Royal Mail – Industrial relations from another era

The current postal strike brings back bad memories. The union-dominated economy of the 1970s was – with a few exceptions – laid to rest by the Thatcherite view that customers were paramount. What should be done as Royal Mail, like the coal industry of the 1980s, inexorably declines on the back of competition for the delivery of mostly unwanted junk-mail and by the surge in e-mail?

Yet, Royal Mail has access to c.27 million addresses – no other UK company can boast such customer access. Surely, even the Royal Mail’s management should be able to run a decent business from that legacy. Once another ‘solemn and binding’ agreement has been cobbled together, privatization of Royal Mail should proceed apace.

Central to any valuation is the Universal Service Obligation, parts of which date back to the venerable Rowland Hill of 1840s Penny Black fame. The principle of the geographic uniform postal rate that he set still endures. Even the Hooper Report failed to recommend its abolition. Why should letters posted in say Penzance for Helston cost the same as those posted in Penzance but destined for the Shetlands Islands?

Surely, some type of simple zoning charge could be introduced to reflect much higher transport costs to faraway places. After all, charges for water – arguably a more vital product – vary substantially throughout the country as South West Water’s customers know only too well.

Full privatization of Royal Mail would attract interest despite the combination of the march of e-mail and ongoing industrial relations problems, not forgetting the infamous c.£10 billion pension deficit. The latter – by comparison quite small beer - should be added to the existing £1 trillion plus public sector pension deficit. Certainly, Holland’s TNT and Germany’s Deutsche Post would be interested along with some private equity funds.

Is public patience for Royal Mail finally running out?