The week that was: 15 October 2010

Postal Services Bill approves Royal Mail privatisation, Post Office reform to be explored, and UPS expands Mexican operations… A big hello from Post&Parcel Towers. Before the weekend arrives lets have a look back at the big stories from this week.

We all knew it was a matter of ‘when’, not ‘if’ – and that day finally came on Wednesday when the Postal Services Bill was published. Up to 90% of Royal Mail will be privatised. Business secretary Vince Cable stressed the need for ‘urgent’ private investment. The Bill states that 10% of Royal Mail’s shares would go to its employees, and there would be no upper limit to private investment on the remaining shares. Royal Mail will also be relieved of its “enormous” historic pension deficit by the Government, it was announced. Under the proposals existing regulator, Postcomm, will be replaced by Ofcom, the communications regulator, with the Bill accounting for staff transfers. Cable said: “Royal Mail is in a difficult position – there is no hiding from the facts: mail volumes falling; a multi billion pound pension deficit; less efficiency than its competitors and an urgent need for more capital at a time when there are huge constraints on the public purse. This investment needs to be delivered by the private sector, particularly in light of the huge public sector deficit.” Moya Greene, Royal Mail Group chief executive, said: “Deregulation of the UK postal services market is long overdue and I’m delighted that the government has made it clear that where there is competition, the shackles of regulation should be rapidly removed. It’s simply wrong that this suffocating regulatory approach should apply at all in a competitive market – and that it applies only to Royal Mail, which is the only company able to provide the Universal Service on which so many people depend.” For more information, click here.

The Postal Services Bill also proposed reform at Post Office Ltd. The company could be turned into a mutual body – giving power to staff, subpostmasters and communities. Cable stressed that the company will become a separate business, and will not be sold. There are also no further planned branch closures. He also confirmed that the organisation could adopt a structural setup similar to that of John Lewis or Co-operative Group. He said: “I’m concerned that the current structure of the company is holding the network back. The interests of the central holding company and locally owned branches are not always aligned. So, for example, subpostmasters are pitted against Post Office Ltd when they negotiate annual pay rates. And they fear Post Office Ltd expanding online because they worry it will drive customers away from their stores and that they won’t share in the profits. I want to start a conversation about how it is run in the future, but it seems to me that the Post Office is ideally suited to a John Lewis or Co-operative Group style structure – where employees, sub postmasters and communities get a greater say in how the company is run. This would be the Big Society in action.” Co-operatives UK has been asked to explore options and report back to the government next spring. For more information, click here.