Tony Dalton is an ex-leader of Warwick District Council and former area chairman of Warwickshire and Worcestershire Conservative associations.
We have all been told that the Royal Mail is losing money. However, that doesn’t change its legal requirement to deliver a universal service across the United Kingdom. It still must deliver letters six days per week, from Monday to Saturday. They have it slightly easier with parcels, as they don’t have to deliver them on Saturday.
With such a legal requirement it is not hard to see why they could lose money. At the same time, they have also been hit by a series of problems.
A series of strikes have undermined a service already under mounting pressure. What incentive is there to send a letter, already slower than available alternatives, if it isn’t even going to be delivered? Public confidence was further shaken by a ransomware cyber-attack a year ago, and won’t have been helped when the Post Office was also fined £5.6m by Ofcom last November for missing delivery targets. Then, in the same month, it lost its monopoly on parcels at Post Office branches, which given the way they have been operating isn’t very surprising.
However, their biggest problem is emails. Sending an email instead of letter is so much easier, not to mention faster and easier to track.
Now with these problems, what the Post Office should be doing is everything it can to persuade more of us to send letters. Its future depends on providing a service that people will actually use.
Instead, they have done the opposite. As demand falls, they keep increasing the cost of sending a letter! This has naturally resulted in even fewer letters passing through the system. Did you, for example, send fewer Christmas cards this year, or more? When that didn’t work, their next idea was to ask to be released from their legal commitment. Again, the Government said no.
So, what can they do? Well, let’s look at the business.
The Post Office has a vast and expensive network, which they must maintain due to the legal requirement to deliver mail across the whole of the United Kingdom by the next day. It has been hit hard by new technology and changing behaviour, especially the arrival of emails. They have responded by raising prices on a smaller volume of posts, which only accelerates the very shifts undermining the Post Office. Finally, with fewer letters going through the system and the future uncertain, the staff have lost their enthusiasm to work, which I believe has led to the current series of strikes.
My solution is simple: drop the price of post.
This may sound radical, but remember that so long as the Government insists on the Post Office’s existing service obligation, the same number of people are required to deliver one letter as a million. With this massive fixed cost, the Post Office must make certain that it is being fully used. This is especially because, with the delivery network needing to be maintained regardless, it will not result in a large increase in their operating costs.
As a result, the postal system would become much cheaper to use – a boon in a cost-of-living crisis. The more it is used, the easier it is to justify the high fixed costs of the delivery network as a genuine public benefit. The job will most likely become more enjoyable for the staff too, which could reduce the frequency of postal strikes.
Therefore, my suggestion is that the Post Office should drop the price of both first and second-class stamps. The question is, how far should they drop them?
This is where the market comes in. It should be able to tell us the figure, because the Post Office will know they have the right price when, as as they keep dropping it, the volume of letters sent meets the point where the staff is being fully utilised, and the income reaches the point where it makes a profit.
This is idealistic because the competition, emails, are so easy to use. It means that there must be a point at which there will be a limit on the number of letters being sent. We therefore don’t know the price required to reach profit – and we may never get there.
Nevertheless, remember this is an organisation that is losing money. Whatever happens, increasing volume will generate cash to flow through the system, keep their staff active, and meet their legal obligations.
The basic point is that by putting the price up all that has happened is their losses have increased. Consequently, they have been asking the Government to remove this legal requirement. But it hasn’t worked – so why don’t they do something different? Drop the price!
Remember Albert Einstein’s famous quote: “The definition of insanity is doing the same thing over and over again but expecting different results.”