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Blogs

Yes, Royal Mail should be privatised.

12 September 2013

12:36 PM

12 September 2013

12:36 PM

In this morning’s post: enticing offers from McDonald’s, Domino’s pizza, Sainsbury’s a local clothes shop and a children’s charity. Arriving later today: a couriered parcel from Amazon.  That’s often the reality of the modern British postal service. The Royal Mail delivers things you don’t want; private companies deliver the things you do.

Which is one reason why all the arguments citing the fact that Margaret Thatcher – sorry, even Margaret Thatcher – thought privatising the Royal Mail a step too far are cute but utterly irrelevant. It’s a different world now. One in which if things are to stay the same they must change.

And so, on balance, the partial privatisation of Royal Mail is a better idea than not partially privatising it. The choice is between taxpayers funding the reforms and investment Royal Mail requires to compete and secure its future or allowing the market and private investment to do so. The latter seems the better bargain.

Opponents of privatisation may have emotion on their side but that’s about it. True, Royal Mail made an operating profit last year of £400m. But that’s not enough to finance the investment the organisation needs. Moreover, Royal Mail is only in a relatively healthy state because the state – ie, the taxpayer – has bailed the company out to the tune of assuming responsibility for Royal Mail’s £10bn pension deficit. That works out at something close to £400 a head.

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But, but, but, they splutter, what about price increases? What about the universal service? Well, postage rates in Britain are already relatively high. The volume of privately-posted mail fell by 8% last year but revenue increased by 3% thanks to a 33% increase in the cost of stamps. In other words, the very things opponents fear privatisation will bring have happened without privatisation. You cannot sensibly boast that the organisation turns a profit and complain about the increased prices that have helped produce that profit.

And it is not as though privatisation is some eccentric, far-out, policy. Postal services across the globe are changing and Britain’s service is much less innovative than those found in many other european countries. And if Germany and the Netherlands can privatise their postal services  – and make them work – there’s little reason to suppose that doing so in Britain is simply a question of crazy free market ideologues running amok. (And if that were the case then you’d have to include a number of former Labour ministers in their number.)

As for the universal service? Well this too is a shibboleth of dubious merit. That is, there’s little reason – in 2013 – for a six day service. New Zealand Post is preparing to move to delivery just three days a week, for instance. On the other hand Germany and the Netherlands still, I believe, have six day deliveries which suggests that privatisation need not necessarily result in a reduced level of service. (Royal Mail will still be regulated, you know.)

It is not so much a question of private good versus public bad (or vice versa) as finding a way for Royal Mail to make the changes it needs to make in order to have a viable stand-alone future. And that requires making it easier for the company to compete with its rivals. Which in turn is most likely to happen with fresh injections of capital that allow it to diversify and, essentially, subsidise the parts of the service to which customers are most keenly emotionally attached.

 

 

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