Michael Fallon is the Minister for
Business and Enterprise and MP for Sevenoaks
This is an important day for Royal Mail, its employees and customers. Royal Mail needs to be able to compete with the internet, smart phones and international postal operators – and to be able to adapt to the changing postal market and seize new business opportunities.
That’s why I have announced that the Government will sell shares in Royal Mail through an initial public offering on the London Stock Exchange. This sale will complete the final part of our reforms of the postal sector which Parliament debated and decided over two years ago. Our objective is to continue to secure the universal service – the six day a week, same price, goes anywhere service which is vital to the UK economy. We have already put in place a proper regulatory framework and given Ofcom stronger powers to take the action necessary to protect the universal service. We have also taken away Royal Mail's historic pension liabilities which were crippling the company's financial position.
Our reforms, together with the hard work of Royal Mail employees, have put Royal Mail on the road to sustainable health. But under the restrictions of public ownership Royal Mail's core mails business lurched between profit and loss in 5 of the last 12 years. Losses were around £1bn, and over 50,000 jobs went during that period. The sale of shares will give Royal Mail the commercial freedom it needs to succeed. It will give the company future access to capital it needs for investment – to seize the opportunities for growth such as increasing parcel volumes from the boom in online shopping. It will give Royal Mail commercial confidence – free from Whitehall interference.
Labour’s claims that this is a firesale are ridiculous. Two independent reviews led by Richard Hooper – in 2008 and 2010 – found that the universal service was under threat and recommended action to secure its future commercial viability. Labour agreed back then, and took a Bill through the House of Lords before dropping its plans. Its newfound opposition to a sale shows Ed Miliband yet again dancing to his union paymasters’ tune. And they still cannot say whether or not they would renationalise the business.
Unlike Labour’s half-baked plans for a sale which did not include shares for hard-working postmen and women, we are making 10 per cent of the shares available to around 150,000 eligible employees for free. This is the largest employee share scheme of any major privatisation for almost 30 years. We are also giving people the opportunity to buy shares in Royal Mail through intermediaries, online or, of course, by post. By allowing Royal Mail to get future access to private capital, subject to demand and market conditions, it will no longer have to compete against schools and hospitals for diminishing public cash.
We will take forward the sale and Royal Mail will publish its prospectus in the coming weeks. Our intention is to dispose of a majority of the shares in the company, taking into account shares sold and those transferred to employees through the employee free shares scheme. The final size of stake sold will be influenced by market conditions, investor demand and ensuring that value for money for the taxpayer is achieved.
Any privatisation brings concerns. I understand the importance of the six-day-a-week, one price goes anywhere universal service. A change in Royal Mail ownership does not trigger any change in the provision of the universal postal service. Royal Mail will continue to be obliged to deliver six days per week to urban and rural areas alike at the same, affordable prices. Changes to the uniform nature of the service would require new primary legislation. The Government have no plans for such changes. Changes to the universal service’s minimum requirements, which include free services for the blind and services to urban and rural areas alike, can only be made by votes in both Houses of Parliament. The Government have no plans for such changes.
So any suggestions that the privatisation of Royal Mail will lead to changes in the universal service are completely unfounded. Similarly, Royal Mail's stamp prices for the universal postal service will continue to be regulated by Ofcom which has a duty to ensure that they remain affordable. As part of this regulation they have imposed a price cap on 2nd class stamps.
We are clear that the Post Office is not for sale. There will be no repeat by this Government of the closure programme that Labour implemented. Far from it – we are committed to ensuring a sustainable future for the Post Office. We are providing funding of £1.34 billion over four years to maintain a network of at least 11,500 branches across the UK. We want Royal Mail to have the real commercial freedom it needs to compete, and to ensure the universal service that consumers and businesses can all rely on. That is what our plans will deliver.