Postal service shake-up plan goes 'too far'
Radical proposals from Postcomm to shake up postal services with more competition go “too far”, ministers believe, and risk crippling Consignia’s own attempts to modernise.
Although they intend to stay out of the row between the company and the independent regulator, ministers say the recommendation to open up the market for bulk business mail within six weeks is “excessive”.
The signs of growing private concern within the government will strain its public attempts to distance itself from the troubled former Royal Mail group.
The Department of Trade and Industry has consistently claimed that details about how quickly Consignia’s monopoly should end are best left to the independent regulator. Nevertheless, Postcomm’s plan to allow immediate competition in its most lucrative market – bulk business mail – has led to fierce lobbying by unions and management who fear it will threaten Consignia’s ability to subsidise a universal service.
Fearing a public backlash if residential services suffer further, the government hopes a compromise can be found. Direct intervention from ministers in the dispute is tricky as it was Labour that set up the new regime for the Post Office during the last parliament. Ministers feel they cannot publicly question the judgment of the regulator they created.
Postcomm said it had seen no evidence of a government “whispering campaign” but said ministers were welcome to make their views known during a three-week consultation period. Privately, the regulator is determined its proposals are not knocked off course and is thought unlikely to change its mind.
Under Labour’s plans, the Post Office was granted greater commercial freedom in exchange for the introduction of greater competition.
The move was criticised by opposition parties at the time for shying away from full privatisation. It was a result of a row between Gordon Brown, chancellor, and Peter Mandelson, then trade and industry secretary, who disagreed on the future of the Post Office.
Ministers thought they had done enough to protect Consignia from competitors’ cherry-picking the most profitable parts of the business by telling Postcomm its primary duty was to maintain the universal postal service.
Following Postcomm’s recommendations on bulk business post last month, the government reminded the regulator that this must be its top priority.
However, there is little sympathy for Consignia management in government circles. Ministers think the company, losing Pounds 1m a day, has failed to take advantage of its new commercial freedoms and prepare properly for increased competition. www.ft.com/consignia
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