Letter from Westminster 24.12.08
THE HOOPER Review of postal delivery market which was published last week did not make pleasant reading. The Royal Mail (the delivery network as opposed to the Post Offices) has yo-yoed in and out of profit in recent years. Since the opening up of the letter market to private sector competition it has haemorrhaged business – especially in the lucrative bulk mail sector.
Bulk mail is the mail sent by the likes of banks and credit cards. Most of that is now given not to Royal Mail but to a private company who sort it and pass it then to Royal Mail for local delivery. The price charged for that is set not by Royal Mail but by Postcomm, the mail services regulator. When Postcomm set that price some of us argued that it was set too low and that it would lead to a crippling of the Royal Mail. We were right of course, even if we were dismissed at the time as being scaremongers. Add to that sorry picture the fact that the Royal Mail has a pension fund that is somewhere between £3-7 billion in deficit and you can see why the current situation is simply not sustainable.
So it was that the postal services minister, Pat McFadden, came to the House of Commons last week to announce that the government accepted the analysis and the conclusions of the Hooper Report. Most controversially of all, a “partner” from the private sector was to be found for the Royal Mail. To put it another way, the Royal Mail is to be part-privatised with 30 per cent of it being sold to a private company. The Dutch postal company TNT is said to be interested.
That may or may not be the best option for the company but in truth it is difficult to see how the Royal Mail can continue to operate as it does. Not only does it need to have its pension fund sorted it also needs massive modernisation and investment on the scale that it is unlikely to get from the government.
For me therefore the real issue is not who owns the company but how it can continue to provide a service six days a week to nearly every door in the country. That is both the Royal Mail’s biggest burden and its greatest asset.
In the current set up where the Royal Mail alone has a universal service obligation it is not competing on a level playing field. Surely the thing to do is to say to its private competitors: “If you want to be part of our letter post market but not to provide the same service as the Royal Mail then you must pay a levy to support delivery to those parts of the country in which you choose not to operate.” That way we should be assured that our letter post service will not be allowed to go the same way as our parcel post.
An Orkney postman told me last week: “I wish I had placed a bet a year ago that by the end of this year the government would be privatising the Royal Mail and nationalising the banks.” He would have got good odds.