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Royal Mail under siege

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The Penny Black, enlarged

In 1840 Rowland Hill persuaded the government to streamline mail delivery by eliminating complicated travel cost computations. Many government officials just didn't get it, but the people did. To send a letter by the Royal Mail you simply bought an adhesive stamp for a uniform charge at the post office. The money that was made on short distances covered the greater cost of delivering to remote areas of Britain. This brilliant system and much more is now under threat.

Bryan Smalley explains, "If postal rates are set wisely to balance out the differences then Royal Mail will make a profit". But in the 1990s the EU forced the Royal Mail to allow European companies to compete in delivering mail. This was supposed to foster competition, but the private companies did not have to deliver mail to remote locations. No, only the Royal Mail has to do that. The private companies could "cherry pick" where they would deliver and for how much.

As a result the profits that the Royal Mail previously used to subsidize rural deliveries are no longer available. Because the Royal Mail is no longer making a profit, it has to receive government support. In other words, British taxpayers are now underwriting the Royal Mail so private, non-British companies can make a profit. Add to the cost of your stamps the stealth tax that is paying for a subsidy. Does this sound fair?

But oh, no! The EU cannot allow the government to “subsidize” the Royal Mail. The EU insists that it will not allow subsidies unless the government slashes 2500 mainly rural post offices, including David’s main post office in Winchester. The government is pleased to oblige.

Now it could be argued that people are increasingly online, and need the post offices less, and there is some truth to this, but many people need the post office as much as ever. The post office, the pub, and the church form a hub of local rural life. The post office is where people meet up, and talk while expediting their business.

David says, it is outrageous that politicians bow their heads to the EU, destroy something as beautiful and important as the Royal Mail, and undermine rural life.

Why is the EU constantly making decisions it has no business making? Why do British politicians put up with it?

We are indebted to Bryan Smalley, a District Councillor for 15 years, for his information. His letter follows.

From Bryan Smalley - The story of post office closures.

(N.B. Every reference that I make regarding these events which includes an asterisk * means that I can provide a copy of the document quoted.)

For decades, prior to the late 1990s, the Royal Mail was an efficient, profitable monopoly providing the finest postal service in the world as well as being an important element in the structure of British life. A monopoly was important because many parts of Britain are remote. It follows that if we are to charge the same postage rates regardless of that part of the country to which mail is to be delivered, there will be some areas which are serviced at a loss whilst others are served at a profit. If postal rates are set wisely to balance out the differences then Royal Mail will make a profit.

It should be emphasised that Post Office Limited is a subsidiary of Royal Mail.

One of the EU’s key objectives is to impose competition throughout the whole of its territory regardless of whether or not a national monopoly is beneficial to the local community.

Detailed rules, which affected the British postal services, appeared in December, 1997 in an EU press dossier ‘Notice from the Commission on the application of the competition rules to the postal sector and on the assessment of certain state measures relating to postal services*’.

EU Directive 97/67/EC issued on 15 December 1997 ‘Privatisation of Postal Services*’ began the introduction of an EU-wide postal service and immediately reduced the Royal Mail’s monopoly to mail weighing less than 350 grams. The delivery of mail over that weight was privatised which meant that public sector companies, mainly the Dutch ‘TNT’ and the German ‘Deutsche Post’ (trading as DHL), were able to cherry pick the profitable areas of mail services in this country, leaving the unprofitable areas to the Royal Mail.

In addition, the private companies can require the Royal Mail to accept mail which they do not wish to deliver at a cost to them of up to 9 pence a package cheaper than 2nd class postal charges. Because of this arrangement in 2006/2007 the Royal Mail’s operating profits fell by 86% to just £22 million. (22 Feb. 2007- Royal Mail Calls For Radical Review of Postal Market Regulation*). It follows that this state of affairs created by the EU forces the Government to subsidise our postal services.

A second Postal Services Directive 2002/39/EC* issued on 10th June 2002 further reduced the Royal Mail monopoly to 50 grams. An extract from Article 14 of the Directive reads: ‘An appropriate period of time is needed to enable Member States to adapt their regulatory systems to a more open environment. It is therefore appropriate to provide for a step-by-step approach to further market-opening, … . In 2009 the dwindling Royal Mail monopoly will cease altogether as Article 14 goes on to disclose that ‘…a review and proposal confirming, if appropriate, the date of 2009 for the full accomplishment of the internal market for postal services’.

It is obvious that there has been a great deal of negotiating behind closed doors between the British Government and the EU, particularly because few countries are making any serious attempt to ‘liberalise’ their postal services.

At the end of February 2007, the European Commission announced that it had launched an in-depth inquiry into the British Government's funding of national postal services provider Royal Mail, totalling more than 2.5 billion euro. The investigation followed complaints from Royal Mail's competitors (particularly TNT and DHL - Deutsche Post) made between August and October 2006.
It should be noted that only the UK, Sweden and Finland have fully liberalised postal markets. It is therefore ironic that the Netherlands and Germany are benefiting from our liberalised service whilst not adopting it in their own country.

On 9th March 2007 the EU Competition Commissioner’s newsletter Nr. 10/07* reported that she (Neelie Kroes) had given permission for the UK to provide 460 million euros to Post Office Limited (approx. £345 million at the time). It reads: The European Commission has authorised, under the EC Treaty’s rules on state aid, proposed funding by the UK Government to allow Post Office Limited to continue to provide public services through the network of post offices in the financial year beginning 1 April 2007’. The approval was separate from the investigation referred to in the previous paragraph and concerns only the aid granted to Post Office Limited.

A letter from Brussels to David Miliband, Secretary of State for Foreign and Commonwealth Affairs - Ref.. N388/2007 - dated 28 November 2007* discusses the relationship between our Postal Services and the EU. It leaves no doubt that the EU is in control. It discusses the ‘transformation programme’. Para 11 states: ‘The transformation programme will involve POL [Post Office Limited] reducing the size of its post office network by around 2,500 branches’

On 29 November 2007 the EU announced that it had granted the British Government permission to subsidise the Post Office.

It becomes very obvious that the EU was prepared to allow us to subsidise our Post Offices to the tune of 460 million euros in exchange for us closing down 2,500 Post Offices.

An extract from Hansard dated 07 February 2008* reads:

‘Mr. Gordon Prentice: To ask the Secretary of State for Business, Enterprise and Regulatory Reform what obligations arising from (a) the UK's membership of the European Union and ( b) the UK's participation in single market legislation govern the provision of subsidy to the network of Post Office branches; and if he will make a statement.

Mr. McFadden: All state support for undertakings, whether privately or publicly owned, are subject to the rules laid down in Article 87(1) of the EC treaty. Funding of the Post Office network is therefore subject to the state aid rules and can only be given in compliance with these rules.
In November 2007 the Commission approved Government plans for support for Post Office Limited.’

Instead of using the EU term of ‘transformation programme’, the demolition of the Post Office network is being managed under the title ‘Network Change Programme’ which, on its website, explains that the closures are necessary because ‘The Government has recognised that fewer people are using Post Office branches [and] … that the shape and size of the overall network of Post Office branches needs to change’. It fails to state that fewer people are using the post offices because the Government has been slowly and deliberately withdrawing services which the Post Office traditionally provided. There is also no mention at all on the website or in any material issued by the Network Change Programme of the involvement of the EU and the real reason why our Post Offices are to close.

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