View from City Road: Stamp of disapproval on privatisation

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The Independent Online
Believe it or not, the Government has decided against legislating to force a privatised Royal Mail to provide free replies to Father Christmas letters. Instead, it accepts the Post Office's assurance the service will continue.

The City may not be unduly worried about such niceties, but Michael Heseltine obviously is. This is one of the many delicate issues around which he has been forced to tiptoe in his attempt to get privatisation through the cabinet.

Even if Father Christmas is to escape regulation, little else will. Privatising the Post Office is proving an awesome task. The Government has had to agree that many of its functions and modes of operation are a form of public service and must be tightly controlled and - in the case of low-cost letters - kept as a monopoly. This in an attempt to ensure a stamp will still be the same price for a letter that travels to the next street as from Penzance to John O'Groats.

As for sub-post offices, they and Post Office Counters escape privatisation altogether, an implicit acknowledgement that cost-cutting under private ownership would cost Tory rural areas dear.

There is no detail in yesterday's green paper about precisely how privatisation of Royal Mail - the bulk of the business - and Parcelforce will be achieved, beyond the promise that employees and sub-postmasters will be offered special terms to become shareholders. Both are operating in highly competitive markets where many of the pressures are from other types of service, such as the fax.

The green paper seems to set out a workable structure of regulatory safeguards for this privatisation. The constituent parts of the Post Office are, after all, now well used to dealing with each other at arm's length and no longer need to be operated as an integrated whole. But the threat of a powerful regulator policing lots of high-profile public interest obligations combined with Labour talk of unwinding the whole privatisation is going to make it hard to sell at a decent price. It may not be worth the bother.

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