BBC BLOGS - Peston's Picks
IN ASSOCIATION WITH
« Previous | Main | Next »

The timebomb under Royal Mail

Robert Peston | 12:26 UK time, Friday, 10 September 2010

Unsurprisingly, Richard Hooper has renewed his call for the Royal Mail to be privatised - and has therefore underwritten the coalition's plans to do just that.

Post box

It would have been extraordinary if the former deputy chairman of Ofcom had said anything else in his update of the review of the postal services sector, which he originally carried out in 2008.


That's not because privatisation is the right answer. Of course my day job requires me to be utterly agnostic about that.

It's just that the conditions that led him to recommend selling off the Royal Mail have not altered in any fundamental way.

For Hooper, privatisation is the logical answer because the letters market is set to shrink for years to come, which makes it increasingly important that Royal Mail becomes more productive and efficient, which requires investment in new kit and the implementation of new working practices, which requires significant investment, which can't come from a cash-strapped public sector.

Hooper is also a fully paid up adherent of the view that modernisation won't happen on an acceptable timetable while politicians have a licence to meddle in Royal Mail's affairs - which for him is another powerful argument for flogging the business.

There are a few numbers in the report that tell quite a tale of the challenges faced by Royal Mail. And for once, I'm going to ignore the de facto debt burden of an £8bn pension fund deficit, since I've banged on enough about that in earlier posts.

Here's the big trend: the average daily mail bag contained 84m letters, packets and parcels in 2005; this year, the national mailbag was 15% lighter, containing just 71m items every day.

And the cause, as if you online readers didn't know, is that e-mails and texts are replacing letters at a far greater rate than the growth of online shopping is expanding the parcels market.

What's more, as Hooper warns in a resonant phrase, the "digitisable mail sector faces a demographic timebomb" - or to put it another way, our kids can't be bothered to send physical thank-you cards and letters, and never will (and if they end up running big companies, they won't bother with mass or bulk communication at a pedestrian's pace).

There's also, he says, an "environmental time bomb", such that growing numbers of companies are embarrassed by the number of trees they're felling for mass mailshots, and are therefore opting for electronic spam over paper junk (which, some would say, sounds like progress).

So Royal Mail expects that the decline in letter traffic to UK addresses will accelerate, predicting a 20% fall over the next five years.

The implication is that this lossmaking business can only return to profit if it improves productivity. And at a time when the construction of many new school buildings (inter alia) is being cancelled and when much of the public sector faces 40% cuts, if the upfront costs of delivering those efficiency gains are not to come from injections of private-sector capital, where will the money come from?

UPDATE 17:57  John Major, as prime minister, gave up trying to sell Royal Mail in the face of opposition from his own MPs.

The last Labour Government faced intense criticism from its backbenches when it tried to privatise part of Royal Mail - and surrendered when it couldn't find a buyer at the right price.

So will it be third time lucky or a trio of flops, now that the Business Secretary in this coalition government, Vince Cable, wants to offload the whole thing to outside interests and staff.

Opposition in parliament may be slightly less of an obstacle than on previous occasions, partly because post office branches - the part of the business which serves the most overtly social function - will stay in state hands.

And, of course, opposition to privatisation from the CWU trade union will resonate rather less with Lib Dems and Tories than it did with Labour - which has been a major beneficiary of CWU donations.

What about the financial obstacles to privatisation?

Well, it would be impossible to sell unless the taxpayer takes on the £8bn net liability in the pension fund - so taxpayers can certainly brace themselves for that.

But even without the pension burden, Royal Mail faces growing competition in a shrinking market, the regulatory system is widely perceived as hobbling it, the business has a record of losses and its history of industrial relations is lamentable.

This won't be the quickest or easiest of privatisations. 

Comments

Page 1 of 2

  • Comment number 1.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 2.

    My person Lesson #1 about the Public Sector value for money:

    In a previous life I was an auditor at a large accountancy firm. One assigment was to audit the London Regional Transport pension scheme. The first thing my line mangaer told me was:

    "this scheme is just like the numerous private company schemes we audit but it had 4x the number of staff".

    I thought he was joking. Until i arrived on the first day to see them all troop in at 9, leave for an hour at lunch and go home at 5. Unbelievably inefficient.

    And that was my first taste of WASTE in resources of puhblic sector.

    Reducing headcount and driving efficiency is the only solution to our fiscal problems. Break down the unions and privatise the ineffcient ones.
    Roytal Mail...

  • Comment number 3.

    Calls for increased investment and productivity to regain profitability are a veil for greasy pole climbing bean counter MBAs to feather their own nests at the expense of the rest of the staff.

    In the absence of innovative leadership, Royal Mail should shrink gracefully, behave frugally and charge fairly.

    Richard Hooper and Ofcom should not flatter themselves they have anything to contribute to this debate. Like all regulators, Ofcom is selling the public down the river over matters such as internet copyright enforcement and should address its own failures rather than meddling in things it doesn't understand.

  • Comment number 4.

    The obvious efficiency is to lower the service level. I suggest Robert you suggest that you invite Evan Davis to discus service levels on your blog following him running a discussion on "The Bottom Line" on this topic. Choice of an appropriate service level and managing expectation is the key to efficient service delivery.

  • Comment number 5.

    But if the post office is privatised a huge surplus will have to be created each year in the form of profit. This is so that the shareholders can receive a dividend and the board be handsomely renumerated. Isn't that rather wasteful? Or am I missing something?

  • Comment number 6.

    "That's not because privatisation is the right answer. Of course my day job requires me to be utterly agnostic about that."

    Mine doesn't, so...

    Privatisation is the right answer.

    Did you a favour, Robert. :)

  • Comment number 7.

    Robert Preston is making clear his political bias in this post.

    There is no fundamental reason why the Royal Mail should remain in public ownership, and the current state of the organisation is a clear example of the damage inflicted on businesses while under Government control.

    Get rid of it; it is the only that the organisation will engage with reality.

  • Comment number 8.

    @1. if you don't have anything clever to say then don't say anything at all.

  • Comment number 9.

    The matter of Royal Mail was never resolved and Peter Mandalson only put it on the back burner because he couldn't get it through with a Labour Government in power.

    The longer it is left unresolved the worse state it will all be in especially with a spiralling pensions deficit.

    Although public opinion would rather it wasn't PART privatised I'm sure they would still prefer that to no Royal Mail at all.

  • Comment number 10.

    I'm not a fan of privatisation, PFI, outsourcing of public services and other private / public ventures at the best of times; seldom has this seemed to be a success (though I am aware of few precious examples). I think the problems with Connaught have provided an apt example of how it can go wrong.

    In effect you're talking about a service (which by its nature will be heavily regulated if it were to be privatised) that requires significant investment (leading to a long wait before return on investment can be seen) which will be subject to heavy cost-cutting (much in the way of job cuts leading to a disgruntled and demoralised workforce) that has a market which has and will continue to shrink (rising costs to meet shortfalls in demand). But atleast the Government wouldn't have to worry about nasty union types quite so much.

    Hope I'm wrong though.

    My crystal ball has revealed to me that whoever was daft enough to take this on in the first instance would find that they'd overestimated what they could extract from it, leading them into administration, and other companies would subsequently come in and provide some of the more viable services leading to a reduction in service for certain aspects of the origingal operations - any of this familiar? Of course, we'd have some painful job cuts, price increases, and cessation of particular services in the run up to this.

  • Comment number 11.

    Rather like British Telecom the opening up of the market to often foreign competition leads to a situation where longer term investment becomes impossible.

    The real answer is not to privatise Royal Mail but to remove the licences from their private competitors giving RM the monopoly it needs to make money. On top of that we then need an RM regulator to ensure UK postal costs are good enough to compete with our industrial competitors.

    The objective has to be the provision of a solid and reliable service to ensure UK plc stays competitive and not to line the pockets of the private sector.

    I would also do the same to the telecomms sector and possibly even merge BT with RM.

  • Comment number 12.

    How long before daily delivery to residential addresses comes to an end? It must happen if the number of staff are to be drastically cut.

    And we start having to collect our post from the nearest RM sorting office (Wherever that may be)?

    I've always enjoyed dealing with the RM. Unlike the other half of the old GPO.

  • Comment number 13.

    > 3. @PacketRat

    We no longer have the time nor the funds to indulge the self interests of the workforce. The failure of the Royal Mail was not of the management, but of a partisan government afraid of offending the unions.

  • Comment number 14.

    Two scenarios with the same results:

    Option 1. Royal mail is part privatised resulting in price increases, cost cutting and lost services. We pay for the profits of the investors.

    Option 2. Royal mail remains in the public ownership less price increases and less cost cutting and retained services. We pay for the losses of the state.

    Its the same result either way.

  • Comment number 15.

    "Unsurprisingly, Richard Hooper has renewed his call for the Royal Mail to be privatised - and has therefore underwritten the coalition's plans to do just that."

    if it looks like fascism, it sounds like fascism, then it's fascism folks.

