Climb down time on Royal Mail

There was some good news this morning for a change. I heard that “There may not be time in the legislative programme” to sell a minority stake in Royal Mail to a foreign company. It was presumably phrased like that by the BBC because they have both been told it has been dropped from the legislative programme, and told they must not confirm it until Parliament has been told officially just in case Parliament and the new Speaker wakes up on the issue of briefing before Statements.

This would be good news indeed. Selling a minority stake in current markets to a foreign company was always going to be a rip off deal at the expense of the taxpayer. Adding to it nationalising the very expensive and deficit ridden pension scheme made this government proposal yet another part of their scorched earth approach to the public finances. It would strip out assets at low prices and increase liabilities so the next government faces an even more impossible task to bring the public sector into balance.

Any new government serious about curbing the deficit will need to sell a majority of the Royal Mail and transfer responsibility for the pension fund to the private sector. It would be well advised to encourage and allow a substantial employee participation, as this is a people business where we need the saff to be well motivated to deliver a good service. The current position of a poorly managed Royal Mail starved of capital to grow, modernise and change the busienss is not a good one. Making the Royal Mail the creature of a foreign owner who controlled a blocking stake but did not own a majority would be even worse, leaving the taxpayer with the main liabilities and offering taxpayers a low share price for the stake. A foreign buyer of such a shareholding might well be more interested in blocking a competitior from full takeover, and in running down those parts of the business were they had spare capacity to take up the slack.

This is a rare case of the government deciding against making the public finances worse. At least it leaves the problem for someone else to sort out, instead of doing another bad financial deal at our expense.

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12 Comments

  1. Colin D.
    Posted June 29, 2009 at 7:16 am | Permalink

    You are giving the government more credit than they deserve. They have decided to back off not for common sense financial reasons but because they don’t want a fight with the unions and a vote loser on the run up to an election. A lot of what we will see out of this government from now on can be simply characterised as ‘…it’s the election stupid’.

  2. Brian Tomkinson
    Posted June 29, 2009 at 7:52 am | Permalink

    JR: “Selling a minority stake in current markets to a foreign company was always going to be a rip off deal at the expense of the taxpayer.”

    Why then was your party determined to support this flawed measure? That decision is even more incomprehensible when it was obvious that the government would have been defeated if you had opposed it, given the revolt on the Labour backbenches. I have pointed out previously on this subject that your party’s role is to hold the government to account and act as an effective opposition. In this case I regret that you have singularly failed.

    • Brian Tomkinson
      Posted June 29, 2009 at 10:02 pm | Permalink

      I now read that Cameron has offered an Opposition day to hold a second reading of the Royal Mail Bill! Sounds as though he still thinks it is a good measure after all. What do you make of that?

      Reply: I don’t think Mr C expected the PM to accept! He was making the point that this Bill is dropped for political reasons, not because we are short of time.

  3. Denis Cooper
    Posted June 29, 2009 at 8:41 am | Permalink

    But Royal Mail has been starved of capital because during the decades when it was profitable its sole shareholder, the government, insisted on taking most of the profits as dividends, leaving too little for re-investment. Basically therefore the postal service was being used to raise what we would now call “a stealth tax”.

    • jean baker
      Posted June 29, 2009 at 2:16 pm | Permalink

      Well said, spot on.

  4. Ross Warren
    Posted June 29, 2009 at 8:47 am | Permalink

    I agree with Colin, John is being far to nice to Labour. This is a cynical climdown to keep the Unions on side in the run up to the next general election.

  5. jean baker
    Posted June 29, 2009 at 9:07 am | Permalink

    Labour’s acting, as always, in ‘self interest’ – damage limitation in the run up to the next election – shelving potentially vote losing plans.

    Six figure salaries continue to be advertized for public sector ‘executives’.

  6. jeff todd
    Posted June 29, 2009 at 9:16 am | Permalink

    Why not point out that the sell-off is mandated by the EU?

    In the ideal world Brown would have already won his election some 18 months ago and the Post Office sell-off would have been a done deal and forgotten by the (then) next GE.

    It will have to be sold off, but now it looks likely that the Tories will have to be the ones to do it – and get the blame.

    Get Dave to start spouting off exactly WHY this is happening – and who is to blame. Too late after a GE. A nice PMQ – which muppet signed up to the sell-off?

    • pipesmoker
      Posted June 29, 2009 at 11:58 am | Permalink

      Absolutely. It’s the elephant in the room again that no one dare mention. JR you should know better!

  7. James C
    Posted June 29, 2009 at 12:37 pm | Permalink

    This sell-off is the result of an EU directive, ie law.
    And it is supported, disgracefully, by the Tories.

  8. alan jutson
    Posted June 29, 2009 at 5:45 pm | Permalink

    Interesting to hear Lord Mandy this morning on Radio Five saying the problem with selling off the Royal Mail was the Pension deficite.

    If this is regarded as a real problem with Royal mail, then why is he not worried about the Public Services Pension deficite, its an even bigger problem.

    At least getting him to recognise the problem would be a start.

    Oh i forgot, he cannot be questioned in the House of Commons can he.

    Same situation when Mrs Kinnock decides to take up her position as European minister, she cannot be questioned either.

    Democracy ???

    What a bloody farce.

  9. Adrian Peirson
    Posted June 29, 2009 at 9:21 pm | Permalink

    It’s British, it’s in the British Psyche, it has to go, we are EUropeans Now, anything British must be Sold off, destroyed, everything must go.

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    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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