Two decades of government policy made Royal Mail fail
The Tories aim to succeed in privatising Royal Mail where Labour failed. To do that they have had to reverse New Labour’s policy of using regulation to batter Royal Mail, in order to restore it to profitability. The crisis in Royal Mail has always been to a large degree artificial, manufactured by the government to restructure the company for the needs of big business, and prepare it for a selll-off.
1. The DSA swindle
Royal Mail wasn’t in crisis until the postal market was fully opened up to private companies in 2006 – – years before it was required to by EU legislation that the Blair government itself had pushed for – and competition rigged by Labour’s neoliberal regulator, Postcomm. The proof are Royal Mail’s 2005 profit figures, £537million, higher than any year since including this year’s bumper figure, more than halved already by the following year.
With the “downstream access” system (DSA), private multinationals like TNT and UKMail cherrypicked the profitable contracts to collect and sort bulk mail from banks, big companies, councils and government agencies worth billions, before shovelling it into Royal Mail’s delivery network for the “final mile”. Royal Mail was left the unprofitable social mail and huge costs of actually delivering the mail, with rigged prices set by the regulator that ensured it made a loss, forcing it into crisis and restructuring. The losers were the workers and the public, while Royal Mail managers made fat bonuses off of cuts and TNT & Co. cherry-picked the lucrative business and government bulk mail contracts that had previously been collected and sorted by Royal Mail.
Under the Coalition the new regulator Ofcom changed regulations to allow Royal Mail to hike stamp and parcel prices for consumers, and charge more for DSA – now it’s made £80 million off DSA in 2011-12.
2. The pension holiday
The Postal Services Act of EU gave the green light last March, the government took over the company’s pension scheme with its £10 billion deficit. The roots of the deficit in previous governments taking a thirteen year “holiday” from paying into the scheme from 1990-2003. In 2004 the deficit already stood at £2.5 bilion, and the 2008 financial crisis and stock market meltdown did the rest. Debts on this scale made the company unsellable, and the nationalisation of the scheme saves Royal Mail £300 million of contributions a year – a big chunk of the “success” of Royal Mail bosses in supposedly boosting profitability last year. The Tories in the process got to spin a reduction in public sector borrowing, with nearly all the reduction on the previous year due to the transfer of the £28bn in assets of the pension fund to the Treasury.
The Coalition’s “change of heart” on pensions and prices was solely to remove these obstacles to privatisation. [LINK TO OLD ARTICLE https://workerspower.uk/2012/04/countdown-to-royal-mail-privatisation-begins/]
3. Price hikes and closures
Consumers have fared worse under either regime, with thousands of post offices closed, the loss of the second daily delivery, and now huge hikes to stamp price and parcel rates. Ofom lifted restrictions on price hikes, and First class stamps went up 30 percent to 60p and second class up 39 percent to 50p, helping to kill off the unprofitable letters business while slightly increasing revenue. Overall stamp prices have risen by over 100 percent since 2000, when a second class stamp was 19p and first class 26p.
4. The internet means the end of postal services?
Economists, politicians and Royal Mail managers justify the need for efficiency measures like flexibility and cuts to jobs by pointing to falling letter volumes, due to the rise of mobile phones and email. There are three arguments against this. Internet buying has led to parcel traffic rapidly rising, largely offsetting the fall in letters. Even if total mail volumes were falling, the Socialist answer would be to share out the work with no loss of pay – as it is the CWU’s historic policy of the 35 hour work week would mop up any fall in volumes so that it benefit workers not bosses. But the killer argument is the most obvious: TNT and UKMail have been doing just fine, with all the mail contracts they stole from Royal Mail via the DSA system! If Royal Mail had them back it would be immensely profitable, money it could use to lower prices and expand services rather than pay some City of London parasite. More importantly, the economies of scale of a single postal system would be far more efficient than a fragmented mail market like Holland already has, where up to four postal workers in different uniforms visit your house every day to post letters! What to every ordinary person is clearly an example of the “madness of the market” is just “healthy competition” to the thinktank gurus of the free market, their disciples in all three mainstream parties and of course the capitalists who make a pretty penny off it.
The conclusion is clear. Price hikes, nationalising the pension deficit, freeing up Royal Mail’s price – just as Royal Mail’s crisis was manufactured by the government, so correcting these policies – purely to allow privatisation – has removed the company’s artificially created “crisis”.
