Lib Dem Business Secretary Vince Cable has confirmed that the Tory-led Coalition will aim to float Royal Mail on the London Stock Exchange this Autumn, saying the public sector postal service was on an “irreversible course” of privatisation. His announcement in parliament on 10 July is the latest milestone in the government’s fast track privatisation of Royal Mail, launched in the Spring, If it goes through it will be the biggest privatisation in twenty years, fetching up to £3 billion.
For the Tories privatisation ticks all the boxes in their strategy to impose austerity and flatten the trade union movement in the process:
A 9 July YouGov poll showed 67 per cent of the public oppose the sale. But that won’t stop the Tories, the only thing that can stop the sell-off is an all-out strike against privatisation by postal workers, supported by the entire trade union and anti-cuts movement.
With Royal Mail profits doubled in the last year to £403 million, and the stock markets fat from quantitative easing, Tory Business Minister Michael Fallon announced the start of the tendering process in late April. The rightwing Telegraph newspaper gloated at the speed of the assault after previous governments’ failed attempts:
“After years of procrastination, false starts and ideological battles, this looks very much like a blitzkrieg strategy. The strategy will be to set the terms of the debate so that privatisation is seen as inevitable, emasculating the campaign against it”
Seven big investment banks led by Goldman Sachs – the same ones at the heart of the 2008 financial meltdown and subsequent bailout – have been brought in by the government to get their cut and oversee the sell-off and earn a cool £30 million in the process.
A pro-business George Osborne-clone, Fallon will try every dirty trick in the book – now he’s accusing Royal Mail of going “cap-in-hand to ministers” whenever it needs investment funds, taking money away from schools and hospitals – a bit unbelievable given the billions the postal service contributed to government coffers over the years, not to mention the government’s decision to cut taxes on the rich.
Fallon’s strategy to deal with the union is the carrot and stick. He has said his preferred sales option is an IPO, selling shares on the stock market. Cable has confirmed that one tenth of these, worth potentially £300,000, would be given to Royal Mail staff possibly for free, in line with 2011 Postal Services Act, which opened the way to privatisation. They would be first in the queue to buy more, though they cannot sell shares for at least three years and any dividends would come out of huge cuts to jobs and conditions. The Tories are dangling a bribe in front of postal workers, out of fear that industrial action could upset the privatisation bandwagon.
However if postal workers strike and damage a stock market sell-off, he has threatened a sale to private investors such as slash and burn private equity funds. Royal Mail has joined in, informing staff that if there is no stock market sell-off, there will be no free shares. Already institutional investors like big pension funds have stated that that they’re not interested, citing possible “instability” from a workforce hostile to privatisation that would hit profits.
Unfortunately that threat has not materialised, and the analogy of giant tanks rolling over easy terrain and weak resistance is a powerful one, thanks to the CWU leadership. Last December the CWU leadership launched a belated, lacklustre campaign with the usual petitions, postcards, lobbies and Early Day Motions, a repeat of the failed campaign against the 2011 Postal Services Bill itself. This has been followed by CWU tops backing down on its threat to boycott mail put through Royal Mail’s delivery network by private sector rivals like TNT and UK Mail, after a 19 June court injunction was granted to Royal Mail, only a day after the huge vote supporting a boycott was announced.
This inaction has only made the Coalition and Royal Mail bosses more aggressive. The company refused to agree a pay rise for postal workers, now it is threatening to pull out of the pension scheme if workers don’t accept cuts. CWU leaders have been forced, very late in the day, to threaten a national strike – it will be up to postal workers to force them to see that they follow through.
The Coalition offensive from above, relaxing regulations to allow Royal Mail to make a profit has been coordinated with the restructuring process pushed by Royal Mail tops. That’s no surprise, Moya Greene was appointed Chief Executive of Royal Mail by the Tories in 2010 to groom the company for privatisation.
The Business Transformation agreement signed off with the CWU in 2010 has driven through flexibility speedups, job losses and flogging off the real estate from massive office closures. The balance sheet of the union agreeing to “modernisation” – which has led directly to privatisation – is bleak. Sixteen mail centres have been closed – nearly a third – and scores of delivery offices, while 50,000 jobs have been lost over the last decade. Below inflation pay rises and lump sums in the BT agreement have been little consolation for workers.
The latest profit figures have seen Greene boast that “”Our strategy is delivering”. Profits rose from £152 million for 2011-2012 to £403 million for the last year. The boost came mainly at the core of Royal Mail’s national delivery operation, letters and parcels, rising from £33 million to £294 million. The rise in “door to door” junkmail has played a role, while the rise in internet shopping and parcels growth has offset the decline in letters. But the fact is, without the government taking on the pension scheme with its deficit and allowing Royal Mail to raise its prices, the company would still be in the red, crushed by unfair competition. Still it does beg an obvious uncomfortable question to ask the privatisers: why sell Royal Mail at all if it can actually make a profit in the public sector?
Greene has openly pushed privatisation from the start in the company’s staff magazine Courier, arguing the company needed to tap private finance in order to invest and become more efficient, ie make more profit. The company has unleashed a unprecedented propaganda blitz on the workforce via Courier and at times nearly weekly leaflets and mailings to workers hammering home the benefits of privatisation. With over ninety per cent voting in the consultative ballot against privatisation and to boycott the rival companies’ downstream access mail, that clearly didn’t work!
Now Greene has taken it on herself to tour North America and Europe touting for investors to buy into Royal Mail, and Royal Mail is negotiating a £1.4 billion loan with private banks before privatisation even goes through, locking in debt and the commercial pressures that come with it.
Meanwhile City economists insist Royal Mail’s profits still aren’t enough, with profit margins a mere 4.7 per cent, while rival Deutschepost’s figure is 8.6 per cent. With limits to how high stamp prices can go in a competitive market and investment can hike productivity after a decade of efficiency cuts, rival companies state openly that they are eager for privatisation, which will help them to force Royal Mail to tackle its remaining “inefficiencies” – the higher wages and conditions of its workers.
To do just that, a new front has been opened, threatening the whole postal service, with TNT starting a rival delivery service in West London, with plans to roll it out to city centres across Britain. TNT’s new initiative could see half the postal market from top to bottom go private even without Royal Mail privatisation. It will create massive pressure in the future to cut back on delivery days (the Netherlands and US are moving to a five day delivery) or unprofitable rural deliveries. The Tories solemnly pledge to defend the USO – today, when they need to sell privatisation to the public – it will be a different story once it’s a done deal. After all their track record on the NHS shows they can’t be trusted with any of our public services.
Unlike most privatisations, the Tories haven’t even bothered to mention creating a better service or more choice for consumers. With rising stamp prices and post office closures, the results are so obviously the opposite.
The most immediate threat to the privatisation bandwagon is the workforce itself. The Tories and Royal Mail bosses are terrified that serious national industrial action will take off and derail a sell off. They are banking on the tamed CWU leaders caving in as they have done on the boycott and as they did in the 2007 and 2009 strikes.
The key question is whether postal workers can “rise like lions” and throw off the strategy of cooperating with modernisation that has shackled them to cuts and brought the postal service to the brink of privatisation. What is needed is not a “tactical” strike aimed at winning some concessions on pay and conditions, but an all-out strategic struggle to defeat it. The CWU leaders won’t do this. The rank and file need to get organised and fight for an all-out strike, a real challenge to the Tories that could rally the whole trade union and anticuts movement behind it.
