Markets and prices are information, even if we don't like what's being said

Jeremy Warner has a possibly depressing article telling us that there’s really no future for Royal Mail - or at lesat, none that preserves it as it is.

But since then, the volume of letters has continued to collapse, falling another third. Reducing the number of days is again just chasing your tail to oblivion.

With so many other calls on the public purse, I doubt subsidy is an option for Britain either, even under Labour. What is essential, however, is that any adjustment in the USO reflects what people and the economy actually need, not what Royal Mail and its heavily unionised workforce want, which is just the protection of profits and jobs respectively.

But it’s also about Royal Mail rising to the challenge of finding better and more efficient ways of delivering parcels and other services to households so as to substitute for the death of the letter.

Now, it is possible - possible because many will use this argument - to argue that privatisation is what has caused this. But that’s not, in fact, true. What privatisation has done is make this clear.

There are very large fixed costs to having the universal service obligation. Very large costs which are not covered by revenue given that fall in volume.

And?

If Royal Mail had stayed as some subunit of government then these harsh facts could be disguised. It’s vilely easy to handwave numbers around inside a £1.2 trillion a year behemoth. A service that privatisation has performed for us is to put the organisation on the one balance sheet, the one P&L, we all get to see the information. This is of great value to us as a society.

Sure, we’d all like the USO to remain. But there’s a cost to that. What the one set of accounts does for us is show what that cost will be - and then we can make the decision about whether we desire to keep that USO quite so much. Maybe we do and maybe we don’t, but at least we’ve now got the information necessary to make the decision.

It wouldn’t surprise us at all to find that just as Great Britain was the first place to have a universal letter delivery system it also becomes the first to not have one. For exactly the same reason, being sensibly ahead of everyone else in travelling along that technological curve.

Do note that we’re not insisting that has to be the answer. It is indeed possible that people think the USO is of such value that it should be subsidised into remaining in existence. What markets, prices and the existence as a stand alone organisation achieve for us is making clear the cost of doing exactly that - at which point, fully informed, the decision can be taken.

Prices in markets are information - however much we might not like the lessons being delivered.

Using France as a guide the subsidy would be of the order of £20 per household per year. £20 to not send a letter but retain the ability to do so, each actual letter would cost an additional £1. That worth it? That’s entirely up to you and your valuations. Privatisation has brought that clarity to the numbers though.