I was pleasantly surprised by the success of my 12 Things you should know about the Daily Mail slur campaign against Ralph Miliband article, so I thought I’d give the extended bullet points format another shot, but this time on a much more serious subject; the sell-off of the Royal Mail
So here we go – 12 things you should know about the Royal Mail privatisation:
A bit of Royal Mail history
The Royal Mail can trace its history back to the appointment of a “master of the posts” by Henry VIII. It was run purely as a means of establishment communication until Charles I made the service available to the public in 1635. The first designated Royal Mail coaches, featuring Royal Mail livery, appeared in the 18th Century, and in 1793 the Royal Mail Investigations Branch was established, making it the World’s first recorded criminal investigations authority.
The first Royal Mail train, between Manchester and Liverpool, began service in 1830 and in 1838 the Postal Order was introduced. In 1839 the concept of pre-paid postage was introduced and this was quickly followed by the invention of the adhesive postage stamp in 1840. The fact that the postage stamp was invented in Britain is the reason that the Royal Mail postage stamp is the only one in the world which does not include the name of the country of origin.
The Post Office was responsible for the UK telephone network from 1912 (when it was established) until 1980 when the Tories hived off British Telecom as a separate company, in order to prime it for the privatisation that took place in 1984.
In 2012 the Royal Mail and the Post Office were divided into separate companies in order to facilitate the sell-off of The Royal Mail in October 2013.
There has been a lot of debate over whether the current Tory led coalition is the most right-wing UK government in living memory, with many people claiming that the 1979-1990 Thatcher regime was actually more right-wing. In my view the current government are significantly more right-wing than Thatcher for many reasons (Secret Courts, Mandatory Unpaid Labour schemes, privatisation of the NHS, privatisation of 1,000 English secondary schools, absurd exercises in retroactive lawmaking and their fixation with the bankrupt and hopelessly discredited neoliberal pseudo-economic dogma that was new and untested in a democratic environment when Thatcher had her fixation with it), however the Royal Mail sell-off is particularly illustrative, given that Margaret Thatcher absolutely refused to countenance it with the famous and oft quoted statement that she was “not prepared to have the Queen’s head privatised“.
67% of the public opposed the privatisation of the Royal Mail, compared to just 20% that approved. When we look at the people that feel strongly about it, 36% of people strongly opposed the sell-off, whilst just a tiny 4% minority strongly approved. [source]
Given the strength of public opposition, the Royal Mail privatisation looks like yet another Coalition own goal for the opposition parties to take advantage of.
Before Royal Mail stock began trading on the 11th of October 2013, the Labour party produced a report that claimed that by pricing the shares at 330p, the government were selling it off at significantly below the true market value.
The Labour analysis showed that the government had undervalued it by £1 billion (about 30%), whilst other city analysts have calculated that it had been undervalued by between £600 million and £2.7 billion (between 22% and 80%).
On the day of the stock market floatation, the share price immediately rose from 330p to 450p, before settling down at around 445p, indicating that the Labour party and the city analysts were right, the Royal Mail had just been sold off at massively below its market value.
In a fair world the incompetent (or brazenly corrupt) Tory and Liberal Democrat MPs that devised this ludicrous undervaluation would be jailed and the two political parties would be forced to stump up the difference between their absurd undervaluation and the real value of the Royal Mail estate. The problem is that we don’t live in a fair world, and none of the people responsible for ripping off the public will ever be held to account for their actions.
The absurdity of the Labour stance
In the week before the Royal Mail was sold off Labour adopted the stance, not that it was wrong to sell-off a public institution against the wishes of the vast majority of the population, but that the sale price was too low.
Of course they were right to point out that the government had undervalued Royal Mail and were selling it off on the cheap, however, this price complaint hardly harmonised with the strong sense of outright public opposition.
The reason they couldn’t vociferously oppose the privatisation of the Royal Mail on principle, is that Labour themselves had planned to sell it off when they were in government. Even though they have a different leader now, their PR team knew that outright opposition would leave the door wide open for accusations of hypocrisy and political opportunism. Hence their quibbling over the valuation of the stock, rather than representing the views of the overwhelming majority of the public by stating outright opposition to the sale.
Privatisation of the profits
Before the Royal Mail was sold off the coalition government did something that the majority of people don’t know about. They separated the Royal Mail pension liabilities in order to keep them on the public books as the company was sold off. This is an absolutely classic example of lumbering the public with the debts as the private sector are handed the profits.
