Beckett could dash Post Office hopes for commercial freedom
Monday 05 May 1997
The appointment of Margaret Beckett as the President of the Board of Trade could dash the Post Office's hopes of greater commercial freedom or even partial privatisation under the new Labour government.
Mrs Beckett is regarded in industry quarters as an "old Labour" figure who would be more reluctant to allow an infusion of private sector funding into the Post Office, much less a full-blooded sale of the business.
Post Office executives have drawn up a range of privatisation proposals and discussed them with senior Labour figures before the election.
Two options have been studied. One is to sell 49 per cent of the Post Office, thus keeping it in public ownership, but at the same time give it commercial freedom to raise money on the financial markets and enter joint ventures with private sector partners.
The second, more radical, option is to sell a 51 per cent stake in the Post Office but retain a "golden share". This would enable Labour to ring- fence monopoly services such as the Royal Mail and guarantee a universal service to every address in the country at a uniform price.
As a first step along the road to privatisation, the Post Office could be reconstituted as a 100 per cent government-owned company. This would free it from Treasury spending rules, giving it the freedom to fight growing competition from overseas post offices and private mail firms such as DHL, TNT and Federal Express.
Although Mrs Beckett might oppose Post Office privatisation, Labour sources pointed out that the key player in any decision would be Gordon Brown, the new Chancellor.
A flotation of the Post Office could raise at least pounds 2bn towards the "black hole" in the public finances.
Mr Brown is conducting a "national inventory" of state assets which will lead to the privatisation of any assets no longer needed. Labour has also said it will examine the sale of Parcelforce.
Kim Howells, the member of Labour's trade and industry team with responsibility for the Post Office, favours "commercialisation" of the Post Office, including the introduction of private capital.
Post Office chiefs have cautioned it against piecemeal sales, arguing that Parcelforce should be kept intact and sold along with Royal Mail and the Counters network.
The Post Office made a profit of pounds 422m in 1995-96 and in the current financial year is budgeted to contribute pounds 330m to government finances through its external finance limit (EFL). A 100 per cent sale could raise pounds 4bn. But a more attractive solution might be to give it commercial freedom and then sell a half stake. This could raise pounds 2bn instantly but give Labour a continuing stream of income through the EFL.
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