Royal Mail and La Poste Privatisation Plans

Both the UK and France are looking at the possibility of part-privatisation of their state-owned postal services although postal unions and some MPs are likely to resist any attempts to privatise, in part or in whole.

In the UK, there is growing concern that the funding of the universal service is being undermined by what some see as an over-zealous drive to introduce competition into the market. The CWU (communication workers union), which repesents the majority of postal workers at Royal Mail, has already hinted at the possible withdrawal of it’s contribution to Labour Party funds if the present government continues to back what it describes as a ‘slash and burn’ policy on postal reform. The union’s present view is that Royal Mail is being run down as an excuse to privatise it.

The European Commission has taken a rather ‘loose’ approach to deciding how the USO could be maintained in a deregulated European postal market by saying that it was up to individual countries to decide how it should be funded. Some argue that in a somewhat grand plan to liberalise postal services quickly, it has effectively ‘passed the buck’ on the USO. Last year saw demonstrations in Berlin from unions concerned about the USO and the impact on jobs.

Neither the UK or France has made any firm committment to privatisation yet, but the idea is likely to find favour with both governments as a way to ease problems in a more competitive market. Directors at France’s La Poste, are said to be keen on the idea of an IPO that would involve 20 percent of the company’s total capital, said to be worth around 10 billion euros. Both the UK and France are looking at the possibility of part-privatisation of their state-owned postal services although postal unions and some MPs are likely to resist any attempts to privatise, in part or in whole.

In the UK, there is growing concern that the funding of the universal service is being undermined by what some see as an over-zealous drive to introduce competition into the market. The CWU (communication workers union), which repesents the majority of postal workers at Royal Mail, has already hinted at the possible withdrawal of it's contribution to Labour Party funds if the present government continues to back what it describes as a 'slash and burn' policy on postal reform. The union's present view is that Royal Mail is being run down as an excuse to privatise it.

The CWU's submission to the Government review of postal liberalisation said that:

"The union campaigned for a review because we recognised from the outset the problems liberalisation and the system of regulation would bring to Royal Mail and the future of the universal service. In our response to Postcomm’s 2001 consultation document on Promoting Effective Competition in Postal Services we argued that “liberalisation presents a serious threat to the provision of a universal service at a uniform tariff”. We argued that the form and timing of competition introduced by Postcomm would create serious imbalances in the UK and European postal markets which would adversely impact on Royal Mail’s revenues and ultimately threaten its long term commercial viability and its ability to support the universal service."

An independent review earlier this year highlighted a substantial loss being made on the universal service obligation (USO) in the UK and that under present legislation as well as a decline in postal services, the USO was unsustainable.

The European Commission has taken a rather 'loose' approach to deciding how the USO could be maintained in a deregulated European postal market by saying that it was up to individual countries to decide how it should be funded. Some argue that in a somewhat grand plan to liberalise postal services quickly, it has effectively 'passed the buck' on the USO. Last year saw demonstrations in Berlin from unions concerned about the USO and the impact on jobs.

In the UK, responsibility for ensuring the future of the USO falls to Postcomm but critics say that Postcomm has 'shifted the goalposts' several times and more recently, hinted that it might be prudent to scale down present delivery targets, similar to lifting the lid slightly on a pressure cooker.

Neither the UK or France has made any firm committment to privatisation yet, but the idea is likely to find favour with both governments as a way to ease problems in a more competitive market. Directors at France's La Poste, are said to be keen on the idea of an IPO that would involve 20 percent of the company's total capital, said to be worth around 10 billion euros.

Certainly as recently as 2005, the UK government had assured unions it had no plans to privatise Royal Mail but the added commercial pressure from liberalisation and a growing pension deficit has turned the tide on Royal Mail's fortunes over the last two years. Those against the present deregulation plan say that Royal Mail is slowly being shrunk by force rather than allowing Royal Mail to compete on equal terms. Competitors would argue that it wasn't being reduced enough.

What complicates matters for both the UK and France is that unions pay vast sums into party funds and with the UK Labour Party already close to bankruptsy, a sudden withdrawl of contributions could be disastrous. Having made few inroads through direct industrial action at Royal Mail last year, the CWU has now shifted to political pressure, a tactic now finding favour with a growing number of unions. With PM Gordon Brown losing badly in the popularity stakes and the Labour Party in serious trouble financially, any moves to privatise are likely to be slow at best.