To understand what is happening today at Royal Mail, we would recommend reading a Lalkar article from May 2002, ‘Consignia: death by a thousand cuts’, which can be found online at www.lalkar.org.
Dismantling of Royal Mail
Since that article was written, the name ‘Consignia’ has been consigned to oblivion, where it always belonged, and the name Royal Mail restored. Nevertheless the policy of slowly but surely destroying the government-owned organisation remains.
Those who wish to understand the government’s attitude should remember that in 1997 when the Labour government was first elected, its top guns – Blair, Brown and Mandelson – were in agreement that the Royal Mail (including its post offices, its parcel delivery and its letter delivery services) would be privatised, but they were unable to implement the plan for lack of more general support. Their decision then was to run the organisation down bit by bit until there ceased to be a reason for it to remain.
Thus, over the last few years, Royal Mail has lost its role in distributing social security payments and in renewing TV licences and is now having its role in issuing both passports and vehicle excise licences drastically reduced. The National Audit Office has also instructed government departments recently to look into using alternatives to Royal Mail for delivering their bulk mail, and the Department of Work and Pensions has already switched.
More and more cuts are being imposed on Royal Mail under the guise of the drive for profitability.
From 218,000 staff in 2000/01, this figure has been reduced to 150,000, and cuts of a further 40,000 jobs are envisaged over the next five years. From 19,000 post offices in 1997 when the Labour government first came to power, only 14,300 are left and 2,500 more are due to be scrapped by the end of next year. Even large and thriving post offices have been closed down, with their business transferred into branches of WH Smith, where workers earn even less than Post Office counter staff.
In the last five years we have seen the second delivery to homes disappear, as well as a cut in the number of collections from post boxes, and the axing of the Saturday delivery can be expected soon.
These cuts, along with a modest rise in the price of stamps, have enabled the Royal Mail management to turn a large ‘loss’, ie, the cost of running a public service, into a ‘profit’, but the government, as owner of the Royal Mail plc, and PostComm, the ‘regulator’, which in fact merely implements government instructions, are seeing to it that the Royal Mail shrivels up – at minimum cost to the government.
The Royal Mail, for instance, has a very successful European subsidiary, GLS, from which it makes very healthy profits. It would have liked to have made other overseas purchases in order to use its expertise and equipment to boost profits still further, but it has been forbidden from doing so. It has in fact been put under pressure to sell GLS, worth about £1bn, to help plug the £4-6n hole in its pension fund.
This hole only arose because Royal Mail over the years boosted its profits – and thus the amount it handed over each year to the Exchequer – by taking contributions ‘holidays’ (ie, failing to pay that part of wages that the employer pays into the employees’ pension fund) at the times of rapidly rising stock market prices. Now that share values have fallen, instead of the government repaying the money to which it had helped itself, Royal Mail is expected to make good the shortfall out of current operating profits which the government itself intervenes to reduce!
Profitable avenues closed
In order to cover the cost of delivering post to every home in the country, Royal Mail would need to charge 40p for a first class stamp, which is more or less in line with what is charged in most of the rest of Europe, but PostComm has denied it the right to do this, even though this would do no more than wipe out the loss it currently makes in supplying the Universal Delivery Obligation.
Furthermore, PostComm also prohibits Royal Mail from making the kind of hard-headed business decisions that every other postal provider makes quite freely. In particular, Royal Mail would like to offer special low rates for bulk mail, rather than the standard price paid by occasional users of their services. But PostComm has decreed they are only allowed to charge on a single basis. The result has been, inevitably, that companies – and government departments – that generate bulk mail (such as British Telecom, Amazon, and others) have deserted to cheaper rivals.
One card that Royal Mail still holds is that it is for the moment the only contender able to deliver to every house in the country. Therefore, even its business rivals have to use its services if they wish to deliver to individual households. However, Royal Mail is not allowed to charge them the kind of sum for ‘last-mile delivery’ that would be needed to enable them to break even on their Universal Delivery Obligation, being instead restricted by PostComm to 13p per item. In this way, Royal Mail is ordered in effect to subsidise its own competitors, who as a result have been able to take over 40 percent of the Royal Mail’s bulk business mail!
These competitors apparently have more modern equipment and pay their workers 25 percent less than Royal Mail, without providing any expensive public services such as last mile delivery and rural post offices, let alone the obligation to plug a massive hole in their staff pension fund. By tilting the competitive balance in favour of these competitors, our ‘Labour’ government is allowing the life blood of Royal Mail gradually to ooze away.
It cannot allow the Royal Mail to fold immediately (a) because the public is not ready for this and would certainly punish at election time any party whose government would allow this to happen, and (b) because no competitor is prepared for the moment to take on universal delivery.
While the obvious answer to a government wanting to scuttle the Royal Mail would be to abolish the Universal Delivery Obligation altogether (so that we all have to go to some nearby office to collect our post), this would be quite unacceptable to our government’s big business masters: 90 percent of mail these days is junk mail and, frankly, who would go down the road actually to collect it?
