Warnings of disastrous consequences of Royal Mail privatisation

The Government announced today it is to press ahead with plans to privatise the Royal Mail – describing the action as “urgent”. A number of recommendations have been given to the Coalition from the former deputy chairman of Ofcom, Richard Hooper, with business secretary Vince Cable insisting the measures had to be taken becuase of  a reduction in the amount of mail sent, poor investment down the years and a lack of efficiency.

Dr Cable said:

“We will come forward with new legislation in the autumn. It will draw heavily on Hooper’s analysis and recommendations and the government’s wider objectives, including the need for employees to have a real stake in the future of the business.”

Speaking out against the privatisation proposals this afternoon, former London mayor Ken Livingstone said he completely disagreed with the Government pursuing cuts to the service, adding:

“I am fully committed to the Royal Mail staying in public hands. I will campaign vigorously with the CWU on the Keep the Post Public Campaign.”

Labour leadership candidate Ed Balls, meanwhile, said that the Royal Mail should stay in public ownership, warning the consequences of privatisation could be disastrous:

“But the case for privatising or selling off parts of the Royal Mail has not been made. With the economy so uncertain it’s unlikely to fetch a fair price and the taxpayer may still be expected to carry the burden of Royal Mail’s pension deficit – a massive public handout to whoever bought the company.

“Private investors might cherry-pick the most lucrative parts of the business and if rival postal firms bought Royal Mail, a conflict of interest would exist. And the result could one day see the end of the current universal service and the post office network itself – a disaster for all who rely on the post, especially pensioners and people in more remote areas.”

The Communication Workers Union (CWU) also warned that the cost to customers using postal services would increase. In March, the pensions deficit was reported to be around £8billion. Billy Hayes, general secretary of CWU, added that the service’s assets are worth in the region of £26 billion.

As Left Foot Forward reported earlier in the year, privatisation has been shown to raise costs, undermine the public service ethos and lead to two-tier workforces. TNT, who wanted to buy a stake in Royal Mail last year, threatened to sack 10,000 of its staff if they didn’t accept a 10 per cent pay cut – leaving many to wonder whether this will be a sign of things to come.