UK Postal regulator warns off government price control proposals
The postal services regulator has warned the government not to interfere in its fight with Royal Mail over future price controls, in spite of the fact the controls will be crucial in determining the financial health of the state-owned company.
Sarah Chambers, chief executive of Postcomm, said Sir George Bain – who is reviewing Royal Mail’s future for the government – had been told any arbitration between the regulator and the company had by law to be carried out by the Competition Commission.
“The discussions we’ve had with Sir George have made it clearer what he’s not going to be doing – he’s not trying to determine our price control or somehow act as an arbitrator,” Ms Chambers told the Financial Times. Asked if Sir George was acting as a go-between, she said: “I think at the beginning that might have been the way they saw it but we made it clear that was not as we saw it.”
The regulator’s determination to bar ministers from weighing into the bitter pricing battle will exacerbate uncertainty about the government’s plans for the postal operator.
Royal Mail is lobbying its sole shareholder Alan Johnson, the trade and industry secretary, to allow the transfer of about 20 per cent of its shares to staff – a politically contentious move that some Labour backbenchers have condemned as back-door privatisation.
The company is also seeking urgent government help to deal with its Pounds 4bn pensions deficit, which has made it technically insolvent, before the onset of full market competition on January 1 next year.
Mr Johnson appointed Sir George, former chairman of the Low Pay Commission, in July “to support me in working on Royal Mail issues”. His remit and deadline have not been publicly disclosed.
The Department of Trade and Industry said yesterday Sir George’s “main focus is the working relationships between Royal Mail and its stakeholders to make sure it’s properly placed to face the challenges of full liberalisation”.
This broad brief overlaps with the regulator’s remit, not least as Royal Mail is arguing loudly – and very publicly – that Postcomm’s proposed controls would severely curtail its ability to cope with full competition.
Ms Chambers said it was likely Sir George would contribute to the consultation on the controls, which are due to be finalised next month: “My guess is he may well come up with some sort of thoughts before the end of our proposals, which we will take into account.”
The regulatory process and the government’s review are meant to be running in parallel, since both could significantly affect Royal Mail’s profitability balance sheet.
But the regulator, and indeed the company and other interested parties, appear unclear what exactly Mr Johnson’s review entails. “I don’t think any of us know what they’re going to do . . . it’s not entirely clear what (Sir George’s) locus and focus is,” Ms Chambers said.
Asked about the regulator’s reaction when the industry secretary ann-ounced the government review, she admitted: “we thought it was a bit odd at first, we weren’t entirely sure what was going on”. But she said: “In an atmosphere which is otherwise rather highly charged. . .he’s quite a nice, calming influence and as long as it’s just that, we’re happy.”
Ms Chambers confirmed Sir George was looking at the “question of the (pensions) deficit and the various ways it might be dealt with” as well as issues such as employee share ownership schemes.
