Natural Monopoly

Roy Mayall · Privatising the Royal Mail

It appears that the Royal Mail is to be sold off. According to the Daily Mail, it will be transformed into a ‘John Lewis-style trust’ by the autumn. John Lewis is a chain of department stores whose employees are also partners. The employees own shares, but these are held in trust, so cannot be sold off when the employee leaves the company. John Lewis employees earn a dividend in addition to their wages and are allowed some say in the running of the company.

The idea is that a similar scheme will give postal workers an incentive to help improve the Royal Mail’s performance. Except that the government has said that its intention is to ensure the Royal Mail 'benefits from private sector capital and disciplines’. The private sector will only inject capital on the expectation of returns. So it won’t be a ‘John Lewis-style partnership’. Part of it will be part-owned by postal workers, but staff will be subject to ‘private sector discipline’, meaning attempts to cut costs in order to maximise profit.

The Dutch postal company TNT and the private equity firm CVC Capital Partners, which owns a Belgian postal company, are already sniffing about in anticipation of the hoped-for returns. TNT is currently involved in drastic staff reductions and cost-cutting exercises in its domestic market.

The usual excuse that is reeled out every time anyone brings up the idea of privatisation is the huge £10 billion pension deficit which the company has run up in the last 20 years or so. But no private sector company will take this on. So in order to create an incentive to the private sector, the government will have to agree to fund it. Whether the Royal Mail is in the public sector or the private sector, the pensions deficit will remain a public liability.

Doesn’t anyone ever get the feeling that we are being ever so slightly conned here? The government brings in private sector bosses, such as Allan Leighton and Adam Crozier, to run the Royal Mail. They run it down while alienating staff and ignoring the needs of the public. The state then turns to the private sector for a solution. The government starves an industry of funds while it is in the public sector, but then quietly promises to reinstate a public sector subsidy once it is privatised.

That the ConDem coalition government is promising a 100 per cent sell-off, while the previous Labour administration only proposed a partial privatisation, shouldn’t blind us to the fact that privatisation has always been the agenda. Previous governments just didn’t have the nerve. The company was always too popular with the public. This was entirely down to its workforce who would often go out of their way to help their customers. It has taken years of careful preparation and a sustained attack on the workforce to make it ripe for the selling.

But there’s a reason the Post Office has been publicly owned since its creation in 1660. It’s what’s known as a ‘natural monopoly’: you can’t have two sets of postal workers trudging the same streets, or two post boxes on the same street corner. It just wouldn’t work. Not only would it be absurd, but no private company would take it on. The monopoly also allows profitable parts of the business to subsidise the much more costly deliveries to rural and outlying communities. The universal service is dependent on this. Privatising the Royal Mail will not change its monopoly status. It will just change it from a public to a private monopoly, unaccountable to the public but subsidised by public money.


  • 12 July 2010 at 4:24pm
    A.J.P. Crown says:
    John Lewis is a chain of department stores whose employees are also partners.

    Someone once told me that John Lewis has different staff toilets for "Partners" and "Directors".

  • 12 July 2010 at 8:02pm
    Joe Morison says:
    It's very sad. Until she was moved, our postie had delivered her route for 18 years; she knew us, misaddressed mail was correctly delivered and she kept a lookout for the vulnerable. She told me 'I used to love this job, now it makes me miserable.'

    The Royal Mail is one of those great institutions whose value is far more than is revealed in profit and loss accounts. They take a long long time to build up but can be knocked down in moments. We are losing a hugely important part of our social fabric so someone somewhere can become even more obscenely rich.

    • 12 July 2010 at 8:52pm
      lighteninglad says: @ Joe Morison
      yes joe,
      it is sad I hav been a postman for 31 years and remember when it was a service not a business, we used to help customers, and take time for them
      it is no longer the case as we are pushed all the time

  • 14 July 2010 at 12:12pm
    Doomlord says:
    Not sure the Post Office is a natural monopoly. I get parcels from UPS and other rivals all the time. And I see no reason why we couldn't have, say, blue post boxes on street corners.

    But, of course, this being mooted by the ideological shambles known as the Tories, there are no plans to institute competition - merely a sham of it so that yet more public moneys can be trousered by the private sector.

    Thank the Lord I live in London, where most post originates, and where costs can accordingly be kept somewhere approaching reasonable. Pity those who live out in the sticks: the price of their stamps is about to rocket...

    • 15 July 2010 at 3:04am
      pinhut says: @ Doomlord
      Natural monopoly or not, there is an inexorable logic to permitting everybody to be served, regardless of the remoteness of their location (and not that many places in the UK are that remote), by the postal service and charging a flat rate. Unfortunately, the 'profit potential' of the postal service is formed, in large part, by simply chopping away all the expensive out-of-the-way places and/or placing massive premiums against them. The same happened with bus services.

      Now, to finish the point. There are reasons why people live in remote areas, or, for that matter, in rural areas where it costs more to send a bus. They doubtless work as hard as the rest of their fellow citizens, and, what's more, we need them. It's not worth building a lighthouse in the centre of Nottingham, it's not a good idea to have a dairy farm in the basement of a tower block.

      If we have a notion that we as a people form 'a society' then it can be seen that it is a part of that society to carry the extra costs as a group, of providing the small number of loss-making services to our fellow citizens. Who knows, we might even want to send them a letter some fine day.

      If we reject this logic, we end up with the wholly atomised model, you know, the model that is always talking up 'personal responsibility' and would give treatment to somebody who broke their leg while working, but deny it to somebody who broke their leg while snowboarding (we know this type of person). And don't mention treating diseases linked to smoking, etc. These people are basically Nazis who want to externalise all the costs of providing services, without acknowledging that the formulation of such a system would itself vastly inflate prices for goods and services thus rendered (see US healthcare).

      To turn it around then, this destruction of the Royal Mail, and the 'efficiencies' that it pursues, are, to me, just another means of releasing the profit for a small group of mercenaries from that thing they simply don't believe in - society. I can understand them. What I find harder to fathom are the Little Men who cling to their coat-tails and rejoice in each ritual slaying of some aspect of the social fabric. It would be best to force such people into the completely privatised existence that they pine for FIRST, while the rest of us continued on our merry way. They'd soon be back.