Comment: ‘Privatising the Royal Mail is a bad idea’

Last week Vince Cable signalled the Coalition was going to implement full privatisation of the Royal Mail, which instantly made me draw parallels with the fate of railways (more about that here). Like the trains, the postal service seems to be a natural monopoly, where the cost is so high to create a network, like water pipes, that there really is only one supplier. I mean, can genuine competition exist when posting a letter, turning on the tap or buying a train ticket?

If trains are anything to go by I'd say no and please leave our natural monopolies alone because either I've got early onset dementia or booking train tickets has got really confusing. Why is it sometimes cheaper to travel first class than standard and why do the machines cough out about 15 different old school BR tickets/seat reservations which must all be crammed into your wallet or they will fine the life out of you? Well, now imagine posting a letter - there would be loads of different post boxes crowding the pavement, each one requiring a different stamp (second class will be more expensive sometimes of course) which will only take your letter up to Crewe before it will need to change services.

Natural monopolies seem like public provisions or service providers rather than businesses. Much like operating a train service to remote parts of the country, it is impossible to turn a profit from delivering letters to the Orkneys. Luckily these parts of the operation can be subsidised by the postal equivalent of the London to Birmingham cash cow express. Dave 'classic union name' Ward of The Communication Workers Union claims that the Labour government's attempt to liberalise postal services allowed private companies to take 60% of Royal Mail's profitable business, thereby reducing the funds available to ensure Grandma's annual birthday cheque makes your letterbox for less than a packet of crisps, a service that the Royal Mail is obliged to fulfill due to the universal service obligation.

'If it ain't broke don't fix it' is probably not a phrase you'd apply to the Royal Mail. Back in 2006 it admitted that it had lost or pinched 14.6 million letters, and anyone unlucky enough to have been a victim will know what it's like when you try and complain. I always imagine them putting you on speaker phone and all miming along with what you're saying before issuing a witheringly jobs-worth and soul-destroying put-down. You have to hope that your parcel ends up in a good-ish home and just let it go.

'Dispatches' on Channel 4 made an undercover documentary in February this year that demonstrated that, despite significant improvements in delivery rates, problems still existed in the organisation; many of which stem from an over-reliance on temporary staff, who don't know the postal routes and have no real incentive to learn. Privatisation is supposed to solve this problem and fund the Royal Mail's £8bn pension deficit.

It's seductively simple but also undeniably false to believe this approach will deliver the postal service we deserve for the same sort of money we pay to post stuff now. I'm paraphrasing the recently departed historian Tony Judt here as he makes some great arguments as to why most privatisations result in a royal shafting for the taxpayer, even before you start wondering which colour of post box you're meant to be using for the monthly Swansea service.

The private sector is supposed to be super smart and so, if the Royal Mail is the disaster the Coalition makes it out to be, private suitors are hardly going to be paying top dollar. In fact if they are serious shouldn't they start talking about the Post Office's south-facing garden and how it's only had one previous owner? Well they can't, they basically tell the public they have a right old banger on their hands and so the only option is to send it to the bargain basement.

Over to you Tony: "...when the state sells cheap, the public takes a loss. In the course of the Thatcher-era UK privatisations, the deliberately low price at which public assets were marketed to the private sector resulted in a transfer of £14 billion from the taxpaying public to stockholders. To this loss should be added a further £3 billion in fees to the banks that transacted the privatisations. The state paid the private sector some £17 billion to facilitate the sale of assets for which there would otherwise have been no takers."

The Royal Mail is a natural monopoly which provides a universal service at a low cost and, while it has problems, a sell-off will inevitably result in price rises and a down-grading of the service. Assets will be undervalued to lure in hard-headed corporations who will strip out and sell the juicy bits (like expensive real estate) and us muggins will still be liable for losses because an organisation like the Royal Mail is simply too big to fail.