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Royal Mail privatisation gets back on track under Michael Fallon's guiding hand

By Mark Wallace
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Pillar BoxToday, the Government - in the person of Vince Cable - will present to the Commons its plans for privatising Royal Mail.

The Royal Mail is one of the last outposts of the state in the service sector. While its competitors in the UK and abroad have been able to innovate, attract private investment to modernise and adapt to the challenges of the digital age, Britain's public sector postal delivery service has struggled. 

There are clear opportunities for the company to grasp - particularly the boom in parcel delivery brought about by the rise in online shopping. But there are still major challenges for a service facing an inevitable decline in letter-writing given the arrival of e-mail.

Interestingly, the Royal Mail sale will involve at least three different markets. As well as selling shares to private investors and offering attractive deals to members of the public, a 10 per cent stake will be given to Royal Mail employees either free or at a sizeable discount. George Osborne will likely be watching closely as he mulls the best way to return the banks to private hands.

An article in the Daily Telegraph by Michael Fallon, who is actually steering the process despite Vince's role in making the announcement, reminds us of the scale of Royal Mail's financial troubles over the last decade:

"Royal Mail is now profitable but the challenge is to maintain this – we should not forget that its core UK letters and parcel business has suffered losses in five of the past 12 years. Overall, losses were around £1 billion, and more than 50,000 jobs went during that period. And although Royal Mail’s performance has improved, its profit margin lags well behind international competitors"

Its recent profitability will no doubt be cited by opponents as a reason to cancel the sale plans, but in fact it is a good reason to sell. Labour began this process in 2008 (something I'm sure Cable will be reminding Chuka Umunna should the Shadow Business Secretary oppose the move), but it had to be postponed due to the financial crisis.

With markets recovering and the company in question turning a profit, this is the time to get the best deal for taxpayers. As Fallon writes, the move will also bring new freedoms and opportunities to Royal Mail, too.

I don't expect the opposition to the privatisation to go quietly. No doubt there will be scaremongering about an end to the Queen's head on stamps or cuts to the six day delivery service, even though both are now guaranteed by law whether the Royal Mail is privately or publicly owned.

There is a great irony in the political battle to come. MPs will undoubtedly get a heap of targeted correspondence organised by Labour's anti-privatisation ginger groups - and almost all of it will be sent not through the post, but by email.


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