Mandelsons plans to privatise Royal Mail have been in the press a lot this week. What I have found so interesting about it, is that even though the plan is so unpopular and has the potential for Labour to loose a lot of votes (maybe even an election), they have not backed down on the idea. Gordon Brown has openly backed it, even after the large out cry from the unions and their threat to hold back funding for Labour.
So, why go ahead with the idea? Well we all know the Royal Mail pension pot is in a lot of trouble and the group is haemorrhaging cash. Talk to postal workers and they will tell you that the communications watch dog will not allow Royal Mail to increase the cost of a basic postage stamp. Royal Mail mainly makes a loss on the mail service to the general public which needs to be shored up by the money it makes from businesses, for example the delivery of your BT phone bill, Gas bill,bank statements etc. Currently Royal Mail is finding it very hard to be competitive in this market because companies such as TNT (you've seen their postage stamps on your mail) are offering more competitive rates to win these business contracts.
You may be asking,how does TNT deliver my mail to me? The answer to that question is they don't! All TNT do is collect the mail from large companies sending out their bills and statements, and sort the mail. They then get their lorries to deliver this sorted mail to the various Royal Mail sorting offices, ready for Royal Mail postman to deliver it to your door. In this market Royal Mail as I am told, is not allowed to undercut these private companies. They rely on Royal Mail which has the delivery network to deliver this post. Without Royal Mail it would not be very cost effective for companies such as TNT or Business Post to try and employ their own postmen, its just far to expensive. The money Royal Mail would have made by trying to be competitive and cutting their rates for sorted mail to companies is not allowed by the competition watch dogs. The money Royal Mail needs to cover the cost of the public service is then reduced. So the government is left having to pump more money into the postal service. But wait a minute, the government as been pumping a lot of money into the banking industry lately so there can't be that much left to spend on much else could there?
Would privatising Royal Mail make the government some money to help them fill the depleted coffers caused by bailing out the banks? I know its a drop in the ocean but I can't help but feel this wont be the last attempt by the government to raise some cash by selling off the family silver. Maybe they will attempt to privatise Network Rail again?