The Cost of Privatisation

Roy Mayall

In the last year our delivery office has moved from working on bikes to working in vans. There are two of us to a van, doing two rounds between us. We’ve also been given new trolleys so we can carry more weight, new bags to fit onto the new trolleys, and new tracking devices to show customers exactly where their post is. They also, coincidentally, show the Royal Mail exactly where its employees are.

We’ve been given new tools in the office too: a wheeled basket each, like an oversized shopping trolley (called a 'mini-york'), for moving our bags about, and a new storage and shelving unit for keeping our equipment in.

Our rounds have been extensively restructured to take account of the new working methods. For the past year a union rep, a manager and a planner have been huddled together in a room working out every detail of every round: how long it takes to open every gate, to walk up every path, to deliver every letter.

Everything about the Royal Mail operation is being changed. There are very expensive new walk-sequencing machines in most offices, for sorting the post into the order in which it will be delivered, new regional mail centres, where the post is gathered together and then sifted and sorted for delivery to local offices, and new lorries for shifting it around the country. Meanwhile hundreds of local offices have been closed and consolidated into larger units serving several towns at a time.

So far the Royal Mail has invested £2.1 billion in its modernisation programme, buying around 36,000 new tracking devices, 30,000 new trolleys and 11,500 new vans, and building new mail centres around the country.

All of this is being done at public expense in advance of privatisation. When the Royal Mail is floated later this year, it is expected to fetch up to £3 billion.


  • 11 September 2013 at 9:09am
    Hornets Nest says:
    Good blog which posses the questions "Why not retain a profitable Royal Mail as a public asset?" and "With the investment that has already been secured why does Royal Mail need to be privatised to secure more, surely this can still be achieved with the business in public hands?" the latter being the largest red herring currently being touted by RM management and the Govt.

    I think we all know the answers and the main drivers are not safeguarding the future of the company, looking after the vast majority of it's employees or the customer. The treasury is looking for a cash injection and the (very) senior levels of Royal Mail management are looking at privatisation from a personal perspective. The latter is based on good old fashioned greed but the former is a little more difficult to take as so many MPs seem to have developed selective memory loss when it comes to this subject.

    Your blog has outlined most of the initiatives that have or are currently being invested in and the casual observer would think that they can only be good for the company. Under normal circumstances this would be correct if it wasn't for the huge amount of waste that has taken place. With World Class Mail everyone is trying to invent the wheel at the same time when a national benchmarking system would have saved countless amounts of money. Unskilled staff and managers have taken on roles that they are ill-equipped for and again money has been wasted whilst they dawdle (aimlessly in some cases) up the learning curve. In terms of automation there have been successes particularly with the sequencing of letters but the planning models were out of date at the time of implementation and this has resulted in a number of area work plans being altered, machines being moved/de-commissioned which has added needless cost.

    Royal Mail have also been particularly slow to consider the effects of e-shopping and the growth of packet/parcel streams on their units. Look at any parcel/packet outhouse this Christmas and you won't see a state of the art Amazonesque processing unit you will see something that more resembles Bedlam with teams of ill-equipped managers looking after vast teams of poorly trained zero hour contract workers, it may work in the long run but not as well or as cost effectively as it could.

  • 12 September 2013 at 8:10am
    Roy Mayall says:
    Thanks for your comments Hornet's Nest. You are obviously very knowledgeable about the Royal Mail. I take it you have an interest in the company? Yes, I agree, Royal Mail should be retained as a public asset. Its tendency to make a loss was always a manufactured thing anyway, as the lifting on pricing restrictions by Ofcom showed. And I agree about senior levels of management looking to privatisation from a personal perspective. My view is that if it has to be privatised (which is questionable) then it should be as a John Lewis style partnership, giving the workforce a real stake in the company. And the truth is, we are the real assets of the Royal Mail, the workforce: the loyalty and trust that individual postmen and women have built up with their customers over the years. That's where the real wealth of the Royal Mail lies, but neither Vince Cable, nor Moya Green are ever likely to appreciate that.

    • 12 September 2013 at 8:38am
      Jake Bharier says: @ Roy Mayall
      Not just loyalty and trust: knowledge, too.

      I live in a rural area. There are some 25 houses under this postcode, scattered over about 1.5 square miles; some at the end of obscure tracks. Under the universal service commitment of Royal Mail, we are all treated as customers. Postal staff know where, and who, we are, and may be the only personal contact for some of us on some days.

      The private firms regard only the people who pay to send as their customers. So when their drivers can't find one of us, they don't deliver; or they dump the delivery with one of the other houses. Only the most assiduous bother to seek us out.

      So I am not convinced that a privatised Royal Mail would function as the publicly owned service does now.

    • 12 September 2013 at 4:45pm
      Roy Mayall says: @ Jake Bharier
      Jake, the Royal Mail, too, only regards those who pay as customers. That was the basis of my book: Dear Granny Smith. We were told at a meeting that Granny Smith (the affectionate name we give to our customers) doesn't matter any more. However, there is still some of the old public service ethos left amongst the postal workers themselves, and the difference between us and management is that we are on the front line. The people we meet every day, and regard as customers, are the people we meet on the doorstep, whereas Moya and her cronies are more concerned with bulk customers, such as the utilities and the banks, who get the service cheap and who will be the main source of profit once the company is privatised.

  • 17 September 2013 at 4:55pm
    John Perry says:
    There are a couple of letters in yesterday's Guardian asking why the Royal Mail can't have financial freedom within the public sector. The answer is that it can. I've just sent the Guardian the following short letter:

    'Readers ask what stops the government allowing Royal Mail to access the capital markets and enjoy true financial freedom yet remain in public ownership (Letters, 16 Sept). The answer is purely the Treasury's insistence on keeping to the UK's unique borrowing rules, which are not followed by any other country. After all, the government-owned French energy company EDF, or the German transport company Arriva, have no such limitations, and operate freely here. The Royal Mail is already classified by the Office of National Statistics as a public corporation and could therefore enjoy the same freedoms as state-owned companies elsewhere in Europe. All that is needed is for the Treasury to adopt the same rules as other countries have had for decades.

    'It continually surprises me that opponents of Royal Mail privatisation have not pursued this argument, especially as it addresses one of the government's main arguments in favour of selling it off. Given that the government have already made a similar rule change in favour of the publicly rescued banks, there is a clear precedent for such a change in favour of Royal Mail, that would render privatisation unnecessary.'