BECKHAM
12-05-2013, 12:29 PM
More than 100 postboxes were painted gold to celebrate Britain's medal haul at the 2012 Olympics, but those vivid symbols and thousands of others may not be British for much longer.
Three decades after Margaret Thatcher refused to countenance a sale of Royal Mail, the coalition has committed to selling off the 497-year-old postal service within a year. The about-turn was underlined during last week's Queen's speech, when veteran Labour MP Dennis Skinner quipped: "Royal Mail for sale. Queen's head privatised", probably a reference to Thatcher's own objection to the monarch's image falling into private hands.
The Royal Mail's army of more than 130,000 postal workers has committed itself to fight the government every step of the way against a privatisation that the union claims will "hurt staff, customers and thousands of small businesses".
In an unprecedentedly provocative move, the Communication Workers Union (CWU) is trying to get rural Tory MPs and other traditionally rightwing, small-government proponents, including the Countryside Alliance, to join an "unholy alliance" against the most ambitious privatisation since British Gas 26 years ago.
But rather than back down, Michael Fallon – the business minister who set the wheels in motion for the sale – parked his tanks firmly on the CWU's lawn this weekend.
In an interview with the Observer, Fallon warned the union that if it continued with its campaign against Royal Mail's flotation on the stock market, the government would explore selling the company to overseas buyers.
The company's Canadian boss, Moya Greene, has already sounded out potential investors in her native Canada, the United States and Europe, and Fallon repeatedly warned that if the union's activism put at risk the "preferred" option of an initial public offering (IPO), it "will look at other ways of getting capital into the business".
"Our preference is for an IPO: but if that's not possible, we would look at alternatives [such] as sovereign wealth funds or other institutional investors," he said. "It would certainly be less popular with postal workers and it would delay them getting the shares parliament said they should get ."
The government, which is advised by UBS and Lazard, hopes to appoint lead bankers to run the sale by the end of this month, and hopes to start the sell-off process by the autumn. Royal Mail is being advised by some of the City's biggest guns: Barclays, Goldman Sachs and Bank of America Merrill Lynch.
Potential private buyers include private equity funds such as CVC Capital Partners, which was in the running during the previous botched sale in 2009. TNT, the Dutch postal group, was also interested in the previous sale but it is thought to be mainly interested in Royal Mail's highly profitable parcel arm GLS.
Other potential buyers could include the sovereign wealth fund of Qatar, which has been buying up large chunks of prime UK assets including Harrods, 95% of the Shard and stakes in Camden Market and Sainsbury's.
Fallon categorically dismissed the union's demand that the Royal Mail – which has been owned by the state since Henry VIII established a "master of the posts" in 1516 – remain nationalised. "It's a profitable, successful, company that needs access to new capital in order to continue to innovate to take advantage of a rapidly changing market," he said.
The rise of email, Facebook and text messaging has led to a 25% fall in letter traffic over the past five years to just 58m items a day, while parcel delivery is booming thanks to the rise of Amazon, Asos and other internet retailers.
Fallon said that if Royal Mail were to remain in state hands "every £1 it borrows is another £1 on the national debt.
"That means growing the national debt. No responsible party could propose that in the current environment or for that matter in any environment when Royal Mail – run on a fully commercial basis – has the capacity to be cash generative, profitable and perfectly able to raise the capital it needs from the private sector."
After years of losing money hand over fist – £320m in 2010 and £258m in 2011 – Royal Mail is now steadily increasing its profits. In the six months to September it made operating profits of £144m compared with £12m a year earlier, while sales remained roughly flat at £4.4bn.
However, consumers will note that, over the same period the price of a first-class stamp has risen from 41p to 60p and many deliveries have been delayed until later in the day. The sale has also been made more attractive by the hiving-off of Royal Mail's £12bn pension fund deficit to the state – at a cost of £1.3bn in the first year alone.
Fallon said the regulator's approval for price increases, the removal of the pensions headache and the splitting off of the Royal Mail from the Post Office, its more publicly beloved sister, means the coalition will be able to succeed where Thatcher, John Major and Peter Mandelson all failed. "What actually stopped the privatisation under Thatcher was the combination of Royal Mail with Post Office, and the pensions," Fallon said. "It's been changed."
He says there is no argument now about whether the privatisation will happen, given that MPs have voted through the Postal Services Act 2011 that laid the way for the forthcoming sale. "This is fully supported by the coalition. This is a commitment. It is very important not to delay any longer."
