Selling the post?

I have always favoured an employee and management buy out of the postal service. Much of the Post Office is already privatised, as it takes the form of a string of small businesses operating the Post Office franchise through a big network of shops. Much of the transport is contracted out.

I am not keenon foreign interests buying a minority stake on the back of the weak pound. Why not enter negotiations with the staff to see what could be organised? The government deal looks like another bad one for the taxpayer, leaving us with the massive pension liabilities so the foreign buyer can buy a clean interest.
It may be better than keeping the whole thing in public ownership, where we have to pay both the losses on the business and the losses on the pension fund, but why are they the onlytwo options? Can’t we have an option where staff and taxpayers are both better off?

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20 Comments

  1. Robert
    Posted March 1, 2009 at 9:23 am | Permalink

    Same old Tories new labour and the Tories should join to make one party maybe you have one decent idea.

  2. Brigham
    Posted March 1, 2009 at 10:09 am | Permalink

    What makes it worse is that the person overseeing the deal is Mandelson. A (person -ed) that has (had to resign from-ed) of high office, not once, but twice, for …. questionable dealings. How can anyone trust him?

    • alan jutson
      Posted March 1, 2009 at 5:51 pm | Permalink

      Do not forget he is still drawing his EU Salary, as well as being paid by the Taxpayer.

      Not elected to represent the people, so given a Title so he can, makes you wonder !!!!!!!

  3. backofanenvelope
    Posted March 1, 2009 at 10:20 am | Permalink

    Just give it to the postal workers; they can keep the profits.

    • a-tracy
      Posted March 1, 2009 at 6:50 pm | Permalink

      Do you own a home?

      After buying it (building it up) and paying for it’s upkeep for many years would you simply give it to the person you engage to clean the windows, or clean the house, the plumber you engaged to put in a new bathroom, the carpet fitter and the decorator?

      It’s our taxes that have propped this organisation up for years and it will be ours and our children’s taxes paying for pensions for generations to come. £9 billion is the current estimate.

      “Just give it to the workers” you say – NO! There were already too many mistakes made on the last set of privatisations.

      However, these workers have a pension fund that they can raise the finance on, they could offer the same stake as TNT and buy up 30%. It will then be in their direct interest to work to make the business successful in the future.

  4. Brian Tomkinson
    Posted March 1, 2009 at 10:48 am | Permalink

    Good suggestion but first you need to vote against the government’s proposal. Why you are going to prevent a Labour defeat on the Royal Mail is beyond me. It isn’t your job to keep a rotten government in power with a clown in charge who is taking us into pecuniary ruin. I am sure Labour wouldn’t do that favour for you regardless of the subject.
    Are you sure the pension fund isn’t just going to be swallowed up by the Treasury leaving future pensions to be paid from taxation? This must not be allowed.

  5. Frustrated taxpayer
    Posted March 1, 2009 at 10:57 am | Permalink

    John,
    As an astute member of the Commons I am sure that you know that the answer is, of course, that the Government is planning this sale merely to comply with the EU’s Postal Services Directives [see website link]:

    “The first Postal Services Directive, adopted in 1997 (97/67/EC ), and a second one, adopted in 2002 (2002/39/EC ), succeeded in opening up a number of postal services, including the delivery of parcels and express services, but stopped short of imposing competition for the delivery of letters weighing less than 50 grammes.

    Incumbent operators were entitled to hold onto this so-called ‘reserved area’ – which represents more than 70% of all letter post in the EU and around 60% of all revenues from postal services – in order to keep up their role of “universal service provider” (USP).

