Murnaghan 14.04.13 Interview with Michael Fallon, Business Minister & Dave Ward Dep Sec-Gen CWU on privatisation of Royal Mail

ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Well one thing that Margaret Thatcher did not privatise is the Royal Mail but now this government is giving it a go. Business Minister, Michael Fallon is in charge of the plans and he joins me now along with the Deputy Secretary General of the Communication Workers Union, Dave Ward, a very good morning to you gentlemen and I’ll put that straight away to you Michael Fallon, with Margaret Thatcher, with all the things she did privatise she said she never wanted to see the Queen’s head privatised when it came to Royal Mail.

MICHAEL FALLON: Well the Queen’s head will be protected, that’s in the legislation, the Queen’s head will not disappear from our stamps but successive governments have wrestled with this issue of how do you put the Royal Mail onto a long term sustainable footing and the object now to allow it access new capital, to modernise, to develop its parcels business and so on. The object is to put the six day a week service onto a sustainable footing for the long term. Now successive governments have tried to do that and we’re trying to do that this year.

DM: Dave Ward, is it possible, we all know about the Hooper Report into Royal Mail and I suppose the headline of that is modernise or decline, that is the only way forward.

DAVE WARD: Well we have already been modernising, we have tried to embrace change and I think what is important in this debate is that privatisation isn’t the answer to the challenges that the Royal Mail still faces. I actually believe that there is a long way to go in this debate, I don’t think it’s going to be easy for the government to privatise but we need to be clear that the privatisation of the Royal Mail will destroy one of the last great British companies.

DM: Why will it destroy it?

DW: Because it will bring an end to the service principle that the company has been founded on for many years so for example at the moment, if you are a customer of Royal Mail, you can expect six days a week deliveries every single day and no matter what the location – and this is the important point – you get that for the same price, so if you live in a rural area, if you live in a village and there is no way, and we have to be honest about this, there is no way that a private Royal Mail will sustain deliveries daily for the same price to rural areas.

DM: Okay, a key point that Dave Ward raised there, can you protect that if you privatise Royal Mail?

MF: That is in the Act of Parliament that was passed two years ago, it is regulated by Ofcom, the six day a week service is absolutely there, it is enshrined in legislation and everybody …

DM: But if you post a letter in London and you post a letter in Shetland …

MF: One cost, one place, six days a week. That’s enshrined and protected in the statute. The issue is, how do we make sure that Royal Mail can continue to deliver that? We have to give it access to capital, we can’t divert capital from schools and hospitals to something like the Royal Mail. It is now a successful, profitable company and it should be allowed access to the capital markets like any other big successful company.

DM: I mean it does have to change doesn’t it, because the very nature of communication is changing so rapidly that I mentioned sending a letter from London to Shetland or London to Birmingham, fewer people do that now?

DW: Look, privatisation is not the answer to the challenges. Michael says that investment is necessary, we accept that. We understand that the company will need investment but the fact of the matter is that this government has not looked at any other ways of Royal Mail being able to do this.

DM: Give us a couple.

DW: Well Royal Mail could borrow debt capital on the open markets in its current status as a plc, it is entitled to do that, there is absolutely nothing that stops Royal Mail being able to do that. The point here is that the government are relying on a failed policy of the past, actually one of the policies that you recognised as tired old thinking. What would be really good for Royal Mail, and I would challenge politicians of all parties, when are they ever going to come up with anything new? When are they going to come up with something that is a model that benefits the customers and the workers …

DM: Let me ask Michael Fallon, if it is going to be so profitable, why doesn’t the government want to maintain its stake in something that is going to make money for the taxpayer?

MF: I’m glad Dave Ward accepts that it needs new capital but you can’t borrow capital as a public company without adding to public borrowing. It should have access to the capital markets like any other big company. It has just started to be profitable and to be successful, now we want to make sure it can access more capital from the private markets to modernise and to innovate and also to do something else that Parliament laid down two years ago which is to give all the employees a stake in the business.

