Britain - New threats to postal jobs - the long road to privatisation

Jan/Feb 2002

Early in December, the chief executive of Consignia (the rebranded Post Office), John Roberts, declared that 30,000 postal workers' jobs would have to be cut to meet a cost-cutting target of £1.2bn by the year 2003. Roberts implied that this reduction in the Post Office workforce would be achieved by compulsory redundancies if need be.

Predictably this prompted the postal workers' union leadership to threaten a strike ballot. And just as predictably, in view of the history of industrial relations in the Post Office, it took only a few days for the union's general secretary Billy Hayes and his deputy in charge of the Post Office, John Keggie, to claim that Consignia had been "forced" to withdraw its threat - or rather one of its threats. Indeed on the 15 December, the union leaders signed a two-page agreement which merely committed the company to take "no steps towards compulsory redundancies" - for the moment. By implication, of course, this meant that the union endorsed the planned "voluntary redundancies" - and the resulting worsening conditions for those remaining in work. But how many redundancies exactly? 30,000? More? And this at a time when official unemployment is increasing across the country! And how "voluntary"? Under the blackmail of compulsory transfer to a distant depot? In fact what Hayes and Keggie have de facto agreed to is all of the job cuts that Consignia wants to make, merely on condition that the language used to describe them is changed. What is more, notification for a strike ballot over a £300/w wage claim and a cut in working hours, which was meant to be made on 10 December, was withdrawn into the bargain!

So despite the newspaper headlines calling this agreement "backpeddling" by a "red-faced" Consignia management, nothing has really changed. And although union leaders like Keggie pretend that "Consignia has taken compulsory redundancies off the table and restored job security undertakings", he knows this is rubbish. Consignia has been planning to achieve a large number of redundancies - voluntary and/or compulsory - for some time. Already, at the beginning of October, when Consignia first announced its cost- cutting programme - quoting 10,000 job cuts at the time - Keggie himself predicted that Consignia's real target was more likely to be 30,000. He denounced "this madcap plan to slice up the industry and reduce the workforce by 15%" as "ill-conceived and destructive." And now he expects workers to believe that "job security" is guaranteed, just like that, because he says so?

In fact the writing has been on the wall ever since Blair and his government took its seats in Westminster with a commitment (shared with the Tories) to bring "commercial freedom" to the Post Office. Four years later, the Post Office became Consignia plc, with the "freedom" to operate as a private company - i.e. to borrow money and use its cash to officially maximise profits rather than just minimise costs. Needless to say Consignia's top management cannot wait for the time when they will be able to enjoy the salaries and perks attached to similar positions in the private sector. Hence their eagerness to cut the workforce to the bare bones under the pretext of fending off "competition".

The government may well claim that this "commercial freedom" has nothing to do with privatisation. Of course, against the backdrop of the railway disaster, they would not use the "P" word! But who can they fool? Certainly not the workforce.

Significantly, this transformation of the Post Office under Labour was carried out under the auspices of Alan Johnson, a former general secretary of the post workers' union, promoted as "minister for competitiveness" by Blair, in charge of industrial relations and.. the Post Office. This is no coincidence. The fact is that in the long process leading up to the present changes, the union leadership has proved willing to play along with the successive governments, claiming that this was the only way to keep the Post Office as a "public" service. But in so doing, they have been pushing the workforce further and further (though not always successfully, fortunately), into a dangerous trap.

The making of a state monopoly...

Of course it is pure nonsense to claim that any private company would have the means to replace or duplicate the national postal network which has evolved over centuries. Contrary to popular belief, the British postal system is not the "oldest public system in the world". It was, as it happens, the French king, Louis Xl who was first in Europe to employ mounted mail couriers, back in 1477. In England, Henry Vlll appointed a Master of the Posts in 1516, to maintain a regular postal service along the main roads radiating out of London. But neither of these systems was comprehensive, nor were they meant to serve the public.