Fallon implored Billy Hayes, general secretary of the CWU, to meet him to discuss the sale and the share awards to staff. Hayes countered that he regularly meets with Fallon, but accuses the minister of singing a changing tune. "In the last meeting we had at the Department for Business, he gave us a copy of the [I]Sun … and said to look at a story saying postal workers would get £2,000 worth of shares," he said. "Later in the meeting he said it would be £1,000. They're all over the place on the shares."
Fallon says it is impossible to say how much the postal workers' 10% stake might be worth because it is dependent on the flotation value. City analysts have put a £2bn-£3bn valuation on the company, which would mean £1,500-£2,300 per worker. But the government has refused to say whether workers will be handed the shares for free or offered to them at a discount to the sale price.
Hayes said the government could not "buy off" his members with the offer of shares. "People ain't going to turn away free money – but it's not going to impact on our members' stance to privatisation," he said. "They can see what it means: break-up, sell-off and deteriorating service and conditions.
"Our people are also in BT and we know the impact of what happened [after privatisation] there – hundreds of thousand of job cuts. Then you get the break-up too."
The union is in the process of sending out ballot papers to its 130,000 Royal Mail members for an independently monitored referendum on privatisation. Hayes said he was confident that members would vote overwhelmingly against the sell-off. Both Hayes and Fallon accuse each other of acting solely out of ideology. Fallon said the sale was a "practical, logical, commercial decision", not a dogmatic battle.
Hayes is tossing party politics aside in order to hit the Tories where it hurts – by signing up backbench Conservative MPs in rural areas. "We're making a series of unholy alliances," he said. "We'll work with anybody to advance the interests of our members."
He is targeting Tories in rural constituencies under pressure from voters worried that privatisation may threaten the frequency of deliveries in the countryside. The government has reiterated its pledge to maintain the universal service obligation – that is, to deliver to villages as well as cities at the same price – no matter how Royal Mail is sold.
Hayes says the CWU is also in active talks with the Countryside Alliance and may approach Ukip, which is also said to be anti-privatisation. "Obviously we won't be interested in fascists or racists, but if someone is prepared to work with us against the privatisation we'll work with them.
"They've got a fight on their hands," he says. "We won't let the government take the Royal out of Mail and sell out British interest."
Three decades after Margaret Thatcher refused to countenance a sale of Royal Mail, the coalition has committed to selling off the 497-year-old postal service within a year. The about-turn was underlined during last week's Queen's speech, when veteran Labour MP Dennis Skinner quipped: "Royal Mail for sale. Queen's head privatised", probably a reference to Thatcher's own objection to the monarch's image falling into private hands.
The Royal Mail's army of more than 130,000 postal workers has committed itself to fight the government every step of the way against a privatisation that the union claims will "hurt staff, customers and thousands of small businesses".
In an unprecedentedly provocative move, the Communication Workers Union (CWU) is trying to get rural Tory MPs and other traditionally rightwing, small-government proponents, including the Countryside Alliance, to join an "unholy alliance" against the most ambitious privatisation since British Gas 26 years ago.
But rather than back down, Michael Fallon – the business minister who set the wheels in motion for the sale – parked his tanks firmly on the CWU's lawn this weekend.
In an interview with the Observer, Fallon warned the union that if it continued with its campaign against Royal Mail's flotation on the stock market, the government would explore selling the company to overseas buyers.
The company's Canadian boss, Moya Greene, has already sounded out potential investors in her native Canada, the United States and Europe, and Fallon repeatedly warned that if the union's activism put at risk the "preferred" option of an initial public offering (IPO), it "will look at other ways of getting capital into the business".
"Our preference is for an IPO: but if that's not possible, we would look at alternatives [such] as sovereign wealth funds or other institutional investors," he said. "It would certainly be less popular with postal workers and it would delay them getting the shares parliament said they should get ."
The government, which is advised by UBS and Lazard, hopes to appoint lead bankers to run the sale by the end of this month, and hopes to start the sell-off process by the autumn. Royal Mail is being advised by some of the City's biggest guns: Barclays, Goldman Sachs and Bank of America Merrill Lynch.
Potential private buyers include private equity funds such as CVC Capital Partners, which was in the running during the previous botched sale in 2009. TNT, the Dutch postal group, was also interested in the previous sale but it is thought to be mainly interested in Royal Mail's highly profitable parcel arm GLS.