    Why is a businessman telling the Government what to do? - Is private enterprise the panacea of productive activity?

    Doesn't seem that's the case considering the state of the financial world at the moment - does it?

  • Comment number 16.

    RP: 'Here's the big trend: the average daily mail bag contained 84m letters, packets and parcels in 2005; this year, the national mailbag was 15% lighter, containing just 71m items every day.'
    ------------------------------------------------------------------------
    Seems to me from those figures the business is thriving. Incompetent and oversized, overpaid management, excessive price increases, colossal fuel bills (made worse by taxation) and two years into a severe downturn and 15% smaller volumes suggest the Royal Mail is weathering the storm pretty well.

    Mandelson cited the internet, last year, as the big problem for the Royal Mail for the previous three years, obviously not knowing or forgetting that the internet had been a significant competitor for letter traffic for over a decade.

    If you add that into the mix, I wonder what the real motive is for the sell-off. Avoiding sorting out the Pension Fund? Probably. Raising cash for the Government? Cutting the need for State financial support? If the business has such a grim future, it is unlikely to sell for much and why would anyone buy it?

  • Comment number 17.

    At 12:52pm on 10 Sep 2010, nilihist wrote:
    My person Lesson #1 about the Public Sector value for money:
    In a previous life I was an auditor at a large accountancy firm. One assigment was to audit the London Regional Transport pension scheme. The first thing my line mangaer told me was: "this scheme is just like the numerous private company schemes we audit but it had 4x the number of staff. i arrived on the first day to see them all troop in at 9, leave for an hour at lunch and go home at 5. Unbelievably inefficient.
    And that was my first taste of WASTE in resources of puhblic sector.
    Reducing headcount and driving efficiency is the only solution to our fiscal problems. Break down the unions and privatise the ineffcient ones.
    Roytal Mail...
    Well to be lectured by an accountant about efficiency is an insult to start! He/she suggests the same tired solutions; smash union staff representation, cut wages & destroy the pension scheme the staff have already paid into (with the exception of Executives who are usually awarded huge salary increases & gold plated pensions the size of the GNP of a small nation). The tired old solution that privatisation will solve everything is shown to be a lie when you see companies, large & small declared bankrupt. Many of them are perfectly efficient but have temporary cash flow problems.
    There isn't a private company in the world who will deliver a letter/package at such a reasonable universal rate, i.e. a letter from (say) Northampton to Edinburgh at the same price as to London. He/she says the staff 'troop' in at 9am. take an hour for lunch and leave at 5pm. What's unusual about that? They are largely normal office hours! Only those fortunate enought to earn the sky high salaries or consultancy fees he/she may earn may be willing to put in the extra hours.
    I enquired recently on the price of a small package from the Midlands to the West Country & it was 3 times the price of the Royal Mail. I have ordered an item one afternoon and had it delivered the following day by normal First Class Mail. That took the efficiency of a private company sending the goods out staight away & Royal Mail processing overnight.
    We in the UK take all the Royal Mail trains out of service and put them on the roads. The processing of mail on the move is so much more efficient on long haul distances because it's ready for delivery when it gets to the other end.
    Next time you drive through France and see a yellow flash pass you at 185 mph you will know it's the La Poste TGV delivering mail and parcels to people without cluttering the roads and polluting the environment.
    The inefficiencies of the Royal Mail have for years been (largely) due to incompetant & confrontational management practices.
    And one last thing. If you are so sure of your opinions nilihist, GIVE YOUR REAL NAME!

  • Comment number 18.

    As an outsider:

    The dilemma is: if Royal Mail didn't exist, would there be a pressing need to invent it tomorrow? If so, would it look like the present organisation? Answers to the latter in no more than two letters?

    This has been a labour intensive legacy service or institution which in the good times was milked by successive govts. It does have parts adding more value than others. Belatedly there has been some reform of working practices, and a lot of job losses, but it is hard to see this being more than managing decline.

    Given the competition faced by the Royal Mail, it looks as though the issue for the Exchequer is to find a way to get something for it or parts of it before its too late.

    The worst things: 1. Consignia, what a waste, 2. Junk mail- nobody asked for it or wants it through their door, and it hides the real cost of mail deliveries. Rowland Hill must be spinning like a top in his grave.

  • Comment number 19.

    Privatisation per-se will not solve the problem of the pension scheme. This can only work if you are bribing financiers to make a capital injection now by allowing them to milk what's left of the business in future years.

    In a rational world, It would not matter if the "industry" were declining, as that would not alter the productive capacity of the economy - that is the ability of the economy to provide for people's reasonable needs.

    New technology should make people's lives easier, but it doesn't. Our economic system requires that some people buy what they don't need in order that others can earn a living. So unions will defend jobs to the last, even if they're not productive, because society hasn't worked out a way of sharing the benefits of technological change.

    Thus, in the presence of mass unemployment, we still put pressure upon (ordinary) people to work longer and harder for less; even though this decreases economic activity as a whole and just makes the treadmill more unstable.

    I am not against private enterprise, far from it. But for a sustainable future we need an socially agreed economic strategy based real capital, ie productive capacity, not the fictions of finance. Money should be there not as a commodity, but as an entitlement to consume. Hence the amount of money should be strictly linked to the real productive capacity of an economy, and perhaps its spending power should be time limited, like holiday entitlement. Then we can work out whether pensions are affordable or not.

    Though not in the least a supporter of feudalism, I am rather attracted to the idea of the feudal Japanese "koku" system, where all payments were linked to the expected quantity of the rice harvest. Our own system of finance has no formal link to anything rational at all.

  • Comment number 20.

    Starting with the conservative administration in the 1980’s, successive governments have opted for selling public companies.

    And a variety of political rhetoric has been used to support the idea of ‘privatisation’.

    But why do we need to privatise anything?
    And more to the point, why would we want to?

    One of the reasons often put forward by the pro-privatisation’ group is that services can be more efficiently run and offer a better service.

    Now consider the big ‘privatisations’ such as gas, water, electric, telephone and rail network. And having so considered it, do you believe that the service offered by these companies, are better or worse than before?

    Then the ‘pro-privatisation’ group will advise you it is because the government needs to raise revenue, because of its ever increasing debt burden and the ‘Austerity’ we all must endure.

    But then we don’t actually need to operate on a debt based monetary system.

    So in my view neither argument actually holds up.

    As regards the true meaning of ‘Austerity’ (see the link below)
    http://www.youtube.com/watch?v=jUmQbf1AyA8&feature=related


  • Comment number 21.

    13. At 1:49pm on 10 Sep 2010, Lorentz wrote:
    > 3. @PacketRat
    We no longer have the time nor the funds to indulge the self interests of the workforce. The failure of the Royal Mail was not of the management, but of a partisan government afraid of offending the unions.


    The failure of the Royal Mail or any other business is *entirely* of the management.

    You indulge the self interest of the greasy pole climbing MBA bean counting brigade by refusing to hold them responsible for their failures.

    Try explaining your philosophy to your postie.

  • Comment number 22.

    I have nothing against the postman but why should they receive a share of a publicly owned utility? Why would a private company want to invest in a firm that is as troubled as Vince Cable suggests?

    If it is just new technology or machines then why does the govt. or indeed the Royal Mail profits from last year not get used to fund it? That does not appear to be a reason for privatisation.

    Personally think we do occasionally need to send letters often these are commercial or business related. I think one way the Royal mail could become more efficient is if we all have a Post office Box, not door-to-door delivery, this may help post-offices become more commercially viable by increasing footfall, and encourage greater postal use. You could simply have a chip in the box that emails you the notification that you have mail. And if you want it posted to your door you simply need to pay extra. Simples. This does involve laying off a lot of people, not something I would be keen to do myself, but I guess this is a case of where technology and utility may have overtaken a relatively protected workforce, and as such the process needs to be managed well. We employ these people lets not be complete B@!*tards about it.

    Not sure how this relates to Postmen & women but I think in relation to people starting a day at 9am having an hour at lunch and knocking off at 5pm, seems entirely reasonable to me. My experience is in the private sector you need to work later because so much time is spent on the golf course on a Friday afternoon brown nosing and flattering each other. I think as a nation of fairly overworked and underpaid individuals (except of course the top 10% who are overworked and overpaid and the final 10% who barely do any work and are just overpaid), that if you can start at 9am and end the day at 5pm then good for you. Is this guy suggesting we should work from 6am to 8pm without lunch, does he actually believe this would not generate diminishing returns, people do not operate like a spreadsheet, and would expect a commensurate rise in remuneration.

  • Comment number 23.

    "The mail is down, the mail is down"

    That's all we ever hear from management these days, but for us actually walking the street's delivering the stuff then it couldn't be further from the truth.

