In defence of the Royal Mail

The Royal Mail currently costs the taxpayer nothing to run.

Its performance from market changes has recovered in recent years, and it has posted a profit of £403m – a 2.6 times increase on the previous year’s posting. In fact it has broken-even on operating income for the past three years. The pension deficit is to remain nationalised regardless of sale.

The operations of the Royal Mail are sound.

Others argue that significant capital investment is required to modernise the Royal Mail’s processes. Essentially this amounts to the automation of parcel sorting; the growing market driven by internet shopping. George Osborne has checked his deficit reduction plans and there is no room for this kind of investment.

You know, the kind of investment that would guarantee the jobs of 150,000 postal workers, would modernise a key element of the UK’s business infrastructure, and would ensure the continuation of a national brand.

Instead – George wishes to sell up shop for a one-off payment of £3bn. Context: the annual cost savings under this parliament was intended to be £81bn. This one-off payment is just 4% of the annual savings under the 2010 Spending Review. It is a drop in the ocean when weighed against the inevitable job losses faced by many; the price hikes and service losses to be experience by us all.

Job losses, price increases, and service losses are inevitable. The only way the Royal Mail would be able to ‘compete’ as a private company is by cutting its cost base – the majority of which is staff costs – by increasing prices, and by reducing the service it offers.

The Coalition maintains that universality of service is protected in legislation, and yes for now it is. But it would only take a couple of years of ‘poor performance’ and a parliamentary majority to undo this basic right. And it is not urbanites who will feel the brunt of this reform – although we will experience a reduction to our six day deliveries and inevitable price hikes. Those affected most will be our rural poor, already under the cosh from years of government neglect of the rural economy.

So what can our Labour Party do to prevent this great loss?

Ed Miliband could instantly undermine the sell-off by pledging the Labour Party to renationalising the Royal Mail should it be privatised in this parliament. He has chosen not to, likely on the basis that this would force him to reveal the rest of his economic plan.

This is little comfort to those who face the prospect of job losses.

The Parliamentary Party must consider other options if they deem such a pledge politically unpalatable. A legislative limit on the profits of a privatised Royal Mail – with surplus profits going to the public sector – would go some way to remove incentives for job losses and price hikes. The Party could also push to legislative a levy – such as a percentage of turnover – to be applied to the buyer. This would be returned to the public sector and ring-fenced for capital improvements to the mail infrastructure.

The unions are doing their bit, balloting for strike action both before and after privatisation. But whilst the unions can do so much to protect their members, they can’t fight this partisan issue alone. The Parliamentary Labour Party needs to echo their support and commitment to the Royal Mail as a public body. It must put aside its current spat with the unions, and come together on this decisive issue.

Ed could control the agenda by pushing this issue, and continuing the debate.  Above all he must remember that in opposition you are rarely remembered for what you have done, much rather for what you didn’t do.