Government lost in the post?

Contrary to common belief, Ken Clarke does not set, influence or seek to change Conservative policy towards the EU. He does, however, have an important position when it comes to Conservative policy on the Post Office. He is leading the Shadow Cabinet’s response on that. The government looks as if it is lost in the post. What should the Opposition do?

Current policy backs Peter Mandelson’s proposal to sell a minority stake to a private sector company. This policy happens to be very unpopular with Labour MPs, with the Postal employees and Unions, and with a section of the public. What are Mr Clarke’s options?

A- Back the Unions and oppose the botched partial privatisation.

Some Labour MPs probably think it is the Opposition’s duty to oppose. They privately would like him to find a reason why the Conservatives can no longer back Mr Mandelson. They see the attractive politics of siding with the Postal workers and the ever popular local postman. This would greatly increase their bargaining power, and would probably scupper the whole proposal.

B- Demand proper privatisation, and oppose the bodge

Some enthusiasts for privatisation think this will be bodged Labour style partial privatisation, which will prevent a future outright sale to the highest bidder. It could both damage the Post office and the taxpayer, leaving a future government with no option other than selling the balance of the shares to the partner at a knock down price or soldiering on with an unhappy partnership where the taxpayer has limited influence despite owning the majority of the shares. They would like the Conservatives to vote against the Labour idea for very different reasons to the Labour rebels.

C- Demand a seat to negotiate a better outcome

There is a third way. Mr Clarke could demand a place at the negotiating table, now it is obvious the Labour rebels are giving the government a hard time. He could say that Conservatives are still minded to vote for the government, but seek improvements and reassurances about the scheme. He could, for example, demand shares for the employees at the time of the partial privatisation. This could improve workforce motivation and would add a “people’s privatisation” element to the scheme. He could seek to rule out certain overseas monopoly state owned or influenced buyers for competition reasons. He could demand assurances that a future government will still have a majority stake of value which in defined circumstances it could sell to someone other than the minority buyer in this proposal.

What is he likely to do? I suspect he will think he has given his word on supporting the government’s scheme, and stick with it. It is, however, a very interesting situation where for once the Opposition has some power to influence.


  1. IanVisits
    May 5, 2009

    My personal opinion is that there are almost two arms to the Post Office.

    The “front end” – the last mile delivery and the post offices, both of which are much loved by the general public.

    The “back end” – the parcel office only delivers you were out cards, and the sorting offices which have a tendency to lose things – neither of which are particularly loved by the public.

    Fortunately, it seems that the area in most need of shaking up is the back-end sorting offices and logistics.

    I would split the company in half – with a state backed last mile delivery service, but then let anyone compete to provide the unseen side of the postal service – the cross-country logistics and sorting office services.

    That not only largely fixes the area where most work is needed – but is politically acceptable for the public as it keeps “nasty capitalism” out of the last mile delivery service.

    It should be remembered that the idea of an integrated post office service is a moderately recent idea – and outsourcing the logistics to private courier firms was how the Post Office originally operated, to much success.

  2. Waramess
    May 5, 2009

    The opposition already stand accused of cosying up to the government at every opportunity so will this be any different?

    I hope it will and that the opposition will push for total privatisation.

    It will make no difference either way, of course, but it is an opportunity for the Conservatives to show they can and will oppose, particularly when the action is fundamentally against what they should stand for.

    State ownership, either partial or full, should not be on the Tories radar, and if it is we are all doomed.

  3. Robert Eve
    May 5, 2009

    I’m rather concerned that Ken Clarke will support the government to prolong this awful administration.

    He knows that after a General Election we should be getting the missing Lisbon referendum if all 27 have not ratified.

    Delay at this stage assists the EU.

  4. Brian Tomkinson
    May 5, 2009

    Why does any action concerning the Royal Mail need to be taken now? There must be an election by June next year. The real question is – what would the Conservative party really want to do with the Royal Mail when in power? Why support Brown in his measures if they do not represent fully what you would do in power? If you have different proposals then you should vote against the government and await your chance to implement what you think is the right solution. I suspect, however, that Clarke will not want to risk another government defeat which might bring forward an early general election and will therefore decide to stick with his support. As you say, “for once the Opposition has some power to influence”. As in all things, political considerations will get in the way of taking the correct measures. The action your leadership takes will be revealing about what form of government they would make.

  5. Alan Wheatley
    May 5, 2009

    The very words “partial privatisation” suggest cock-up. Can anyone argue a good case as to why such an arrangement would work?

