Presidents and prime ministers found their way to London this week to discuss ways to save the global economy. Up for discussion were bail-outs, fiscal stimuli and greater regulation of the banks and other financial institutions.
Nowhere in the packed agenda was there any mention of privatisation. The days of big state sell-offs are well and truly behind us. Who could possibly see privatisation as an appropriate economic model for the twenty-first century?
Well, Lord Mandelson for one. The business secretary has enthusiastically supported plans to part-privatise Royal Mail, and is legislating to this effect. He hopes to sell a 30% stake in the business and to complete the deal by early 2010.
However, Mandelson faces huge opposition. More than 140 Labour MPs have signed an early day motion, while the postal workers union is threatening to withdraw its funding for the party.
Moreover, the business and enterprise select committee has called on the government to step back from its privatisation plans.
So, given the prevailing economic philosophy and the level of opposition, why is the government pushing through such controversial legislation? Postal affairs minister Pat McFadden tells Public Finance this week that ‘to govern is to choose’ and that means taking tough decisions.
Royal Mail is in a mess. The company’s pensions deficit is so large that it is technically insolvent, while its industrial relations record seems more appropriate to 1979 than 2009.
Something has to be done and that something might involve the private sector. But attempting a part-privatisation at this moment – with the economy enduring the worst recession for 70 years – seems like unfortunate timing.
There are other ways of using the private sector without losing government control, and ministers do not have to look far for inspiration. Another part of the Royal Mail Group – the Post Office – already has an effective joint venture with the Bank of Ireland.
Such strategic partnerships offer private sector expertise and finance without the need to sell off a stake. It’s an option the government should consider.