    The packet industry has indeed increased hugely over the past few years, but to suggest we deliver less letters is laughable. I started working for the company in 1997 and at that time 2 bags was considered a heavy day in our office. These days 4 bags is the norm, that's excluding the huge increase in packets.

    Royal Mail are saying they deliver less, wrong. They are dealing with less mail directly (downstream access) as a result of the market being opened up allowing other companies (UK Mail, TNT etc...) to cherry pick the most lucrative contracts. But who delivers it? The Royal Mail of course.

    There is also dispute on how many items of mail arrive at offices, the Royal Mail say trays of mail contain an average of X, the CWU after conducting manual counts say the figures are far greater and that the company are indeed falsifying the figures in order to continue with the endless job cuts, which incidentally were nowhere to be heard when the Royal Mail were urging all union members to vote YES to a new deal, a deal which would IMPROVE public service.

    Then why is it in the past week I've had to bring my own mail home from work on three occasions due to that particular round NOT being delivered as once again we are short staffed thanks to the cost cutting policy?

    This once proud company is now a laughing stock. The problem being no one seems really bothered.

  • Comment number 24.

    Robert, whilst accepting the arguments concerning digital communications it would be worth Royal Mail revisiting its postal charges. In the past to find out the cost of a letter or small packet you simply weighed it. Today there are three factors to consider, weight, cross-section and thickness. Each of those factors has a separate impact upon the cost.

    When this change was introduced a few years ago it may have seemed like a super wizz to get more money out of customers just like those restaurants that charge extra for a bread roll. Many people are put off using the service because they can't visit a post office and are unable to calculate the correct charge themselves.

  • Comment number 25.

    Yes 71 million letters I assume also parcels, is not really an argument that suggests their is no demand, efficiency to make it profitable or cost break even might be good, but not scrapping or selling it off.

  • Comment number 26.

    The Government is pressing ahead with privatisation of the Royal Mail.
    After receiving updated recommendations in a report from the businessman Richard Hooper, Business Secretary Vince Cable made the announcement. Among other things the Hooper Study maintains that the service can only be maintained by an injection of private sector money and expertise.
    Hooper remarks that the Royal Mail is facing a combination of challenges - falling mail volumes, low investment, not enough efficiency and a dire pension position.
    Vince Cable says he will bring in new legislation in the autumn with “A Postal Services Bill”.
    Supposedly this bill will enable: the modernisation of Royal Mail, in partnership with employees, and will ensure it "benefits" from private sector capital and disciplines.
    And then, and then...There is the size of the Royal Mail Pension Deficit. Trustees of the Royal Mail pension scheme are to confirm a £10.3B pension deficit and outline a new long-term funding agreement. This deficit may have trippled since its last evaluation.
    What I don’t like is the part-privatisation process outlined by Vince Cable. Privitize the Royal Mail or not, but do one or the other.
    Suppose that there was no Royal Mail - all we have is email, twitter, etc.
    Aside from billions of trees now being saved and the much greater lightness of out environmental footprint, what would happen?
    Would we have some private individual coming forth with the hot idea to creat a Royal Mail, maybe he's submitted his idea to Treasury as a money-saver.
    What do you think would be his/her success?
    What is going through the Royal Mail - except tons of advertisements (dead trees)?
    Maybe the first question we should ask ourselves is do we need the Royal Mail, or do we just like the sound of its name?
    What do you mail?
    What do you receive by mail?

  • Comment number 27.

    Pension debt aside I have not yet heard anyone talking about the social contract aspect of the royal mail. What are the minimum service levels we would like as a society to maintain and what is the gap between the price for this and a free market model? The gap can be centrally funded (subsidised) with subsidy reductions based on overall profitability.

    It doesn't have to be all public or all private. This could lead me back to pensions.....

  • Comment number 28.

    What would the private sector want to put money into the Royal Mail for?

  • Comment number 29.

    "The real answer is not to privatise Royal Mail but to remove the licences from their private competitors giving RM the monopoly it needs to make money. "

    ========================

    Well our past experience of state monopolies would tend to the conclusion that the service will be much worse than a privitised service. I still remember BT before privitisation, you could wait for months for a phone line, often had to share it with the street, phone calls were far more expensive than now and the choice of phones you were allowed to connect to the phone system rather limited (and not particularly nice)

    As far as the postal system is concerned privitisation could hardly make the service worse - the number of letters I get clearly addressed to someone else, or letters which are days or weeks late (if they arrive at all).

  • Comment number 30.

    @20 Great link! :-)

  • Comment number 31.

    My immediate thought was this is another report to match the Beeching Report in the scale of national calamity that it could cause in the long term.
    What terrible regret we have for many of the lost rail lines and stations due to a narrow view taken 50 years ago.
    The premise that mail will decline is ridiculous. Like the phantom of the paperless office. Yes it is a dream of some IT boffins but the opposite is true.

  • Comment number 32.

    "Here's the big trend: the average daily mail bag contained 84m letters, packets and parcels in 2005; this year, the national mailbag was 15% lighter, containing just 71m items every day."

    Robert Peston drinks the Post Office managements kool aid.

    Maybe you should read Roy Mayall's blog to find out how flawed the calculation of mail volumes is these days..

  • Comment number 33.

    At last!

    Will increased efficiency mean that the red rubber bands usually dumoped outside my front door will be reused instead?

  • Comment number 34.

    [Liked the Casablanca edit yesterday. Surely you have the 'Casablanca Code' now.]

    Packets, parcels, letters and mailshot. Special delivery, recorded delivery and next day parcel delivery, going up...

    How well are you being served by Royal Mail in it's present disguise ??

    Better than it was a few years ago, but not at it's peak performance I would say.

    The price of the first-class stamp is 41 pence and is approaching the '50 pence' price sensitive barrier.

    Royal Mail needs to get it's act together before this level is breached.

    Two years max.

    [Wink]

  • Comment number 35.

    Why would anyone buy it. A declining industry competing with email and delivery services that don't have a duty to provide a daily residential delivery. The numbers might look good now but they are declining. And it's a highly unionised business.

    Great brand but even without the pension shortfall we'll need to pay someone to take it on.

    There is not a happy ending here. Perhaps handing it over to the workforce and removing it's public service duties in exchange for a chunk of the pension shortfall is the answer.

  • Comment number 36.

    #17 Sue...

    My underlying point is the utter inefficiency and the stark contrast to the private sector

    This unit did EXACTLY the same function as the corresponding ones in the private sector.

    You and I are paying for that inefficiency in sky high tube fares.

    The problem is the unions. Well, lets do what reagan did with air traffic contrrollers in 1981. fire the lot of them.

    Keeping with the tangential subject of the tube, i would fire them all. People are queing up to be tube drivers. They are not lining up to be nurses. Fire the lot of them. it up to you (i live in Switzerland now anyway as i got fed up paying taxes for the bloated non-job public sector). good luck!





  • Comment number 37.

    Robert,

    All good and well. But if the economic conclusion is that Royal Mail should not be privatised, then that still remains the economic conclusion.

    For a great many years, I have worked for some of the biggest private corporate names in this country, with varying degrees of responsibility (including senior, before anyone takes a shot). All this hot-air about private efficiency is just that. Private companies will drive their staff into the ground in the name of profit, but ironically they're about as wasteful as public ones (sorry to let that one slip people, but that is the way it is). The difference is in duty of care, and what motivates us to provide it.

    So, on the assumption that we Brits accept that things can be run better (including businesses), do we learn from elsewhere (and therefore be given the opportunity to learn), or do we still persuade ourselves that second best is better than perceived nothing at all?

    Anyone caught a train in Switzerland? Notice something?

    Or Sweden for that matter?

    Or Norway? Austria?

    All are publicly run. Yes, they have overheads, this is called operating cost. Strikingly enough, it is not a private playground either. And they work. Very very well. Service comes first, and is costed appropriately. Unlike here, where cost comes first, and service is an afterthought (anyone caught a train on a regular basis in south lately?) Oh, and critically, the latter option will in the medium term become the more expensive to users between the two. So much for market forces.

    Which brings us back to Royal Mail. Two points in fact:

    - Service needs to be costed appropriately. We are, after all, in a commoditised world. And if that means a letter costs 92p at the moment to post, then that's what is costs. It also means if a letter costs 17p in the future, then that is what it must be adjusted to.
    - The business needs to adjust to cope with negative growth. This will also mean negative (ie: reduced) profits, following the laws of economics.

    And in both cases we have identified Royal Mail's problem. Political dogma.

    Line up one CEO against 100 posties. Who costs more? Yup - the CEO, every time.

    Line up ten senior managers. Yup. Same problem.

    So, if we are serious about decapitating operating costs based on business downturn, then the economic conclusion would be to spread the burden, from top to bottom (sorry, it sounds egalitarian, but that is the way a pure market works).

    I would bet my house the political dogma would change immediately if an appropriate number of management positions were threatened; I'll go further. The argument would change. Hallelujah! No more waste!

