Royal Mail: the cost of failure


In The Guardian yesterday, Lord Mandleson raised his head above the parapet and set out why the government needs to go ahead with a partial privatization of Royal Mail.

Mandleson is of course right that reform is needed. As he pointed out: “Royal Mail has a pension deficit larger than that of any FTSE 100 company. This deficit was last valued at £3.4bn, but the pension trustees warned this week that it will now be much larger, and even more unsustainable".

Given that this government was elected on a manifesto commitment to keep Royal Mail in public ownership, this compromise sails close to the wind of Labour breaking its promise. For this reason it is probably proper that they have not gone any further than this. Yet in truth it is a band-aid solution to a more fundamental problem, one in which the founding principles of the UK postal service need to be overhauled.

In the same piece, Lord Mandleson made the statement that: “Nobody would disagree that a universal postal service is more than just a business." Well I for one would. The standard argument against true liberalization of the postal service is that it would be costly for those in remote locations. There is some validity to this argument, but more importantly why shouldn’t people pay for the cost of the service they get? A postal service should never be a right that an individual burdens his fellow man with. Indeed, with the rise of competing technologies to post, such arguments will look increasingly anachronistic.

At present we have a socialistic model for our postal service. As such it costs much more than it could and should. Many of the costs are unseen in the price of a stamp, as governments have subsidized Royal Mail at the cost of billions of pounds to the taxpayer. One cannot expect any party to endorse this position, but as with all collectivist failures, history will prove this side of the argument right.