Michael Fallon MP: Why we're right to modernise Royal Mail

Michael Fallon is the Minister for Business and Enterprise and MP for Sevenoaks

Royal Mail rightly has a special place in public affection as an essential part of Britain ’s economic and social fabric.  The iconic red – and glittering Olympic gold - pillar boxes and the one price goes anywhere universal postal service are an important part of our heritage.  But as with all institutions, if we are to preserve Royal Mail for the long term then it needs to change to keep with the times.

That’s why the government is implementing a package that Parliament enshrined in the Postal Services Act 2011 to ensure that it is successful over the long term.  We’ve already reformed the regulatory regime and removed Royal Mail’s historic £10bn pension liability.  The final step is to give Royal Mail access to the private capital so that it can innovate and invest.  The Coalition is clear that 2013-4 is the year that this should happen.

Royal Mail is one of Britain ’s biggest businesses with a turnover approaching £9bn. It is ridiculous to deprive it of the same access to capital that other large businesses enjoy so it can make the investment necessary to seize new market opportunities. With the huge deficit we inherited, it’s simply not tenable for any government to prioritise scarce public capital for Royal Mail over schools and hospitals. There has been much speculation that we have decided to sell shares via an IPO. While this is a potentially attractive option the government remains open minded about what the best approach would be.  I meet both management and the CWU regularly to discuss the sale.

Fundamental to Royal Mail's modernisation is the largest employee share scheme for 25 years.  Privatisations of the 80s and 90s extended share ownership to millions and gave employees a tangible stake in the success of their companies.  But our plan breaks new ground in guaranteeing that at least 10 per cent of shares should be reserved for employees.  It’s now two years since Parliament made that commitment - it would be wrong to deny 140,000 Royal Mail employees any longer the chance to own shares in the business.  

This isn’t some ideologically-driven policy.  The Coalition is united in securing reforms that will ensure Royal Mail can continue to become more efficient and compete successfully. It is opponents of private capital that are stuck in an ideological straitjacket. Given Royal Mail’s importance, it’s also essential to debunk some myths about a sale.  There are claims that selling shares in Royal Mail threatens the minimum requirements of the universal service.  That is untrue: the six day a week service at uniform and affordable prices to all areas – rural and urban – is protected in legislation.  Only Parliament could change it.

Parliament has also legislated to ensure the Queen’s head remains on stamps. Other claims that free services for blind people or for the armed forces would be scrapped play are simply scaremongering and equally untrue.  Our reforms and the hard work of Royal Mail employees and management have put the company on the path to sustained profitability.  The delivery of Parliament’s commitment to new private capital and employee shares will be good for employees, consumers and business, and will ensure a better capitalised, more adaptable company able to meet its customers’ needs.