Natural Monopoly - Roy Mayall

It appears that the Royal Mail is to be sold off. According to the Daily Mail, it will be transformed into a ‘John Lewis-style trust’ by the autumn. John Lewis is a chain of department stores whose employees are also partners. The employees own shares, but these are held in trust, so cannot be sold off when the employee leaves the company. John Lewis employees earn a dividend in addition to their wages and are allowed some say in the running of the company.

The idea is that a similar scheme will give postal workers an incentive to help improve the Royal Mail’s performance. Except that the government has said that its intention is to ensure the Royal Mail ‘benefits from private sector capital and disciplines’. The private sector will only inject capital on the expectation of returns. So it won’t be a ‘John Lewis-style partnership’. Part of it will be part-owned by postal workers, but staff will be subject to ‘private sector discipline’, meaning attempts to cut costs in order to maximise profit.

The Dutch postal company TNT and the private equity firm CVC Capital Partners, which owns a Belgian postal company, are already sniffing about in anticipation of the hoped-for returns. TNT is currently involved in drastic staff reductions and cost-cutting exercises in its domestic market.

The usual excuse that is reeled out every time anyone brings up the idea of privatisation is the huge £10 billion pension deficit which the company has run up in the last 20 years or so. But no private sector company will take this on. So in order to create an incentive to the private sector, the government will have to agree to fund it. Whether the Royal Mail is in the public sector or the private sector, the pensions deficit will remain a public liability.

Doesn’t anyone ever get the feeling that we are being ever so slightly conned here? The government brings in private sector bosses, such as Allan Leighton and Adam Crozier, to run the Royal Mail. They run it down while alienating staff and ignoring the needs of the public. The state then turns to the private sector for a solution. The government starves an industry of funds while it is in the public sector, but then quietly promises to reinstate a public sector subsidy once it is privatised.

That the ConDem coalition government is promising a 100 per cent sell-off, while the previous Labour administration only proposed a partial privatisation, shouldn’t blind us to the fact that privatisation has always been the agenda. Previous governments just didn’t have the nerve. The company was always too popular with the public. This was entirely down to its workforce who would often go out of their way to help their customers. It has taken years of careful preparation and a sustained attack on the workforce to make it ripe for the selling.

But there’s a reason the Post Office has been publicly owned since its creation in 1660. It’s what’s known as a ‘natural monopoly’: you can’t have two sets of postal workers trudging the same streets, or two post boxes on the same street corner. It just wouldn’t work. Not only would it be absurd, but no private company would take it on. The monopoly also allows profitable parts of the business to subsidise the much more costly deliveries to rural and outlying communities. The universal service is dependent on this. Privatising the Royal Mail will not change its monopoly status. It will just change it from a public to a private monopoly, unaccountable to the public but subsidised by public money.

Originally published on Roy Mayall's blog.