    Clearly there are things that the government should not own and run, and the Conservative government was wise to shift many into the private sector. However, it does not follow that because some privatisation is good more must be better. Where normal market conditions can not operate there is a case for government to run things, and the Post Office could be a good case in point.

    Of course, I assume that government is competent to run it. But if government is so incompetent it can not run something like the Post Office, then what confidence can we have that it is competent to run anything.

    On a slightly different tack, from time to time the question is raised as to what it is to be British. To my mind a part of the answer is the Royal Mail. Britain invented the postal service, and being the first, and only, there was no need to put the name of the country on the stamp. And Britain is still the only country that does not have its name on its stamps. A minor point you may think, but it is a part of what makes us what we are.

    1. Waramess
      May 6, 2009

      I agree,the government is not competent to run anything and they should not be encouraged to think otherwise.

      There is no sphere of commercial activity over which the government have any control which could not be better run by the free market and that includes schools and hospitals.

      The rational for this argument is that governments are not elected for their commercial skills and if some of their numbers possess them they are coincidental.

      When governments employ people to run such endevours they employ people who are top heavy in communication skills and light in commercial skills, which is why they make such a mess of things.

      The free markets work because people are in the first instance willing to invest their own money into making things work.On the other hand the governments use our money.

      But dare we hope for this opposition to wrench itself away from the delusion that we need a socialist inspired National Health Service.

      And why then why should we expect them to disassociate themselves from a semi nationalised post office? So maybe you will have your way

  6. mikestallard
    May 5, 2009

    Yesterday my wife went to John Lewis to return a faulty radio. It was immediately, without question, exchanged for a new one of the same type. There was a lot of paperwork involved which the lady at Returns did with great good humour. She spoke politely to us and we went away very happy. The guarantee was extended for another two years.
    Today my wife came back from the Sorting Post Office where you go to collect oversize parcels. When she got there, there was a lady whose parcel had got missing. The clerk did not even greet my wife. He just kept explaining patiently to the other lady that he couldn’t do anything about the missing parcel. After some minutes, my wife was attended to. She handed the slip to the clerk who disappeared without even a word and then reappeared with the two parcels. He put them on the desk without speaking. She felt (rightly or wrongly) that she was being treated like a nuisance.
    Can privatisation change his attitude?
    And isn’t that the question?

    1. alan jutson
      May 5, 2009

      Perhaps the postman was deaf and dumb ?????
      Your luckey he didn’t use sign language.

  7. Denis Cooper
    May 5, 2009

    I could suggest this: before condemning Royal Mail, make sure that it’s operating on a level playing field vis-a-vis its competitors.

    There are now 23 licensed postal operators in the UK:

    and guess how many of them have the obligation to provide a universal service?

    That’s right: just one postal operator, Royal Mail, has that written into the terms of its licence.

    And guess how many of them have their prices fixed by an external regulator?

    That’s right: just one again, Royal Mail.

    And guess how many of them are required to sort and deliver mail on behalf of competitors, for a charge which barely covers the cost, or is below cost?

    That’s right: just one again, Royal Mail.

    So if we’re going to have free competition, shouldn’t that also be fair competition?

    That is, with all 23 of the licensed postal operators having the same terms in their licences.

    Rather than having 22 operators who can adjust their own prices, while the 23rd can’t; and who are free from a costly social obligation which is imposed solely on the 23rd; and who are even allowed to parasitise the (publicly owned) facilities of the 23rd for their (private) profit.

    And if the EU doesn’t like this, tell them to push off and stop interfering with every last thing in our country:

    “The development and improvement of the quality of Community postal services”

    What a joke.

    But they’ll only be happy when they’ve wrecked all the national postal services across the EU and replaced them with a Federal European Post Office – which like as not will be owned by the state, ie by the EU state.

    Which is, of course, why a eurofanatic Business Secretary, and a eurofanatic Shadow Business Secretary, both want to see an end to Royal Mail.

    1. Waramess
      May 6, 2009

      Do you not think that if Royal Mail were to be fully privatised this would promote full competition, and don’t you think that full competition would be a good thing?

      And if Royal Mail were not up to the job don’t you think someone else in the private sector would fill the breach?

      What the hell is government for if it’s not regulating? and how can it properly regulate if it is also an operator?

      1. Denis Cooper
        May 6, 2009

        “Do you not think that if Royal Mail were to be fully privatised this would promote full competition?”

        We already have full competition, actively promoted by Postcomm with the clear intention of weakening Royal Mail’s market position.

