Royal Mail - sleight of hand?
Robert Peston reports the government's "sleight of hand" in separating the Royal Mail's assets and liabilities in order to sell it off.
Well, there's some argument there. But perhaps this is the only way the organisation can be saved.
There are two reasons this might be a good policy:
- A thriving, efficient and well-managed Royal Mail provides a boost to the economy. It's a key part of our infrastructure and, when it works properly, it helps to speed up projects and increase GDP. When it doesn't, it interferes with business activities (and those of consumers), creates risk and delay, and gives people excuses for not delivering their side of an agreement. In short it creates friction in the economy, which destroys economic activity with no corresponding gain (a negative-sum game). If this separation is a necessary step toward privatising the organisation, we will all gain from it.
- The pensions are likely to be more efficiently handled as part of a larger public pensions pool. The connection between employer and fund manager is broken (which the last twenty years of experience show is invariably a good thing), and the overhang in public pension liabilities can be dealt with all at once instead of piecemeal.
And along with this, the government might score a political point as a side-effect. Big deal. Let them.
Incidentally, the £650 billion of total public pension liabilities are unlikely to cost that much. The current figure is inflated by low gilt yields - which are likely to increase over time as the economy recovers. This (and a volatile stockmarket) is what led to the big private sector pension deficits of a few years ago - which mostly went away with an increase in the FTSE.
And one final point: the government is already liable for the Royal Mail's pensions. So pooling them with ordinary civil service liabilities is not going to cost us anything.