Monday, March 06, 2006

Privatising the Royal Mail

This motion we passed in Harrogate was not clever, but it wasn't a straight privatisation either. Mind you, not that is matters - the media and the other parties will talk endlessly about privatisation in any case.

I can understand the desire to raise some large chunk of money to try to save local post offices, but there are two essential weaknesses in selling off a minority shareholding in the Royal Mail to do so:
  1. The sell-off gets in capital money, not revenue, and the Post Office network needs money every year, not a one-off infusion of cash.
  2. Either the minority shareholding will mean that the Royal Mail is a commercial profit-taking business, in which case we might as well have privatised it in the first place, or the co-operative/state sector 51% will be able to resist short-term profit-taking pressures, in which case the shares won't be worth anything and we won't raise the money we want to.
What we should have proposed is to turn the Royal Mail into a third sector public-interest corporation. Whether that should be a workers' co-operative, a customers' co-operative, a trust or some new legal status, either created specifically for the purpose, or made generally available to other third-sector corporations is the sort of question that the high-powered working group should have been working on. But there are too many economists and financiers on this group for me to regard the idea that 51% is still state/co-operative owned as anything other than an attempt to convince conference representatives into supporting privatisation without realising that is what they were doing.

If we feel that an injection of cash from the Royal Mail will turn the Post Office network back into a profitable business, then bonds could be issued on the open market on behalf of the Royal Mail corporation before it is separated from the public sector, with that money turned over to the Post Office. If a more long-term revenue stream is wanted, then give a chunk of the RM shares to the PO – that would create a long-term stream of revenue. Obviously, if the money is to be directed to unprofitable sub-post-offices, then it would need to be done through a trust mechanism, rather than directly to the top-line of POCL.


Joe Otten said...

The revenue/capital objection was made during the conference debate. But I think it is a little unfair. It wasn't suggested that the proceeds of the sale would support post office revenues - those revenues would be supported by increasing the range of services the post offices could offer. Both government services, and those of rival delivery companies.

The proceeds of the sale would go towards capital investment in post offices, and other non-revenue support that makes the new revenues possible.

Your second objection is that the proposed ownership model is uncompelling. I must say I find the idea of devising a brand new ownership model even less compelling. Royal Mail must be able to compete in a deregulated delivery market. That's not the sort of thing that the 'third sector' is for.

Richard Gadsden said...

Actually, my objection is that we shouldn't pretend we aren't privatising it when we are.