        See its website:

        “The UK’s mail market was fully liberalised – that is, opened up for competition – on 1 January 2006. This means Royal Mail no longer enjoys the statutory monopoly it held for 350 years. New operators licensed by Postcomm can now collect and deliver any mail, from any customer.”

        Yes, they can collect and deliver any mail from any customer, but they certainly don’t want to be under any obligation to do so – they want the freedom to pick and choose their customers, and focus on the most profitable business. Only Royal Mail has the burden of providing a universal service:

        “The universal service means that anyone in the UK can post letters and parcels to any other part of the country at the same affordable rates. And it guarantees one delivery of mail for every UK household and business, each working day, and one collection of mail, six days a week.

        Royal Mail’s licence requires it to provide universal postal services.”

        And what’s more, at “affordable” prices set by the regulator so that normally it loses money on every second class stamped letter that it handles, and often even on the first class stamped letters as well, plus so that it makes no profit, and may even make a loss, on mail that it finally sorts and delivers on behalf of its competitors.

        Which is one reason why postmen are now delivering so much junk mail: without that, the price of stamps would have to go up.

        “And if Royal Mail were not up to the job don’t you think someone else in the private sector would fill the breach?”

        I doubt that any private company would want to take on the job on the same terms as those imposed on Royal Mail. Certainly no private company would accept that when it made a profit – which Royal Mail did, operating at a profit for 23 consecutive years up to the year ending March 2001 – almost all of the profit would be taken by the Treasury to supplement tax revenues, making it impossible to maintain adequate levels of investment in improved equipment and methods.

        There have always been complaints about Royal Mail; in fact over the years I myself have quite often been dissatisfied with Royal Mail. But then I have also quite often been dissatisfied with other service providers, both when they were public services and after they were privatised.

        Privatisation is not a panacea, and especially privatisation of a service which is intrinsically unprofitable but which must be maintained for social purposes.

        “What the hell is government for if it’s not regulating? and how can it properly regulate if it is also an operator?”

        I’d rather have the British government both owning and regulating the operator, than have either the ownership or the regulation determined by Brussels. At least there is a faint hope that one day we’ll finally get our national government back under some kind of democratic control, but that will never happen with the EU.

        1. Waramess
          May 7, 2009

          With respect, your points in summary would seem to be :

          1 competition already exists but the competitors pick and choose what to provide
          2 The regulator imposes economically unrewarding tariffs on those services provided by the Post Office
          3 Treasury relieved them of past profits
          4 Services that are unprofitable but socially necessary should be run by governments

          There can be no dispute that competition already exists, but in deregulating the market Postcomm has allowed the private sector to select the most profitable parts of the deregulated service. This exposes a most serious and entirely predictable flaw in the deregulation process. “Cherry picking” is what the free market does best if facilitated.

          If the regulator has imposed economically unrewarding tariffs then, in order to maintain a viable postal system it must re-visit the issue and if necessary re-balance the attractiveness of revenue streams accordingly.

          Shareholders relieve companies of their profits, perhaps not in such a draconian manner, but they do, and this cannot be part of the argument because you are separating the Post Office and the State when in practice they are the same thing. It’s a bit like a subsidiary company complaining that the parent company always up-streams the subsidiary’s entire annual income.

          There is no socially necessary service that cannot be provided by the private sector, provided the rewards are there. The regulator can play his part with a re-balancing of revenues and if this does not fully provide the solution, then the consumer will have to pay more. At the moment the losses fall upon the taxpayer anyway.

          So, in my view there can be no circumstances where the government should be permitted to continue to run the Post Office, or indeed anything. It should however be tasked with implementing proper and well thought out regulation, which it seems to find quite a challenge, not only with regard to the postal system

  8. David H
    May 5, 2009

    This is all flimflam. What is the government really after? The money, as usual. The couple of ÂŁbillion in sales to TNT (or whoever else turns up) is just the deceptive icing on the cake. What they really get is the ÂŁ23 billion pension fund assets NOW in exchange for a government promise for 100%, government backing for the Post Office Pension Fund in the FUTURE. The pension fund has a black hole but the ÂŁ23 billion assets exist.

    The black hole is due to past governments’ use of “funding holiday” manipulation of the Post Offices’ accounts. (Too complicated a story to tell here).

    Governments make promises but do subsequent governments necessarily feel bound by those promises?

  9. Jonathan
    May 6, 2009

    The Conservatives considered Post Office privatisation when they were last in power, and decided it was a bad idea.

    Has anything changed in the past 12 years that makes it now a good idea to privatise the Post Office?

Comments are closed.