Manifesto pledge to hold on to UK Royal Mail set to please Labour loyalists and unions
The Royal Mail is to remain in government hands, Labour's election manifesto will pledge next week in a promise that is likely to be welcomed by party loyalists and trades unions.
Tony Blair has decided that, while competition to open up the postal market should continue as the government brings more private involvement into the running of public services, the Royal Mail itself should remain in state ownership.
The manifesto pledge effectively rules out a partial sell-off of the business, one option that is thought to interest Allan Leighton, its chairman.
There has been persistent speculation that the government might approve a part-privatisation after the general election. However, ministers are in agreement with trades unions, which have argued fiercely against it.
The pledge's inclusion in the manifesto will go some way towards reassuring union leaders who have begun to question the government's commitment on other issues including pensions.
But the promise is controversial. Mr Leighton is believed to have considered some form of privatisation, possibly a minority sell-off raising several billion pounds that could be spent on investment to position the Royal Mail to fight new competitors.
No formal proposals have been drawn up, however, and it is unlikely that Royal Mail would want to take on the challenge of privatisation and fresh competition at the same time.
It has struggled to hit performance targets and has been grappling with a large pension fund deficit. From the beginning of next year, it will face competition in its letters business when the market is liberalised.
Last month, Postcomm, the postal regulator, announced that an industry consultation had provided a clear majority in favour of the speedy introduction of full competition in the postal market.
Partial competition was introduced in January 2003 but was restricted to 30 per cent of the letters market and to companies handling bulk mail. At the time Royal Mail was losing Pounds 1m a day and was in the middle of a painful restructuring programme involving 30,000 job cuts. It has now returned a profit. Lib Dems spending plans, Page 6 Man in the News, Page 11 www.ft.com/ukelection
Right Royal Row
Sunday Telegraph (UK), Sec. City, p 003 04-17-2005
By by ROBERT PESTON CITY EDITOR
THERE'S a “tick tick tick'' emanating from Labour's little red book. It's an unexploded bomb on page 21 of its newly published manifesto, which takes the form of some disingenuous sentences about what a Labour government would do with the Royal Mail.
A few of the words are worth quoting: “We … have no plans to privatise it. Our ambition is to see a publicly owned Royal Mail fully restored to good health … We will review the impact on the Royal Mail of market liberalisation.''
The impression created is that not even a single share in Royal Mail would be sold during the lifetime of the next parliament. And that's deliberate: Tony Blair is desperate to avoid a dispute with trade unions, which oppose a sale of Royal Mail, this side of the general election.
But on close inspection, the words are not quite as clearcut as they seem: the absence of current “plans'' to sell the Royal Mail does not rule out the emergence of such plans some time in the near future. Indeed, although there may not be a present intention to sell the business, the Treasury – which looks as though it could use the few billion quid that a Royal Mail disposal might raise – already sees the case for doing so.
What's more, Allan Leighton, whose energy and imagination have gone some way to reconstructing Royal Mail into a half-decent commercial outfit, would not hang around as chairman for more than a few seconds after any definitive decision was made to retain the business in state hands. Privatisation is absolutely what he and his senior team require.
So a promised post-election review of “market liberalisation'' will carry heavy consequences. If, as would be rational, the Government were to conclude that Royal Mail needed to be set free from public ownership to stand a chance of survival against the onslaught of competitors, there would be – in the words of one minister – an “almighty row.'' And if it were to stupidly decide the opposite, there would also be an “almighty row.''
However, my hunch is that Royal Mail will eventually be privatised. But the weasel words in the manifesto may have the unfortunate consequence of delaying the deal until after a subsequent general election – by which time, Leighton would probably be long gone.