In France, in 1627, a "real" public service was created for the first time, when fees and timetables were fixed and post offices established in larger cities. In Britain, a separate public service was launched in 1635, by a royal proclamation, "for the settling of the letter office of England and Scotland". Thomas Witherings, a London merchant, was given the task of organising regular services to run by day and by night along the great post roads. The growing financial returns then "encouraged" the development of a royal monopoly and private and municipal carriers were suppressed except in areas not covered by the state system. In fact one such area was the collection and delivery of letters in London. William Dockwa set up a "Penny Post" in 1680 whereby letters were prepaid and stamped to indicate place and time of posting and hourly deliveries were made. This service was so successful that he was taken to court for infringing the state monopoly and his service was closed down, only to be relaunched almost immediately by the government! Then the era of the stagecoach and the building of roads and the railways resulted in the rapid development of a fast, frequent and reliable national system over the next 150 years.

However it was educationalist and tax reformer, Rowland Hill's proposals for a uniform rate of postage, regardless of distance with prepayment by means of adhesive stamps - a new "penny post" - in 1840, which for the first time made the postal system truly "public", in that the vast majority of the population could now afford to use it. The simplification of the system thus implemented formed the basis of the modern postal system allowing the handling of millions of letters daily. It also brought an increasing revenue to the state. By 1900 there were 21,940 post offices nationally - some 1,180 Crown post offices, 4,950 town sub-post offices and 15,815 country sub-offices. The sub-offices were run under a variety of private subcontracting arrangements. Once social reforms such as state pensions and benefits were implemented, the post offices became the main payment agencies, providing them with an additional regular source of income, since they gained a fixed handling fee for these payments.

Bringing the union bureaucracy on board

The state-run system remained fairly stable over the following decades. The first major change that the Post Office underwent was in the 1960s, when its transformation from a government department, which was part of the civil service, into a "public corporation" was proposed. And as is often the case for measures which are unpopular among workers, it was a Labour government which carried out this transformation - that of Harold Wilson.

The Post Office thus became a public corporation in 1969. It was justified at the time as a way of exploiting the Post Office's commercial potential. But of course it was the increased exploitation of the workers which was the real objective. The splitting off of this large workforce, who were now no longer covered by the civil service's collective agreements was one of the preconditions for the process.

However, Wilson failed to secure the cooperation of the postal workers' union, something which might have proved a real headache given the high level of unionisation in the industry.

In the post office, unionisation went back to the 19th century. Unions had been recognised in 1906. The amalgamation of the many different early "associations" of postal workers took place in 1921 when the centralised Union of Postal Workers (UPW) was born. But apart from the participation of postal workers in the 1926 General strike, there were few postal strikes over the next decades.

After WW2, the UPW was among a minority of unions which opposed the setting up of public corporations, anticipating the effect this would have on their bargaining position. The UPW leadership therefore opposed Wilson's corporatisation of the Post Office in 1969 and also refused seats on the prospective board of directors. But they did little more to demonstrate their opposition than to debate the issue of what they called "workers' control" of the Post Office at their annual conference. Of course what they meant was the union's participation in management, and little more.

In 1977, it was again a Labour government which dared to threaten to remove the right of postal workers to take industrial action. This was the result of a series of unofficial strikes in London, in support of workers who were on strike at the Grunwick's factory in west London over union recognition. At the time this was regarded as an important "test case" by union activists and the huge daily pickets and clashes with police outside the gates pushed the dispute into the political spotlight.

The threat against postal workers was never acted upon in the end, however. It was more useful for the government to keep the union leadership aboard - and anyway the UPW leaders had always made loud noises against any unofficial action. What is more, they were no longer making even a peep against the Post Office Board of Directors. On the contrary, in 1978 they happily accepted seats on this board as part of an "experiment" in so-called industrial democracy. However, as a report by Warwick University, commissioned by the Post Office itself reported, key decisions were made outside of the boardroom, and the "worker directors" were kept in the dark. So much for participation!

The Tory years: privatisation on the agenda

Once in power, in 1979, the Tories were to pursue the logic of commercialisation of the postal service - all the way to their 1992 privatisation proposals - on the foundation laid by Wilson's public corporation. Of course, the underlying reason, as with the public utilities and the railways, was two-fold. Firstly, to provide the private sector with new opportunities to make money, and secondly, to kick the workforce into shape, so that privatisation would be viable.

But unlike the previous Labour government, they did not try to woo the union bureaucracy for their support. Instead, they threw them out of their coveted seats on the Post Office Board - which was certainly no big loss for the workforce. And they then kept the union leaders on their toes by demanding from them that they should turn their bargaining machinery into an effective instrument to serve government policy.

