Government and Institutions

Delivering Privatisation of the Post Office


Press Release

IEA economists are often credited with initiating the process of privatisation in the 1980s.

"The post office could and should be privatised" claims economist Ian Senior in a study produced for the IEA.
He argues that by dividing its letters, parcels and counter services into three separate businesses that each will succeed or fail on their own merits without the need for public subsidy.

Senior argues that were it not for the cash reserves that the Post Office had to keep with the Treasury in the 1990s, the Post Office would be insolvent. “For a company with a near-monopoly of a valuable market” writes Senior, “to make massive losses resulted purely and simply from incompetent management.”

Senior argues: The Post Office is suffering from heavy-handed regulation by Postcomm which will not allow the Post Office to get on with its job of rooting out inefficiencies.

Parcelforce, the Post Office’s parcel delivery business should be privatised and set free to compete with its major competitors. There is no case for Parcelforce to remain owned by the government. Parcelforce should be privatised even if it leads to it going out of business.

The letter delivery service should also be privatised. Postcomm should concentrate on ensuring that new entrants to the market can get proper access including to the Royal Mail’s “final mile delivery network” at economic prices.

The subsidy used by the government to keep local post offices open should be ended.

Post Office Limited, the counter and sub-post office network, should be privatised and should charge the government a proper commercial rate for its business. Post office counters are run profitably in Germany and the Netherlands and they can be run profitably in the UK too.

Ian Senior shows how a post office free of government and regulatory control will be able to innovate to produce lower costs, better services and better value for money, whilst reducing the drain on the taxpayer. Post could be delivered more efficiently by organisations delivering other products such as milk; parcels could be collected at petrol stations; and local post offices could provide a much fuller range of financial services.

The Post business could be profitable and make a contribution to the Treasury in corporation tax, rather than be a multi-million pound drag on to the taxpayer.

Read the full study here.