Any other business

Privatisation is the only solution for Royal Mail

23 February 2013

We have had a very high failure rate in deliveries of the catalogues for Emily Patrick’s exhibition,’ says an email from the painter’s husband. ‘Over 50 per cent have been lost in the post or inexplicably delayed.’ Come to think of it, my own most recent Amazon order, allegedly dispatched a fortnight ago, hasn’t reached Yorkshire yet — and neither has last week’s Spectator, although a large envelope posted to me from Old Queen Street on Wednesday did arrive on Thursday, but without its contents. Have aliens seized the sorting offices, or have Royal Mail managers been distracted by a ‘secret 62 per cent increase’ in their bonuses, revealed this week?

That percentage turns out to apply to middle managers at £2,717 apiece, hardly a sum to froth about. Royal Mail chief executive Moya Greene (poached from Canada Post) banked a £371,000 bonus last year, taking her package to a provocative £1.1 million; but that’s barely half the bundle collected by her predecessor, known to this column as ‘Teflon-coated Adam Crozier’, who moved on in 2010 to run ITV leaving a chorus of disgruntled mail users behind him. And the three executive posts below Greene averaged packages of £760,000 last year, compared to as much as £1.4 million in the Crozier era. So what I called ‘the delusion that turns astronomical numbers into “the rate for the job”’ last time I wrote about Royal Mail pay has been partially shaken off — perhaps setting an example for another state-controlled problem business, Royal Bank of Scotland, where five of chief executive Stephen Hester’s top team are in line for £6 million of share awards under a long-term incentive scheme, in addition to Hester’s own £780,000 pot.

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The key question in both cases, of course, is whether they are running significantly stronger businesses than their predecessors. It’s easy enough to tick that box for Hester, since the previous RBS regime left the bank in ruins. In the case of Royal Mail, however, the wider public is less interested in balance-sheet strength than in quality and price of service. And what they see is a limping dinosaur in retreat, missing delivery targets, pushing up stamp prices, closing village post offices, yielding to militants in its workforce, and failing at every turn to maximise the competitive advantages of its brand power and infrastructure. On that assessment, Moya Greene and her colleagues are still paid far too much.

Prospectuses in the post

These issues will come into sharper focus now that the resurgent stock market has put privatisation of Royal Mail and RBS back on the agenda. Business Secretary Vince Cable is reportedly promoting the idea of an RBS share gift worth up to £400 to every taxpayer as compensation for pain suffered these past five years — a new form of quantitative easing, you might say, with the merit of relieving ministers of the embarrassment of owning RBS, ahead of the 2015 election and sooner than would be the case if they waited for conditions to ripen for a conventional share offer or sale to a single buyer. What’s more, if a portion of RBS were given to citizens, the residual state-held portion should rise in value by virtue of increased activity in the shares. So it’s not such a daft idea, but it would look like a blatant pre-election bribe — and one that would inevitably favour the Tories as the party of popular capitalism, rather than the Lib Dems. So if George Osborne starts to show enthusiasm, watch for a swift U-turn from Vince Cable.

Meanwhile, business minister Michael Fallon has inherited a filing cabinet stuffed with feasibility studies and covered with dents where previous incumbents have kicked it in frustration. It’s the one labelled ‘Royal Mail privatisation’, and it bears the boot-prints of, among others, Lords Heseltine and Mandelson. This is an industry with shining examples of postal services in Germany and Holland that have transformed themselves into successful global businesses, having adopted privatisation models pioneered in Britain for the sell-off of other kinds of consumer-facing public services. It’s astonishing that the Communications Workers Union and its Labour chums have been allowed to thwart every proposal to date (even with the promise of generous share giveaways to postal staff) for a partial sell-off, trade sale or commercial partnership with a European operator. Royal Mail will only ever shape up as a real business when one of those options is finally allowed to happen; let’s hope Mr Fallon finds the key to the cabinet.

