We need private posties: Coalition right to sell off Royal Mail

 
Allister Heath

MANY of the people who deliver our parcels now work for private firms, so the idea of private posties is no longer a novelty. But the government’s belated decision to privatise Royal Mail – it should have happened 20 years ago – is to be entirely welcomed. The sell-off will allow the public to invest in the firm, give workers a stake in their business and reinvigorate the company, thus allowing it to fight back against its many highly-driven competitors.

The opportunities are immense, despite the technological revolution. Letters are fast dying out, especially for younger, metropolitan people; at some point soon, the major corporate users of snail mail, including big banks and financial institutions, will seek to fully digitise their communications with their customers, as some energy companies have already sought to do. It is just a question of time before what is left of that business withers away, though there will undoubtedly be a large market for delivering hard copy junk mail, as that will increasingly be an easier way of reaching prospective consumers than seeking to email them (with spam filters, few unsolicited emails get through any more, and phone calls are rightly deemed utterly unacceptable).

But the parcel and delivery business is booming, and has much further to go. The Royal Mail’s great tragedy is that even though it has done reasonably well out of parcels, its strength and established position in the market means that it should not have ceded so much ground to new competitors.

That is the problem with publically owned companies dragged down by legacy costs (even when pension obligations are removed, as with Royal Mail) and practices: they are simply not efficient, nimble and motivated enough, and don’t have access to the capital markets to raise additional funds when required. Hence why privatisation is essential.

At present, 9.7 per cent of all retail spending excluding petrol and diesel is conducted online; this will probably peak at 25 or even 30 per cent. It is true that much of the rise will come from click and collect, in many cases with shoppers using existing stores, and hence not needing a delivery or postal firm as an intermediary. But another big area of growth will come from same day delivery.

I have two reasonably minor issues with the planned sell-off. There is widespread support for maintaining a universal postal service, defined as delivering a letter anywhere in the UK for the same cost, and this will continue post-privatisation. I, for one, disagree. I don’t see why it should cost the same to send a postcard a few streets away as it does to one in the middle of the countryside. Those who choose to live more remotely should bear some of the cost of their actions; after all, they enjoy much cheaper property prices and rents. Why should everybody else, and especially urban consumers, subsidise their lifestyle?

The other, more significant issue, is that it would have been nice to have seen a different kind of privatisation. It is good news that such a large chunk of the shares are going to the staff, more so than with any past large sell-off; this will help focus their minds and help smooth the transition and cultural revolution that is no doubt about to kick in. But perhaps the proceeds from the shares that will actually be sold could be handed over to a new fund to help build a properly financed retirement provision system.

One option would be for the money raised from selling the shares to be allocated pro rata to all citizens as part of universal accounts in the new Nest retirement system, which is gradually being rolled out. In time, the proceeds from shale gas licences could also be allocated in this way, rather than spent on day to day expenditure.

Other than that, for once, the government is doing the right thing. Private posties are the way to go.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath