When Royal Mail was privatised, one of its putative competitors predicted that within 10 years the universal postal service, guaranteeing six-day delivery, would appear as outdated as red telephone boxes. On Wednesday, the communications regulator, Ofcom, appeared set on fulfilling that prophecy. It said that Royal Mail should be able to cut postal deliveries to as few as three days a week. Ofcom wants a debate about whether anything gets done urgently by letter in an age of electronic communication. The discussion with voters is likely to be a short one, a thought not lost on the prime minister, who quickly ruled out any change to deliveries.
The watchdog argues that, while Royal Mail’s “universal service obligation” has not changed since 2011, the volume of letters sent in the UK has halved over the same period. The company, it reckons, could save £650m if it delivered letters just three days a week and £200m by stopping Saturday deliveries. The logic of this wrong-headed policy is to socialise the pain and privatise the gain. The fallout will be worst for those least able to deal with the change: people in rural areas, small businesses and elderly people. These groups are also the most sensitive to price increases, which has not stopped the cost of first-class stamps more than doubling since privatisation.
In private hands, Royal Mail has been badly run. It had a damaging strike, making threats of it being pushed into administration. Ofcom fined it £5.6m for failing to hit delivery targets. Customer dissatisfaction resulted in Royal Mail losing its monopoly on delivering parcels from Post Office sites. Yet the parent company, International Distributions Services, said last July that its Royal Mail division will be profitable next year. While pleading poverty, the company will pay out dividends, making its largest shareholder – the Czech billionaire Daniel Křetínský – happy. Chutzpah doesn’t come close, really.
Parcels are increasingly important to people’s daily lives, with 3.6bn items sent last year. However, this was down 10% from its pandemic peak. Royal Mail’s market share dropped as weaker online shopping trends were compounded by industrial strife. In the past, this would have been offset by revenues from the parent firm’s successful international parcel business, GLS. In retrospect, the “crisis” in Royal Mail seems to have had its origins in a July 2022 statement from directors that they didn’t want to subsidise its losses with GLS earnings.
Mail services should be more socially determined. The postie is often a key point of contact in many towns and villages. The government spends £50m a year to support 3,000 “last shop in the village” postal branches. The Post Office scandal provides an opportunity to recast the network of shops as social hubs, which could be more effectively buttressed with a more robust Royal Mail.
Before it was sold off, Royal Mail was a successful public sector enterprise. Privatisation has not seen consumer interests properly protected, and its staff have been in a race to the bottom with tech behemoths such as Amazon in terms of pay and conditions. When privatised companies have failed to deliver, governments – including Tory ones – have taken them back into public hands. Ministers also allow state-owned utilities in the water and rail sectors to borrow capital and run themselves in the wider social interest. NHS foundation trusts are public benefit corporations. There appears no compelling reason why Royal Mail could not be too.
