‘Modernise or Decline’ – Government and EU Chicanery? How the EU is destroying Britain’s Royal Mail system

There are probably three reasons why the Royal Mail system will not last for many more years.

The first reason is the Amsterdam Treaty which lays down detailed rules stating that grant aid to private and public companies must first be approved by the EU Commission. The Government has subsidised remote and unprofitable Post Offices for some years but this now needs EU approval. For the financial year 2008/09 the Government was only allowed to subsidise Post Offices with a €460 million subsidy provided it closed down 2,500 Post Offices.

The second reason emanates from the several EU Directives which have taken control of Royal Mail and incorporated it into a liberalised EU wide postal service.

The British postal system was founded in 1635 by Charles I, but it was in 1839 that Sir Rowland Hill introduced the business model where the sender pays, and mail is delivered at the same price throughout the length and breadth of the country. Many adjustments were made during its lifetime as new systems and practices developed, but the basis of equal cost throughout the land prevailed until it was destroyed by the EU. The wider public has great affinity with our mail system, although a survey shows that only 21 per cent of residential customers are familiar with the concept of the nationwide service with a uniform tariff.

Britain joined the EU in 1973 and in doing so adopted the Treaty of Rome which has since transmogrified to become the EC Treaty.

EU Directive 97/96/EC established the EU-wide postal service. The Directives which followed, clarified the way that the postal service was to be organised. In the UK the Royal Mail was appointed as the Universal Service Provider with responsibility for delivering mail to every address in the country and with a monopoly on mail weighing less than 350 grams. Mail above 350 grams could be delivered by other companies known as the Unreserved Sector. The weight below which Royal Mail has the monopoly has been reduced periodically until this year (2009) when the Directive states that mail in this country of any weight becomes entirely open to competition, although Royal Mail continues to have the responsibility to deliver to every address.

The main disadvantage of this arrangement is that the companies operating in the unreserved sector, comprising mainly the Dutch TNT and the German Deutsche Post trading as DHL, are able to cherry pick the profitable areas of mail services leaving the unprofitable areas to the Royal Mail. As they have no responsibility to deliver nationwide they are able to charge less and destroy the traditional nationwide service with uniform tariff. This competition now takes 20 per cent of the total volume of UK mail. If these companies find that they have accepted mail which is unprofitable they can pass it on to Royal Mail for a small fee. The Royal Mail, as the USP, is legally obliged to deliver it. Similarly if mail is received at an incorrect address and the occupier forwards it to the correct address, the Royal Mail must deliver it without charge. There are other responsibilities which fall unfairly on Royal Mail.

There are now 21 companies forming the Unreserved Sector which are licensed to provide postal services in the UK.

Britain was the first country to implement the Directives. Sweden and Finland followed making these three countries the only ones to obey. The German and Dutch postal groups and nine other member states refuse to abolish the last “reserved area” of postal services until other EU member states follow suit.

The effect of this unfair competition from the unreserved sector resulted in RoyalMail’s profits falling by 86 per cent to £22 million in 2006/2007. In the following year it lost £33 million.

To overcome this the Government began to subsidise Royal Mail with the equivalent of €2.5 billion in order to introduce more and improved mechanical sorting equipment into the system although this was in breach of the Amsterdam Treaty. On hearing of this some time later, a number of Royal Mail’s competitors, led by TNT and DHL, complained to the European Commission regardless of the fact that their Governments have not liberalised their postal service.

In February 2007, the European Commission announced that it had launched an in depth inquiry into the British Government’s subsidy of Royal Mail. To date no result of the Commission’s investigation has been announced.

In December 2007, the Government announced that it was launching a review of the postal services sector. Its terms of reference included “to consider how to maintain the obligations of the universal service”. Richard Hooper CBE was appointed Panel Chairman with Dame Deirdre Hutton, Ian Smith and seven other members. It was emphasised that the Panel was entirely independent.

The Review Panel submitted its report to Parliament on 16 December 2008. It is entitled ‘Modernise or decline’. The report describes Royal Mail as inefficient but it doesn’t acknowledge that it is the EU that is thwarting the introduction of modern systems. Instead the report suggests amalgamating Royal Mail with one or more private sector companies.

The Report is comprehensive but it avoids a number of relevant points and it only mentions the EU’s involvement in passing.

In identifying the ‘stakeholders’ in the postal service the report disregards the people at the 28 million business and residential addresses who use the mail service. It is also untruthful in saying that the practice of delivering mail throughout the land at the same price survives today.

The report admits that unless Royal Mail can modernise faster, a forced restructuring under European rules is highly likely. So the Government is in a quandary in that it cannot modernise whilst the European Commission prevents it, but if it doesn’t modernise the EU will take it over.

A further comment is that “Parliamentary accountability for providing the universal service should be strengthened”. Bearing in mind that the Government owns Royal Mail it is difficult to see how its accountability could be strengthened. The FSA, BERR and Postcom are the departments which should monitor Royal Mail. It is not a question of their accountability being strengthened, but that they should exercise their responsibility conscientiously and honestly.

