Royal Mail to be privatised

Royal Mail is to be privatised or sold, the UK government has announced. Business secretary Vince Cable made the admission after receiving updated recommendations from businessman Richard Hooper.

Controversial plans to privatise Royal Mail were originally floated by the previous Labour Government last year, but former business secretary Lord Mandelson put the move on hold due to the turbulent economic climate.

Now the coalition government will push ahead with the strategy after Hooper’s latest report highlighted the need for ‘urgent action” – stating that the universal postal service can only be maintained by an injection from the private sector.

Cable said: “Royal Mail is facing a combination of potentially lethal challenges – falling mail volumes, low investment, not enough efficiency and a dire pension position.

“We will come forward with new legislation in the autumn. It will draw heavily on Hooper’s analysis and recommendations and the government’s wider objectives, including the need for employees to have a real stake in the future of the business.”

The Communication Workers Union (CWU) condemned the plans and said it will fight the “politically motivated” move by all means. The Union said privatisation would devastate the postal service and lead to higher postal charges.

Billy Hayes, CWU general secretary, said: “Privatisation is old politics. It’s the failed politics of history which brought disruption to Britain’s utilities and railways and astronomical prices for consumers. Dangerously in this case, we fear the government may also be plotting to seize the pension assets.

“Privatisation would be devastating for Royal Mail and the whole country’s postal services. The universal service has been a key part of the UK post for 170 years but because it isn’t the profitable element of mail, the privatisation will put it at risk.”

Dave Ward, CWU deputy general secretary, added: “Everyone’s a loser if you privatise the Royal Mail. Jobs and services will suffer and customers will see prices soar.

“We’ve put in place a detailed and fully funded modernisation programme which is dramatically transforming Royal Mail. Why does the government want to threaten the stability and capital of this programme when it’s proving a major success?”

Hooper’s latest 50-page report, which follows-up on 2008’s original, proposes that the government should take over the company’s £8bn pension deficit to relieve the national operator.

Hooper said: “The introduction of private sector capital is by itself far from sufficient to secure the future of the universal postal service. Its future depends just as much on resolving the closely connected issues of the pension deficit and the need to transform postal regulation.”

The coalition government is also said to be supporting Hooper’s proposal that staff should be given a stake in the company after its privatisation or sale. “It is important that any future employee ownership scheme should be taken forward with the aim of achieving the culture change that is needed within Royal Mail. If it does drive culture change, employee shares could be a powerful force in supporting the company’s modernisation and future success,” Hooper added.

In response to the Hooper report, Nick Wells, CEO of TNT Post, called for tougher handling of Royal Mail affairs by the necessary regulators.

“A strong postal regulator is essential to counter the monopolistic strength of Royal Mail. Postcomm has done a reasonable job so far, but it has not been tough enough on Royal Mail on some issues that will enable true competition to take place in the UK.

“It is important that the proposed new regulator, Ofcom, is firm and fair and has the detailed market knowledge and expertise necessary to supervise the currently monopolistic postal market,” Wells added.

What are your thoughts on the plans? Would privatisation prove to be a positive or negative move? Please comment below…