Hence, Universal Delivery must be provided somehow. It seems that the Dutch company TNT has some pilot schemes going to see whether it could make money from offering this in certain areas only, but it is most unlikely that it would be required to do so on the terms that are imposed on the Royal Mail.
Wave of strikes
If competitor companies pay their staff 25 percent less than Royal Mail does, how is it that Royal Mail workers are so dissatisfied with their pay and their conditions that they are willing to strike?
The answer lies in the fact that, while postal workers are expected to cover the work of the thousands of staff who have been lost in the last few years, so that their work has become infinitely harder, they still earn well under the national average. Their basic wage is £323 a week (as compared to the national average of £395).
Over the last five years, although there have been wage increases, these have been below inflation. On top of that, every effort is being made to make Royal Mail employees pay for the money that the government, as employer, failed to contribute in the past to their pension fund – in breach of its contractual obligations as employer to do so.
The Mirror of 24 July 2007 reported that it had come by a 24-page document emanating from the management of Royal Mail under which the age staff could retire with full pensions was to be raised from 60 to 62 next year and to 65 from 2010. The lump sums to which workers are entitled on retirement would be drastically reduced: “A worker aged 50 today, with 30 years’ service could have expected a one-off payment of £29,826. This would be cut to £25,515.” Pensions themselves would also be drastically reduced: “A 30-year old with 10 years’ service could currently expect to retire with a pension of £15,260 a year. This would be slashed to £8,764 … A worker aged 50 today with 30 years’ service who would have retired on £9,942 a year would see that cut to £8,505.” (‘Work five years longer or your pension is cut’ by Clinton Manning)
In addition, the document proposed closing the final salary scheme to new entrants, a proposal that has been in the offing for years but which the Communications Workers Union (CWU) has been resisting by threatening to cut its funding of the Labour party should this be implemented. Of course, Royal Mail management are denying all knowledge of the document, of which several thousand were apparently produced but then pulped following The Mirror’s exposure, but everybody believes that it definitely does represent what management are planning.
Workers are therefore fighting the only way they can against the lowering of their already modest standards of living. The Royal Mail effective monopoly on the Universal Delivery Obligation (which no private company as yet has been able to undertake because of the lack of scope for making profits) is a trump card in the hands of the workers that they will have to use while they still can. With limited action (one-day strikes etc) having proved ineffective, a solidly supported indefinite strike, ought, under present conditions, to force the government’s hand and bring about concessions in favour of the workers.
Of course, our bourgeois government will then no doubt also be stimulated to finance some private company such as TNT to set up an alternative national network so that in a few years’ time the situation may be different (especially if the union fails to recruit widely within the rival companies in the meantime and to conduct campaigns supported by all postal workers for uniform wages and conditions throughout the industry), which is all the more reason to strike today, as it were, while the iron is hot.
The CWU has for years been presiding over the haemorrhaging of Royal Mail jobs and the consequent intensification of labour, but it did take a stand to try to protect pensions by threatening to withdraw its funding of the Labour party. For the struggles ahead – to recruit in the private sector, to campaign for support for its members’ just cause, and to fight to prevent the ultimate close down of Royal Mail – it is going to need all the resources it can muster. It should certainly not be handing even a penny to the Labour party, which is entirely on the side of the enemy.
Rats desert the sinking ship
Royal Mail is now sinking so fast that even the henchmen are bailing out, for reasons that can only be related to the fact that Royal Mail has no future.
Ian Griffiths (managing director of Royal Mail letters, salary £500,000pa), who presented a business plan to the Royal Mail board suggesting that redundancies should not be implemented until after new machinery had been introduced that would make a large number of sorters redundant was sent off with a flea in his ear. Other managers who have bailed out are Elmar Toime, who received a £750,000 pay-off after only 18 months in the job, finance director Marisa Cassone, David Mills, Head of the Post Office Division and Satya Kurtara (head of ‘dignity and inclusion’).
It is also reported that the government are looking for a replacement for Chairman Allan Leighton, but have been unable to fill his million-pound post …
It is one of the most obvious absurdities of the capitalist system that, as mechanisation advances and work becomes more productive, instead of an all-round increase in living standards in line with increased productivity, all we get are mass redundancies, reduced services and low wages, such as we are witnessing with the Royal Mail and in its rival companies where even more advanced mechanisation means even lower wages. The only people to benefit from the advanced technology being developed in our society are, on the one hand, a handful of billionaires and, on the other hand, their hatchet men who get £1m+ salaries for implementing cuts and riding roughshod over the lives of thousands of workers.
By fighting to the death, workers can delay the process of pauperisation, but the pressure remains as long as we live in a capitalist society. Until British workers take on board the fact that the only escape from this downward spiral is to overthrow capitalism and establish communism, their future is indeed bleak, and the future of postal workers is even bleaker than most.