    All good and well. So of the two problems, if the major constraint is not so much to do with the flow of money, but how it is distributed, then do we not have a major governance problem?

    I wonder if the problem (or rather, both of them) would elegantly disappear if governance were addressed in the following manner: no individual in an organisation should earn more than 15x the least paid?

    Would certainly make 'the talent' work very hard...

    --

  • Comment number 38.

    Why do seemingly intelligent people think privatize companies are models of efficiency. It seems to me one of the biggest problems Royal Mail has is that it can’t charge for the true cost of its products. I keep hearing the total number of letters sent every year is reducing but I still get the same number of letters everyday for the last ten years……… And yes I do send and get loads of txt and emails everday……

  • Comment number 39.

    I believe we all take Royal Mail for granted. It’s a fantastic service they provide. Very rarely does a first class letter not get there next day. And remember only for 40p! People in the UK always expect a better service but we are not prepared to pay for it. People will have to decide what they prefer higher costs or worse service.

  • Comment number 40.

    If it service started now who would even bother to have a national country wide service that would deliver to any door or address? No private company could be that bothered!
    As always we will not know what we have till it is gone. And has been said before we will collect post from a unit in the back of no-where because no company can be bothered to deliver, only to the offices and factories (if any are left after the cuts)

  • Comment number 41.

    Why not just give the Royal Mail to the employees/unions to run? It is worth nothin/less than nothing in its current state.

    That would mean the employees would have a take in reforming the business and making it profitable.

    Meanwhile the rest of us can get on with working out how to do without it.

  • Comment number 42.

    The privatisation of any national service or utility takes away the power of the people through government to influence its pricing levels and puts the same in the hands of private corporations.

    I do not believe that selling off state assets to pay interest to banks (who create money form nothing and lend it to us), has, or will ever benefit us.

    For the avoidance of doubt I am neither a capitalist nor socialist,

  • Comment number 43.

    I would recommend everyone who is interested in the Royal Mail to read Terry Pratchett's "Going Postal". It is a great read and there are some key points made that might be relevant in the present situation.

    If internet shopping is increasing, surely there is a business opportunity for a national infrastructure to deliver the physical goods? Surely, the RM with its infrastructure should be able to compete effectively with the private carriers? Perhaps the issue is the lack of imagination and talent in the management of the RM!

  • Comment number 44.

    Robert - I see you are falling for the old adage that all paper is bad and results in the destruction of trees. "There's also, he says, an "environmental time bomb", such that growing numbers of companies are embarrassed by the number of trees they're felling for mass mailshots, and are therefore opting for electronic spam over paper junk (which, some would say, sounds like progress)."
    Much of the paper you refer to is sustainably manufactured from well managed forests and contains lots of recycled fibre. Making and converting it creates real jobs in this country as does delivering it and recycling it. Unlike the huge energy (mostly fossil based) requirments to run electonic systems. (I also note that there is much talk of "felling many more trees" for the energy industry in future to support the electronic age and achieve sustainability. Will you attack that when it happens?) Cutting back on paper use is not an "environmetal" goal it is simply a cost reduction for business.
    Please do your homework as most "forest felling" particulalry of ancient forests is so BBC personnel and those making decisions to get extra profits by cutting back on paper can sit behind nice big wooden desks and live in big houses made of timber frames.

    p.s. Apart from that I agree with what you are saying.

  • Comment number 45.

    am i the only one that questions the need for continuous drives for efficiency surely the purpose of the state is to raise the general standard of living we are a consumer economy after all the majority without reasonable salaries is counterproductive. it was always my opinion that the idea of a state owned/controlled utility is to keep a limit on the amount we must spend to just exist

  • Comment number 46.

    If the Royal mail ceased overnight what would the consequences be, who would pick up the pieces? In effect that's what's being considered. The whole premise of the Royal Mail is to provide a subsidised means of communication at a cost available to all. It was never intended as a profit making enterprise but a social responsibility. It has always cost more to print a stamp than buy one so how does anyone expect it to be profitable, I repeat it was never intended to be, like the NHS it was seen as a moral obligation not a money spinner.

    Letters may be outdated but many services still rely on the honourable postie to get their goods around, once we put private enterprise into the equation we're looking at increased freight costs because reducing the workforce further is not an option.

  • Comment number 47.

    Ignoring the pros and cons of Privatisation. Who, in their right mind, would buy Royal Mail in it's current state anyway. They may be prepared to buy a portion which can be made profitable, but that would leave the rump of the company still in public ownership and in a worse state than ever. I very much doubt if anyone can be found who would buy an £8bn deficit.

  • Comment number 48.

    I've been a postman for two years now, I've been delivering more mail the past 6 months than at any other point in those two years. I do not believe for a minute mail volume is down, nor do my colleagues who have been working there for longer than I have been on this earth!

    Typically royal mail counts the mail that is presorted at it's large sorting offices and placed into trays for rounds. They do not count the mail that is sorted at the delivery offices into the trays. The majority of my mail in the morning does not come pre-sorted in nice boxes for us to pick up and place in our frames. No we still have to sort them, by hand, and these aren't being counted by anyone at all at any points in the mails lifecycle. Also what days to the managers tend to get the mail counted? Tuesday. Business don't send that many letters out on a Monday anyway, but the FACT is Royal Mail managers openly hold back mail on Tuesdays thus creating a backlog that makes Wednesday through to Saturday unbearably heavy and they never ever take count of mail then.

    Managers are overpaid, we have managers getting paid FOUR times as much as ONE postman in ONE WEEK! That is ludicrous. Royal Mail as a whole is pretty autonomous, the managers are hardly ever utilised. You only go to a manager if you need a day off (you can't get them unless you're one of the favourites) or you have a puncture. Everyone knows what they are doing and everyone does it, with or without managers.

    Postcomm do not help the matter with their ludicrous fair play rules they enforce on Royal Mail. We have to legally accept business with other companies at a loss! Take Amazon for example. They're weaning themselves off of Royal Mail and on to others like SecuredMail. What does SecuredMail do with it? Collect it from the depot and give it to Royal Mail to sort and deliver. How can Royal Mail thrive on that relationship?

    Scrap Postcomm, allow Royal Mail to dominate that market once again. Royal Mail was always a thriving profitable business before competition from abroad came in. Companies like DHL and TNT have some of the highest prices in their own countries, employ immigrants on below minimum wages and because of those high profits can afford to undercut royal mail. Why does Postcomm ban Royal Mail from operating in German and Holland to undercut DHL and TNT? It's stupid.

    Don't even get me started on the modernisation that results in us losing all of our bikes and going two/three people to a van with a trolley. I could go on for days about how wrong that is but this post is far too long anyway!

    It's time someone has the gaul to stand up in Royal Mail and not worry about themselves all the time. I would love to do it myself but getting a full time contract is hard enough never mind someone wanting to listen to what you have to say inside the company.

    Royal Mail is like the BBC, it's what makes Britain great and to lose either of them would be a crying shame.

  • Comment number 49.

    I remember when All water Companies were Pravatised including Thames Water.We were told that they will invest billions to upgrade leaking
    pipes and reduce wastage. My water bill has increased by more then 100%.
    Owner of Thames water sold business after several years and made handsome
    Profit and dividents.As far as Iam concerned nothing has changed as it si still a Monopoly.

    Manilal Shah

  • Comment number 50.

    2. At 12:52pm on 10 Sep 2010, nilihist wrote:
    “I thought he was joking. Until i arrived on the first day to see them all troop in at 9, leave for an hour at lunch and go home at 5. Unbelievably inefficient.”

    You mean that working to your contracted hours is “unbelievably inefficient” i.e. wasteful!

    Reducing the staff to make the headcount look good but paying the workforce overtime at 1.5 hourly rate rather that employing more staff at the normal rate would be even more inefficient.

    Or are you proposing that the workers should do a prescribed number of hours overtime per week for nothing?

    How on earth would that be beneficial to any of the workforce? (And don’t give me any guff about increasing efficiency, i.e. profitability, ensures the long term future of the company. We all know that with the large multi-nationals profits are sucked out of the company as quickly as possible rather than retained for a rainy day.)

    This “flog them until they’re dead” attitude that managerial level employees in large public sector employers take to the rest of the workforce seem to have is the major reason why millions of people in this country hate the work they do and couldn’t give a tinkers cuss about the company they work for.

    Believe it or not a contract of employment is exactly that – it stipulates conditions that both sides (not just the employees) accept and adhere to.

    as sonone who has both been employed and employed others I think it very important that the contract is adhered to and management should expect nothing over any above what they have contracted for. That's how it is with any external supplier which is all an employee really is.

  • Comment number 51.

    Growths in internet trading mean that much more stuff is being delivered to homes and businesses. Moreover, growth in internet trades means there's scope for Europe wide consortia too.
    All of which suggests that a more pro-active marketing of Royal Mail - a distinctive & prestigious brand - could yield growths in volume and revenues. Maybe Hooper is correct: Royal Mail management remains unimaginative and lacks flair?

