The Post Office will struggle to escape its woes while a state monopoly
THE IMMEDIATE cause of the Post Office's troubles is poor management. This much was admitted with his usual candour by Allan Leighton, the new chairman, as he unveiled his strategy for saving the business over the next three years.
The plan contains many of the elements needed to turn the Post Office round: cutting thousands of jobs (although yesterday's figure of 17,000 is, in fact, lower than most estimates of what is required); ditching the chief executive, John Roberts, who must take responsibility for the mistakes of recent years, and whose departure will allow a shake-up of the senior management; and scrapping the Consignia name, one of the most disastrous rebranding exercises in modern corporate history.
All this is unlikely to be enough, however, unless the underlying cause of management failure is solved. That cause is the Post Office's monopoly.
Workforce and unions must notmake the mistake of blaming the problems on supposedly unfair competition from private-sector rivals. The truth is that the Post Office is still largely protected from competition, and the calamity of yesterday's results was largely the product of its own making. It cannot blame the e-mail revolution; that destroys the careers of political advisers, not postal workers. Volumes of what internet disciples deride as snail-mail have continued to rise. In the growing market for letter post, the Post Office is the only player, and it also holds a dominant position in the growing but more competitive parcels market.
The context of the present disaster is the attempt by Peter Mandelson, when he was Secretary of State for Trade and Industry, to make the Post Office behave like a private-sector company while keeping it state-owned. Giving it "more commercial freedom" was the rubric, but it could not work. An organisation is either commercially free – albeit regulated – or not. The Post Office is not, and the consequences are now returning to the hen house.
The argument against privatising the Post Office rests on a combination of sentiment and muddled economics. But sentiment will not pay for the pounds 2bn that the taxpayer has to stump up for its losses. Nor will it pay for the present density of sub-post offices in urban areas, which is to be thinned.
Then the economic argument against privatisation is that the post is a "natural monopoly", because it would be silly to have two different- coloured pillar boxes on street corners. But gas, electricity and telephones were said to be natural monopolies, and it is not an argument that has stopped the Germans or the Dutch from successfully privatising their postal services.
Of course, the public service obligation, to collect from all boxes and deliver to every address in the country at a fixed price, is important. But it can be defined and subsidised. Most of the Post Office's business – as opposed to that of the former Railtrack – is potentially profitable. Especially if the regulator agrees to Mr Leighton's request for a 1p rise in the price of first- and second-class stamps.
Mr Leighton is doing the new broom, and doing it well: focusing on core business ("we collect mail, we sort mail, we deliver mail and we retail"); adopting a year-zero approach to getting all the bad news out of the way; and remotivating the work force (as much as that is possible at the same time as sacking thousands of them).
But his brave reforms risk running into the sand unless the Post Office is exposed to the rigours of competition. Whether it is privatised as a regulated monopoly, like the Dutch and German postal services, or broken up matters less than sticking to the principle of the regulator's target of achieving full competition by 2007.
