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The Out-Inners

By Guest
February 27th, 2016 at 9:12 am | Comments Off on The Out-Inners | Posted in EU

The most moderate part of the Leave coalition is I think well represented here by Michael Howard. People who would like to be in a very different European Union, but are genuinely sceptical about whether this EU can ever get there. Boris Johnson is also in this camp.

Within the context of the Referendum their central hope is that a vote for Leave will finally persuade the EU to offer a form of associate membership they can accept. This is also what Dominic Cummings (the Campaign Director of VL) means when he talks about a second referendum.

Cameron is at the very mildest end of this point of view. He has after all used a single referendum threat to get change. He thinks the double-referendum bluff, is just that, a dangerous bluff. He earnestly believes that negotiation and compromise are the only route to successful reform. He worries that a Leave vote would be final, not a prelude to further deal-making.

Both have a point. Cameron’s analogy of improving your marriage by seeking divorce is a good one. It doesn’t happen. Equally though international diplomacy is not a marriage. It’s transactional. It’s ‘speaking softly and carrying a big stick’.

Out-Inners see a calm debate with a Leave vote at the end of it as in that tradition. They regard Maggie swinging her bag for a rebate, or De Gaulle’s empty chair as evidence that in the main European Leaders are “weak, weak, weak…” and respond mostly to the stick not the soft voice. They don’t think the answer to a bad marriage is a Directive on harmonised sleeping arrangements.

The problem though is that other member states may look at the Referendum and see British diplomacy as ‘screaming hysterically and carrying a bendy banana’. Possibly with a blond wig on it.

Those pro-Europeans regard Brexit as welcome and long overdue. They see the manner in which the UK blocks EU nation-building, taxes, common institutions and other federal goals as insuperable. They are UK-sceptics and want us gone.

In that divorce the ex is already repainting the walls as you walk out the door. Ta ta Britain, we’ll leave the tunnel open so you can visit the cheese. Those pro-Europeans are not a large group. But they’ll have a few new recruits on June 24th if we vote Leave.

Beyond that there are then very practical issues around what new deal the Out-Inners might agree. They don’t have homogeneous political views or reform ambitions. They would have enormous domestic fights to get some things like the Common Agricultural Policy or migration policy changed. None of them for this reason is prepared to stay exactly what renegotiation they would have gone for if in Cameron’s shoes. None of them knows if they could have got it.

For neutrals between these campaigns what we can say is that the Out-Inner strategy is a gamble. It’s risky. It’s not one I want I someone who finds some aspects of the EU nearly as unappealing as some aspects of Westminster.

Out would most likely mean out. The double dip is not I think a gamble worth taking.


The Postman Never Rings Twice . . . Reflections on the Future of the UK Postal Sector

By admin
February 20th, 2016 at 11:49 am | Comments Off on The Postman Never Rings Twice . . . Reflections on the Future of the UK Postal Sector | Posted in Uncategorized

Guest Post

Apparently, many moons ago, the postman used to knock on the door when he put the mail through the letterbox. Maybe in the USA it was a ring of the bell instead, which might explain the inspiration behind the title of the 1946 classic film-noir, starring the late John Garfield.

All that has long changed and further change is coming. Technology is advancing to a point where the daily sight of a Royal Mail delivery worker might be something we remember with fondness but rarely witness.

Following privatisation, the UK’s oldest, (and for a long time the monopoly) postal body, has struggled to adapt.

The mail that for so long was carried in the delivery satchel now increasingly arrives via the junk mail section of our inbox.

Those big customers who once exclusively used Royal Mail sorting offices to process their postings, often now present them presorted for onward transportation to delivery depots, cutting out the middle man.

Royal Mail’s core business of processing and delivering letter mail is in terminal decline.

Below I examine the current state of play in the UK postal sector and make suggestions for reform.

1. Royal Mail Today

Royal Mail had already gone through periods of significant change prior to its privatisation. The move to a single daily delivery and reduction in mail processing centres being two of the most significant.

The sell off, at what turned out to be an undervalued share price, gave investors looking to make a quick buck an opportunity, but for those wanting something longer term the situation is a bit more problematic.

Further rationalisation is unlikely given the cuts already made and costs remain high.

The postal union CWU has so far been able to frighten the RM board that it might strike if their demands aren’t met, resulting in above inflation pay increases and retention of generous redundancy terms.