  • Comment number 52.

    Another reason the mail volumes are down, aside from e-mails and texts is reliability!
    For example, last Sunday afternoon, I placed an internet order with a national mail-order retailer. For whatever reason, they decided to send part of it by UPS and part by RM, First Class; both were despatched in the same city around noon on Monday. The UPS parcel (about 5kg) arrived 100 miles away at 7.30am on Tuesday. The RM parcel (about 400grm)arrived today (Friday) at 2pm.
    Another example; in the last few months we have used the RM 'Recorded Signed For' service on about ten occasions. Proof of delivery (which was all we needed) was only available for two of these letters. The response from RM Customer (dis)Services? A boiler plate letter and a refund of 74 pence on each occasion. I gather that the problem is that the letters were sent to a P.O. Box address and that there is no effective mechanism in this case for obtaining a signature!

  • Comment number 53.

    2. At 12:52pm on 10 Sep 2010, nilihist wrote:

    "I thought he was joking. Until i arrived on the first day to see them all troop in at 9, leave for an hour at lunch and go home at 5. Unbelievably inefficient."

    mmm - now let me give YOU a lesson in efficiency.
    Firstly, people who work longer hours become less efficient the more they work. The self employed often find this when they're working until 10pm at night but actually achieving very little.
    Secondly, people who work beyond the alloted time for that work are unable to complete the task in the alloted time - and therefore are themselves inefficient

    There's a belief in this world that working long hours means you're a good worker - well I'm afraid not, if you can't do your job in 7 hours - then you're no good at it!

    "And that was my first taste of WASTE in resources of puhblic sector."

    ...and consequently seeing people working until all hours of the night in the private sector was my first taste of WASTE in the private sector.

    "Reducing headcount and driving efficiency is the only solution to our fiscal problems. Break down the unions and privatise the ineffcient ones.
    Roytal Mail... "

    break out the chains, remove the minimum age for working and bring back the workhouses.

    What century do you live in man? - certainly not the one I do. maybe you just have a chip on your shoulder...

    You should be like me - private sector 9-5 - top of the ladder in my field and still I don't find it a challenge. That's how efficient the private sector is.

  • Comment number 54.

    5. At 1:24pm on 10 Sep 2010, Mark Ruston wrote:

    "But if the post office is privatised a huge surplus will have to be created each year in the form of profit. This is so that the shareholders can receive a dividend and the board be handsomely renumerated. Isn't that rather wasteful? Or am I missing something?"

    Nope - you've got it exactly right - but then you're not applying 'capitalist logic' to the situation which would lead you to conclude that profit = a sign of efficiency (rather than waste)

  • Comment number 55.

    The Royal Mail complains that they lose money doing the 'last mile' deleiveries of letters sent via other mail carriers. Who set the RM charge for the delivery service?
    You've got it! The ill-informed, overpaid top brass at the time who have long since moved on (in most cases with their golden handshakes) to greener pastures.

  • Comment number 56.

    I'm a postie,and over the last 3 years my number of mailbags has more than doubled!!! I have no idea who is feeding the figures to this guy,but i would welcome him to come to my office,and carry my bags for a day.

    It's absolute nonsense,someone is making a lot of money out of the company somewhere,and it's not the postie,who now carries more product than ever,whether it be letters,A4 magazines,parcels,or household leaflets.

    It will be the end of an era,and Royal Mail as it is now,will be missed,guaranteed.

  • Comment number 57.

    Why don't we apply logic to this.

    1) Is the Royal mail profitable at the moment - No.
    2) What do private comapnies want? - profitable companies
    3) What will happen if RM is sold? - well the private companies will cherry pick the profitable parts and discard the rest (or leave that bit in public hands)

    The efficiency of public industry can be seen in the Royal mail, it costs about 30p to send a letter anywhere in the UK next day - there is no private company that could ever do that - or they would be in business competing with RM.

    What you're being sold is a lie - yeah RM won't be a burden on the taxpayer - the burden will have been shifted to the consumer.

    It happened with the railways, with the TV, with the utilities, with the telecommunications - all those things which are most infuriating to the consumer now were public industries privatised with a lie.

    ...and now you'll probably all fall for it over again..

  • Comment number 58.

    ...here's another often missed point.

    RM is one of the last public industries - if we sell it now what are we going to sell off to get us out of the next crisis!

    ...but of course there won't be another crisis - right Capitalists?

  • Comment number 59.

    Royal Mail volume has only been very low in letters for some years. This is nothing new. The mail you and I get is Mostly Junk mail, direct mail and general buckshot style marketing and every magazine and unwanted sales brochure you can imagine. This blog says Royal mail "Items" are declining. BUT the weight of the stuff being delivered is, if anything, going up! Posties used to take out 3 to 4 bags on a walk only a few years ago now they take out 7 to 8 bags of A1 Junk. The mail in the UK is not letters from friends and postcards, but an extension of marketing and door drops for Pizza. Plus all the DVD and internet stuff you can imagine.

    I could go on for hours. surfice to say Royal mail has loads to deliver. The problem for the government is it can't do it for the money because in the past all the profits from stamps went straight into the coffers and NOT into reinvestment.

    The end game is to deliver on a 5 day week and so cut Royal Mail staffing levels by 20% in one go....

    As for thev pension deficit - successive governmets took a 13 year pension holiday - during the BIG bull market run... The posties were still paying their bit - So what happened Mr Government?

  • Comment number 60.

    It costs 36p to send a letter First Class.

    In the real money we used to have this would have beed seven shillings and tuppence. Seven bob to post a letter!

    The Royal Mail used to be part of the Civil Service and it worked. The concept was that by providing easy communication throughout the country the greater good was assured and national and social unity enhanced. Posties were respected members of the community and many owned modest houses as the regular work of a postman was deemed a reliable income.

    The rot set in when Harold Wilson's government made the Royal Mail a nationalised industry rather than a department of government. As soon as the idea of making money from the post became accepted the whole operation went to the dogs.

    It is a tragedy. It is yet another pastiche of our wider economic and social conditions. Nothing works as all anyone is interested in is more money. Our culture is rotten and its beginning to stink!

  • Comment number 61.

    Segaro (#44) rightly bemoans the energy needs of electronic systems for information delivery but neglects to mention the energy required for the conversion and reconversion of paper for mailshots and the like or that needed to transport and deliver the said paper, much of which immediately re-enters the conversion cycle!

  • Comment number 62.

    29. At 2:53pm on 10 Sep 2010, Justin150 wrote:

    "Well our past experience of state monopolies would tend to the conclusion that the service will be much worse than a privitised service. I still remember BT before privitisation, you could wait for months for a phone line, often had to share it with the street, phone calls were far more expensive than now and the choice of phones you were allowed to connect to the phone system rather limited (and not particularly nice)"

    ...now let me throw a spanner in your works....the phone infastructure which was implemented and built in the only way it could be (through a publicly owned company) means that the cost of making calls today are 0 (or near enough to make it not matter)

    ....now what were you saying about calls being 'cheaper'? I think you'll find that if BT had remained public then you wouldn't be paying anything for national calls.

    Strange how you think this is a good deal.

    Go and ask the rural people of Britain how the implementation of broadband is coming along under a privatised company. In my street I cannot choose a cable provider as they have decided it's not worth putting in the infastructure - so I only have a monopolistic BT infastructure (which is now privately owned) - now how is that better?

  • Comment number 63.

    33. At 3:05pm on 10 Sep 2010, Boilerbill wrote:

    "At last!

    Will increased efficiency mean that the red rubber bands usually dumoped outside my front door will be reused instead?"

    yes - in the same way that you don't see late trains anymore because the private sector is driven by ultimate efficiency and losing customers is their greatest fear.

    ...or how Thames water don't dig up the same piece of road 14 times to fix the same pipe in 2 years.

    http://www.thisislondon.co.uk/standard/article-23872728-most-dug-up-road-in-london---22-times-in-two-year.do

    ....or how you won't find you've been unfairly switched by your utility company because the private sector ensures you get the best deal..

    http://www.bbc.co.uk/news/business-11150541

    ...do I need to provide more examples of private sector efficiency?

  • Comment number 64.

    You don't know what you've got 'til it's gone...

    I'm a visitor here, an American working in the UK for the past two years, and I have to say that the Royal Mail is AWESOME in terms of service provided. The UK may not be an enormous geography, but where else on Planet Earth does a mere first-class stamp get you almost-guaranteed overnight service? I can't count how many times we ordered something via internet or over the phone... and had it arrive the following day... (That's mind-blowing, at least for an American...)

    FInally, the Royal Mail is more a part of the national social contract, one might say, than a profit-making enterprise... If it makes a loss, so be it. Manage it as well as you can, minimize the loss... and subsidize the rest...

