Royal Mail in the Free Market Casino

It’s not a free market, it’s a rigged market, says Roy Mayall

When Peter Mandelson came on TV in May last year proposing the part-privatisation of the Royal Mail, he was very clear. Volumes are down, he said. People don’t send letters any more, they send texts and emails instead. The Royal Mail is under threat from the incursion of new technology into the communications business. It is all down to the market and to market choice.

The company he had in mind as the new potential co-owner of the Royal Mail was TNT, which had once been the Dutch national mail company.

TNT, of course, is one of any number of private mail companies vying for a place in the British postal market.

The impression we were being given was of an old-fashioned and beleaguered Royal Mail struggling with its more efficient rivals in an open market place.

The document that Peter Mandelson was basing his statements on was the Hooper Report.

The report makes a number of recommendations which are worth reviewing as they are still the basis of government policy. The Royal Mail has to modernise, but fast, it says. The CWU and Royal Mail need to get their act together and start being more cooperative. The government should take on responsibility for the pensions deficit in order to allow the company to concentrate on the modernisation process. A new regulatory regime is required to put the postal business in line with the rest of the communications market. And finally – and crucially – there should be a “strategic partnership” between Royal Mail “and one or more private sector companies with demonstrable experience of transforming a major business, ideally a major network business.”

These were precisely Peter Mandelson’s conclusions, although his plans for the part-privatisation were shelved - according to him - because of the weak condition of the market prevailing at the time. We might also add that there was an almighty outcry from the public, and from his own backbenchers, not to say, from Royal Mail staff and the CWU.

Plans for the sell-off remain in place, however, awaiting a change in “market conditions.”

All of this talk of “the market” makes you wonder.

What market?

Because when you take a close look at it, the market doesn’t exist. There is no market. It turns out to be little more than a propaganda tool used by the privatisation lobby to beat the Royal Mail over the head with.

In fact, the Royal Mail is in a very healthy state in terms of the profits it generates. Not only did it make £255 million in the first nine months of 2008 – a profit of over £1 million a day – but it also, through downstream access, generates massive profits for TNT and the other private mail companies too.

This is the issue that the Hooper Report fails to address: downstream access, the process by which private mail companies can crowbar themselves into the Royal Mail network, profiting from the system while undermining it. The Royal Mail is being regulated in order to allow the private companies to make a profit from it.

This isn’t a “free market”. It’s a rigged market.

What’s worse, according to Billy Hayes, general secretary of the CWU, the Royal Mail actually subsidises the private mail companies at the rate of about 2p per letter. So not only do they take the profitable trade away, leaving the Royal Mail with the expensive and hard to run universal service obligation, but the Royal Mail actually pays them to do this.

“I must make it clear, that the system used in the UK is not used in any other country,” Billy Hayes said, in a recent article. “It is uniquely bad."

So what is going on here? The government can’t pretend that it is not aware of this. The members of Postcomm, the regulatory body which sets the prices, are all appointed by government, and I can’t imagine that Peter Mandelson, control freak that he is, does not insist upon being kept fully informed.

Not only that, but if you check out the Postcomm website you’ll see that members of the commission all have interests in private mail companies; either that or they are in the deregulation business. In other words, the people who the government appointed to look after the regulatory system are also the people who are rigging the market, for their own benefit.

It’s like the Royal Mail is being forced to enter the “Free Market Casino” against its will, only to discover that the roulette wheels are loaded, and that the dealers are all card-sharks.

None of this is mentioned in the Hooper Report, which also goes on to avoid a number of other issues. In particular, while it highlights the pensions deficit, estimated to reach £10 billion this year, what it doesn’t do is to tell us the cause of the deficit in the decades long pensions holiday which the company took, with full government approval, draining the coffers while allowing the workforce to pour our own hard-earned money into what was effectively a bottomless pit.

Finally the report makes what amounts to a threat. “Our recommendations are a package,” it says. “Each element of the package is needed if the universal service is to be sustained: modernisation achieved through partnership, tackling the pension deficit, and changing the regulatory regime.”

Or, to put it another way, the Hooper Report is a long drawn out ransom note with our pensions as hostage.

Give us privatisation, it says, or your pension gets it.