The cost of privatisation

Generally the idea of privatising a public service is to save us money, not cost us, though in the brave new world of the coagulation this is exactly what privatising the Post Office is going to do.


Royal Mail sell-off could cost taxpayer over £10 billion
Up to £1.7 billion of public money will be injected into Royal Mail as part of the Government’s plans to privatise the national postal service, ministers said.
Adding in the cost of taking over its £8.4 billion pension deficit, it means that the bill to the taxpayer of selling off Royal Mail could be more than £10 billion.
The news came as plans to privatise Royal Mail were formally agreed by Parliament. The sale could happen as early as next year.
Ed Davy, the postal services minister, confirmed a report in The Daily Telegraph last month that an extra bail-out is needed of Royal Mail. Mr Davy told MPs yesterday said the extra cash was vital to ensure that “the universal service” was protected.
He added: “To do this, Royal Mail needs to be on a sustainable commercial footing. The company currently has around £1.7 billion of debt facilities with the Government.
“We intend to restructure the company’s balance sheet in due course. In order to put Royal Mail on that sustainable commercial footing, we will need to reduce significantly that level of debt.”

Granted the Post office provides a valuable service in many ways, though not as much as it used too in the days of the Child benefit Giro but really if the government want it off their hands, it should be sold as is, debts and all otherwise this just looks suspiciously like someone in the government feathering the nest of a buyer complete with a non executive directorship thrown in at a later date no doubt.  Of course I might be a little paranoid there, but if it waddles like a duck etc…

I have no issues these days with the Post Office being privatised so long as it maintains or even improves the existing services, though I suspect the first thing to go might be the 1st class one price fits all, though anyone trying to post a slightly oversized envelope with a birthday card in would tell you it’s gone anyway.

Normally I’d say in an ideal world that competition would keep the price down in the delivery business and it does to an extent if you’re in a large conurbation or even near one. But it would also mean someone in John o Groats is going to pay through the nose for a delivery which while fair enough is hardly a good example of a universal system.

In this case though if we are to have a universal system it either has to be run by the state (in a manner of speaking) with all the problems that entails, or the state has to subsidise it. Without looking at the figures, £10 billion which includes the pensions pot seems a high price to pay for handing it over for someone else to run at a profit, particularly when the government admits it will only cost £1.7 billion to put right.

Personally I don’t trust that this sell off is in the public’s interest over all. But no-ones asking me or any of us, which is why after thinking about it, I’m now in favour of referism. Sooner we take over the control of spending the quicker we can start to put things right.

11 comments for “The cost of privatisation

  1. Lord T
    June 10, 2011 at 11:18 am

    Heavily unionised, debts, full of public sector types. Who would want to buy this posioned chalice unless it was well sweetened?

  2. June 10, 2011 at 12:14 pm

    No no no, the idea of privatisation is to enable mates of the people in government to make wadges of cash in fees, salaries, commissions, subsidies etc.

    In the instant case, there is no need to privatise the Royal Mail, it would be quite sufficient to allow private competition and to put and end to the general taxpayer subsidies.

    If outlying regions want to hang on to their actual post office, or want to be able to post letters at the same (low) cost as in urban areas, then by all means, they can do their local referism and decide to pay for it via their council tax.

    • QM
      June 10, 2011 at 12:41 pm

      That’s pretty much what I thought Mark, though I was struggling to formulate my thoughts with this one.

    • June 11, 2011 at 7:34 am

      “No no no, the idea of privatisation is to enable mates of the people in government to make wadges of cash in fees, salaries, commissions, subsidies etc.”

      Spot on!

  3. Andy
    June 10, 2011 at 12:52 pm

    Does any know if the flat rates for stamps are held in law or just how the royal mail has been run all hese years? Privitisation will be a failure if these sorts of price controls remain. Of course, no one will think blame the price controls and demand it be re-nationalised…

    Like with the banks it was perceived to be the fault of capitalism but no-one wanted to look at the government manipulations of the interest rate and the housing market.

  4. PT
    June 10, 2011 at 1:32 pm

    The Union seems to work on the basis, every year at negotiation time, that there’s loads of money available in the business to increase the workers’ wages. Sell it to the Union for a quid, let them run it.

    • June 11, 2011 at 7:35 am

      That’s the way the RMT think too, and it seems to do the trick. But then, there are other postal opportunities.

  5. June 10, 2011 at 3:37 pm

    The public are not stupid, they already know that the EU issued a directive in 2003 for the break-up and sale of National postal services, in all 27 member states, and that they must become supranational in make-up, thereby allowing regulatory control to fall under the EU remit and removing it from national control.

    Or have you all forgotten?? UK is just running a little late on this directive, so must make it saleable with your money.

  6. PPS
    June 10, 2011 at 5:27 pm

    The post office is a wholly owned susidiary of Royal Mail:
    From Wikipedia:

    Royal Mail is the national postal service of the United Kingdom. Royal Mail Holdings plc owns Royal Mail Group Limited, which in turn operates the brands Royal Mail (UK letters), Parcelforce Worldwide (UK parcels) and General Logistics Systems. Post Office Ltd, which provides counter services, is a wholly owned subsidiary.

    The post office has a whole different set of issues from the delivery services part of the group. Perhaps as a first stage HMG should split the group into it’s seperate businesses so the public can see exactly how much of any subsidy is going to be spent on which business.

  7. Junican
    June 10, 2011 at 7:57 pm

    I don’t know, but I wonder if too much emphasis is being placed upon ‘outlying places’ – after all, there is a daily ferry to the Hebrides. I have no doubt that there are people plying their way daily from town to town even in these far flung spots. I could certainly see ways in which ‘while you’re at it, can you take….’, although obviously much controlled than I imply! The significant issue perhaps would be greater delay in delivery – if that matters.

    • June 11, 2011 at 7:36 am

      The Big Society at work! 😛

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