The Czech Now Owns the Post

And that's OK

The government has approved the sale of Royal Mail to a Czech billionaire. This appears to have outraged many people, and not just the ones you would usually expect. The Centre-Left to Hard Left are understandably disappointed as they would obviously prefer for it to be renationalised. However, there have been a number of commentators on the Centre-Right who are arguing that Royal Mail is an important historical institution and a national asset and so this is further proof of the UK’s decline. Both of these arguments are wrong.

First, should Royal Mail be renationalised? Beyond ideological reasons I can appreciate part of the argument that some people do rely on letters being delivered because they are elderly or live in remote areas where alternatives are not readily available.

However, Royal Mail was in public ownership for centuries and by the start of this one its finances were in a parlous state and it was running an inefficient service which required it to receive more and more money from the government. Royal Mail is currently in a bad situation under its current ownership but If it were to be renationalised then it will still face the same issues as now.

Proponents of renationalisation would hit back at this and claim that it would provide a better service if only it wasn’t being ‘underfunded’ by the government. Perhaps this is true, if we did renationalise Royal Mail and massively increase its budget then it might well do so but how will this be paid for? This will only come from increasing taxes, borrowing more money, or cutting spending elsewhere. None of these are suitable or fair options for subsidising the postal service.

Those against selling off Royal Mail to a foreigner tend to lament that an historic British institution will no longer be in UK hands. I do get the appeal of this argument but it doesn’t mean that it’s a valid one. Yes, it’s an historic institution but it’s hardly as though the Royal Family or the Crown Jewels are being sold off to foreign powers which they are not (despite Prince Andrew’s alleged best efforts).

As for it being an important asset for the functioning of the country which we should prevent from falling into the hands of people from other countries, I can again appreciate the argument but it is a weak one. If it was critical national infrastructure, a chip manufacturer or a defence company then yes, absolutely, it would be imprudent to see it become controlled by a potentially hostile foreign power such as China. The simple truth is that it’s not. It’s the postal service.

We also need to look at why Royal Mail continues to perform poorly despite having been privatised. Royal Mail’s main source of income for a number of years has come from delivering parcels. Unfortunately for Royal Mail it has been outcompeted by a number of other firms who have been able to deliver parcels in a more efficient manner. Under normal circumstances then Royal Mail would either be forced to up its game by becoming more productive or go out of business.

Unfortunately for Royal Mail, it has not been able to function like a normal business despite having been privatised. This is because it is regulated by Ofcom (also responsible for regulating broadcast media and the telecoms sector) which insists that Royal Mail must deliver on Saturdays. There are also regulations on the price of stamps while Royal Mail is forced to charge the same price for delivering letters regardless of where they are sent from in the country or the distance.

This is a ludicrous situation which ties Royal Mail’s hands. How can a business be expected to function in this way if it is restricted in its pricing policies and forced to deliver mail on certain days? All this while having to do battle with the very powerful Communication Workers Union (CWU) which insists on high wage increases and makes it difficult to restructure the organisation or bring in more automation.

Rather than renationalising Royal Mail or lamenting the fact that it has been sold to a foreign buyer, the government needs to embark on a process of reform and deregulation. Ofcom should be broken up and split into separate organisations with a new office established to focus on the postal sector.

While I do not think that a replacement office is necessary, if this new office is to exist then its function should be to ensure that there is fair competition in the postal sector and work in a constructive way with firms operating within it. Specifically this would be to deregulate the price of stamps and allow Royal Mail to set its own policies as to which days it delivers and also allow it to charge customers more for sending letters over longer distances and inconvenient locations.

Finally, the new owner of Royal Mail will have to make other reforms such as investing in new technologies and automating more processes. This will mean that it will have to be prepared to take on the CWU and, if the government is serious about the survival of Royal Mail, it should support the owner.

It would obviously be nice if Royal Mail continues to function and I have no wish to see it go out of business. However, the way to ensure its survival is not through renationalisation or preventing foreign ownership, it is through deregulation. That is the only way that Royal Mail can not only survive but also thrive.

Other stuff

Last week the EU finally agreed a deal (in theory) with the Mercosur countries after 25 years. I wrote an article for CapX on why both sides should be congratulated on this and why the UK should follow suit. You can read it here.

On Sunday the UK completed its accession to CPTPP. I played a very small part in this all the way back in 2021 so I’m thrilled to see it finally completed.

It hasn’t received too much media attention but last week a Venezuelan politician was ‘disappeared’ by the Maduro government. In some ways the fact that Jesús Armas was kidnapped by the Venezuelan government has not received too much coverage is in many ways not surprising – sadly that is the price of standing up for freedom and liberty in Venezuela under Maduro’s evil socialist regime. However, Armas has close links to the UK as he studied here and interned at the IEA so in some ways it is surprising – and disappointing – that it hasn’t received more attention in the UK. You can read the IEA’s response to it here.

Thanks as ever for reading!