As one of the people responsible for the Lib Dems' policy on Royal Mail, I am pleased to see that Vince Cable as Business Secretary is, according to the Guardian, set to take this policy forward. Labour attempted a partial privatisation of Royal Mail last year but withdrew the plans. In effect, the Labour proposal would have meant the worst of both worlds - stuck mainly in the public sector without the benefits that can be gained by being in the private sector. Furthermore, their proposals did not separate the Post Office from the Royal Mail.
The Lib Dem policy agreed in March 2006 (I wrote the paper on it with Norman Lamb as I was still working in the Policy Unit at the time) allowed for the sale of half the shares to the private sector, a quarter to remain in government hands and a quarter to be put in trust for the benefit of the workers. The business would be run along the John Lewis Partnership model. As the business would be in the private sector, with the government as a minority shareholder, the company would have access to private investment currently denied it by its status as a publicly owned company (no publicly owned company can borrow without the approval of the government who has to guarantee the loan). A private sector company can borrow and use its assets and future cash flow to guarantee the loan.
Royal Mail has been starved of the major investment it needs to fend off competition from other private sector mail providers which are gaining market share because Royal Mail often lacks the modern machinery to compete effectively. Royal Mail needs to be put on a similar footing as the other private sector providers of mail services. A privatised Royal Mail would be able to go to the private sector and raise the money for investment that the government has denied it.
Regulation will still be needed to ensure the Universal Service Delivery continues. Action will be needed to ensure the pension deficit is reduced. And the Post Office network needs to be removed from Royal Mail, thus freeing the network to deal with other parcel and mail providers and to move into new areas of business, therefore generating new forms of income for Post Offices.
Assuming Vince puts into operation something close to the plans passed 4 years ago, we will have a model of mutuality, worker involvement and profit sharing that we could apply to other areas, such as the banks, once they have recovered, been restructured and returned to the private and mutual sector. Exciting times ahead.