As MPs quiz bankers over Royal Mail's flotation, they should ask what it means for its future – and that of the Post Office we trust and use
Today MPs on the business, innovation and skills select committee will have the chance to quiz Goldman Sachs and UBS about whether or not the advice they gave the government on the sale value of Royal Mail was sound, or so wrong that it came close to negligence. And customers across the country wanting to use the 373 crown post offices will find them closed this afternoon because of strike action. The two events are closely related. They are taking place because of fears that both institutions are being so badly handled that their futures are in jeopardy.
Take Royal Mail. It's now a truism that it was undervalued. Shares sold for 330p are now selling at 550p – a total difference in market valuation of a stonking £2.2bn. That's money the taxpayer missed out on. But there are more pressing questions about Royal Mail's future. Will the sovereign wealth funds of Abu Dhabi, Kuwait and Singapore be more interested in long-term investment in it – the government's justification for the sale – or in the more usual short-term share dealing? Will they forgo rising dividends in the interests of new technology for the British postal service?
The chatter around the sale was remarkably light on the "need for private investment in Royal Mail" (the government's mantra since 2010) and rather more concerned with share value. And the future? One quoted market commentator highlighted the attractive takeover value of Royal Mail: "If things don't work out on an independent basis, then it [Royal Mail] would look very cosy in the portfolio of UBS or Deutsche Bank."
The other big unanswered question of the sale concerns the Royal Mail relationship with the Post Office. A third of the Post Office's income comes from dealing with the mail, with Royal Mail. There's a 10-year agreement that this shall continue. But there is chatter that big investors might come to tire of it – and what then?
Today's Post Office strike– taking place in less comfortable conditions than the parliamentary hearing – mirrors the anxieties about the future of the great institution of Royal Mail. The Post Office will have to do without any public money from 2015. Post Office Ltd has to bridge a gap of around £37m in its crown network (the post offices owned and run by Post Office Ltd rather than by the independent sub-postmasters) and to do this it has embarked on a further cost-cutting exercise. It wants to franchise 70 crown offices to the likes of WH Smith and Yogi Eyecare. (And WH Smith is now advertising jobs on the minimum wage of £6.31 an hour where PO employees don't want to relocate.) It wants to lose 600 jobs elsewhere through automation. There is a three-year pay freeze on all employees (though not on the salaries of senior Post Office executives). To the unions it looks like a popular public service being run down.
When the government began preparations to sell off Royal Mail, Ed Davey, then the relevant minister, played up the future of a post office safe in public hands. It got a big five-year investment sum. It was to be the "front office of government", both national and local. It was to be encouraged to grow its financial services.
That was 2010. Today we know that government services, which brought in £209m in 2009/10, only brought in £164m in 2012/13. Financial services revenue also dropped substantially (though rose again by 6% last year) in the same period.
Sub-postmasters in the 11,500 post office branches are having a horrible time – their income has dropped by up to a third in the last five years. The National Federation of SubPostmasters is desperately worried about its members' ability to stay in business, citing the 50% cut in pay rates for DVLA transactions (and Post Office Ltd's £15m bonus payments). There has been no will or push in government to help the Post Office become a "front office" for anything.
Today's select committee should ask whether the money from Royal Mail's sale – however much or little – will benefit the company in the future, and how. Customers faced with strikers should ask exactly what the future holds for the Post Office they trust and use.