DM: Okay, about 10% but is it going to be a public offering, a Thatcherite privatisation or are there plans perhaps to sell it to another company, a foreign company? MF: Well we’re considering exactly how we do it and that will depend on the state of the markets later in the year. It’ll also depend on Royal Mail continuing to be successful month after month and to continue to modernise so we haven’t decided the exact form of the sale but what’s essential is to put the whole thing onto a sustainable footing for the long term.

DM: Okay, 10% or so of the shareholding going to the employees, that’s going to incentivise people isn’t it?

DW: Well let’s be clear, employees, postal workers up and down the country know there are no free lunches. What they want is real money in their pockets, what they want is decent pay, an increase to their pay which we are in negotiation with the company at the moment and what they want is secure pensions and the idea that postal workers are going to sell their soul for a 10% stake in the company which as we understand it means they have to buy the shares, is not going to work.

DM: If it continues, if you continue to hear what you’re hearing right now from the horse’s mouth if you’ll excuse the analogy there Mr Fallon, strike action, is that a potential?

DW: We’re not ruling out strike action. We’re part of a campaign, a strong campaign, a coalition of different organisations including the Countryside Alliance who are concerned about the future of the service. We’re concerned about the impact of privatisation on our members terms and conditions, we absolutely think that a private Royal Mail will end up wanting to bring in a cheaper workforce and we will oppose that through industrial action.

MF: I’m not sure what it is that Dave wants to protect here. The Royal Mail in public ownership has lost 50,000 jobs in the last ten years so terms and conditions haven’t been too good for those who have lost their jobs. That’s why we want to put it on a sustainable footing and this privatisation is quite unique. Parliament has decided that 10% of the entire company as a minimum should go to the employees of that company, there are 130,000 people who work for Royal Mail, the company is now successful, they’ve worked extremely hard to help modernise it. I don’t see why they should be denied the chance to have a proper stake in it.

DM: Will it be as successful when and if it moves into the private sector, if it open to full competition and you may well face legal challenges from other private companies who say …

DW: It is already open to competition and this is one of the problems that the company faces which I think will put off a lot of private investors anyway. The company at the moment is facing huge competition, unfair competition and that will also be part of destroying the future of the company so nobody is going to put in money without expecting a huge return on that money. These things don’t add up Dermot. They’ll put a billion pounds in and they’ll take two billion out.

MF: Let me just answer that. The competition is going to be regulated, is regulated from now on by Ofcom, there was no proper regulator before. Parliament has put that in place and that will ensure that the universal six day week service is protected and the best routes can’t be cherry picked by other competition.

DW: It’s already happening.

MF: So there will be a regulator in place and we’ll make sure that …

DM: But doesn’t European legislation have a role to play in this about open markets and free and fair competition, there could be legal challenges.

MF: You are allowed under European law to protect the six day week service and this isn’t the first postal service by the way in Europe to have private capital, that’s happened in Germany already, it’s happened in Austria already, it’s happened in the Netherlands and Belgium already so this isn’t unique here, it isn’t some unique experiment. This is a delivery …

DM: We’re running out of time.

DW: Competition is already killing the company, Michael knows that.

MF: We can’t protect every business from competition, this is a delivery business, it’s very successful, it needs new capital and I want the 130,000 people who work for it every day, I want them to have a full proper stake in the business.

DM: Okay and the last big point on this of course is the pension fund viability. I mean the government is taking those on, that’s not an inconsiderable debt is it?

DW: The government also took on the assets of the pension scheme so they got a good deal out of that. That came straight off of their debt and as we understand it, and we’re waiting for this story to unfold, the company and the government are both saying at the moment that there may be a further problem and in our view that is directly linked to a private company who may want to come in and not carry on funding the pension scheme. So we’re going to have problems with this whatever way.

DM: Lastly on that, Michael Fallon.

MF: The pension deficit has been removed from Royal Mail so we don’t have that legacy and this is part of a series of steps to prepare Royal Mail for the future. We’ve removed the deficit, we’ve set up the independent regulator, Parliament is protecting the six day week service, the next step now is to get new capital into the business and ensure that everybody who works for it has a proper stake in it.

DM: Okay, well thank you both very much indeed. Dave Ward and Michael Fallon, thank you very much.