Tribune will be happy. So will the Communication Workers’ Union, the National Federation of Sub-Postmasters, the Federation of Small Businessses, backbench Labour MPs and quite a few frontbench ones too. Today’s announcement by James Purnell (pictured), the sometime sideburn-wearing Work and Pensions Secretary, that the Post Office will keep the successor to the card account guarantees it £1 billion over five years and, apparently, safeguard 3000 post offices previously threatened with closure.
I’ll come back to Mr Purnell and the political issues in a minute. But what does the decision to short-circuit the competitive tendering process mean for the Post Office network and its parent company, Royal Mail Group?
It doesn’t mean that Royal Mail won’t be fully or partly privatised. Royal Mail Group as a whole turns a profit; the Post Office loses money. If you believe postal minister Pat McFadden, it loses £3.5 million a week – slightly more than the £150 million subsidy it receives from government. Moreover, Richard Hooper’s review into competition in the postal sector has yet to be published, and it’s expected to recommend some sort of joint venture with a private company. The postal sector is officially open to competition; that’s not likely to change.
Nor does this leave the Post Office in good health. The contract is a renewal of an existing one, and the £1 billion won’t kick in till the old contract expires in 2010. So it’s not extra money. Meanwhile, post offices continue to be shut in a closure programme affecting 2500 branches. While the Government is apparently happy to talk about protecting the Post Office in the current economic climate, it doesn’t believe in subsidy at any cost. The status quo, as Hooper said, is not an option.
Now for the politics. It was in December 2006 that the then DTI announced a bidding war for the new Post Office card account. The press release at the time put a really upbeat spin on it, but there’s no disguising the fact that, rightly or wrongly, it was exposing one more piece of the state-owned enterprise to market forces. Even then, ministers knew at least 2,500 post offices would shut. Losing POCA would mean more. What’s changed?
Partly, as Purnell admitted, it’s the economic crisis. Enough people are losing jobs without adding thousands of sub-postmasters to the equation – not to mention the other small businesses that will suffer from the erosion of communities. Lord Mandelson’s recent suggestion that the Post Office to step into the breach to offer financial and other services by trading on its trsuted brand name was a suprising thing for such a Blairite to say about a public corporation – and music to Labour ears. Purnell, also seen as Blairite, must have taken note.
But partly – like the 10p tax debacle – it’s sheer embarassment. On the Today programme this Monday morning, Conservative MP and Business and Enterprise Select Committee chair Peter Luff said how inexplicable it was that the Government was taking so long to announce the award of the POCA contract. It was supposed to be early this year, he said, and November isn’t early. Wasn’t it harmful for the Government to take so long he was asked. I am not the government, Mr Luff politely replied. But yes. He added that the thousands of closures if the Post Office lost POCA were just plain wrong.
Could a Labour MP have put it any differently? Ears may have turned red at No 10, and not for the first time. For more than a year now, the POCA has been, as Sir Humphrey would say, rattling round Whitehall like a grendae with the pin out. Give it to the Post Office and its commercial rival PayPoint might challenge the decision in court as it may still. Give it to PayPoint and you could have another 10p tax situation.
Purnell cannot have been looking forward to this decision. His announcement today puts the best possible gloss on it, as you’d expect from such a suave and intelligent minister. But if I were him, I’d be feeling that I’d been dealt a very poor hand. How Purnell deals with this, and all those unemployed people, remains to be seen. Should be interesting to watch.
Update: Tom Miller reminds us that Lord Mandelson’s remarks about the Post Office are eerily close to Jon Cruddas’ recent Guardian column calling for the Post Ofice to become the People’s Bank. The Communication Workers’ Union’s Billy Hayes has said much the same thing in Tribune.
In fact, Cruddas’ column was actually ghosted by the CWU. Mandy and Billy Hayes on the same page? Whatever next?
Update no. 2, 8:18pm: Jon Craig at Sky News is calling this a triumph for the “sideburned schmoozer” (sound familiar?) Hardly suprising that Lindsay Hoyle cheered Purnell’s Commons statement; he was one of very few MPs on the Business and Enterprise Committee to rasie the subject of Royal Mail when Mandelson made his debut appearance before them last month. He’s also a staunch union man.