Privatising the Queen’s head

Is the government right to be selling off yet another national treasure in the Royal Mail? Piper Terrett reports.

Royal Mail looks set to be privatised in a £3bn public listing later this financial year. Vince Cable told MPs last week that the government is on "an irreversible course" to take the state-owned business private. Workers will be offered 10% of the shares for free. However, the Communication Workers Union has threatened immediate strike action in protest.

"Margaret Thatcher balked at it, Michael Heseltine was thwarted and Peter Mandelson threw in the towel. So full marks to Vince Cable for defying union opposition and public misgivings by pressing ahead," says The Times. It is the right thing for Royal Mail, the taxpayer, customers and workers.

Privatisation has largely been a success in the past. BT, BP and British Airways have "thrived". While the railways haven't done so well, Royal Mail has "more in common with the successes". The fall in letter deliveries has been offset by the rise in deliveries of goods bought online. Unions have "fuelled worries" that the universal service obligation could be axed. But "it is enshrined in law".

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"There was a reason that Margaret Thatcher never went so far as auctioning off the Royal Mail," writes Adrian Hilton in the Daily Mail, "and it had nothing to do with inefficiencies, chronic losses or union power." She would "no more have privatised Royal Mail" than "abolished the monarchy or disestablished the Church of England".

This "cherished" institution has been publicly owned since 1635. "Far-flung communities" appreciate its commitment to universality. "It belongs to the nation and the monarch's head upon its postage stamps is symbolic of that contract." This will "soon become faade, if not a humiliating farce". And let's not pretend universal provision is here to stay.

It is a "national disaster" that another great British organisation is to be exposed to the "short-term greed of stockmarkets", agrees Will Hutton in The Observer. Royal Mail will put up prices, cut into universal provision and contract out delivery to the "least protected workers".

But this won't be enough. Within a decade, directors will sell the company overseas. What will stop it being sold "to the Chinese communist party"?

Any government that sells this "crucial" business for just £3bn with 10% of shares given to the workers as a "blatant bribe is as short-termist as the stockmarket". Why not turn it into a private trust, like Deutsche Post, with its own supervisory board? Labour should seize this opportunity for "responsible capitalism".

But Royal Mail's difficulties make the case for privatisation all the more urgent, says the Financial Times. A private-equity takeover might have brought cost savings and made more money, but "poisonous job losses" would have been the price. The coalition may be privatising the Queen's head, "but it is not selling the crown jewels".

Royal Mail is less profitable than its peers and the public scrutiny will be intense. Proceeds from the sale will be "modest" and dwarfed by the £12bn pension deficit the government absorbed. Universal provision is costly to run and the government is unwilling to invest in automation. Royal Mail has "brighter prospects in private hands".

Piper Terrett is a financial journalist and author. Piper graduated from Newnham College, Cambridge, in 1997 and worked for Germaine Greer and for Adam Faith’s Money Channel before embarking on a career in business journalism. 

She has worked for most top financial titles, including Investors Chronicle, Shares magazine, Yahoo! Finance and MSN Money. She lectures part-time at London Metropolitan University and is the author of four books.