Britain: Royal Mail faces privatisation and jobs massacre

By Richard Tyler
3 February 2009

In a move that threatens tens of thousands of jobs and a further worsening of conditions for postal workers, the government has approved the partial privatisation of Royal Mail, the UK's state-run postal service.

Addressing the Business Select Committee in the House of Commons, Business Secretary Lord Peter Mandelson said it was his hope that introducing a "strategic partner" from the private sector would bring "a gale-force fresh air, into the management and culture of Royal Mail, because I think that is needed in order to continue modernisation."

Mandelson told the committee that the government accepted all the recommendations of the Hooper Review—"Modernise or decline"—which calls for "a radical reform of Royal Mail's network". This would include establishing "a strategic partnership between Royal Mail and one or more private sector companies." The Business Secretary has already appointed the investment bank UBS to lead the search for a private partner or partners interested in purchasing up to a 33 percent stake in Royal Mail, with a deal possibly being in place as early as April.

This could cost between 40,000 to 50,000 jobs from a remaining workforce of almost 170,000, according to some observers.

Mirroring the break up of British Rail under the Conservatives into competing private train operating companies, the Times reports that Royal Mail "would be divided into different units, such as collection and sorting, with rival operators allowed to buy stakes. The ‘last mile' delivery is likely to remain with Royal Mail as a natural monopoly."

But the "last mile", a vital social service that guarantees delivery of mail to every household, is the most expensive part of the business to run and is least likely to provide profits for any private operator. In other words, big business will be able to cherry pick the most lucrative operations, leaving the unprofitable "last mile" to Royal Mail.

This latest proposal follows the steady erosion of Royal Mail's previous monopoly over postal services in the UK, with several private companies already having poached the profitable business post and mass mailing sectors, while leaving the far more expensive to run "universal service".

To make Royal Mail more palatable to any new private operator, it is proposed that responsibility for its pension fund—whose deficit some analysts put at £7 billion—be moved onto the government's books. The wipe-out of share values across the globe throughout 2008 has hit the value of the fund, but the massive deficit is due in no small part to the company having earlier taken a 17-year contribution holiday.

Once again it is the workforce that is being made to pay, with the Royal Mail final salary scheme closed to new participants since April 2008. Placing new staff on a scheme linked to "career average" earnings means that a 30-year-old employee with 10 years' service will lose almost half his or her previous pension entitlement—a fall to £8,764 per year from £15,260.

The threat to a partially privatise Royal Mail has met with some opposition from within the Labour Party. About 70 Labour MPs signed a protest motion in the House of Commons this week calling on the government to uphold party policy, which nominally commits it to "a wholly publicly owned Royal Mail".

However, clearly acknowledging the treacherous role played by the Communication Workers Union in imposing job cuts and worse conditions on postal workers, the motion also "welcomes the commitment of the CWU to negotiate an agreement which would support the modernisation of the industry."

The general secretary of the Communication Workers Union (CWU) Billy Hayes told the press, "There is no need to privatise and sell stakes in key public sector businesses to get government assets, particularly Royal Mail, to perform."

For once, Hayes is speaking the truth, since he heads a union that has signed away the pay and conditions of postal workers, in one rotten concession after another to management, in order to help Royal Mail "perform".

Some 48,000 postal jobs have gone since New Labour came to office in 1997. Thousands of local post offices and dozens of mail delivery centres have closed or face closure. Part-time and casual working has increased dramatically.

When postal workers have taken industrial action to oppose job cuts and the imposition of speed-ups and inhuman working conditions, it has been the CWU that has stabbed them in the back.

Postal workers were involved in a bitter dispute over pay and conditions in autumn 2007. This took the form of an escalating series of wildcat strikes, which threatened to run out of the control of the union bureaucracy. Hayes stepped in to abruptly end the industrial action—without any consultation with the membership—telling postal workers to put their faith in the Hooper Review.

Now the report by businessman Richard Hooper has been published, and far from offering postal workers any respite from years of cutbacks and attacks, it proposes to intensify them.

Several large rivals including Deutsche Post, UPS and FedEx, are said to be "lukewarm" about investing in the Royal Mail, but the Times reports that "private equity group CVC, which owns stakes in both the Danish and Belgian postal services, is believed to be interested". 

Mandelson has revealed the interest of one potential private "partner"—Dutch postal company TNT. With private postal operators having already grabbed 40 percent of the profitable bulk mail business—and after years of chronic under-investment during which any profits where siphoned off by the Treasury to help balance the government's books—New Labour is once again opening up the public purse and saying to big business, "help yourself".