The right-wing press predictably dressed this pensions scam up as some kind of triumph for sound Tory financial logic, with ridiculous claims that the £28 billion Royal Mail pensions portfolio would be used to “pay down the national debt” whilst forgetting to mention that the government would carry the liability for paying the pensions of all of those Posties, for decades into the future.
Here’s a quote from an MP that was capable of seeing through such a tansparent scam:
“I fear the government is going to steal £22bn of pension assets, dump the liability as a mortgage on future generations and dress it up as the salvation of the Royal Mail. Their plan to steal the pension assets to help reduce their borrowing figures while taking out a massive mortgage to cover Post Office pension liabilities for 50 years is nothing more than a massive accounting scam … This dangerous plan must be resisted.”
The problem is that this opposition was raised by the Tory MP Alan Duncan in 2008 in opposition to the Labour plans to sell-off the Royal Mail and lumber the taxpayer with the huge cost of the pensions liabilities. In 2008 he was deriding this exact strategy as a “massive accounting scam“, now in 2013 he is actually a member of the government that has enacted exactly the same scam and hasn’t raised the slightest whister of complaint.
Over the next couple of years the mainstream corporate media will probably tell you a hell of a lot about how much Royal Mail profits are up since privatisation, and how much of a wonderful success it’s all been. But bear in mind, the old publicly owned Royal Mail had to pay their own pension liabilities, this new company has been absolved of those responsibilities entirely, meaning that the taxpayer is once again left subsidising corporate profits, and the corporate media once again will be ever so keen to sell the public the narrative that it’s been a wonderful success for everyone.
Only for the rich
Much has been made by the right-wing corporate media of the narrative that this privatisation is allowing ordinary people to invest in the Royal Mail. The problem with this interpretation is that it is absolute cobblers.
Firstly, only 30% of the shares will be made available to the public, whilst institutional investors like banks, hedge funds, pension funds and sovereign wealth funds will be sold 70% of the ludicrously undervalued shares. It doesn’t matter how you dress it up, it doesn’t benefit the public to sell-off an institution that 100% belonged to them, and then only allow them to buy up only 30% of the shares. Why on earth should institutional investors like American hedge funds and Middle Eastern sovereign wealth funds get more than double the amount of shares than are made available to the British public? It’s not as if there was no public demand. In fact, given that the public share offerings were seven times oversubscribed, there was clearly more than sufficient demand to sell the entire 100% of shares to the British public.
The second objection is that the paltry 30% of shares that were made available to the public were sold off in tranches worth £750. Now, perhaps you’re so wealthy that this amount doesn’t seem like all that much money, however, to a huge percentage of the population, £750 is an enormous amount of money, meaning that they were completely priced out of the market before the sell-off even began. This means that the only people who will have benefited from the cash windfall from the government selling off public assets at significantly below their true market value, are the already well-to-do (ie. self-serving Tory voters).
The biggest privatisation since British Rail?
It has been claimed several times that the Royal Mail sell-off is the biggest privatisation since the hopelessly botched carve-up of the railways back in 1994, however this is pretty debatable.
OK, the Royal Mail sell-off is the biggest direct IPO (Initial Public Offering) of shares in a newly privatised part of national infrastructure since then, but there have been several other privatisation scams that have taken place between 1994 and 2013 that weren’t done in the form of an upfront public offering of shares.
One example of a massive privatisation scheme that has passed completely under the public radar (thanks in a large part to the complicity of the press and the Labour opposition) is the fact that half of the secondary schools in England have been privatised, including the buildings, meaning that £billions worth of public property were just given away for free to unaccountable private interests by Michael Gove and his chums at the Department of Education. What is more is that the new private owners that have been gifted all of this public infrastructure (many of them Tory party donors) will receive indefinate subsidies from the government to cover the entire cost of running the schools, plus enough left over to hand themselves ludicrous six figure salaries. The fact that the recipients of all of this public infrastructure and subsidies are educational pseudo-charities rather than shareholders in a newly formed company doesn’t mean that this hasn’t been a privatisation process.
Another example of a massive privatisation scheme that has passed under the public radar is the carve-up of the NHS. If all of the NHS services that have been privatised in the last few years are summed up, they absolutely dwarf the £3.3 billion undervaluation of the Royal Mail sell-off.
The privatisation of the Royal Mail less than one year before the Independence referendum in Scotland looks like a deliberate act of malice. The ruling Scottish National Party and the vast majority of the Scottish public are opposed to the sale, but the Tories have pushed through the privatisation of the Scottish Royal Mail regardless.
The Scottish First Minister Alex Salmond had asked for a moratorium on the Royal Mail privatisation until after the Independence referendum, but David Cameron and his government ploughed on with the plan to sell it off at significantly below its market value.