  • Comment number 65.

    An issue that seems to be missed by everyone is what happens to the Postal Address database that the Royal Mail maintains as part of its royal charter on behalf of the government?

    Essentially the Royal Mail is the de facto authority on the registration and approval of all addressable properties in the UK.

    It might seem boring but this is one of the significant national databases containing a definitive (or as accurate as it can be) list of all postal addresses in the UK. It is used, in one form or another, by pretty much every organisation, both private and public sector including the BBC, in the UK and without it most organisations and people would be in a bit of a mess.

    Is it the intention that this function is also going to be privatised along with the mail delivery function?

    If so then that worries me because, although delivering letters and parcels is very important, I’m not at all comfortable with a private enterprise being able to extract profit from something that is critical to the national infrastructure.

    Before we know it they’ll be charging us money for using the copyright to the addresses for the houses in which we live. (Theoretically that’s possible if you look at the data ownership agreement for AddressPoint or PAF).

    Hmmm…

  • Comment number 66.

    35. At 3:07pm on 10 Sep 2010, sizzler wrote:

    "There is not a happy ending here. Perhaps handing it over to the workforce and removing it's public service duties in exchange for a chunk of the pension shortfall is the answer. "

    Now that is a solution that would work - give it to the workers and see how efficiency and productivity rockets as they actually have an incentive to make it work (and of course you'll save the millions you're paying Adam Crozier, or his replacement)

  • Comment number 67.

    i worked for the post office for over 36yrs, never late and a 100% attendance, the thanks i received for my loyalty i am still waiting for.
    regarding the privatisation of the royal mail, this would be fine so long as they do it correctly, at the moment the news states that there is strong competition within the post, this i strongly dispute, to be competetive you have to prove you are the best for the job, how can the competitors that are collecting mail, dumping it onto the overworked postal staff who then check it is all correctly paid for by size then have to do all the foot work by delivering the mail be classed as fair competition.
    imagine if the superstores such as tesco was told that the fair competition included them selling their rivals food as well.
    the government needs to wake up and set new rules for fairness with the post, let royal mail join the competition fully and not do any of the work for it's rivals, i wonder how long the competitors would last.

  • Comment number 68.

    Have we not learned from the last time the Tories were in power that taking a public monopoly and turning it into a private monopoly generally leads to massive increases in cost and reductions in service quality?

    The minute bus companies were privatised around here, they started cutting the more rural routes because they weren't economically viable. What's to stop the new privatised postmen not delivering to the further-out communities because they're not economically viable either?

    Of course, if regulation is put in place to ensure the universality of mail coverage, it will be the taxpayer who has to plug the gap, so all that will happen is that we'll be paying twice for mail to be delivered - once through taxes to ensure they don't cut deliveries, and once through the inevitable price hikes once it's hived off to the corporations.

    I don't see how we as the public actually benefit from this at all.

  • Comment number 69.

    Quite simply the ordinary letter delivery service will continue to be replaced by email, which is faster, much cheaper, more eco-friendly and more convenient. Who is going to buy a dying business? Eventually only specialised mail will be left, such as registered mail and recorded delivery - essential for some valuable or legal documents.

    Efforts to increase efficiency will not stop the change-over to electronic communication, though it may buy some time for the business to shrink into a niche market.

  • Comment number 70.

    36. At 3:17pm on 10 Sep 2010, nilihist wrote:

    "Keeping with the tangential subject of the tube, i would fire them all. People are queing up to be tube drivers. They are not lining up to be nurses. Fire the lot of them. it up to you (i live in Switzerland now anyway as i got fed up paying taxes for the bloated non-job public sector). good luck!"

    Oh - I should have guessed - another lecture from someone who doesn't even live here on how we should run our country. Well tell me - can you afford a house in Switzerland yet?
    Had any wild parties lately? - ooops, perhaps not, don't want to get arrested.

    I hear you need to carry your 'Auslanderausweis' ID Card at all times - well we don't need ID cards in this country - we're free to be anonymous.

    What about the restrictions on when you can use your washing machine? or when you can wash your car? - or maybe that you can't install your own plug socket, or flush the loo after 10pm - all sounds a bit petty and restrictive to me.

    Yes, I can see why someone would move to Switzerland and then tell people in the UK how to live - give up your freedoms and live in a place where you can't even get a steak bigger than 6oz!

    Thanks but I think I'll stick to our 'non-functioning' freedom thanks - oh and the security that if war breaks out we're not going to be the first place everyone heads for (because past neutrality is not an indication of future neutrality - especially when some people want their gold back!)

  • Comment number 71.

    49. At 4:19pm on 10 Sep 2010, Manilal Shah wrote:

    "I remember when All water Companies were Pravatised including Thames Water.We were told that they will invest billions to upgrade leaking
    pipes and reduce wastage. My water bill has increased by more then 100%.
    Owner of Thames water sold business after several years and made handsome
    Profit and dividents.As far as Iam concerned nothing has changed as it si still a Monopoly."

    Now that is a true reflection on the 'cost of privatisation' - we may have complained before, but the service from the public waterboard was exempellary compared to the private sector running it.

  • Comment number 72.

    Over the last three decades the number of carriers has increased, but the service I receive has worsened. I use the Internet for purchases, but work prevents me being in when carriers deliver. My only option us to drive to the depot to collect my packages. The minimum time it takes me to get to the nearest carrier depot and back is 75 minutes. Amazon uses Royal Mail, and that means I can collect my packages from my local sorting ofice on the way to work. I just wish all Internet sellers would use RM.

    Competition improves profit, but reduces the quality of products and services.

  • Comment number 73.

    Once again this debate demonstrates the narrow minded and selfish nature of the 'Great british public'

    Whilst those in cities (like me) won't have a problem, because the density of addresses will ensure a private company would find it profitable, anyone who lives in a rural area - will simply lose their postal service.

    We in the cities pay a slight premium on our delivery so that people in remote areas can have a service. I don't mind this, I see it as helping out others who need it. However naturally we have many green eyed citizens who question this and would rather everyone paid for their own postage relative to the area (which is what a private company would do).

    This is the same argument over and over again, whether it be about banking, or cuts - everyone agrees in principle but when the time comes they all find reasons why it shouldn't be them that suffers.

    Well it seems we need a change of attitude - this self centred way is a path of destruction for mankind.

    ...and with that - I bid you a good weekend (well those of you who aren't obsessed with thinking about yourself all the time)

  • Comment number 74.

    Just heard Cable on R4's PM. It's not the Pension Fund, that will be ring-fenced. So, if the sale only produces a coupe of billion, the Goverment (us) will be stuck for the balance.

    According to Cable RM is facing a cash crisis. Couldn't be anything to do with stamps that play tunes if you wipe a mobile phone screen over the stamp, would it?

  • Comment number 75.

    Hmmm, market declining by 20% pa, investment returns 3-4% pa where's the pay off?

    This is a rapidly declining industry, it's now too late too waste further funds, just give it way ASAP including - especially - the pension liability

  • Comment number 76.

    What I don't want to see is a private company running what should be part of this country's basic infrastructure, being paid huge amounts of Government subsidy and paying dividends to shareholders out of my tax. That's certainly my perception of how the privatisation of the railways worked. The service has been appalling but plenty have made lots of money out of an industry that is only profitable through Government subsidy. Also, I have to ask, if the Government believe that the private sector can run the Royal Mail better than they can run it themselves, why on earth do we have these people running the country?

  • Comment number 77.

    Why should the private sector invest in an industry that is known to be shrinking, where there is no monopoly? The need for profit will not be fed by productivity gains, but by rising prices and lower service levels for those who cannot receive their mail by any other means. Investors will seek sweetners of undervalued assets and guarantees and subsidies which will eliminate their risk. The government, desperate for a successful sale will succumb, and we will suffer. Almost any alternative, including government investment, would be better.

  • Comment number 78.

    The government is turning out to be the worst government in history. What is next? Privatisation of the monarchy or the army? Yes, can’t wait for bombs to be opened up to market forces (!) My dad has just left the Royal mail after 40 year loyal service. And he decided that he would take the pension instead of wait for David Cameron to get his hands on what isn’t his. SO I think I know more than either Vince Cable, David Cameron on the issue. So I would like t is what the country is. Reaganomics devastated the America in the 80s and will here. And with 40, 000 jobs to go, the recession is getting better? I bet f we had another blitz, they would be cutting corners on gas masks. WE wouldn’t have any. The government says that privatisation didn’t work in BR, so why would Royal Mail’s privatisation be any different? The Tories and the Lib Con Demned will be history soon, and you Vince have helped secure 10 per cent approval for Lib Dems.
    A lesson from history, David, Bush apologised many times for Iraq. You would invade Iran without even praying never mind apologising. And to the BBC question about what to cut, cut Cameron, Cut Osborne and Cut the unelected Condems. Just when do the jobs start coming, Cameron?

