Why Give Royal Mail Commercial Freedom?
The granting of greater commercial
freedom to the (then) Post Office (and subsequently the Post Office company) was
one of the key developments of the policy towards postal services in 1999/2000.
The reasons for permitting greater commercial freedoms - long advocated by
informed commentators and by the organisation's management and employees - were
described in the White Paper - "Post Office Reform - A World Class Service
for the 21st Century". The changes were effected by administrative action
(where appropriate) and by the Postal Services Act 2000.
In parallel with the increased commercial freedom, the Post Office company has
been subjected to independent regulation and the prospect of increased
competition. This has exposed the Post Office company to a commercial regime
comparable with that of private companies, whilst still remaining in the public
sector, and keeping an arm's length relationship with Government (which allows
the Board greater freedom to run the business). The benefits of this model
include:
-
greater freedom to invest where the board sees appropriate;
-
greater freedom to expand its range of activities and explore additional sources of income - i.e. electronic commerce - for example, home shopping and bill payment on-line, hybrid mail and other ventures related to electronic messaging;
-
greater freedom to develop new products and services;
-
greater freedom for prudent borrowing and larger growth investment;
-
greater freedom to price commercially - for example, the price control review currently being undertaken by Postcomm (the independent regulator), freedom to price commercially is of course subject to restrictions necessary in relation to continuation of the universal services obligation under a uniform tariff structure;
-
greater flexibility on pay and reward of performance for staff.
These freedoms are similar to those
enjoyed by private companies - they differ only to reflect the unique position
of Royal Mail in the public sector - e.g. that borrowing for a large investment
should pose no undue risk to the tax payer.
Recent developments have shown that the challenges that the company faces are
considerable, and that commercial freedom does not guarantee commercial success.
Tell me more about
Postal
Services Act 2000
Relevant publications
White Paper - "Post Office
Reform - A World Class Service for the 21st
Century" 
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