Hamish McRae: If we can't run the Royal Mail, we'd better let the Dutch try

There are no prizes for governments taking control of businesses

Share
Related Topics

Governments don't want to own businesses, do they? They have tried hard to avoid full nationalisation of the banks here, through they have legal control of Royal Bank of Scotland and de facto control of Lloyds and HBOS. In the United States there has been similar reluctance by the new Administration to nationalise the big banks and even more so, the big car companies.

This is pretty universal, irrespective of the political make-up of the governments concerned. When in the early 1990s several Scandinavian banks were rescued by governments, they sold them back to the private sector as soon as they had been nursed back to health. And in China, hardly a capitalist country even now, they are selling shares in the formerly state-owned banks off to the public as fast as the market will bear.

Yet here the proposed sale of 30 per cent of the Royal Mail to a foreign buyer, the Dutch TNT, is causing huge concern. That raises three questions. Why the resistance to the sale? Why, given the opposition, is the government so determined to push it through? And how will the debate about the appropriate balance between private and public sector move in the next few years?

The first is easy. Some people have a political vision of the Royal Mail as a collective good that should be state-owned, while others have political aversion to state ownership in any form. But our postal system has a special place thanks to its historical role in pioneering a universal postal service.

This was the heroic age of Sir Rowland Hill's introduction of the penny post and Anthony Trollope's development of the pillar box, two of the three great 19th century advances in postal communication. (The third was the invention of the letter box, tricky as it meant persuading people to cut slots in their expensive front doors, but essential as it saved the postman having to wait for an answer when delivering mail.) So the Royal Mail was a pioneer of public ownership, showing that the state could do things better than the private sector, and it was invented here.

Our present service may have become a shadow of what it was but it does carry an unbroken tradition of public service. Rather like that other great 19th-century invention, the police, there may be evidence of sub-standard performance but people are understandably twitchy about over-turning a model that has lasted for a more than 150 years.

So why is the government so determined to push on? The narrow argument advanced by Lord Mandelson that the pension burden makes it impossible to support the present structure seems odd. The pensions have to be paid some way or another, irrespective of the ultimate ownership. We are only talking about a minority stake, in any case, so I can't see this as a deal-breaker either way. Nor can it be a need to get the investment programme off the government's balance sheet, because there are other ways of doing it.

The only thing I can think of is a sense of frustration that, despite putting in good people at the very top, the business is still losing money and at times like this it is not reasonable to make the taxpayer stump up for managerial failure. TNT could bring outside experience and cut through the knots. If this is right it is really the reverse of the 19th-century experience, where the public sector really could manage things better than the private sector, or at last manage this thing.

We have lost faith in the ability of the state to do this job well. Or to put the point more directly, politicians have become fed up with taking the blame for something beyond their control. That has a ring of truth about it, for it squares with the experience with the banks. The one bank that the public fully owns, Northern Rock, has been busy cutting its loan book; in other words it has been doing exactly the opposite of what the government has been urging on the rest of the banking system. That has not been changed and Northern Rock will do some new lending but the government has had to put in new capital to enable it to do so. But you see the point.

The state owning some commercial enterprise does not mean that the enterprise will automatically follow state policy. Paradoxically the government is probably more likely to get an organisation to do what it wants if it does not own it than if it does. Regulation is a more effective method of control than ownership.

This is not completely clear-cut, of course. I suppose the old British Airports Authority was under tighter control than the now foreign-owned BAA. But Heathrow was not a place of wonder and delight when it was owned by the state, and the solution now, to break up the monopoly, will probably eventually deliver a better service than anything else to date. But even if it doesn't, the government do not carry the direct blame.

But whether politicians see passing things to the private sector as a way of avoiding blame, or whether they find they can achieve a better outcome with a combination of private-ownership and regulation, the conclusion is the same. There are no prizes for government taking control of businesses, and there are a lot of practical pressures on them to unload anything they do find themselves running as fast as decently possible.

There is also the little matter of money. We don't yet know the scale of the increase in public debt that will take place worldwide as a result of the recession and the measures to counter it. All we know is that it will climb everywhere, and Britain's national debt will at least double. The size of the national debt, and the need to set aside significant revenues to service it, has not been a concern for a generation. You really don't want to add to it by taking on the burden of financing banks, the postal service, indeed anything you don't have to finance.

The result here will be that the next government will have to struggle to get its debt under control. There will be a lot of pressure to move yet more functions towards the private sector and to sell off any under-used assets that have not been released to date. But the cupboard is quite bare. The easy sales have been made and in any case the private sector will be in no position to find money for investment until the banking system gets going again and world financial markets recover.

So this will be a slow business. Over the next decade governments around the world will first have to get their finances in order. Then they will have to figure out to what extent it is in their self-interest to run all sorts of functions that they do at present or whether they would be better to contract them out. As they do so they will look over each other's shoulders to see which governments are achieving better outcomes with fewer resources.

Our government is not particularly bad by world standards at delivering value for money. But it is by no means good – according to the OECD, we are about two-thirds of the way down the league table of developed countries. One way forward is to learn from others, and even, more radically, by getting them to help us.

So see the notion of the Dutch running the Royal Mail, as I expect they will in the end, as a sign of something bigger, maybe much bigger, to come.

React Now

iJobs Job Widget
iJobs General

Mobile App/IOS Developer (C#, ASP.NET, .NET, MVC)

£50000 - £60000 per annum + Benefits + Bonus: Harrington Starr: Mobile App/IOS...

Front End Developer-JavaScript, Angular J.S, HTML, CSS, ASP.NET

£40000 - £45000 per annum + Benefits + Bonus: Harrington Starr: Front End Deve...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Day In a Page

Read Next
 

i Editor's Letter: Only a game? Far from it

Oliver Duff Oliver Duff
Abu Bakr al-Baghdadi speaking at the Grand Mosque in Mosul  

The al-Baghdadi doctrine: leading British Muslims offer their response

Independent Voices
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

Hollywood targets Asian audiences

The world's second biggest movie market is fast becoming the Hollywood studios' most crucial
Grindr founder Joel Simkhai: 'I've found love on my dating app - and my mum keeps trying to hook me up!'

Grindr founder Joel Simkhai: 'I've found love on my dating app'

Five years on from its launch and Grindr is the world's most popular dating app for gay men. Its founder Joel Simkhai answers his critics, describes his isolation as a child
Autocorrect has its uses but it can go rogue with embarrassing results - so is it time to ditch it?

Is it time to ditch autocorrect?

Matthew J X Malady persuaded friends to message manually instead, but failed to factor in fat fingers and drunk texting
10 best girls' summer dresses

Frock chick: 10 best girls' summer dresses

Get them ready for the holidays with these cool and pretty options 
Westminster’s dark secret: Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together

Westminster’s dark secret

Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together
A History of the First World War in 100 Moments: Dulce et decorum est - a life cut short for a poet whose work achieved immortality

A History of the First World War in 100 Moments

Dulce et decorum est: a life cut short for a poet whose work achieved immortality
Google tells popular music website to censor album cover art in 'sexually explicit content' ban

Naked censorship?

The strange case of Google, the music website and the nudity take-down requests
Howzat! 8 best cricket bats

Howzat! 8 best cricket bats

As England take on India at Trent Bridge, here is our pick of the high-performing bats to help you up your run-count this summer 
Brazil vs Germany World Cup 2014 comment: David Luiz falls from leader figure to symbol of national humiliation

David Luiz falls from leader figure to symbol of national humiliation

Captain appears to give up as shocking 7-1 World Cup semi-final defeat threatens ramifications in Brazil