Thursday 12 September 2013

The Politics of Royal Mail Privatisation

It's looking like they will really do it this time. Where the blessed Margaret feared to tread, and New Labour ignominiously failed, our merry coalition of Liberal Democrats and Conservatives in the process of privatising Royal Mail. Wheeled out to defend a policy that is conspicuously unpopular, Michael Fallon says this is about liberating Royal Mail, of giving it the freedom to invest in the future. As profits were £324m in May this year and £211m in 2012, it looks like there are funds to invest - if the government allowed the company to do so. The sell-off requires members of the public buy at least £750 worth of shares. Staff will automatically receive free ones, as well as access to a preferential buying scheme with a lower threshold of £500.

The puzzling aspect to this is why, despite consistent opposition from the public and a major strike on the way, the government are absolutely determined to push the sale of Royal Mail through. Why are they prepared to do so when even for Thatcher it was a privatisation too far? I would suggest that while the Tories and LibDems are ideologically committed to privatisation, there are more pragmatic political calculations that have come to the fore.

Thatcher's privatisation crusade in the 1980s was a class struggle assault on the bastions of working class power. It broke up solidarities and ground trade unions under the Tory boot, leaving a weaker, less combative labour movement and a significant diminution of class consciousness. There are sectors of the economy Thatcher and her successors were not able to take on and defeat. Royal Mail was one of them. Privatisation, if it is not derailed by workers' action, will inexorably lead to an erosion of the Communication Workers Union, both in terms of the apparat and workplace organisation. Conditions, pay and pensions will also be "rationalised" so the newly-privatised entity can meet its legal obligation of returning value for its new shareholders. The consequence of this from a Conservative point of view is that a well-organised, militant and disruptive group of workers are de-fanged.

Another desire of Thatcher's programme was to create a 'popular capitalism'. By selling off council homes and "democratising" share ownership, it is reasonable to surmise that if you have a mortgage to pay or own a clutch of shares the less likely you are to oppose further restructuring of the British economy. There was also the potential that new home owners and shareholders would follow the immediate interests associated with their acquisitions and vote for the party that would protect them. This did not lead to a resurgence of the Conservative Party as such. In fact, their decline continued unabated through the 1980s but it was perhaps just enough to stymie a collapse and convince enough people to give them 18 years of government.

This obvious and partially successful attempt to socially engineer the electorate is what lay behind New Labour's attempt to privatise the post. At first glance, attacking the social base of one's own party - in this case the CWU - doesn't seem smart politics. And it wasn't. But in the mania for triangulation beloved of Blair, Brown and Mandelson, selling off Royal Mail to a preferred bidder would demonstrate to Middle England (who our triangulators thought were mad keen on such sell offs) that Labour was on "their side". Besides, there would be opportunities for the small shareholder too. The staff, as 'core voters' wouldn't have anywhere else to go, and so Labour off the back of popular capitalism could coast home in many more marginal seats.

The Tories share this mindset. Most postal workers aren't going to vote for them anyway, but it might be enough to convince red-in-tooth-and-claw Tory voters to eschew UKIP and return to the fold in sufficient numbers come election day. Who knows? It might be enough to allow them to squeak back in. Of course, the short-sightedness of this course of action is that it will displease another group of rural Tory voters who aren't as vocal or reactionary as UKIP switchers. Is the trade off worth it? Perhaps. Just as New Labour calculated postal workers had nowhere else to go, so it is for these traditional Conservative supporters.

The Government are absolutely desperate for good news on the economy. Hence why the lop-sided recovery is getting talked up as if Britain is surging ahead with China-like growth stats. Despite pratting about with unnecessary cuts and hoping for the best for three wasted years, they need to thumb their nose at Labour's correct critique of their shambles of a policy. After all, it's on the economy that elections are won and lost, so received political wisdom goes. Hence stats, any stats, regardless of the content of those stats, are martialed to convey proof of competence. And on three indicators of economic performance, Royal Mail privatisation can make a positive splash. On the "rebalancing" of the economy, immediately 150,000 public sector workers are transferred to the private sector. Mark my words, Dave will use these - as he has done so with other transferred workers - as proof that a private sector jobs recovery is under way. Secondly, those 150,000 workers are going to get "free" cash. As past privatisations indicate, the bulk of employee-owners tend to sell them on as quickly as possible. That will give the quarter's GDP figures a helpful boost. Thirdly, and sticking with GDP figures, as the measure of everything that is brought and sold, the number and values of transactions arising from a £3bn privatisation will also make the economy appear more healthy than it actually is. And what does a growing economy equal? Votes.

