Saturday, March 08, 2008

'Saving' our Post Offices?

The leading story on the BBC this morning appears to be that Essex County Council is trying to negotiate a "localisation" of Post Office that the Council will own and run. What I find amusing about this is that the story is saying that the Government has given its blessing for Council to buy-out post offices that are closing. The thing is, the Government couldn't stop it happening anyway. Much like the Government can do nothing to stop the closures as well. What I don't understand is the Government's line that the closures are necessary for service provision. The actual reason for the closures stem from EU directives and EU treaties.

EU competition laws have meant that the Post Office subsidy has had to be slashed. What do you expect to happen if you have to slash the subsidy from central Government. The purpose behind this was to open the market for other postal companies across Europe. The end game will be different post boxes for different companies. Now you'd think, what with me being a market fundamentalist I'd support this, and in principle I don't have a problem with it per se. However there are two crucial problems with it. Firstly, we get the rough end of the deal because we're already highly liberalised when it comes to markets.

Unlike say Germany or Holland, we don't have national laws that protect something like a national universal postal coverage on the basis of a monopoly. Thus, Royal Mail cannot expand into many EU countries because it is illegal for them to do so there, in reverse however it is just fine. That produces a quite bizarre set of circumstances. In the name of open markets and liberalisation comes the EU competition laws, and yet the most liberalised market place finds itself screwed over by the very principles that it supports.

Practically as well, the result of the "reconfiguration" as the Government like to call it, is going to see some remote areas no longer having any service at all. Or, even worse, having a loss making service run by the local Council causing Council Tax to have to rise in areas where the local economy and demographic can probably not afford it anyway. What is clear though is that were we not a member of the European Union, the Government would not have been legally obliged to slash its subsidising of the post office, and the closures would not be happening.

2 comments:

Anonymous said...

There's a number of errors in this post. The Treasury is doesn't want to subsidise the network of Post Offices for financial reasons, not because of EU competition law. For years, the Post Office network could be subsidised by the rest of Royal Mail because it wasn't hugely loss making. Then the Government ripped away a large part of its business by taking away most of its role in the payment of benefits, while also forcing it to bear the costs of the failed Horizon system. So needless to say, it started losing lots of money. With breathtaking cynicism even for them, Labour gave it £1.8 billion which had been lying on Royal Mail's balance sheet to see it through the 2005 election, and the money has now run out. You can see from that how much they care about state aid rules.

Holland doesn't have a postal monopoly, and TPG, their national carrier, has lost more of its end-to-end market than Royal Mail has. Royal Mail has expanded overseas, but has cocked it up virtually every time, as you would expect from a failing UK nationalised industry. I think it's a blessing, not a curse, that it can't piss its money away overseas.

Dave B said...

Harriet Sergeant wrote a good article on this in The Times.