The row over Royal Mail really should be sorted without a train crash. Quite apart from taking over the £9bn pension deficit (which New Labour is half responsible for, having continued from 1997 to 2003 the Tory policy started in 1990 of taking employer contribution holidays), the Government is insisting that there needs to be increased investment, new management, and a partnership deal with the CWU which the workforce can really get behind and commit themselves to. Almost everybody agrees with this. The sticking point is the 30% privatisation which Mandelson says is necessary as the only way to improve management skills and lever in modernisation expertise from elsewhere in the industry. But bringing in new management happens repeatedly in both the public and private sectors without any change in the equity structure. Then we are told that only private equity will transform the culture of Royal Mail. But it is difficult to see how a minority stake could achieve this, unless having obtained the 30% thin end of the wedge the Government then intends later to extend it to a majority stake or to full privatisation (as the Tories certainly would) which is utterly contrary to Labour’s manifesto and which the Government have (so far) flatly denied. There must be another way, and there is.

The Compass proposal is only one option, based on tried and successful Network Rail and Welsh Water models, but it is a good one. As a not-for-profit company a restructured Royal Mail and Post Office would be able to invest in new technology, without encroaching on government borrowing limits, to bring it up to best current European postal standards. It would avoid splitting post offices from mail, which would be a nonsense. And a new entrepreneurial management could seize the commercial potential of post office premises both to establish a People’s Bank (a modernised version of the Girobank which the Tories sold off) and credit unions for poorer families needing small loans outside the grip of loan sharks, as well as developing the often cavernous open post office spaces for information networks, community meeting points, and even cafes and specialised shops.
The Government’s main objection is that Royal Mail is a basket case and a political fix won’t work. But it isn’t a basket case at all. In the last 9 months it has turned in profits of £225m, which may well amount to £300m in a full year. What has dragged down Royal Mail is the requirement to fund the pension deficit year after year which cost it £280 this last year. Without that incubus, Royal Mail would now be making profits of some £0.6bn a year which could go some way to financing its own modernisation (together with much of the £1.2bn Government loan facility for this prupose which has never been drawn down). Yes, it’s true that Royal Mail is losing market share to the new digital technologies, that each 1% loss costs it £70m, and that it could lose some 6-8% in this next year. But there are countervailing factors: parcels traffic is soaring because of the popularity of on-line shopping, and the market-rigging involved in giving large subsidies to the Mail’s competitors through grossly over-favourable access pricing should be stopped.
What is needed now is urgent negotiations between the Government and the CWU which are pursued for as long as it takes until a deal if threshed out, as it clearly can be. Of the 148 Labour MPs who have signed the EDM, at least 80-90 can be absolutely relied on to stick to their convictions and oppose any Bill that proposes privatisation, which means that it can only be carried with Tory support which would be humiliating, and anyway the Tories can be sure to rat on it at the last moment. The union have to commit themselves genuinely to a new deal which certainly involves bringing in new technology, some job losses and new more efficient working practices in sorting offices, in return for the replacement of the old overpaid management which has caused so much friction.
But the potential benefits for all sides are enormous. Keeping the mail as a fully integrated and modernised public service would be highly popular with the public. Without the millstone of pension liabilities round its neck and with fair market pricing vis-a-vis its competitiors, a new restructured, re-managed and re-invested company would be handsomely profitable and could more than hold its own in a fast-changing technological landscape. It would get the Government off the hook since bringing this Bill as it stands now into the Commons soon after seriously bad Euro elections would be little short of suicidal. The workforce would get a new lease of life and a national commitment to the value and quality of their service. The only loss would be Peter Mandelson’s loss of face, and I think we could afford that.

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