These are the politics of the Royal Mail sell-off. As with all things about this most sectional of governments, it's about the immediate interests of the Tories prior to 2015. I don't believe the gambit will work in the way the Tories hope, but I'm not willing to see fellow trade unionists and a good, universal postal service trampled on in a ludicrous exercise in electoral wishful thinking.


Boffy said...

The question is who would want to buy it? As I pointed out some time ago, the only way such a business is likely to be able to survive is if it is allowed to expand into all areas of communications.

There can be little future for snail mail now that everything is being made paperless, and communication becomes electronic in one form or another. Royal Mail would then really need to be able to go into the business of becoming an ISP. It would also need to go into the business of telecoms, which would have been easier had it not been separated from BT 30 years ago. Also, it would be preferable to have had the post offices as part of the business, if they could be converted into a banking arm.

In fact, all the actions used to set up various bits for privatisation have undermined the overall business. My guess is that as happened with buses and with trains, pressure to maintain some social responsibility for rural areas - where the Tories get votes - will mean that the privatisation legislation will require it to maintain a level of service provision even where its unprofitable. As with buses and trains, anyone taking on that responsibility will demand that they be compensated by the state for doing so.

I doubt, especially when the monopoly is fully removed, as it stands it could run as profitable business, certainly not if it had to maintain unprofitable services to rural areas. So, like buses and trains, I would expect any future private business to be heavily subsidised by the State. In fact the train operators get bigger subsidies than British Rail ever received.

Without that, I don't know why anyone would want to buy it, and even with it, it doesn't look attractive, because you never know how long those subsidies would last.

WitteringsfromWitney said...

"These are the politics of the Royal Mail sell-off......"

How wrong you are! Not one word in your article about three EU Directives that re behind this move by the Coalition.

May I suggest you read:

Perhaps if you threw off your socialist blinkers, you might just see things clearer?

Ultra_Fox said...


Don't other EU countries, most notably France and Germany, still retain their postal services under public/state ownership?

WitteringsfromWitney said...


It is well known that some Member States will attempt to defer the imposition of Directives - and France is one of the most notorious in that regard.

However, such MS will have to comply eventually, as you must realise.

The fact that we in the UK comply so readily is purely the wish of our political class to be seen as good Europeans - and the most obedient of dogs, which said political class most surely are.

In that respect, your question about France and Germany is neither here nor there - sorry.

asquith said...

Not bad about the political side of things. And I think you're right about Bliar, and his triangulation wasn't an embrace of liberalism but simply an acceptance of the Thatcherite status quo (and Tories aren't really liberal, but upholders of their own class interests, who may prefer capitalism generally but will use state mechanisms like farm subsidies if authentic liberalism doesn't suit their aim of keeping themselves rich and generally on top).

One thing though. Aren't rural, anti-privatisation Tories the exact sort of people who are most likely to be going kipper? Kippers aren't all libertarian bloggers, they gained by embracing homophobia and already Farage is blaming this on Europe and vaguely hinting it wouldn't be happening on his watch.

Whereas urban, culturally liberal capitalists, the George Osbornes of this world, are going to be among the keenest customers. He and his fancy London mates will like this a lot more than people in Witney or Grantham.

Phil said...

Witless from Witney is one of those pub bore types who can't see the wood because his vision's blocked by a sapling. He thinks he's stumbled upon a holy grail, a master key to which everything else is so much chaff and has no bearing on the issue to hand. Never mind that privatisation is factored into Tory strategy, never mind it involves dumping on a highly organised group of workers, never mind it will give the economic figures a good massage; it all comes down to an EU directive that "no one else" has noticed. Eureka!

Of course, it would be helpful if Witless actually read the directives. If he had, he would have found it says nothing about privatising postal companies in state ownership. Yes, they are neoliberal directives for sure that talk about opening markets up. That's clearly happened in the UK postal service sector. But it doesn't specify that firms have to be sold off.

What the Tories are doing is *one possible* way of conforming to EU directives. And it's the way that suits their interests. Therefore the issue of the hour is not to moan about the EU like some one trick pony, but ask why they are choosing to implement it this way.

Gary Elsby said...

You make an economic recovery almost sound like a dirty word.

What's wrong with selling council houses to council tenants?
Many Labour members did just that.
What is wrong is not using the money to build new council houses.

The Tories bounced at least one election off the back of a war and Labour lost a hat-trick because socialism was the poor relation to the rich privatisation schemes and ever increasing affluence of the workers.