Alex Salmond has pledged to re-nationalise the Scottish part of the Royal Mail, should Scotland vote for independence in 2014. Hopefully he’ll only be willing to pay the 330p a share undervaluation that it was flogged off for, should the stock price be higher come September 2014.
The non-Royal Mail
Here’s an objection that actually means nothing to me, but may well carry some weight with those with monarchist predilections:
In the 447 page prospectus for Royal Mail investors it was admitted that the Royal Mail may have to drop the use of royal insignia after privatisation. This could spell the end for the use of the royal E II R royal cypher on post boxes, and the right to use the crown insignia could be withdrawn at any time.
There is one obvious plus side to this story, it is a distinct possibility that Prince Charles’ image may never appear on our stamps! Unfortunately this probably won’t be because the British public have awoken from their subservient slumber and overthrown the monarchy, but because Charles is under no obligation to let a private firm use his image in their promotional material.
The Madness of Saint Vince
In the wake of the global financial sector meltdown the Lib-Dem Treasury Spokesperson Vince Cable earned himself the reputation as a politician that actually understands economics, with several economically literate observations about the ongoing crisis and for the fact that he had repeatedly raised concerns about the levels of debt within the economy before the crisis happened.
Given his background in economics and his reputation for economic credibility “Saint Vince” seemed like the ideal choice for Chancellor of the Exchequer in a coalition government, however the Tories were unwilling to let souch an important office go to the Lib-Dems, so instead the UK was lumbered with the economically illiterate buffoon George Osborne, whose commitment to neoliberal pseudo-economics is only surpassed by his inability to actually understand the the fundamental basics of the economic ideology he promotes.
After being sidelined by the Tories, Vince seems to have been slowly going mad. The early signs became visible when he began promoting his conception of “responsible capitalism” to anyone that would listen, but did so at a time when corporate executives and shareholder dividends were soaring, paid for at the direct expense of productive capital investment and labour force wages. The corporate response to the economic crisis was to hoard cash and to fill executive pockets like never before, George Osborne facilitated this process by slashing corporation tax and deliberately opening up tax-loopholes for the benefit of British corporations, yet “Saint Vince” was waffling away irrelevantly about his utopian conception of ethical capitalism.
By 2013 “Saint Vince” had gone completely mad, the most visible demonstration being his decision to compare the Bank of England to the Taliban because they wouldn’t relax the tiny capital reserves they expect private banks to hold in comparison to the amount of money they lend out. Not only was the Taliban comparison insanely disproportionate, the demand that capital ratios be relaxed directly contradicts the “too much debt” stance that won him so many plaudits when the financial crisis hit, because his comments were essentially a desperate and offensively worded appeal for the Bank of England to allow the creation of even more debt!
Vince Cable’s fingerprints are all over the Royal Mail undervaluation. In my view ths is hardly a coincidence. The Tories knew that this appalling privatisation scam was going to be extremely unpopular with the public (see the Alan Duncan quote above), so it clearly suited their interests to lumber some naive Lib-Dem patsy with it. Essentially they’ve got sick of “Saint Vince” and his inconvenient ramblings, so they’ve shoved the mad old bastard under a bus.
A Tory Own-Goal?
Another admission in the 447 page prospectus is that a privatised Royal Mail could soon cease to provide universal coverage. The withdrawal of delivery services in order to cut costs and boost corporate profits would hit rural areas particularly hard, and we all know that the British countryside is absolutely riddled with Tories.
I know from personal experience that country dwelling Tories are the type of people to get extremely worked up about the fact that their bin collection service has been changed from a weekly to a fortnightly service, so they are hardly likely to react calmly when their postal service is cut off and they’re compelled to drive to the nearest town in order to pick up their mail from a Post Office box instead.
Probably the only people with more fealty to the Tory party than the rural farmer, is the investment banker, however, the cancellation of their postal services is one of the things that is likely to drive them to distraction so much that they’ll consider either jumping ship to vote for UKIP, or to give up hope and not even bother voting at all.
There’s really not much to conclude other than the Tory led government have once again sold off the family silver on the cheap. The public should be apoplectic with rage that they undervalued the Royal Mail so badly in their desperation to sell it off as quickly as possible. But as usual public anger will eventually simmer down and people will forget that the Royal Mail was sold off on the cheap against their wishes. Then they’ll queue up to vote for one of the three establishment parties that believe the opposite, that the Royal Mail is better off under the private ownership of American hedge funds, French pension portfolios and Middle Eastern sovereign wealth funds than under the democratically administered ownership of the UK taxpayer.