Unlike in some other industries, the leaders of the postal union (by that time called the Union of Communication Workers - UCW) put up no real resistance to the government's policy. On the contrary, they did their level best to demonstrate how indispensable they were to the Tories.

So despite unofficial strike action on the ground, plus overtime bans, in 1980, union officials went above the heads of the rank and file and signed an unprecedented productivity deal with management in London, which was extended nationally in 1981.

This "Improved Working Method" scheme was the first in a long series of reorganisations which aimed at increasing the rate of exploitation of the workforce, by squeezing more work into fewer hours and cutting the overtime which was by now obligatory for many workers in order to take home a living wage.

The process of the introduction of such schemes followed the same pattern, time and again: the Post Office management pushed it; the workforce retaliated with unofficial strike action which was disowned by their union leaders and eventually, the union leadership agreed to the scheme under a new label or with slightly different packaging. At the end of it all, the consequence was a sharp deterioration in wages and conditions across the whole postal service and of course, a proportionate reduction in costs.

At the same time, the use of casual labour became systematic practice (and this remains the case) as a means to undermine the unity of the workforce - and this was facilitated by the sectionalism of the union machinery, which never tried to unite the ranks of all postal workers, casual or not.

Of course, the Tories "achieved" many changes in the Post Office structure. Under the 1981 Telecommunications Act, the national telephone system, which had always been part of the Post Office, was separated off into its own corporation, BT, before being fully privatised in 1986. This Act also contained provisions for the suspension of the Post Office's monopoly over certain categories of mail, allowing private companies to compete for collection and delivery, though these remained mainly paper provisions until the late 1980s.

By 1986, the Post Office had been divided into three separate operating "businesses" which had reciprocal buying and selling obligations to each other: Post Office Counters, Royal Mail and Parcelforce. This split the workforce up, for one thing, making it easier to impose job cuts and efficiencies. But it also made it possible to single out parts of the business for subcontracting.

For instance, at this stage the Counters division comprised 1,500 Crown Post Offices - large high street branches staffed by public sector employees which, while representing only 3% of the total number of post offices, accounted for 20% of all transactions. By 1988 a process began to reduce these to the 600 which exist today, as many were sold as franchises to become sub post offices, combining retail outlets with post office services - in supermarkets, newsagents and stationary chains such as Rymans. This involved 5,000 direct job cuts.

In 1990, the Girobank business of the Post Office was privatised when it was sold to the Alliance and Leicester Building Society. As for the Post Office itself, throughout the Tory years, but especially after 1992, its possible privatisation, as well as its letter monopoly were kept "under review". Its present boss, John Roberts quipped that during these years, the Post Office had undergone "more reviews than the West End". The fact was that in 1992, opposition to privatisation came from a substantial section of the Tory electorate, because of the likely consequences for 20,000 rural post offices, at least half of which were unprofitable and reliant on state subsidies.

Again in 1996, after an official national strike, Royal Mail's letter monopoly was placed under threat by the government. But again, this was put on hold, after the Federation of Small Businesses registered overwhelming opposition to the introduction of private operators to compete for the business. They were of course being indirectly subsidised by the state-owned post office, because they had no other means to distribute their wares so cheaply.

Labour's privatisation via the backdoor

The Post Office, as inherited by Labour in 1997, was run by a 9-member Board of Directors appointed by the Secretary of State for Trade and Industry. Labour appointed a new chairman, Dr Neville Bain (salary £88,000 for a two-day week), who was formerly chief executive of Coats Viyella, and replaced the 4 non-executive directors. John Roberts, the life-long "post office man" who had been made managing director by the Tories in 1993 with the brief at the time to privatise the Post Office, remained chief executive.

The new Board proceeded immediately with an internal restructuring, under the title, "Shaping for Competitive Success" (SCS), which broke each Post Office business into bite-sized sub-units - the kind of sectorisation which took place pre-privatisation in the railways. In other words, SCS demarcated "chunks" of the postal services which could be subcontracted or sold to the private sector at some point.

