Post haste

The sight of massed ranks of public sector workers and Labour backbenchers furiously protesting against a threat of privatisation surely belongs to a past era. Today’s major political trend is in quite the opposite direction, towards nationalisation of banks, and interventions by government in industry to save jobs and avert financial catastrophe. It seems jarringly out of tune with the times for a cabinet minister to be calling for the Royal Mail, a public sector institution woven into the very fabric of national life, to be exposed to the vicissitudes of the market and the profit motives of private investors — possibly foreigners, to boot.

But that is what the business secretary, Lord Mandelson, is proposing: a partial sell-off which is likely to involve partnership with a European postal operator. He has provoked rebellion in his party and division among his Cabinet colleagues. What his opponents refuse to acknowledge, however, is that privatisation is now the only way the British postal service can be saved from atrophying to the point at which it is no longer capable of satisfactorily fulfilling any part of its national role.

Long starved of adequate investment, poorly managed and held to ransom by a militant workforce, the Royal Mail has already lost much of the public respect it once held. The obligation to provide universal fixed-price delivery to every address in the land is a mighty burden, but the Royal Mail long since ceased to rise to the challenge. Our post arrives later and later, ‘first class’ means no such thing, tens of millions of letters never arrive at all. As the service has deteriorated, so its once-captive customer base has come to rely more and more on email and text-messaging, or on the private-sector parcel and bulk-postal operators that have nibbled away at the Royal Mail’s monopoly. Meanwhile village post offices and sub post offices, which play vital roles in small communities, continue to be axed in a shameful attempt to squeeze costs out of the fringes of the network that cannot be chopped from its centre for fear of the unions’ response.

All this has been happening for many years, and the latest report recommending radical action — by Richard Hooper, the former Ofcom deputy chairman — will only have repeated much of what was said three years ago by Sir George Bain, whose findings were suppressed by ministers with less appetite for a fight than Lord Mandelson. Now the fight is in the open, with the Communication Workers’ Union threatening to withdraw funding from the Labour party, and the trustees of the Royal Mail pension fund — deployed with somewhat less than the business secretary’s usual subtlety — declaring they cannot meet their obligations if nothing is done to restore profitability to an entity whose finances are in a downward spiral.

The Left’s fury — fallen minister Peter Hain to the fore — is wrapped in rhetoric about the Royal Mail as an essential public service, but is really all to do with the threat of job losses in an operation which has steadfastly resisted the kind of modernisation that transformed its continental peers. The irony is that the Royal Mail’s two potential partners, TNT of the Netherlands and Deutsche Post World Net of Germany, are both examples of how the British model of privatisation was successfully adapted elsewhere. Both passed into private-sector ownership with no perceived damage to the services they offer; on the contrary, they have blossomed into profitable and sophisticated international logistics businesses.

In the case of the Dutch — frontrunners to take a stake in the Royal Mail — this success is captured in the company’s branding: TNT was the name of the Australian parcel business with which the privatised Dutch post office merged in 1996, but four years later the prefix ‘Royal’ was added to the name of the domestic service, now Royal TNT Post, to mark its bicentenary. Thus reassuring continuity was achieved at home, alongside global competitiveness abroad.

That is precisely what the Royal Mail should aspire to, but it cannot hope to achieve either element of that formula merely by tinkering with the status quo, pleading with the unions to co-operate, and blaming the internet and mobile telephony for stealing the bread and butter of daily communication. The internet, after all, has created an enormous volume of parcel traffic for online shoppers — and the Royal Mail has failed to match the fast, flexible delivery services offered by private-sector players. Likewise, it has failed to exploit the customer-facing potential of its town-centre post offices — Lord Mandelson’s suggestion of creating a ‘people’s bank’ network is a belated effort to introduce fresh thinking. And it missed the commercial property boom that might have allowed it profitably to redevelop Victorian inner-city sorting-office sites and replace them with state-of-the-art automated facilities (employing smaller, less truculent workforces) elsewhere.

It will be extraordinarily difficult for the management of the Royal Mail — either the present team led by Adam Crozier, who seems to have achieved next to nothing, or others drafted in to replace them — to bring about positive change without privatisation. Lord Mandelson is talking only of a 30 per cent sell-off, which would bring in the expertise of a private-sector partner but would still leave the Royal Mail a hostage to politics and union pressure. Full privatisation along Dutch or German lines must be the ultimate objective, even if it cannot be stated aloud before the next election. Shifting the post office off the government’s balance sheet, and into the 21st century, can only be to the nation’s benefit.