The Postman Never Rings Twice

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, The Postman Always Rings Twice, 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 pre-sorted 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.

 

 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.

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

The postal union CWU has so far been able to persuade 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 still coming to terms with 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 main 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.

 

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.

 

 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 should take place to consider whether there needs to be any further reductions in the USO requirement.

 

 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.

 

 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 competitive 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.

 

Industrial Relations

On the face of it industrial relations in Royal Mail are good, at the top level the level of cooperation between unions and management is high.

A level that would have been unheard of in the troubled times before privatisation.

However at the grassroots the workforce is demotivated, overworked and pretty much alienated from the company.

This has already spilled over in some areas leading to unofficial industrial action.

Further confrontation could be looming over proposed changes to the pension scheme and outdoor working arrangements.

The relative peace of the past three years could soon be shattered.

 

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 capabilities.

Action is needed and it needs to be decisive and fast.

 

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 at a senior level.

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The views expressed in this article are that of the author and do not necessarily reflect the views of Conservatives for Liberty