  • Comment number 79.

    58. At 5:13pm on 10 Sep 2010, writingsonthewall

    Fresh clean air is hard to find, but when you find it there isn't yet a price.

    Yet.

  • Comment number 80.

    Before privatising RM, make the last mile delivery charge pay the proper price. The old top brass were fools or worse.

    Some of you don't seem to realise some of the implications of this for ordinary people. How many companies are going to send out important and/or legal documents to rural areas with return deadlines and then have to take people to Court because those destinations cost too much for the cherry-pickers and those areas - remote/rural - get a worse service? This happens - and it costs us money! I have been accused of non-payment when I never received the bill until two days after the deadline - companies are going to have to change their rules. And don't kid yourselves that it'll come by carrier - no, because many firms charge exhorbitant amounts for carrier service that can be down more cheaply and efficiently by RM. Try waiting five plus months for an article that carriers insist were delivered and still not got it?

    No 62 puts this in a broader aspect.

    I had to laugh, sarcastically, about having to go to the sorting office for residential mail - that would take up five hours of my day on four days a week and an entire day on two! Then you lot would be screaming because I'm not working!

    Nothing changes: it's about money, profits and greed and never about a service for the whole public.

  • Comment number 81.

    68. At 5:45pm on 10 Sep 2010, Ninko1

    You know that. And so do they.

    It's a con to increase the riches of the haves at the expense of the have nots.

  • Comment number 82.

    Is this a requirement of the WTO-globalisation requirements rather than a serious solution for a democracy?

    A Chinese/Indian/Amarican/Russian company with the responsibility of ensuring we all have post codes!

    Try registering to vote when your street has been wiped out!

  • Comment number 83.

    Look at it another way. If the number of items mailed continues to drop, whoever is running it will be forced to cut services and put prices up.

    They'll still want a profit and there'll be shareholders to pay, so these cuts and price increases will be greater than if the Roysl Mail remained in state ownership.

    So the public will tend to use Royal Mail even less than we do now and there'll be a downward spiral, until the privatised Royal Mail goes bust and has to be bailed out by HMG...

    Think again Vince.
    You've got it horribly wrong this time...!

    Royal Mail must remain in public ownership.

  • Comment number 84.

    Nihilist #2: "I thought he was joking. Until i arrived on the first day to see them all troop in at 9, leave for an hour at lunch and go home at 5. Unbelievably inefficient.

    And that was my first taste of WASTE in resources of puhblic sector."

    Why is it "wasteful" to start and finish work on time when you are paid only for that time. Are you suggesting that individuals should work for nothing and if so, why ?

    I realise that there is a culture, fostered by who knows, which encourages this type of behaviour; indeed I myself once harboured delusions that this was a "good thing" and somehow a better person.

    Unfortunately it is not, surely humans were not put on earth to be efficient workers, collectively creating a global slave state - the "wealth" of this mass being space travel, genetics (acting like "God") and military technology.

    cheers

  • Comment number 85.

    It the country needs cuts to balance the budget then it will be obvious to the markets that the sale of Royal Mail is a panic measure. The price obtained will never be the best one. That fails in a fundamental duty of care and in betraying the trust of the electorate.

    The problem is claimed to be investment. The solution is to invest. Selling an underinvested company to the markets is never going to get anything but alms. The truth is, the decision is nothing to do with "unions" or "failures" or "need for private investment". The truth is that the Condems coalition suprised a bunch of opportunists who never actually believed they would get elected. So they searched around for inspiration.

    So far all they have come up with is excessive public spending cuts that remove billions in investment (just ask the regional development agencies - ah, no, they have already been asked) from the economy. Second, they have remembered the great privatisation successes of the past: water, gas, electricity. The companies that now make such huge profits that they could easily pay the deficit off - but they have an obligation to their shareholders not to.

    Perhaps Forgemasters might want to step up and invest in the Royal Mail: or has it escaped the Condems that the whole reason for their election is that nobody has the money to splash out on buying trinkets. So what are they going to do: give Royal Mail away.

    Rowland Hill created the Penny Post and that ended the utter inefficiency of the free market postal system up to then. True, post is declining. Although: lots of things need to be delivered from all these Internet businesses.

    Which is the commercial possibility that the Condem government refuses to even contemplate: that the Royal Mail is actually on the verge of becoming one of the most profitable logistic, fulfillment and trust based businesses in the world. By failing to imagine policies for when they were elected the Condem Government is doomed to repeat whatever policies they can dig up from the 1980's.



  • Comment number 86.

    I completely agree with the moderation of comments about Robert that don't treat him with the respect, no, awe, that he deserves. He is a God among men, and all those who follow his blog are intellectual titans. I can't hope to compete but if I could venture one tiny, tiny comment it would be this; Robert probably doesn't 'care' about any of this. He makes his money as a journalist. He's paid not to get 'too close'.

  • Comment number 87.

    2. At 12:52pm on 10 Sep 2010, nilihist wrote:

    "I thought he was joking. Until i arrived on the first day to see them all troop in at 9, leave for an hour at lunch and go home at 5. Unbelievably inefficient.

    And that was my first taste of WASTE in resources of puhblic sector."


    I don't get it. What is inefficient? Lunch? For whimps perhaps?

    It sounds like a reasonable days work to me. Am I missing something?

  • Comment number 88.

    Their tends to be a very short sighted explanation on why Royal Mails mail volume has dropped to so such a high degree and explanations such as email etc are blamed, but as an owner of a e commerce company I can say confidently that we are sending more and more items out by mail but not by Royal Mail.
    We started sending all our items out by Royal Mail but this has in just two years been reduced to 8 % and we are looking at ways to make this 0 % within the next six months.
    The market has changed and companies such as UPS realise that the money is in parcel deliveries sent out by high street companies that now also operate online or companies such as mine that solely operate online, UPS are a good example of a customer focused, keenly priced business that is able to charge slighly higher than the competition by providing excellent service and incredible customer service, something that Royal Mail has no understanding of.
    I, like most of the British public want Royal Mail to do well but as I have said in the Royal Mail insight feedback panel, I don't believe Royal Mail want to do well.
    Royal Mails policy when they damage and items sent out by us ( which is happening in at least 21 % of all items sent out by us ) is that we have to force the customer who has been unlucky enough to have Royal Mail damage their item, to return fill out a long claims form and send the item at their expense to Royal Mails claim department, we like UPS believe in providing great customer service so we never force out customers to go through this customer unfriendly process and we send them a replacement by UPS and we right the damaged item off.
    We have in the past attempted to put in a claim with Royal Mail for these damaged items ( which usually takes about 75 minutes to complete ) including photographic evidence of the damage and we then recieve a letter say we haven't provided enough evidence and they give us 6 1st class staff as compensation.
    We have this year alone as a small business written off over £1800 pounds ( the cost of the goods to us ) as their is absolutely no point in going through the claim process, which I suspect is the whole point.
    We have also had very high levels of lost mail as well as damaged and I customer service team usually recieve a high proportion of abuse as people still tend to believe that Royal Mail don't lose mail, but when we questioned spoke to a Royal Mail manager about this issue, we were blamed for incorrectly packaging the items, even though we proved that was not the case.
    We joined the Royal Mail insight panel hoping to encourage Royal Mail to deal with these serious issues but like the hundreds of other business on the Insight panel, not one issue has been addressed and they all tend to follow the same complaints as our own.
    Royal Mail could still be a world beating postal service and could benefit from the rise in online sales if they provided 50 % of the level of customer service we get from UPS but Royal Mail have completly lost their way.
    It really is a shame because if Royal Mail becomes foreign owned I believe this would be devasting in the long term for Britain and I strongly believe that if Royal Mail radically chaged it still could be the world beating mail comapny it used to be.
    I do also wat to add in amongst all this extreme disapointment that Royal Mails delivery staff are 99 % of the time an under appreciated asset that are the only positive in Royal Mail arsenal and I believe that if they realised this, this would go a long way to improving their awful customer service, as the vast majority of our postal collection people know what's wrong and how to solve it but they all say the same thing " Royal Mail isn't just not listening to you the customer, they aren't listening to us as well".

  • Comment number 89.

    Oh you have to read this - who says that board are living in fantasy?

    http://www.thisismoney.co.uk/news/article.html?in_article_id=514142&in_page_id=2&ct=5

    Confidence drives the market? well when does confidence become blind hope?

    Rememebr this when they're next talking about dishing out the RBS and Lloyds 'profit for the taxpayer'!

  • Comment number 90.

    29. At 2:53pm on 10 Sep 2010, Justin150 wrote:

    "Well our past experience of state monopolies would tend to the conclusion that the service will be much worse than a privitised service. I still remember BT before privitisation, you could wait for months for a phone line, often had to share it with the street, phone calls were far more expensive than now and the choice of phones you were allowed to connect to the phone system rather limited (and not particularly nice)"

    ...now let me throw a spanner in your works....the phone infastructure which was implemented and built in the only way it could be (through a publicly owned company) means that the cost of making calls today are 0 (or near enough to make it not matter)

    ....now what were you saying about calls being 'cheaper'? I think you'll find that if BT had remained public then you wouldn't be paying anything for national calls.

