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Ridley and the Royal Mail sell-off

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The government yesterday confirmed that Royal Mail was to be privatized, with the first tranche of shares likely to go on sale later this year. Announcing the plans in the House of Commons, Business Secretary Vince Cable argued that privatization was necessary to secure the future of the business, and to ‘allow its management to focus wholeheartedly on growing the business and planning for the future’.

For a long time, however, even the most enthusiastic supporters of privatization have been sceptical about whether the Royal Mail represented a genuine candidate for transfer to the private sector. One case in point is the late Nicholas Ridley, an ardent Thatcherite and a key figure in the development of the privatization agenda. His 1968 report on the future of the nationalized industries, produced at the behest of Edward Heath but never published for fear of the uproar it would cause, was the first ‘official’ Conservative policy document to openly call for a large-scale sell-off of public sector corporations. But although the report identified several promising candidates for denationalization, among them the steel industry and the air corporations, the Royal Mail did not make the list. Ridley had concluded that the postal service, along with several other industries that appeared to hold natural monopolies, represented a genuine public utility and thus should not (could not) be sold.

When he was asked to re-examine the question of the nationalized industries nearly a decade later, Ridley came to much the same conclusion as he had in 1968. The final report of the Policy Group on the Nationalized Industries, a body that Ridley had chaired, concluded that although it might be possible to introduce some private sector competition into postal services (most notably in the delivery of mail) there was little prospect of denationalising the industry as a whole. The PGNI concluded that postal services represented a natural monopoly, in which there was little prospect of achieving genuine competition through fragmentation, and that as a result the industry was ‘unlikely to be saleable’. Although there was subsequently considerable enthusiasm for the privatization of Royal Mail from other wings of the Conservative Party, and most notably from Michael Heseltine in the 1990s, there seems to have been relatively little support for these schemes until now.

Perhaps the real surprise, however, is not that the coalition now believes that there is a genuine possibility of privatizing Royal Mail, but that it has taken so long to reach this point. After all, among the other industries considered ‘unlikely to be saleable’ by Ridley in both 1968 and 1977 were British Telecom and British Gas.

Matthew Francis

Published inBritish Politics

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