Royal Mail and the private sector

The row over the part privatisation of the Royal Mail continues, as Labour MPs threaten to rebel, leaving Gordon Brown in the embarrassing position of having to rely on Tory votes to get the bill through Parliament.

There is little doubt that Royal Mail is in trouble but the government’s claim that private sector expertise is essential if the Royal Mail is to be saved raises a number of questions.

Firstly, outsourcing a management problem to a third party supplier in the hope that it will somehow sort things out is usually a bad idea. A few years ago, a friend of mine worked on an outsourcing project for a bank. As she explained:

The whole thing is a pile of poo. They think that if they just shovel the pile of poo over the wall, the new supplier will have to clear it up and they will be rid of it.

But it never really works like that. Any company taking on part of a business, together with all its problems, will make sure it has enough penalty clauses and get-out options in place to claw back its investment or hit its client with charges should anything go wrong.

In any case, if things do start to turn bad, the new partner can always walk away, leaving the client, which in the case of Royal Mail would be the government,  with an even bigger pile of poo to clear up.

Which is pretty much what happened with the part-privatisation of London Underground. Metronet, one of the private companies that was supposed to have improved the Tube, eventually had to be bailed out by the government after its shareholders walked away. When private sector partners run into difficulties, the government is has no choice but to take back control.

Secondly, as the example of Royal Bank of Scotland and its takeovers shows, just because a company has done something successfully once doesn’t mean it can do so again. TNT and Deutsche Post may have successfully modernised postal services in their own countries but that does not mean that they will be able to do so in the UK. Both companies have recently run into difficulties.  To suggest, as Peter Mandelson seems to be doing, that these companies could somehow sprinkle some angel dust over the Royal Mail and make it more efficient, is naive to say the least.

But the most worrying aspect of Mandelson’s statement is the implication that the government hasn’t a clue how to make Royal Mail more efficient. Employing Adam Crozier didn’t seem to do the trick and yesterday, Postcomm chairman Nigel Stapleton criticised the government for not being tough enough in its attempts to make the state-owned company modernise.

Presumably, then, if private sector expertise is so vital to the Royal Mail, there is no-one in the public sector who is able to come into the company and make the necessary changes. If that is the case, does it mean that no-one in the government knows how to make an organisation more cost effective?

It is now accepted by almost everybody that cuts in public spending will be necessary over the next few years. Even my cat understands that a serious reorganisation of public sector organisations will have to happen very soon.

So who is going to do it? If the government has admitted it can’t make the Royal Mail run efficiently without outside help, how is it going to streamline the NHS, Whitehall, local government and any number of quangos and agencies? If it needs the private sector to bring “a gale force of fresh air” into public sector organisations, the forthcoming public spending cuts will, paradoxically, be very expensive to implement.

A couple of weeks ago a former colleague of mine, who has done a lot of work with central government, quipped:

The government has no idea how to get rid of all its consultants. It’s going to have to hire consultants to tell it how.

Peter Mandelson’s enthusiasm for bringing private sector expertise into the Royal Mail indicates that there may be more truth in my friend’s joke than he realises.

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One Response to Royal Mail and the private sector

  1. CherryPie says:

    I love that last joke 🙂 Funnily enough I found a very old Civil Service joke with at quip about consultants and posted it on my blog earlier this evening!

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