State ownership hampers Royal Mail, says audit watchdog

The continued state ownership of Consignia, parent company of the Royal Mail, may result in insufficient pressure for improvements in its performance and so hamper the introduction of competition, Parliament's audit watchdog warns today.

A report from Sir John Bourn, head of the National Audit Office, also cautions that the postal regulator Postcomm may be hampered in its ability to licence rival operators because of its duty to safeguard Consignia's universal service obligation, which guarantees deliveries in the country at a uniform price.

Postcomm is shortly to unveil plans for introducing long-term competition into the postal market and Sir John said it was important that its proposals took these risks into account.

The NAO said competitors might be unwilling to enter the market unless they were granted the same 15-year licence as Consignia now has.

The report criticises Consignia for failing to achieve its own target of delivering 92.5 per cent of first class mail the next day. Last year the figure was 89 per cent. But it cautions that the Department of Trade and Industry, as principal shareholder, may not be putting sufficient pressure on Consignia. "In the case of other formerly monopolistic industries, such as telecommunications and gas, the private sector shareholders have played an important role in imposing disciplines on the company, ensuring that they improve efficiency and respond constructively to competition," notes the NAO report.

Consignia has announced a £1.2bn cost-cutting plan which will involve up to 30,000 job losses. But it is facing the threat of dispute over attempts to curb the wage bill for its 200,000 staff.

Nigel Waterson, a Tory trade and industry spokesman, said the NAO report confirmed that the Government had not helped Consignia by keeping it fully in state ownership.