One of the stumbling blocks to an amalgamation would be that Royal Mail has probably the largest pension deficit of any British Company. It is in the region of £6 billion. It is unlikely that a partner would accept a share of the pension fund deficit, so it is recommended that if a partner is found the pension fund deficit will remain with the Government.

The report is littered with comments which are either untrue, illogical or blindingly obvious. Examples follow:

• “Modernisation is the key to a positive and profitable future for the postal service”.

• “Sustaining the universal service means removing the constraints which currently impede Royal Mail’s ability to respond to a structural decline in the letters market”.

• “Unless measures are taken to accelerate the process of modernisation, it is likely that Royal Mail will need to approach Government for emergency financial support”.

• “Emergency financial support would lead to forced and rapid restructuring carried out under European rules on restructuring aid”.

• “Liberalisation has had a relatively limited impact on Royal Mail’s financial position”,

The report fails to answer the crucial question “how to maintain the Universal Service”. It should have been “how to restore the Universal Service”.

The Report has received little publicity or press attention but Lord Mandelson, Secretary of State for Business, Enterprise & Regulatory Reform made a statement to the House of Lords on 16 December 2008 setting out the conclusions of the Hooper Report. He said that the Government has accepted a recommendation that the Royal Mail should “forge a strategic minority partnership” with another operator and that “the Dutch postal company TNT had already expressed an interest in taking a minority stake in Royal Mail” and “that this approach will safeguard the future of the service”. He added that the Government “reject cutting back the universal service” and that this will provide “benefits for everybody” and that “It will protect the universal service for consumers. It will give Royal Mail new opportunities to modernise and develop. It offers the Royal Mail’s staff a future in a modern, efficient postal operator with more secure pension arrangements. It offers the whole country a Royal Mail we can be proud of ”, and that securing a minority partner “will bring the Royal Mail fresh investment, new opportunities to grow in Europe and internationally and to offer new services”. He concluded by saying that the Government “agrees with Hooper’s analysis and the recommendations” and “we intend to take forward the recommendations as a coherent package of measures”.

As expected by those who follow these machinations it is being presented with the slant that the EU’s Universal Postal system is good for Britain and that it has not harmed our previous postal arrangements.

A study of our other utilities demonstrates how our economic structure is being deliberately and comprehensively dismembered. The electrical sector is an example. EoN the German energy giant bought Powergen. It supplies energy to every region of Great Britain. Électricité de France (EDF), one of the largest energy companies in the UK (whose major shareholder is the French Government) owns the SouthWest Energy Board and South Eastern Energy Board. On 7 August 2007 the French President, Nicolas Sarkozy, ordered a two per cent limit on any increase in electricity prices in France and five per cent for gas, but EDF raised its gas tariff in Britain by 22 per cent and electricity by 17 per cent. It was also recently agreed that we would sell British Energy to EDF. Its nuclear powered plants generate about 20 per cent of British electricity capability.

On 19 January 2009 David Cameron appointed Kenneth Clarke to be the Conservative Shadow Business Secretary in opposition to Peter Mandelson. Ken Clarke’s views on the EU are well known. Clarke and Mandeslson are like two peas in the same pod.

The first sentence in the Hooper Report emphasises that it is an independent review. That may be so in theory but a check in Who’s Who shows clearly that its main members are part of the British Establishment.

The third reason why the Royal Mail will not last many more years is because of its name. The anti-royalist lobby in Parliament will undoubtedly dispense with the word ‘Royal’ as soon as possible. Many people who are concerned about Britain’s loss of sovereignty write to the Queen – who passes the letter on to the appropriate government department for an answer. One such letter was passed to the Ministry of Justice recently. The reply dated 14 November 2008 reads: “The Queen no longer has a political or executive role” and that “Parliament, not the Queen holds sovereignty”.

The Labour Party’s 2005 manifesto reads “Our ambition is to see a publicly owned Royal Mail fully restored to good health, providing customers with an excellent service and its employees with rewarding employment.” Another manifesto promise broken!

The Government has painted a picture of the Royal Mail as being inefficient, with poor industrial relations and a massive pension deficit. It has convinced the establishment that only a private sector company can save it. Having been through the process of spreading alarm with only one solution, the Royal Mail announced on 21 January 2009 that it has made a profit of £255 million in the nine months to Christmas 2008, and that all its businesses are in profit for the first time in almost 20 years. Royal Mail chairman, Allan Leighton, said: “A huge amount has been done to put the business on a stable footing”,…“we are getting on with our modernisation plans and catching up on decades of underinvestment.” Chief executive Adam Crozier added: “We have plans in place to spend every penny of the £1.2 billion commercial loan agreed by the Government in 2007 over the plan’s lifespan to 2011.”

Two interesting points arise. First, it is remarkable that Royal Mail can produce detailed accounts only a few days after the accounting period has expired, and secondly it appears to demonstrate negotiations have taken place whereby we may continue funding improvements providing we pass part of the business over to a foreign competitor.

Our ultra-Socialist Government intends to destroy all Britain’s traditional institutions whilst the population is supine and the feckless political opposition in Parliament largely supports EU domination.

One thought on “‘Modernise or Decline’ – Government and EU Chicanery? How the EU is destroying Britain’s Royal Mail system

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