    Strange how you think this is a good deal.

    Go and ask the rural people of Britain how the implementation of broadband is coming along under a privatised company. In my street I cannot choose a cable provider as they have decided it's not worth putting in the infrastructure - so I only have a monopolistic BT infrastructure (which is now privately owned) - now how is that better?

    ======================================

    Oh dear. I particularly liked the idea that calls would be free if BT had remained under state ownership. I know this was posted on a Friday afternoon when some people have spent a long lunch hour in the pub so maybe the total absurdity of your suggestion can be forgiven.

    Of course in the privitised world you can get calls for free - via the internet. Quality is getting better all the time.

    As far as rural UK is concerned there are technical reasons why they will always struggle as ADSL only works for a set distance from the phone exchange but with WiMAX and 4G have potential to deliver reasonable broadband without wires

    As for you not getting cable, why worry there are plenty of internet providers who will give you an ADSL modem.

    Please try again

  • Comment number 91.

    Part of me hates the idea of privatising Royal Mail, because I believe all core services should be government accountable not-for-profit (i.e. it should have enough profit to properly re-invest, but not be a fatcat industry). On the other hand, it is obvious that Royal Mail, because it had a safety net, missed a whole load of opportunities the new Internet driven systems could have opened out. Why don't we have an integrated physical mail/e-mail/carriage service? Royal mail were uniquely placed to deliver but could not think 'out of the box.'

  • Comment number 92.

    Well it won't matter about RM - here come the strikes - why not, you're going to lose your job - or be forced to work for less.

    http://www.dailymail.co.uk/news/article-1310681/Royal-Mail-sold-save-universal-postal-service.html

    ..and I got the Tories all wrong, they're spending more not less!
    http://www.mirror.co.uk/news/politics/news/2010/09/10/academy-cash-fears-115875-22550301/

    ...oh and a date for your diary folks.
    http://uk.reuters.com/article/idUKTRE6891JL20100910

  • Comment number 93.

    68. At 5:45pm on 10 Sep 2010, Ninko1 wrote:

    "I don't see how we as the public actually benefit from this at all."

    They don't - every privatisatoin is based on a lie. They run the public utility down, or take cash from it and then they stand in a circle and point screaming "oh look how inefficient it is" - then they flog off the best bits and then dump the unprofitable bits - but the bits some rely totally on - like rural bus services which don't make enough cash and rather than re-invest the excess they cream it off as executive bonuses and shareholder dividends.

  • Comment number 94.

    Taking up the point about the 9-5 with lunch.
    A manager has 2 equal applicants for a vacant position. They both have exactly the same qualifications and produce work to the same standard. The only difference is that one stays on till 7 the other leaves at 5.
    Which do they choose?
    Having put this scenario to many managers almost all pick the former.

    WRONG!!!!

    It takes the person 2 hours longer to do the same job.

    Another adage, work expands to fit the time available, springs to mind as well.

    The long hours culture is another disease of the modern world.

  • Comment number 95.

    84. At 6:55pm on 10 Sep 2010, newspaceman wrote:

    "Unfortunately it is not, surely humans were not put on earth to be efficient workers, collectively creating a global slave state - the "wealth" of this mass being space travel, genetics (acting like "God") and military technology. "

    Crikey! - they sure weren't. Without having to spend on all that carp we'd all be working 3 day weeks.
    How much of the working week is purely for 'profit'?

  • Comment number 96.

    #53 - writingsonthewall

    "You should be like me - private sector 9-5 - top of the ladder in my field and still I don't find it a challenge. That's how efficient the private sector is."

    Mate - WHAT NON-JOB DO YOU REALLY DO. HOW MANY POSTINGS HAVE YOU DONE OVER THE LAST YEAR? GET ON WITH YOUR JOB OR I'LL TELL YOUR BOSS!

  • Comment number 97.

    I really love writing and sending letters - real ones with envelopes and stamps. I remember the end of the Sunday delivery not just the second delivery. To have one's breakfast tray of coffee and fresh croissants with a folded copy of the paper and your morning post was an excellent way to start the day. Alas 99% of what I receive is junk mail (and I include those awful circular letter sent at Christmas!) and the please is delayed to lunchtime. I put up with this as I am told that it subsidises my personal letters, but is it true?

    Perhaps we should go back to before the penny post when a messenger brought you a letter and you paid to receive it as well as to send it? Would any of us, I wonder, pay to receive junk mail?

    Lets face facts it is only Government departments that keep the post running and that is because they can't (they will not !) use email - probably because when they did their classics degree the most up to date technology was a line of natives with cleft sticks. (And that condemnation goes double for much of the medical profession.)

    It will be very sad when the last real letter is sent and received, no more Christmas cards or birthday cards, but I feel it will happen. This will not just be that one has outlived ones generation, but it will be the end of society as it has been for hundred's of years.

    However to get a good price for the Royal Mail the Government dare not admit that the post is dying!

    Tell Sid that he is being robbed yet again!

  • Comment number 98.

    90. At 7:49pm on 10 Sep 2010, Justin150 wrote:

    "Oh dear. I particularly liked the idea that calls would be free if BT had remained under state ownership. I know this was posted on a Friday afternoon when some people have spent a long lunch hour in the pub so maybe the total absurdity of your suggestion can be forgiven."

    No lunchtime drinking I'm afraid, can't afford to make mistakes in my job. You disagree? - well public monopolies don't / shouldn't have sales & marketing costs, executive salaries and bonuses, a revolving door workforce, increased customer loyalty (because the customers 'own' it) and massive economies of scale....and you think this will cost more to run?

    "Of course in the privitised world you can get calls for free - via the internet. Quality is getting better all the time."

    ...and your internet is connected with....have you been drinking perhaps?
    I do apologise if you thought 'calls' meant just voice calls - to me calls mean all types - including remote procedure calls.

    "As far as rural UK is concerned there are technical reasons why they will always struggle as ADSL only works for a set distance from the phone exchange but with WiMAX and 4G have potential to deliver reasonable broadband without wires"

    ...stop reading those cheap computer magazines, if BT was still a functioning, working public monopoly then even the outer Hedbridees would be on fibre optic! - no need to fill the air with microwaves, and build more exchanges.
    Won't get that in the private sector see, they're too busy working out how they can cut costs by offshoring call centres and working out how much to pay the exec's.

    "As for you not getting cable, why worry there are plenty of internet providers who will give you an ADSL modem."

    I live in London (I did forget to mention that) and like others my 'choice' of provider is limited - my old man lives near the welsh border and they've not got an option of anything other than a dial up modem. BT are too busy with other private sector activities to be bothered to activte the local exchange.

    http://www.express.co.uk/posts/view/198323/Phone-The-184m-rip-off-over-paying-your-bill-in-cash

    I mean imagine how depressing it is...you expectantly wait 15 minutes for the page to load and you start reading with excitement...

    Justin150 wrote:

  • Comment number 99.

    If privatising the Royal Mail is better than keeping it in the State Sector, ergo do that with everything. No more taxes!

  • Comment number 100.

    Privatisatiin of utilities and transport has led to a poorer quality yet more expensive service.

    Why would privatising Royal Mail improve the postal service?

    The fact of the matter is that it won't.

    The real problems for Royal Mail and the reason that it is losing money are that a previous government allowed private companies to deliver mail and parcels and that the Royal Mail, a public sector service is run as if it is a business. Anywhere that you have a public sector service you simply cannot and must not have a private sector alternative because it will interfere and damage the public sector service. You cannot run a public sector service as if it is a business, it simply doesn't work, you have to accept that funding for a public sector service has to come from taxes.

    It is not about 'being more efficient'. private companies are always perceived to be more efficient however in reality what happens is they cut corners massively because they need to make a profit, employ less staff than they need to do the job and treat the staff like slaves in order to make up the shortfall.

    We have a public sector mail service to ensure that the post is delivered properly as it is a vital service in this country. Royal Mail is the only reliable postal service in Britain, the only times that I've had problems with mail going missing or mail taking a long time to be delivered is when it has been delivered via a private mail service.

    As for the shortfall in the pensions, this is completely unrelated to whether Royal Mail is being run effectively, this has more to do with the question of whether we should have company pensions and private pensions at all. The answer and the solution to this is no. All pensions in this country should be state pensions and there should be a proper level of taxation in order to fund it.

    This whole matter comes down to one simple fact that during the boom years of the late 90's and early-mid 00's the rich did not pay the level of tax that they should have done and continue not to do so. This is where the shortfall lies and this is why we have a budget deficit.

 

Page 1 of 2

BBC iD

Sign in

BBC navigation

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.