The Post Office at this time still consisted of the two divisions, Royal Mail and Parcelforce and the independent subsidiary, Post Office Counters. Royal Mail was by far the largest Post Office "business" and perhaps the least likely to be sold outright, as such. It had 166,000, employees, mainly delivery and sorting office workers. The internal restructuring under SCS turned Royal Mail into a number of "Strategic Business Units": RM Service Delivery, International Services, and thirdly, Business and Consumer Markets. Another unit, Logistics and Contract Distribution combined the distribution network of Royal Mail and Parcelforce's transport and warehousing system.

Parcelforce, employing 13,000 workers, had already been earmarked by the Tories for a sell-off. The workforce was now moved into new "business units" with some in Logistics and Distribution, some in Sales and Customer Support and some in the Packages and Express Business - all of which are today destined for "outsourcing".

Other smaller sub-units such as Subscription Services Ltd, which provides licencing and subscription services to the BBC, for instance; CASHCO, whose employees have been placed into a Cash Handling and Distribution "business unit"; RoMEC the Royal Mail Engineering and Construction unit and Vehicle Services were also made "ready" for either selling off or subcontracting.

The new Labour government knew, however, that privatisation of the Post Office was unpopular. So, having appointed the new Board, who were able to carry through pre-privatisation preparations behind the scenes, it initially bought time, by undertaking a two-year long "review", resulting finally a White Paper in July 1999.

The option proposed for the future of the Post Office was that of a "plc" with the state as its only shareholder. This left the way open for future privatisation, although not before the 2001 general election. In the meantime the government had already granted the Post Office some commercial freedom to set up joint ventures with the private sector.

The long period of review, however, undoubtedly gave the government plenty of time to get the public and the workforce used to the idea that privatisation "in some form", if not wholesale privatisation, was on the cards. The Board had always been pressing for the Post Office to have commercial freedom, to keep its profits and gain private company status, and in fact Labour's "new" directors were even more enthusiastic over privatisation.

The long saga of Labour's "reforms" was finally ended in March 2001 when the Post Office became Consignia plc. It now had even more freedom to engage in private joint ventures; its £1 letter monopoly would stand for the time being but would be subject to review by a new regulatory body, the Postal Services Commission (Postcomm), which was set up to grant licences to competitors; and the dividend paid to the government each year was to be halved to compensate for an estimated 5% loss of business to competitors.

Of course, this meant backdoor privatisation in the medium term. And the Post Office had already been quietly building up its commercial base in order to compete on the market over the past three years. It had acquired interests in five international companies: the package delivery service, German Parcel had been bought for £254m, the Paris-based Crie group, for £6m; it had linked up with TNT and Post Group of Holland, as well as Singapore Post to promote a cross-border postal service; it had also bought Pakke-Trans of Denmark, and Der Kurier, a German overnight delivery company.

The sack on workers' backs

Postmen have not just been carrying heavier and heavier sacks of mail on their backs, filled with junk mail, over the past 15 years. As wage costs make up 70% of the Post Office's expenditure, wages have been the first target for every new cost- saving initiative. As a result, postal workers are still among the lowest paid public sector employees. Basic pay for a postman/woman is £250.25 for a 40-hour week before tax. In London the special supplement brings this to £300.91 gross.

By 1996, when the Post Office proposed its "Employee Agenda", the volume of mail had increased by 50% while the workforce had fallen by 10%. This deal actually amounted to a cut in wages of 15%, since workers would have lost night allowances and pensionable pay. A series of official strikes was called, followed by unoffical strikes up and down the country. The outcome was the intervention of the statutory Arbitration and Conciliation Service (ACAS) which proceeded to attempt the implementation of this Agenda step by step, under the so-called "Way Forward". By the time the new agreement was "ready" it contained new "Ways of Working" with a flexible Performance Bonus Scheme for local implementation. The content of this endless series of "Ways" was just another productivity deal - you hit certain targets, you get more pay. If not, you lose. Doing away with job demarcation was also a condition. In return the working week was meant to be cut.

However, the deal was finally accepted after a ballot of the workforce in February 2000. In fact there was a 76% turnout - high for a postal ballot, but the margin in favour was only 500 votes. Whole areas and workplaces voted against. When it was implemented in May 2000, unofficial strikes broke out again. This has remained the state of affairs over the past two years. In the year to March 2001, there were 330 instances of unofficial action and 25 official local strikes, losing 66,000 "employee days". In May this year, when an official strike in Watford spread to other areas 41,586 days were "lost" in a single month. And in fact, due to workers' opposition, the deal has still to be implemented in many areas.