Senior management appear to be shocked by their new environment . . Yes, they have overseen an increase in parcel traffic, but the decision by Amazon to use their own delivery force is a blow.

Their response has been to portray the Universal Service Obligation (USO) as a hindrance and complaints to the regulator that they (RM) are being treated unfairly.

2. The Competition

The competition in parcels is pretty long established. Royal Mail’s parcel division has operated in a deregulated market for many years and they are claiming some growth.

This is difficult to verify given their unreliable internal recording procedures.

However, the aforementioned decision by Amazon to facilitate their own deliveries is causing them problems.

Royal Mail are also behind on technology and customer service.

Many of their competitors deliver seven days a week, attempt redelivery, and provide detailed information via email to customers on their purchases.

When it comes to door to door delivery of letter mail, the regulator, OFCOM, is required by the Postal Services Act to protect the USO and promote competition.

The only competitor to emerge so far is Whistl who had started a delivery service in a few major cities, only to abruptly cancel operations quoting a lack of investment.

As for the USO, the regulator is often being told by Royal Mail that it is a burden on them as a business with mail volumes continuing to fall.

Given current trends it (the USO) is not likely to be sustainable in its current form.

3. The Universal Service Obligation

The USO has to change and quickly. The review outlined in the Postal Services Act scheduled for 2021 is too far off and needs to be brought forward as soon as possible.

The obvious first step would be to move immediately from a six day delivery and collection service requirement to five.

Saturday deliveries are largely unwanted by business customers (many of whom are closed at weekends) and residential addresses are unlikely to be unduly concerned.

Premium services like special delivery could be offered across the weekend to replace the USO requirement.

This change would enable Royal Mail to become more efficient by reducing headcount and also make it easier for them to compete in the parcel market.

Once these changes had bedded in, further annual reviews could take place to consider whether there needs to be any further reductions in the USO requirement.

4. Pricing

Currently the regulator has a fairly high degree of control over pricing. Royal Mail is unable to raise stamp prices without permission from OFCOM and companies using DA can request regulatory involvement to decide pricing for access to the Royal Mail network.

The latter is a necessary evil given Royal Mail’s near monopoly of the sorting and delivery infrastructure, but there is no good business reason for the regulator to control the price of standard postage.

This should cease with RM being allowed to set their own stamp prices just like any other business would for one of its main services.

5. Downstream Access

Downstream Access, the process whereby customers can access the mail centre network directly, is fairly well established having been introduced in 2003.

In the past Royal Mail has resisted any moves to allow customers direct access to their delivery offices.

There is simply no logical commercial reason for this. Access to DO’s should be allowed without delay.

Regulatory oversight of access prices would have to remain in the short term, to prevent Royal Mail abusing its monopoly position.

6. Ofcom

The Postal Services Act transferred regulatory responsibility from the largely ineffective PostComm to Ofcom.

Regulators and markets don’t really go together, but in a situation where a public monopoly is privatised they are probably a necessary evil.

In the UK postal sector the competive area i.e. parcels, is growing, while the old monopoly in letter delivery is declining rapidly.

This could and should enable government to reduce the role of Ofcom as already outlined above, saving the taxpayer money.

7. The Political Dimension

Politicians are not by nature very bold or forward thinking. This is particularly true in the field of postal services, where nostalgia, campaigns by unions and opposition parties, always feature if there are any hints at further liberalisation.

The fact is changes will have to come because the status quo is unsustainable.

If this does not happen in a planned way, then it will happen by stealth. There is already some evidence that Royal Mail is failing to provide a delivery to every UK address six days a week.

The regulator hasn’t spotted this because the task of checking is massive and way beyond their


Politicians, and in particular, the current government, need to act fast.

In Conclusion

The question on whether Royal Mail should be in the public or private sector was settled when privatisation was finally completed during the latter half of the last Parliament.

This followed twenty years of uncertainty in which both Conservative and Labour government announced legislation, only to later abandon it.

Things cannot be allowed to stand still, and the measures proposed here are designed to make sure that doesn’t happen.

Further liberalisation of the UK postal sector is not only desirable, it is essential given the pace of change ahead.

David Warren spent more than 25 years working in the Royal Mail and is now the Managing Director of his own consultancy company.