    But, on 18 October 2006, Internal Market Commissioner Charlie McCreevy confirmed, in his proposal for a third Postal Services Directive , the Commission’s intention to eliminate all remaining obstacles to a single postal market and to abolish this reserved area as of 2009 – a date already suggested in the previous Directives. ”

    So in answer to you questions, here are some very simple questions for you and your colleagues at Westminster:
    (a) Why is there little or no mention that the reason for the sell off of the Post Office is compliance with an EU Directive?
    (b) Given “government deal looks like another bad one for the taxpayer” why are the Oppositoin [arties not joining forces with the Labour rebels to have the plans thrown out?
    (c) Why is the UK taxpayer being left “with the massive pension liabilities” – surely we have been here before with BT and the situation has not improved since that privatisation?
    (d) What guarantees do we have that the Royal Mail sale will not create a situation similar to BT – i.e. will the sale cap the current liabilities or is the UK taxpayer picking up the future as yet unknown liabilities?

  6. Neil Craig
    Posted March 1, 2009 at 1:19 pm | Permalink

    Perhaps if there was an employee buyout (a preferable term to management buyout) the company’s termscould be written that if employes sell their shares they have to pay 10% to the compay & if they other emplyees invest in their company they will get a 10% bonus. 10% would not be enough to prevent the share market operationg but would give an incentive to worker involvement.

  7. alan jutson
    Posted March 1, 2009 at 1:41 pm | Permalink

    Understand you are not keen on Foreign ownership and I agree.

    Problem is if you allow a management buy out at favourable terms, then you have to protect against them selling on to outside interests after a trading period (Rover to China) at a large profit.

    Other problem is if you sell off the good bits to raise cash, you (the taxpayer) are left with the Pension Scheme liabilities. Who in their right mind would buy these, unless the Company is given away as compensation for the debt.

    If the Government are confident that the Post Office can be turned around with the right management, then employ the right management. Although their (the Governments) track record for such decisions is not good.

    All too often we have sought to sell off the basic providers of essential services to either Foreign owners or private business.

    Water, Electricity, Gas, Railways which we now do not control but still in some way subsidise, its a nonesense.

  8. chris southern
    Posted March 1, 2009 at 1:56 pm | Permalink

    The plan worked for one or two Welsh mines, where the miners themselves and the management bought the mines and now get all of the profits themselves.

  9. Derek
    Posted March 1, 2009 at 3:05 pm | Permalink

    Employee ownership certainly seems to work successfully for John Lewis.

    However, Royal Mail neatly encapsulates two of the real, unpalatable, issues inextricably linked to the current crisis that no-one in government would dare acknowledge.

    The first is that a vast amount of mainstream jobs have been rendered obsolete through technological advancements. I’ve just had a new electricity meter installed by the utility company. It communicates consumption over the mobile phone network. That’s a meter reader out of a job. When you think about it there are endless jobs that could be replaced with streamlined efficiet use of IT. Paper shuffling jobs are a particularly rich seam. It’s peak jobs.

    The other issue with Royal Mail, also highlighted by the Goodwin affair, is pensions. These have always been something of a Ponzi scheme, but they are simply no longer affordable in their traditional format. With people living into their nineties many are now spending the largest part of their lives in retirement.

    I can’t think of any solutions to these problems that aren’t painful or involve a complete re-ordering of society. I do know that the ‘least said soonest mended’ philosophy applied to this economic crisis is likely to result in more misery.

    • The Half-Blood Welshman
      Posted March 1, 2009 at 3:34 pm | Permalink

      Fully agree with all that Derek says, but he might also have mentioned that the legal obligation of the Royal Mail to fully cover the UK is a big reason not only for the huge staff numbers (which leads to a large pension bill). Given the extent of the network it HAS to maintain, much of it completely unsustainable on its own merits, it will never be commercially viable, no matter who manages it, even with the intriguing idea of a management buyout (which sounds well worth pursuing) in its current form. Either we will have to abandon that pledge of total coverage, or fund a large loss-making firm through general taxation – and let’s face it, neither is going to be popular.

      My full thoughts are here if anyone’s interested.