Small world

David Cameron has been in India again this week promoting trade links, deflecting questions about visa restrictions and hoping to sell a job-lot of Eurofighter Typhoon jets. Despite pitfalls of bureaucracy and corruption, India has always seemed to me to offer more fertile ground for British business than China, and I applaud the Prime Minister’s efforts. I also hope he finds time to pop into one of the kiosks of Geosansar, the venture I mentioned in my New Year review of socially useful advances in banking technology. I make no apology for mentioning it again, because it is a perfect example of positive Anglo-Indian connections. In partnership with State Bank of India and others, this Hyderabad-based social enterprise is dedicated to bringing services such as savings accounts and money transfers to the unbanked masses of India in a simple, accessible, low-cost form. Its network is growing so fast that it recently opened 9,000 new customer accounts in a single day. And the driving force behind it is an LSE graduate who lives in Finchley: he is Nish Kotecha, a former investment banker who long ago I interviewed for a job at Barclays. When we met for lunch the other day, we were both mildly confused by the choice of venue — which turned out to have been booked by a secretary in Hyderabad unfamiliar with London eateries but using a satellite app to plot a midway rendezvous. Technology doesn’t always provide perfect answers, but it certainly makes the world smaller.

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  • TrueBlueTerrier

    “As a company we are not in a position to deliver the post on time, particularly on Saturday and Monday,’ TNT said in a letter to workers in The Hague region in Feb 2011”. 90% of Post Offices shut since privatisation. Mail being sorted in garages – Oh yes Holland really is a shinning example.

  • laurence

    Aah, yes. What a splendid idea. Privatisation has certainly worked wonders for the utility companies and the railways and defence procurement and court translation services and so very, very on. Oops. Almost forgot: consider too the excellent value for money that the numerous PFI initiatives provide. Yes, certainly, let’s privatise some more.

    • The Red Bladder

      I think that you should always remember the utter shambles that government agencies made of security arrangements for the Olymic Games. Thank heaven the private sector was able to bail them out.

      • chris_xxxx

        The armed forces bailed out the Olympics. The private sector caused the problems.

        • The Red Bladder

          So they did and there was me believing all the nonsense about public bad, private good – always. A theory that has been tested and found wanting.

      • Mark Leavesley

        Needed a national solution to that problem….’oh yeah, bring the army in.’

        • The Red Bladder

          An option that will not be available when yet another shambolic privitisation is foisted on us

  • chris_xxxx

    Yes, let’s privatise the Royal Mail so that it can be bought by one of the European or US competitors. One of the reasons Royal Mail has had to raise prices is due to compeition. But the competition, don’t have to deliver to unprofitable parts of the UK such as the Outer Hebrides. They cherry pick the profitable parts and compete with Parcel Force.

    I have never had problems with first class mail delivery and when I send parcel overseas I use Royal Mail because they are far cheaper than FedEx and TNT.

    • Mark Leavesley

      We only know how good it was once its gone. We had the best mail operation in the World until the monopoly went and the cheapest and quickest.

  • Hugh221

    So, we’ll get a second rate postal service, at vastly increased cost, with far fewer collections. Why the hell are they planning this? Its just like when British Rail was sold off, 80% of the public was against it yet they ploughed on regardless. Privatisation demonstrates fully the enormous democracy deficit that exists in Britain today. And then politicians wonder why no-one trusts them, you could not make it up.

    This stems from the completely ludicrous notion that the private sector is innately more efficient than the public sector. Its absolute nonsense, but has been propagated by all conservative (and new labour) parties since Thatcher. Royal Mail actually makes money for the Treasury, it has posted a profit in most of the last few years. This could be used to pay off the deficit. Just goes to show this is 100% ideology and 0% common sense.

    Absolutely going to fight this tooth and nail, and like the NHS privatisation there will be severe repurcussions for both parties in the coalition come the general election.

    • Mark Leavesley

      I’m with you all the way on that, my sentiments exactly.

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