Royal Mail has a long history going back to the 16th Century. It fulfils the classic criteria in the political economy of the definition of a “natural monopoly”.
That is when a single firm can provide a product more cheaply and efficiently than two competing firms. This is because of the scope and scale of the industry.
As a national network, it has to have a permanent allocation of capital and workers capable of delivering to every household and business in the country. Such resources also have to include sufficient collection points so that anyone, anywhere in the country, can place mail and access the network.
This assets and workers of the company have to be capable of operating in this manner over the entire week. The evolution of the economy demonstrated the need for a distribution system that can service the rest of the economy.
It is not an accident that until the 1980’s there was no suggestion of privatisation. Governments of every shade in British Parliamentary history were content to make adjustments to the company – but not to change ownership.
This was no oversight. It was because Royal Mail was efficiently providing the service society needed. It guaranteed a universal service of delivery with a uniform tariff to all addresses.
No systematic competition was possible, as this would require a duplicate allocation of capital and workers with no certainty of competing successfully against the accumulated expertise of Royal Mail.
This a firm with an annual turnover of £9 billion. It has dozens of major mail centres, 1400 delivery offices, over 30,000 vehicles, and a workforce of 150,000. To actively compete, you must make a comparable asset allocation.
When competition was introduced, from 2006 onwards, it was introduced not by the market but through the decision of government.
A regulator was introduced by an act of Parliament, whose remit included the promotion of competition.
The regulator forced Royal Mail to offer access to its network to private operators.
These firms were allowed to collect and part sort bulk postings from large posters, such as banks, utilities, etc. This was then driven to Royal Mail depots for final sortation and for actual delivery by Royal Mail workers.
These firms were able to compete because they were not bound by Royal Mail quality standards – and they paid workers considerably less than Royal Mail. But access to the Royal Mail network was the decisive method of that competition.
This was not only artificial, but it was also parasitic upon Royal Mail. The company was directed by the regulator to handle the work at a price which meant it ended up subsidising these competitors to the tune of £200 million a year, or around 2p per item.
Now the neo-liberals, and the neo-conservatives, analysed the problems of late capitalism as being essentially connected to the state encroaching upon the proper domain of the market.
Conservative politicians and think tanks, like the Adam Smith Institute, began to argue from 1980’s that Royal Mail was an example of the dead hand of the state, and it should therefore be privatised.
No recognition was given to the natural monopoly, or it was dismissed as breakable. In reality, like other privatisations, it would simply become a privately owned monopoly.
The first attempt at carrying through the policy was Michael Heseltine’s Bill in 1994.
The union’s successful campaign against it was based on the political weakness of the Major government – it had a slender Parliamentary majority, and was wracked by divisions.
Alongside broad public campaigning, the union organised a lobby of MPs in marginal seats. In particular, we focused on Tories in rural areas where privatisation would likely result in a reduction of services and an increase in their cost.
This combination of broad campaigning and targeting the Tories vulnerable points paid off and the Bill fell.
The next attempt at privatisation only became public after the event.
In 2001, Patricia Hewitt, then Secretary of State and the DTI, supported private negotiations between Royal Mail management and the privatised postal company from the Netherlands -TPG then, later to become TNT.
The aim was to sell Royal Mail to the Dutch company. Negotiations fell through without agreement.
At that time, the Dutch company was regarded as a model for the future of Royal mail.
This is now embarrassing, as the TNT mail service in the Netherlands has become a basket case. It has been stripped of its profitable sections, provides a lousy service, and the morale and conditions of the workforce have collapsed.
The third attempt to sell was when the chairman of Royal Mail, Allan Leighton, began to lobby government in 2004 for a share sale, including a distribution of shares to staff.
The union had to wage a different type of campaign. Essentially we had to organise a counter-lobby, based on pressure upon MPs and ministers to prevent the Labour government giving in to management demands.
It did involve some familiar public campaigning – but it was very focused on Parliamentary representatives. We also had many meetings and arguments with Labour ministers.
Finally, Alistair Darling, then Secretary of State at the DTI, announced in January 2007 that the government had rejected Leighton’s proposals.
Although this was a lobbying campaign – it still took us nearly 3 years to defeat it.
The fourth attempt was in 2009 when Lord Mandelson introduced a Bill in the Lords to sell off a percentage of Royal Mail. His suggestion was that as this wasn’t a majority percentage then it couldn’t be called privatisation.
Of course, we rejected that suggestion and launched an anti-privatisation campaign.
This time the campaign involved splitting the Labour government from top to bottom. Gordon Brown’s majority was greatly reduced, compared to Blair’s first two terms. Mandelson introduced the Bill into the Lords because he was aware of the weakness of the Parliamentary Labour Party. In the Lords he could rely upon the votes of Coalition peers and many cross-benchers.
We organised to win support in all of Labour’s institutions. We had secured a commitment in Labour’s General Election manifesto of 2005 against privatisation, and used this in the campaign. We organised inside the constituency parties. We organised with supportive MPs inside the Parliamentary Labour Party. And, we organised with ministers in the Labour Cabinet who didn’t agree with Mandelson.
So effective was our work that it became evident to Brown that there would be a major rebellion in the PLP when the Bill came before Parliament for the crucial voting stages.
In these conditions, Brown knew that the only way to get the Bill through was with the support of Tory MPs – potentially disastrous for his government. So the Bill was allowed to drop.
The fifth attempt was the most recent, and successful. The Coalition government was formed by two parties who were both committed to privatisation – albeit with different interpretations.
The government introduced the Bill into Parliament in 2011. We organised against the Bill. Again we lobbied Tories and Lib-Dems in marginal seats.
This time we worked with the entire Labour Front Bench against the Bill. Through this work we secured a number of positive amendments to strengthen the universal service, our members’ pensions, improved regulation, etc.
All these were defensive amendments to a Bill we hoped to defeat. But the Coalition had a majority of 84, and was relatively united.
They had gone for the Bill early in their term – and alongside a range of other unpopular measures which meant we had great difficulty gaining attention for our campaign this time.
The Bill became the Postal Services Act 2011 and gave them the right to sell Royal Mail while keeping Post Office counters in the public sector.
We continued our campaign after the Act became law, and after 2 further years of fighting it was definitely still in the balance whether the Coalition would finally be able to pull it off.
The decisive move was the decision of the government to plump the sale into the bargain of the year.
Firstly, the Coalition government guaranteed £200 million dividend for shareholders for both of the first two years of privatisation.
Secondly, the Coalition sold the shares at a price which – in the words of Frances O’Grady – amounted to “selling tenners for fivers”.
In these circumstances the share sale was subscribed 20 times over. The fiasco with the price has since become obvious to everybody, except Vince Cable.
For our part, we prepared a ballot to protect postal workers in the event of privatisation. This resulted in a 78% strike vote on a 64% turnout. This was to guarantee postal workers’ terms and conditions in a privatised company. We also claimed an above inflation wage rise. This week our negotiators report that they have achieved these objectives.
We are now in a similar position to the rail unions, facing a difficult but necessary campaign for re-nationalisation.
We got off to a good start – securing the unanimous support of the Labour Party Conference.
But we are under no illusion as to the difficulty of getting this commitment enacted by an incoming Labour government.
It is however, the right policy, and one that we will pursue with steady determination.
Thanks for listening.