Royal Mail sell-off
The eventual complete privatisation of Royal Mail (with only the post offices separated and remaining in public hands) passed with barely a whimper let alone anything resembling a bang. This privatisation was one, along with the NHS, that various governments have considered over the years but every one of them, from Thatcher to Major, Blair to Brown have always settled for taking chunks in partial privatisations or ‘opened up’ the work of Royal Mail to let in private competition, but they have shied away from privatising the full thing fearing real resistance from the workforce and the public that actually owned the service. The fact that in the end, after the years of such attacks, it all went through so quietly does not bode well for the last remnants of the NHS.
Of course the sale was brought forward right into the middle of the CWU membership passing a strike ballot that had been proposed by the CWU (Communication Workers’ Union), a ballot concerning pay and conditions following privatisation but not actually mobilising to oppose privatisation. CWU deputy general secretary Dave Ward was quoted in the Express as saying: ” What we want is a groundbreaking, long-term, legally binding agreement that not only protects postal workers’ job security, pay and pensions but will also determine the strategy, principles and values of how Royal Mail will operate as a private entity .”
The strike ballot was won with a 78% majority of a 63% turn-out of the 115,000 members balloted. It has to be said that to achieve this vote at a time when the privatisation was a fait accompli, free shares were being given to the postal workers (albeit shares that couldn’t be sold for three years) and a bribe of £300 offered to those willing to cross picket lines was no mean achievement, but one has to wonder, with that amount of anger among the workforce, what could have been achieved with a plan of indefinite strike action to keep the Royal Mail public? As it is a 24 hour strike on November 4 and another ballot, this time on whether workers should boycott the mail from rival private companies, is all that the union have planned.
Of course, the CWU is affiliated to the Labour Party and will, no doubt, be calling on their members to put their faith in the declared intention of that party at its annual conference in Brighton this year to reverse this privatisation if elected to government. While it is extremely unlikely that anything so controversial will even get into Labour’s election manifesto the likelihood of the Labour Party in power actually reversing this, or any other, privatisation is right up there with the moon turning bright blue and the river Thames suddenly becoming malt whisky. The leadership of the CWU know and understand this as they are part of the Labour Party apparatus but they have made the right noises and can continue raking in the subs of their members whilst claiming they ‘had done their best’.
When it comes to criticism of the privatisation the union, the TUC and the Labour Party seem to be concentrating their combined fire not on the fact that the privatisation took place or why it has been done but rather on complaining that it was done too cheaply. TUC General Secretary Frances O’Grady has said: “Privatising Royal Mail has become little different from selling five pound notes for four quid.
“No one can be blamed for wanting a share of that, but let’s not forget that this has taken something that belonged to all of us and given a large slice away for free to those who could afford an entry ticket. And everyone knows that in the long run the postal service will get worse, just as other privatised industries have ended up abusing markets and ripping off consumers. ”
Actually, it’s worse than selling fivers for four quid as that means a loss of 20 percent, when in fact the difference in this case is nearer 36 percent and rising. But the analogy is flawed in another way as well. The person selling the fivers doesn’t own them but does have a vested interest in line with the biggest buyers. This, rather than any ideological point is the real reason behind privatisation.
The consensus from the CWU, TUC and Labour Party is that the shares were incompetently sold well below their real worth and that this has lost the exchequer a large amount of cash which could have helped alleviate some of the worst effects of the current recession. While there is some truth in this view, it overlooks the whole point of privatisation, ie maximum profit for imperialism! If the union leaderships and the Labour Party were explaining the crying needs of imperialism to find profitable outlets for investment which demand wholesale privatisation of public services, it would do more of a service to the working class – but that is not the function of the Labour Party or the Social-Democratic leadership of British Trade Unions. Any worker can see that Royal Mail has been sold off cheaply, and understand that the ‘Tories are giving a nice fat bonus to their friends in the city’ but this doesn’t reveal the full story. The Labour and Lib-Dem parties are just as likely to do the privatising, the Lib-Dems are part of this present one, of course, so, the problem is not which party is in office but which political system is in use.
We live in a world ruled by the illogic of imperialism. The drive to maximise profits supersedes everything and this drive includes making production as cheap as possible. This is best done within the present system by lowering the cost of labour through lower wages, speeded up working methods and cutting workforces. This inevitably leads to the crisis of overproduction, the curse of capitalism, whereby vast shortages of goods are caused because we have produced too many of these goods. These goods exist. and the low-paid and unemployed may be in desperate need of these goods, but they are unable to buy them because they don’t have the means. The capitalists cannot just give them away or sell them too cheaply as that runs counter to the accumulation of maximum profit. So industries grind to a halt, thus exacerbating the situation since yet more workers find their spending power destroyed. The usual way out of the type of stagnation now affecting the whole capitalist world is war. War uses up surplus production and is wonderful for arms, oil and building companies, giving stagnant capital a useful (ie, one that produces maximum profit) avenue to pursue. At present it is estimated that there are trillions of pounds being retained by corporations around the world who see no viable avenue for profitable investment. US companies are holding on to approximately $1.7 trillion; 2 trillion or so euros are floundering about in Europe, and British firms have about £750bn doing nothing. This is stagnant Capital and the logic of imperialism dictates it must be used to its fullest effect for stagnation is death. By opening up the remains of the public sector in this country to privatisation British imperialism hopes to get a lot of this ‘resting’ capital into circulation.
