Tuesday, March 07, 2006

Centre-left or sliding to the right?

One of the central acts of the Liberal Democrat conference was the affirmation of the policy to sell off the Post Office.

If you recall, the Liberal Democrats have made great capital trying to blame the government for closing urban post offices. So what can these plans mean?

The proposal is for the Post Office Counters business to be hived off from the Royal Mail delivery organisation. The former will remain in the public sector while the rest is sliced up for sale. 51% will be divided between the government and a staff trust, with the remainder split equally between small investors/employees and the major investors. There seems to be a belief that this will inspire greater dedication to the cause of the company by the new employee shareholders. This is exceptionally unlikely. What will happen is that the staff will grab their share entitlements with both hands and sell them off as soon as possible - as will the small investors. The big privatisations of the 80s (British Gas, BT, etc) haven't created a massive share-owning culture - most buyers sold out as soon as they could to make a quick profit. Shares are largely in the hands of the institutional investors like pension funds.

If you seek a model that generates employee involvement, why not try the John Lewis Partnership? There, each of the 60,000 employees owns part of the business - they have a real interest in the success of the company, not just a short-term profit.

So, this newly privatised company will have a cash fund of around £2 billion, which has to be spent on sustaining the publically-owned post office network. Well, actually, most of the post offices are privately-owned small businesses. Effectively, this will be a subsidy for the private sector to support a structurally-flawed business model.

For many years, your local post office has relied upon the handling fees for paying out benefit and pension cash. Increasingly, clients are having their benefits paid directly into their bank accounts, which helps to reduce theft and fraud, as well as cutting out the costs and risks of transferring large amounts of cash around the country. While the current cohort of pensioners may not be used to using direct debits and card accounts, the next generation - people like my own parents - are quite happy with electronic fund transfer and card payments.

Like it or not, the role of the post office is going to have to change, but the Liberal Democrats will tie the company into maintaining failing businesses or reopening branches where they have already failed - as Yellow Peril points out. Lynne Featherstone reckons that saddling the Post Office with this deadweight is going to allow it to compete with the new foreign entrants to the market. No. It won't.

The final question is what happens when this £2 billion fund finally runs dry? Does the government then pick up the tab for subsidising private sector businesses? Does it then let them fail naturally or does it start selling off a little more of the Royal Mail to keep it ticking over?

Yet another half-baked policy proposal from the Liberal Democrats - but then they know that with power nothing more than a pipe-dream, they can afford to play at politics rather than trying to devise real policies for the real world.

8 comments:

Anonymous said...

What's being suggested for the Royal Mail *IS* a John Lewis style partnership, yer daft apeth!

Anonymous said...

So does that mean they will de-recognise the trade unions?

PoliticalHack said...

No, it isn't a JLP process - the Royal Mail will be sold off on the open market. Within a couple of years, almost half of it will be owned by large institutions and pension funds. To portray this as anything other than a privatisation is fundamentally wrong.

Anonymous said...

'The staff will grab their share entitlement...and sell them off as soon as possible'
The employee shares would be held in trust. The Trust could not dispose of its shares...
Read the proposals carefully!
PH is full of misinformation and no information at all about the Labour Party. I suppose it's getting very difficult to say something positive about Labour!

Anonymous said...

You mean like the national LD website only mentions LD policy? Last time I looked it was largely a platform for attacking other parties.

Anonymous said...

Well now the government's programme is carried by the Tories someone has to provide some opposition!

PoliticalHack said...

There's no intentional misinformation here - I'm always happy to have a discussion and to be enlightened on facts.

As I read the proposals, while 51% of the Royal Mail is locked into public ownership, 49% will be flogged off to a mix of small investors, employees and institutions. The experience of other privatisations is that almost all these shares will end up with the institutions within a few years.

Of course, active trading in Royal Mail plc shares will hike their price way above the offer price, thus increasing the value of the 51% shareholding retained by the trustees and HMG. I'd place a small wager that the Treasury will come under pressure from the City to dispose of their share and under similar pressure from the rest of the government to pump a bit more cash into the coffers.

Naturally, this is all so much waffle, as the LDs won't be in a majority government. Ever.

Anonymous said...

Things change so who knows.40 years ago the Ulster Unionist Party support was rock solid but look how many Westminster seats they won at the last election.
Of course the Northern Ireland Labour Party has disappeared.
It may be too soon to write the book'The strange death of Tory England' but that's the way history seems to be moving.