of Royal Mail” according to the Guardian – so rather than having “sold out” what has actually happened is that the Lib Dems have successfully managed to imbue government policy with a liberal outlook.

There should be no doubt that modernisation is necessary. While Royal Mail is clearly a historical institution of which the country has been proud, it can not survive on nostalgia. Largely due to changes in the way we communicate, Royal Mail estimates that its business is in decline and that the amount of mail it delivers is falling by 10 per cent annually. It also has a £6.8 billion pensions deficit, a problem which do date has found no practical solution.

The Post Office Network is being affected by significant changes which can not be reversed. What is needed therefore are imaginative, creative and realistic ideas as to how Royal Mail can evolve to meet these challenges. What is perhaps not needed are entrenched ideological positions and sensationalist headlines from the likes of the Guardian.

Tim Farron MP, in an otherwise good speech at party conference last year, embarrassingly said the solution to the problems facing Royal Mail was to "invest hundreds of millions of pounds". I’m not a huge fan of the populist approach, especially when it involves "let's throw money at public services" types of solution. But he was right to a point - Royal Mail requires significant investment to make it work. My own vision for Royal Mail would be to enable it to offer a wider range of financial services as part of a longer-term plan at ensuring the sustainability of Royal Mail and rural Post Office branches, but the question is how politicians positively empower the service to provide for the changing needs of British society without entering into an acrimonious battle with the CWU. Cable will be more than aware of the struggle Peter Mandelson had last year when he proposed a similar (but not quite as progressively liberal) plan to sell off 49 per cent of Royal Mail. He will surely want to avoid any confrontation with the CWU that would both damage Royal Mail and make it unattractive to potential investors, although given the CWU’s position it is unlikely to accept Cable’s proposals easily.

The problems affecting Royal Mail are not unique to our own postal service. The US Postal Service ended its third quarter in 2009 with a net loss of $2.4billion. Latvian Post claims that mail volume has fallen by 41 per cent and as a result has introduced urgent measures to revise employees' salaries so that they are more performance-related. Even Deutsche Post has been suffering, and has announced that it is to close all Post Offices it operates without a retail partner - this in practice means about 500 post office closures.

The reason I highlight this is to demonstrate the global nature of the problem. Postal administrations across the world are having to take action to ensure the future of their mail services. Royal Mail, in contrast to the above, actually made a significant profit in the last financial year, with the main letters and packages unit making £58million. This gives Royal Mail an advantage in putting into place a genuinely modern programme which will create a fit-for-purpose Post Office network, involves its employees to a greater degree in facilitating change and provides a valuable service to local communities.

The Lib Dem proposals provide a key means of tackling some of Royal Mail's problems and would enable communities to be empowered and assisted to take control of their Post Offices, reform of the Post Office structure and provide a wider range of services. Tim Farron’s “hundreds of millions of pounds” must come from somewhere.

Unfortunately, the historic narrow debate about the future of Royal Mail means that Cable’s constructive ideas are written off as Thatcherite privatisation. What Cable understands is that bureaucratic, centralised control of a monolithic Post Office is unworkable and that the service must evolve to meet the communication needs of today’s society. As a liberal, I deplore both the Tories’ approach (which would have been wholesale privatisation) and the traditional socialist attitude towards public services which results in uncompetitive and uncreative public services being propped up at significant cost by the taxpayer. Vince Cable’s vision is one which will responsibly ensure that our Post Office network has a real future and will work in the interests of the public. It should be applauded, not derided.

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