It is this unofficial action which resulted in the commissioning of a report into the Post Office's "industrial relations problem" which was published in July this year. It was led by "Lord" Sawyer, an ex-Labour Party general secretary, whose credentials were no doubt to be on both sides of the argument, as an ex-deputy general secretary of the public sector union, UNISON and as a non-executive director of Reed Employment, the employment agency group. While this report makes quite hilarious reading, for instance when it explains with astonishment that in some workplaces, "industrial relations are seen as a conflict between the opposing interests of the union (treated as being the same as the interests of the workforce) and the management" it cannot but point to the fact that management is top-heavy, nor that there has been chronic under investment in the service and in the workforce, while the mail volumes have continued to rise substantially, despite "increasing competition". Unsurprisingly, its conclusion is that "partnership" between management and union is the answer...

After the report came out, it seemed that Lord Sawyer's prayers were answered when the CWU leaders signed two consecutive one-month "no strike deals" with Royal Mail management and then a similar three-month deal in October, after the September 11 attacks, scheduled to end on 12 January. However, this meant that Royal Mail was not meant to implement any unagreed changes in working practices at local level. In exchange they would get "industrial stability". John Keggie, deputy general secretary with responsibility for postal workers, said "The key to achieving that for the union and its members to be treated as full partners in decision making at all levels, which is a must in today's changing commercial environment".

The real question is, of course, partners for what? As recent history shows, this is certainly not in order to defend workers' interests against Consignia management.

New threats on jobs

Consignia's latest redundancy and cost-cutting plan is "justified" by the need to bring the company back into the black. 10,000 jobs were already cut last year. But now Roberts invokes the slump in profits over the past two years, in order to cut 30,000 more.

It is true that Post Office profits have fallen. Record profits of £608m in 1998-9 turned into a loss of £3m in 2000-1, despite an 8% increase in sales. The first six months of 2001-2, indicate much bigger financial "losses" of £100m so far, again, even though sales have been maintained at increased levels.

But the "missing profits" are easily accounted for by just adding up the sums spent on buying interests in all those companies abroad, in France, Germany, Holland Denmark and Singapore! The five mentioned, account for around £600m! And then there is the fiasco of the scrapped Pathway project (meant to computerise sub-post offices, via a PFI deal with ICL undertaken by the Tories in 1996 for £1bn and continued by Labour) which lost £571m... What is more, the accumulated profit (over £4bn in total) from previous years which was "borrowed" by the government has neither been paid back nor used for investment in new equipment.

So postal workers are meant to pay for all of this? And the CWU leaders are even prepared to "discuss" thousands of voluntary redundancies against such facts?

Of course, ever since privatisation first came onto the agenda in the 1980s under the Thatcher government, the policy of the postal workers' union has been one of accommodation. And every time they agreed a productivity deal, they paved the way for the next one. Of course their excuse was always that they were defending a "public" service and that they therefore had no choice but to agree to the workforce becoming more "efficient" to prevent the service from being taken into the private sector where market forces would break it to pieces.

Today, however, the Post Office is a plc, and subject to "market forces". So now, following the logic of its previous strategy what else can the CWU do, but try to defend this plc against "competition"? And what does this mean for the postal workforce except the exhortation from the leadership to accept more blackmail from management, in the form of worsening conditions and more job cuts!

But whether the union bureaucracy likes it or not, workers today are more than ever confronted with the fundamental class antagonism, worker against boss, wage and conditions against profits, in all sectors of industry, public and private. Privatisation and its various disguises can be thanked for that. There in no room left in our ranks for the fantasy that somehow both sides of this objectively antagonistic relationship can win. It is "them" or "us". The Lord Sawyers of this world, having joined "them" long ago, may find this unpalatable, but that is only because they hypocritically deny a reality which threatens their existence.

The leadership of the CWU today, while harbouring dreams of becoming "worker directors" are advocating a recipe for disaster for the workforce. But time and again in the very recent past, they have come up against the militant resistance of their own members who have refused to swallow their back- tracking or stitch-ups. And once again, they may well find that postal workers are determined not to rubber-stamp Consignia's blackmail.

1 January 2002