  10. molesworth 1
    Posted March 1, 2009 at 3:21 pm | Permalink

    Do not confuse ‘The Post Office’ with ‘The Royal Mail’, aren’t they separate organisations now? The closing-down of local ‘Post Offices’ & the proposed part-privatisation of Royal Mail are separate, if concurrent & related, issues.

  11. Alan Wheatley
    Posted March 1, 2009 at 3:33 pm | Permalink

    There are certainly businesses that should not have been in public ownership, and it is good that the last Conservative government returned them to private ownership. But it does not follow that the policy should be extended to everything, else where do you stop. For me the universal postal service and the national network of post offices are an essential characteristic of British life – part of what it means to be British. I fear this would be undermined by a privately run organisation.

    I am aware that government does not have a particularly good record at running things, but I would like to think this is not an inherent characteristic of “government”, rather examples of bad government. alternatively, why not get rid of the whole civil service and put the work out to private industry?

  12. Ruth
    Posted March 1, 2009 at 7:54 pm | Permalink

    Derek is right on all points.

    A management buyout is not the answer because the management is part of the problem. It is a unionised organisation with some (not all) archaic working practices, locked into an unaffordable pension scheme and with a management which has largely grown up in that (unionised) environment, unexposed to other ways of doing things.

    If Royal Mail was a private company already it would simply go bust, be carved up and a new business would emerge from the ashes, with all the inefficiencies (and much of the management) removed at one go. The remainder of the deadwood would be identified and removed over the next 1-2 years. The pension scheme would go into windup and the employees would lose benefits just like many other employees have in other industries.

    This is the only way to fix it but it is politically unacceptable, also it would inflict chaos on the postal service, losing more business so is clearly not a top choice!

    I understand the government’s approach – balance the pension problem against investment in new technology and working practices. It makes sense – all options involve the taxpayer continuing to fund Royal Mail in some way. Personally, I think they should grasp the pension nettle, wind it up and get control of it but I doubt anyone is brave enough to do this.

    I don’t think a minority partner would be able to tackle the working practices problem though, as it would by definition be a minority.

    I do think that royal mail has improved in some ways – in this area they have reorganised the routes and reduced the numbers of staff required and we do get a very good service. But for the life of me I can’t understand why they still do the final sorting by hand! I thought that was what postcodes were for…

  13. mike stallard
    Posted March 1, 2009 at 8:48 pm | Permalink

    Yesterday in the Telegraph Christopher Booker repeated his statement that the trouble with the Post Office is the desire of the British Government to gold plate the EU Directives listed above by Frustrated Taxpayer.
    Lord Mandelson is right in with Oleg Deripaska,….. , and Lord Mandelson has already( resigned -ed)from government twice (over allegations about his conduct-ed). He is also right in with the EU. And this is the government that got aerated about “Tory Sleaze”.
    Finally, I cannot understand why, if there is a chance of bringing down this incontinent government, the opposition parties do not take it with both hands.
    Having said all that, I totally agree with what you have written.

    Reply: There is no chance to bring down the government. If the government loses a vote on a matter like this it does not need to hold an election – it would still take a No confidence vote which we would not win.

  14. david
    Posted March 1, 2009 at 10:18 pm | Permalink

    All too often we have sought to sell off the basic providers of essential services to either Foreign owners or private business.

    Water, Electricity, Gas, Railways which we now do not control but still in some way subsidise, its a nonesense.

    Mr Redwood could hardly agree with your comments, thats exactly what the last Conservative government did.

    • alan jutson
      Posted March 2, 2009 at 10:38 am | Permalink

      David

      Did not expect him to agree, but its my view, and I have communicated it to him on his blog, so I am satisfied.

      Never know the Conservatives may now have a change of view over some of these things, given that time has passed, and they can see how its all worked out.

  15. Johnny Norfolk
    Posted March 2, 2009 at 8:20 am | Permalink

    The one thing you can be sure of Labour will make a mees of it.

    • Johnny Norfolk
      Posted March 2, 2009 at 3:43 pm | Permalink

      Mess of it.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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