Royal Mail, if sold, will go headlong into the parcel market on day one and make many investors quite rich in the process. Rich people are rubbing their hands at that un-publicised prospect.
They make their profit at the moment on the back of letters but not for long.

I can't see Labour winning the next GE on the back of a protest, it has to win on the promise of proven affluence for the workers.
Ed promises to be a good Tory if he wins and also promises to spend like one too.
That's one shite sell.

treborc said...

Like always once it's sold it will be difficult to buy back... simple put not everything is going to make massive profits and the Royal Mail and the post offices are two of those.

Phil said...

While you're right about mail Boffy, parcels are booming in a big way - big enough to sustain a competitive market. Also, while "conventional" mail volumes have gone down there as been a huge spike in junk mail. I swear I never used to get as much crap from my bank or energy providers.

Phil said...

HI Asquith, rural Tories come in all shapes and sizes. What the Tory party risk alienating are that core, elderly vote that have voted Tory all their lives out of habit rather than conviction. They are that layer who are deeply attached to British institutions and are also likely to be dependent on public services in some way. They will not be happy to see the Queen's head in private hands.

Phil said...

Your comment was almost a good one, Gary.

There are three things here.

1. The economic recovery is lopsided. If it doesn't address and exacerbates the underlying economic problems then no, I don't think that's worth celebrating. From your own perspective, think about the council move. That is economic activity and would count toward GDP figures. But would you count that as good growth?

2. I'm not completely opposed to selling off council houses provided they're replaced like for like. What would be much better IMO is massive rent discounts after a house has been inhabited for some years, up to and including zero rents and the possibility of passing it on to family members to rent.

3. You're spot on about parcels. But I'm sure you're aware that Labour's programme isn't going to be about 'protesting'. Who knows, when it appears you might find some things you like in it.

guthrie said...

Boffy - why would anyone want to buy the Royal Mail?

I can think of lots of reasons.
1) the government has loaded the public purse with the old pension costs, sometehing previous governments resolutely avoided doing, thus the organisation is a lot 'lighter' than it used to be.
2) previous privatisations indicate that it won't be sold at anything like true market price, thus instant profit!
3) It owns a great deal of useful and well sited land which can be pillaged as the service is run down, which brings me to 4,
4) a managed, deliberate run down with maximum profit extraction through destruciton of workforce pay and conditions, land sales, running machines* until they break etc etc, will make lots of money for a few years for the people who matter, i.e. the senior management and the major shareholders. After that they offload it to some mug and get out of Dodge.

* contrary to popular opinion and conservative propaganda, there's a shedload of modern technology and automation in the Royal Mail and they are always catching up with modern methods and technologies.

As another point, this is a way marker on march to destroy civil national society. A one cost for a letter postal service was a public good; with the destruction of such a service and the takeover of new media, internet etc by corporations, all citizens will have to buy only what services they can afford, meaning proper class segregation and the poor being shown their place, rather than being treated the same as everyone else.

Gary Elsby said...

No Phil, it was your response that wasn't quite good, my original post.was much better.
Building new council houses (social) means new build and jobs. Passing on or lower rents could argue a case for deterioration.
Labour should enter the 2015 election with my 2010 manifesto and be adventurous with it.
If asked nicely, I could spare another few hours writing the entire new manifesto for Labour.
Please note Phil, that I consider it a personal challenge to write cost neutral policies which by definition are appealing and have teeth.
Labour screw themselves by sticking to Tory plans (you say we reject and you baffle us) and will confuse all by promising big spends.

Selling Royal Mail should be a crime and possibly will be due to its current special EU status as 'pan provider' for GB mail delivery requiring zero tax status.

Phil said...

I agree with you, Gary. The Labour position is argued out of what the powers that be think is electoral expediency. They think it's necessary. I'm sure there are some in the shadow cabinet that think it's desirable.

As you know, there might be a smidgen of a possibility that a by-election could occur soon. I'd be interested to hear some of your cost-neutral proposals a Cllr Gary Elsby might push should you be successful.

Gary Elsby said...

The current percentages doing the rounds of Stoke are 77% against any sell and I think that figure is quite low.
Cost neutral policies are slightly more complicated at local level than at national level of where my sole ambition once lay. However, some of the Tory policies coming out of Stoke recently will be a joy to shout down and demolish on all fronts social-if I were to be involved.

Of the other matter in hand:
Oh dear, the aftermath will be amusing, to say the least.