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Royal Mail - privatising public assets has largely been a mistake across the world

Royal Mail - privatising public assets has largely been a mistake across the world

This blog was originally published on Labour List on 8 June and is re-posted here with permission.

Last week, George Osborne decided to sell off the remaining 30% of Royal Mail that still belongs to the public. By now other news outlets will have reminded you that the first 70% to go was grossly undervalued to the benefit of private investors and detriment of the taxpayer. So let’s not focus on that.

Let’s not even focus on how economically illiterate it is to sell off a profitable public asset for a one-off windfall and then claim it’s part of some kind of long term plan for the economy.

Let’s instead talk about the fact that privatisation of public assets has largely been a mistake across the world, leading to generally lower outcomes. In the UK, it has led to lower investment – e.g. investment in rail rolling stock fell by 60% between 2007 and 2012. It has benefitted foreign governments whose companies now own many of our public assets.  25% of the British energy sector is owned by such companies, and the move to privatise energy has led to a 10-20% increase in energy prices.In fact, many other countries are now moving away from privatising national assets in favour of public ownership. Since the year 2000, 86 cities worldwide have nationalised their water supply, including the US cities Atlanta, Houston, and Indianapolis. In Germany, over 100 energy concessions have returned to public hands since 2007.

You can read more about public ownership worldwide in the Class paper “Renewing Public Ownership: Constructing a Democratic Economy in the Twenty-First Century" by Professor Andrew Cumbers.

But even if the argument that privatisation in general has been a mistake isn’t enough, we could just assess the effects of the privatisation of postal services themselves across Europe. In 2014, Christoph Hermann wrote a report on the privatisation of postal services across Europe called, fittingly, “Deregulating and Privatizing Postal Services in Europe.”

He found that privatising postal services generally leads to declining services and higher prices. He says privatised services “typically deliver only two or three days a week and only in highly populated areas.” But at the same time, standard mail costs have increased.

Hermann also says that privatising the post office system has led to job cuts and precarious work: “In some cases, the job cuts amount to as much as 40 per cent to 50 per cent.” Quite a lot of privatised postal companies rely on self-employed delivery people: “in the Netherlands the vast majority of mail deliverers at the new competitors were self-employed until government regulations forced the companies to transform at least 80 per cent of the contracts into regular employment relationships.”

There has been a significant decline in wages in many countries (in Germany, wages have decreased by 30% since 2001), and – of course – the relationship between the postal companies and their trade unions have deteriorated, and many workers who are now working for postal companies on a self-employed basis are completely excluded from trade unions.

You can read the whole thing here. One wonders whether Osborne bothered to do the same before he announced that the privatisation was “the right thing to do for the Royal Mail, the businesses and families who depend on it – and crucially for the taxpayer.”

Work areas: Economy and Industry.