So how big was the undervaluation of Royal Mail? A cross section of city analysts have calculated that the sell off was undervalued by between £600 million and £2.7 billion (between 22% and 80%) while the Labour Party released a report prior to the sale claiming that the undervaluation was around 30% (£1 billion). The shares that had gone out to some small investors and which were allowed to be traded on Friday 18 October rose immediately in value from 330p to 445p at the close of business. Others got their chance to sell on Tuesday 22 October. The shares were sold in tranches or bundles of £750.00 and only 30% were released for purchase by small investors, while 70% went to the big investors, hedge funds, pension funds, banks etc. Small investors who applied for more than £10,000 worth of shares ended up with none while the massive hedge fund, Landsdowne Partners Ltd, got awarded £50 million worth which brought them a hefty £18 million profit on that first day of trading. The 30% of shares that went to the small investors are making their way into the waiting hands of the big investors with far greater speed than any previous sell off as the small investors sell for the quick profits and the big investors buy these hastily sold shares to make huge profits over longer periods.
An area of the sell off that will be very profitable is the huge amount of property that is held by Royal Mail – in excess of 2000 properties around the country. These were badly undervalued at a mere £787 million. Many of these properties are not only huge but are already considered to be ‘no longer required’ which means that they will be sold to developers. As some of these are in prime London locations such as Nine Elms in Battersea and Mount Pleasant they will make very tidy profits. Mount Pleasant sorting office in Islington at 12 acres is one of the largest of these and should bring in around a billion pounds on its own if sold for housing at present rates.
One company that didn’t bother to wait for privatisation to feed off of the Royal Mail property is Great Portland Estates who acquired Rathbone Place, a 2.3 acre site, from Royal Mail for £120 million in 2011 and rented it back to them until just before the privatisation. The site is just of Oxford Street and will now be redeveloped creating offices, retail housing lots, which analysts at Oriel and JP Morgan estimate should turn a £100 million profit for Great Portland Estates. Not a bad return on investment in these hard times!
Prior to the sell off, a nasty little trick performed by the Government with little or no criticism was to separate the Royal Mail pensions from the new company keeping the liabilities and debt on the public books while moving only assets over to the new private company. This liability of the postal worker’s pensions will be the responsibility of the public purse for decades to come. One MP said: ” I fear the government is going to steal £22bn of pension assets, dump the liability as a mortgage on future generations and dress it up as the salvation of the Royal Mail. Their plan to steal the pension assets to help reduce their borrowing figures while taking out a massive mortgage to cover Post Office pension liabilities for 50 years is nothing more than a massive accounting scam … This dangerous plan must be resisted. ” The MP was in fact Tory MP, Alan Duncan, speaking in 2008 when the Labour Government was trying to do exactly the same thing. No wonder Labour have not made a clamour about it. And why is Alan Duncan now happy with this state of affairs? This illustrates beautifully the inter-changeability of bourgeois parties in government and opposition.
Of course, some people have taken note of the obscene profits being made by the privateers in this latest sell off of a publicly owned service. This being the case bourgeois democracy will instigate investigations and reports by committees to review, discuss and make recommendations until everyone is thoroughly bored by the subject. It is in this light that we see the recall by MPs on the Business, Innovation and Skills Select Committee of the Business Secretary, Vince Cable, to answer questions (or for a ‘grilling’ if the press are to be believed) for the second time re this sell-off. They are also calling in representatives of the banks that advised Royal Mail on the price of shares, Goldman Sachs and UBS along with the investment bank that advised the Government, Lazard. Two other banks, who have refused to be named, have already said prior to the sale that the price should have been 500p per share.
Although there is for the moment no great outcry from the public over this privatisation, opinion polls taken before the event found 70 % of those asked were against privatisation with 36% of those saying they were strongly opposed while just 20% declared in favour with only 4% of those strongly in favour. This should then leave the Labour Party in a strong position to make big electoral capital out of this sale of the mail, shouldn’t it? Well, it might have had they not themselves when last in Government already tried to sell just under half of it to a private company in 2008.
Royal Mail can be traced back to 1635 under the rule of Henry VIII but its later history is far more interesting for us. Going back to 1980 we saw British Telecom ripped away from the Royal Mail to become a private telephone company in 1981. 1990 was the year Girobank was taken from Royal Mail and sold to Alliance and Leicester. In 1994 Michael Heseltine, then President of the Board of Trade, published a green paper on postal reform which outlined various options for privatisation but was dropped after a number of Tory MPs said they would not support such legislation.
In 2000 the Labour Government brought in the Postal Services Act making the Post Office a public limited company and changing the name to Consignia a year later. After a public outcry about the name change led by the CWU the name reverted to Royal Mail Group plc in 2002. The 2000 Act set up a postal regulator called ‘the Postal Services Commission’, aka Postcomm. Postcomm was there to offer contracts to private companies to deliver mail in competition with Royal Mail, and 2004 saw the scrapping of the second daily delivery to, we were told, improve efficiency and save money. The mail trains were also axed that year in what could only be seen as measures to destroy confidence in and support for Royal Mail.
In 2006 Royal Mail totally lost its monopoly and the British postal market became fully opened to companies to collect mail and pass it to Royal Mail for delivery in a service known as downstream access. In 2008 the Hooper Review of the postal services recommended selling off a large part of the service to a private company. Despite getting the legislation through the Lords, the Labour Government had to abandon it owing to strong opposition in the Commons. With the change of government in 2010 privatisation was back on the table and prices went through the roof. The aim of this was on the one hand to alienate support for a publicly owned service and on the other to save the new private company from having to put up prices too much straight away.
All of which brings us up to date except to add that the Chief Executive in charge of this privatised service, Moya Greene, is calling for ” protection from industrial action” and, when asked if a price rise was imminent, replied: “Well, we didn’t raise stamps last year.”
Ultimately our services will only be run properly under the system of socialism where the service to the people is the only profit anyone is looking for from it and where the real improvement of that service and the improved conditions of the staff are the only reason for any changes in that service.