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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.


Occupy The Street

By admin
October 23rd, 2011 at 2:17 pm | Comments Off on Occupy The Street | Posted in Uncategorized

Introducing the next leader of the Liberal Democrats : Norman Lamb

By admin
April 11th, 2011 at 7:15 am | 9 Comments | Posted in coalition, Liberal Democrats

 There’s not a vacancy, of course.

And nobody’s talking about a vacancy.

We’re all backing Nick. Some of us still dust down the “I agree with Nick” banners, T-shirts and badges. They bring a tear to the eye. They remind us of those dreamy days when, with just a couple of weeks to go to polling day, the LibDems were at over 30% in a cluster of opinion polls.

Much has changed since then, of course. If a week’s a long time in politics, a year is, in rough terms, about 52 times as long.

But, most likely, if you had to put your house on it, you’d probably shove it on Nick Clegg leading the party into the next election. And if you knew he wasn’t going to – and have to bet your mortgage on someone else – you’d probably have to edge towards Chris Huhne or Tim Farron as his likely successor.

Every loyalist insists in public, of course, that such tittle tattle is just the media making mischief.  But – in our heart of hearts – we know that’s totally disingenuous.

Bar room gossip at party conferences quite often turns to the topic of who the next party leader might be. It’s not plotting. It’s just idle speculation. But that doesn’t make it illegitimate or poisonous.

Everyone involved in politics is interested in how things might “pan out” and telling Jeremy Paxman that you “don’t answer hypothetical questions” is just a cop out. Virtually everything we think about and discuss is based on hypothetical questions.

So, consider this.

Imagine – for whatever reason – that Nick Clegg doesn’t continue as party leader for the next decade. You don’t need the imagination of an Arthur C. Clarke or a J. R. R. Tolkien to see how this might happen. Maybe he just gets cheesed off with the whole thing. Maybe there is some enormous internal party revolt at some stage. Maybe there is some recalibration of the way the Coalition operates. There’s a zillion ways it could happen, even though, on balance, it probably won’t.

Step forward Norman Lamb. He is an almost complete unknown outside of the LibDems. But then so was Nick until the first TV debate.

Crucially, he’s fairly independent. He’s not put all his chips on the Coalition succeeding, which many other possible leadership candidates have had to (partly because, of course, he was shamefully overlooked for ministerial office when the Coalition was formed).

He’s also essentially a party loyalist, but with Orange Book and mildly eurosceptic tendencies.

His television profile is rising. He’s an obvious choice for party-orientated media (by-elections etc) and also strong on his former health portfolio. Yesterday, he broke cover to make a splash on his concerns over the Lansley NHS reforms. Not in the terms of some tedious conservative Luddite, but for fear they hadn’t been fully thought through.

About a year ago, here on this very blog,  Norman was described as a media superstar.  Objectively he is not that – not yet. He’s occasionally a bit defensive and slightly hesitant. But he does have the common touch and doesn’t talk in jargon. Additionally, I’m not sure that “macho” politicians – displaying Ed Balls-style certainty in the face of all credible evidence to the contrary – are very popular anywhere any more.

He also has a few other things going for him. Typically, LibDems seems to vote for more establishment middle-of-the-road candidates rather than firebrand radicals. Despite their many strengths, Simon Hughes and Chris Huhne have now both lost two leadership elections from “the left”. To run for a third time for the party leadership surely puts one in the “Ken Clarke” position – widely considered charming, but unlikely to ever actually inherit the crown.

The lefty-leaning, charismatic, activist-adored and media savvy Tim Farron, only narrowly defeated the more establishment Susan Kramer for the party’s Presidency last year despite running an enormously more impressive campaign.

Norman also has a pretty hardened and impressive political CV – both at the coal face of Westminster and at the grassroots level. He had to deal with the growing disquiet over Charles Kennedy’s difficulties with alcohol (having been his PPS) – and was one of the very first MPs to publicly call for Charles to quit. He also has the battle scars of the frustrating Ming Campbell period, serving as his chief of staff in troubled times.

At local electoral level, Lamb’s achievements are staggering. He first contested North Norfolk – a rock solid Tory seat with a 10,000 majority in 1992. He cut this to around 1,000 in 1997 and just won it with a majority of 483 in 2001. In 2005, he saw off Tory blogger Iain Dale and increased the LibDem majority by over 2,000%. He increased his majority again in 2010 to an eye-watering 11,626.

If the shift in votes which have occurred in Norman Lamb’s seat since 1992 had been replicated across the country last May, the national vote share in the 2010 General Election would have been LibDem 46% Conservative 20% Labour 17%.

He may need simply to find a little more self-confidence and a bit more steel. And no doubt his surname gives rise to a whole string of dismissive newspaper headlines and dispatch box jibes. But the next time you’re speculating about who might lead the Liberal Democrats next, give Norman Lamb serious consideration.

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The Observer fails to fact check its front page pro-Balls set piece

By admin
April 4th, 2011 at 1:04 pm | 4 Comments | Posted in Economics

Ed Balls’ spin doctor, Alex Belardinelli, sent out an excited press release on Saturday revealing that the Observer was to “splash” on a predicted rise in household debts.

“These figures underline Ed Miliband’s warning about the cost of living crisis facing families in the squeezed middle,” it said.

Of course, this wasn’t the Observer’s splash, but Balls’ man was right that his story would appear on the Observer’s front page the next day.

Unfortunately, the second paragraph of this story got its facts wrong.

“The Office for Budget Responsibility has raised its prediction of total household debt in 2015 by a staggering £303bn since late last year,” it says.

Not true. In the OBR’s forecasts “late last year” (ie. November), debts were forecast at a revised £2,113bn. The latest forecasts are for £2,126bn.

This is an increase of £13bn, or 0.6%.

It is not an increase of £303bn, which would be a 14.3% jump.

A big hat-tip to David Smith [@dsmitheconomics], economics editor at the Sunday Times, for pointing out the error.

What the Observer meant to say, Smith calculates, was that the figure has increased by £303bn since last summer.

At that time, last summer, inflation was at 3.1% (CPI), while now it’s at 4.4%. Spiralling inflation might just have something to do with the rise in the figure.

The Observer article is packed with quotations from and citations of Ed Balls (funny, that), Labour MP Chuka Umunna, the Labour-leaning IPPR, and the socialist-Keynesian’s favourite economist, Paul Krugman.

It is bylined, incidentally, by the Observer’s political editor and policy editor – not the economics team.

The OBR’s March report, which the story is based on, also revealed that government sector debt net will break through 70 per cent of British GDP by 2013-14.

The UK’s net debt (note to Balls – this is different to the “deficit”) hit £875.8bn in February, while government spending has increased since Osborne arrived at Number 11.

Central government spending alone is up over £30bn compared to the same time in Labour’s last fiscal year.

And yet it’s “cuts” that are responsible for our economic plight? The Observer and its pals needs to get its facts right.

Where is the Lib Dem candidate for London Mayor?

By admin
March 25th, 2011 at 9:28 am | 2 Comments | Posted in Liberal Democrats, London

We keep wondering – and seem to be getting no closer to an answer – who will be the  Lib Dem candidate for London Mayor? It turns out that the Politics Show is likewise intrigued.  Here is a clip from last Sunday’s show – featuring a piece about this very subject . Well actually it’s about Lembit – as he appears to be the only Liberal Democrat in London who wants the right to be ritually humilated right now.

The more observant of you will notice Liberal Vision’s very own Andy Mayer being interviewed in the pre-recorded piece at the top of the clip.  Andy’s assertions are forthright, but frankly, spot on. 

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