New Royal Mail boss sharpens her axe

The propaganda war over the privatisation of Royal Mail (RM) was stepped up last week when managers at my office briefed us on the intention of our new chief executive to suspend repayment of its government loan.

A Coventry postal worker

Moya Greene, former CEO of Canada Post, has been in the job less than three months but has hit the ground running in implementing the Con-Dem government's aim to sell us off. She says that if revenues continue to fall away, RM will be insolvent by Christmas. Quite how she came to that conclusion eludes me but then I'm a postie and she, and her predecessor Adam Crozier, are business wizards who can do no wrong - even when they are wrong!

In 2009 RM announced profits of £321 million. This year profits were up by 26% to £408 million. Not bad during the worst recession for 80 years.

There is an additional payment into the pension fund (because of the deficit) of £280 million each year. And on top of this, private 'downstream access companies' (dsa's) such as TNT, UK Mail etc, are subsidised by RM to the tune of £100 million each year because our board agreed a price to deliver their mail for less than cost.

So over the last two years, RM made £729 million profit. Add to this the £200 million subsidy we gave to our rivals, plus the £560 million cost of paying for a pension deficit which resulted from the suspension of employer contributions for nearly 15 years. Therefore our total profit could have been just under £1.5 billion - over just two years.

The problem lies not in a lazy, workshy workforce, or indeed in declining mail volumes but in complete incompetence at board level, not to mention the lopsided competition rules laid down by the regulator.

The pension fund deficit was £10.3 billion on 31 March 2009, it was reduced to £8.4 billion at 31 March 2010. Still a colossal sum but moving in the right direction.

Another thing about the deficit I must have missed, is why RM were allowed to take a 'payment holiday' for nearly 15 years. Surely someone would have realised that not paying into it would create a deficit?

Maybe the pension money was spent on the disastrous global expansion plan the RM board undertook in the late 1990s. They went round the world buying up second, third and even fifth rate parcel carriers at premium prices in an effort to increase revenue and open up new 'opportunities'. Right around the time the domestic monopoly in the letters market was being removed.

So instead of looking to consolidate and expand products and services at home, RM changed its name to Consignia and went global. But then the dotcom bubble burst, stockmarkets crashed and the parcel firms bought at a premium were now virtually worthless. Maybe I'm wrong but I'd still like to know where RM's pension contributions went because us workers carried on paying ours.

Let's assume that Moya Greene is right. We will be broke by Christmas if the government doesn't allow us to take a 'debt payment holiday'. If things really are so dire then how come Adam Crozier walked away with £3.5 million in pay, pension and bonuses? Why did his two lieutenants Mark Higson and Ian Duncan receive £3.1 million last year, compared to £1.2 million the year before? Doesn't sound like they did a very good job.

Us workers had a pay freeze last year to go with our extra duties. And the new agreement covering the next three years delivered a pay cut - and more work. It is also subject to 'economic circumstances', ie can be ignored at will.

Greene was at Canada Post for four years. Compared to the previous four years, during her tenure injuries at work rose 15.4%, grievances rose 59.3%, strike days went up from three to 36 and there was a shift away from the customer service ethos.

Greene also has experience of privatisation having previously sold off Canada National Railway (resulting in an increased number of derailments each year) and deregulating the airline industry. She also worked as a banker and has said: "There is a general belief in the private sector that public sector managers do not know anything." Oh dear.