Other potential buyers could include the sovereign wealth fund of Qatar, which has been buying up large chunks of prime UK assets including Harrods, 95% of the Shard and stakes in Camden Market and Sainsbury's.
Fallon categorically dismissed the union's demand that the Royal Mail – which has been owned by the state since Henry VIII established a "master of the posts" in 1516 – remain nationalised. "It's a profitable, successful, company that needs access to new capital in order to continue to innovate to take advantage of a rapidly changing market," he said.
The rise of email, Facebook and text messaging has led to a 25% fall in letter traffic over the past five years to just 58m items a day, while parcel delivery is booming thanks to the rise of Amazon, Asos and other internet retailers.
Fallon said that if Royal Mail were to remain in state hands "every £1 it borrows is another £1 on the national debt.
"That means growing the national debt. No responsible party could propose that in the current environment or for that matter in any environment when Royal Mail – run on a fully commercial basis – has the capacity to be cash generative, profitable and perfectly able to raise the capital it needs from the private sector."
After years of losing money hand over fist – £320m in 2010 and £258m in 2011 – Royal Mail is now steadily increasing its profits. In the six months to September it made operating profits of £144m compared with £12m a year earlier, while sales remained roughly flat at £4.4bn.
However, consumers will note that, over the same period the price of a first-class stamp has risen from 41p to 60p and many deliveries have been delayed until later in the day. The sale has also been made more attractive by the hiving-off of Royal Mail's £12bn pension fund deficit to the state – at a cost of £1.3bn in the first year alone.
Fallon said the regulator's approval for price increases, the removal of the pensions headache and the splitting off of the Royal Mail from the Post Office, its more publicly beloved sister, means the coalition will be able to succeed where Thatcher, John Major and Peter Mandelson all failed. "What actually stopped the privatisation under Thatcher was the combination of Royal Mail with Post Office, and the pensions," Fallon said. "It's been changed."
He says there is no argument now about whether the privatisation will happen, given that MPs have voted through the Postal Services Act 2011 that laid the way for the forthcoming sale. "This is fully supported by the coalition. This is a commitment. It is very important not to delay any longer."
Fallon implored Billy Hayes, general secretary of the CWU, to meet him to discuss the sale and the share awards to staff. Hayes countered that he regularly meets with Fallon, but accuses the minister of singing a changing tune. "In the last meeting we had at the Department for Business, he gave us a copy of the [I]Sun … and said to look at a story saying postal workers would get £2,000 worth of shares," he said. "Later in the meeting he said it would be £1,000. They're all over the place on the shares."
Fallon says it is impossible to say how much the postal workers' 10% stake might be worth because it is dependent on the flotation value. City analysts have put a £2bn-£3bn valuation on the company, which would mean £1,500-£2,300 per worker. But the government has refused to say whether workers will be handed the shares for free or offered to them at a discount to the sale price.
Hayes said the government could not "buy off" his members with the offer of shares. "People ain't going to turn away free money – but it's not going to impact on our members' stance to privatisation," he said. "They can see what it means: break-up, sell-off and deteriorating service and conditions.
"Our people are also in BT and we know the impact of what happened [after privatisation] there – hundreds of thousand of job cuts. Then you get the break-up too."
The union is in the process of sending out ballot papers to its 130,000 Royal Mail members for an independently monitored referendum on privatisation. Hayes said he was confident that members would vote overwhelmingly against the sell-off. Both Hayes and Fallon accuse each other of acting solely out of ideology. Fallon said the sale was a "practical, logical, commercial decision", not a dogmatic battle.
Hayes is tossing party politics aside in order to hit the Tories where it hurts – by signing up backbench Conservative MPs in rural areas. "We're making a series of unholy alliances," he said. "We'll work with anybody to advance the interests of our members."
He is targeting Tories in rural constituencies under pressure from voters worried that privatisation may threaten the frequency of deliveries in the countryside. The government has reiterated its pledge to maintain the universal service obligation – that is, to deliver to villages as well as cities at the same price – no matter how Royal Mail is sold.
Hayes says the CWU is also in active talks with the Countryside Alliance and may approach Ukip, which is also said to be anti-privatisation. "Obviously we won't be interested in fascists or racists, but if someone is prepared to work with us against the privatisation we'll work with them.
"They've got a fight on their hands," he says. "We won't let the government take the Royal out of Mail and sell out British interest."