The Intricacies and Political Potential of Privatising Royal Mail: a look at Japan

The Conservative and Lib Dem government plans to privatise Royal Mail later this year in the hopes of raising somewhere in the region of £2bn to help Britain’s beleaguered economy. The Labour opposition, which first mooted such a possibility during its last time in office, argues that the decision smacks of desperation.

Royal Mail traces its history back to 1516
Royal Mail traces its history back to 1516

How the privatisation scenario plays out could have a significant effect on British politics in the near future, as a similar attempt by Japan several years ago suggests.

In 2005, LDP Prime Minister Junichiro Koizumi called a general election as a de facto referendum on his decision to privatise Japan Post – the state-owned postal and banking service – the equivalent of Royal Mail. The call for an election arrived after several bills proposing privatisation were turned down in the Japanese Diet and because of a split over the issue within the ruling LDP party. Koizumi saw the election as a way of securing his personal mandate, both from the people and his own party politicians.

Koizumi won a landslide in the 2005 election. Whether this was because of the proposals to privatise Japan Post, his own impressive charisma or the disunity of the opposition is impossible to tell. Yet, he manipulated the situation to attain a clear political advantage. In the subsequent Diet session, Koizumi’s LDP party had 82 of its 91 proposed bills passed, including the one on postal privatisation.

The flamboyant Koizumi used postal privatisation for political gain
The flamboyant Koizumi used postal privatisation for political gain

Ironically, by the time Japan Post was privatised in October 2007, Koizumi had resigned from office, as per LDP regulations, having left on a resounding high. Operational authority over the postal services went to Japan Post Holdings, a state-owned conglomerate, with a view to floating shares on the stock market. Amazingly, in 2010 the privatisation process was put on hold and the Japanese Ministry of Finance still owns 100% of the shares in the postal system.

As with Britain, Japan desperately needed revenue during the first decade of the 20th century and postal privatisation was a means of doing this. That it has yet to derive any financial windfall shows the problems inherent in privatising such a huge enterprise. In 2012 it was announced that shares in Japan Post Holdings would be sold off to raise money for the areas devastated by the March 2011 tsunami. Whether this will occur remains to be seen.

Japan Post Holdings took over the responsibilities of Japan Post but remains state-owned
Japan Post Holdings took over the responsibilities of Japan Post but remains state-owned

Britain has experience with large privatisations – the utilities companies, mining enterprises and British Rail – and thus has the confidence that a smooth transition from state to private ownership can occur within the postal service. Whether or not significant opposition to the proposal materialises, David Cameron could take note from Koizumi’s decisiveness in securing a political victory over his opponents from a nationally-important issue.

Offering current Royal Mail workers free shares in the new enterprise is one way of appeasing the potential job losers. Convincing them that more work will follow will further sugarcoat the decision, possibly by getting assurances from the private owners to hire Royal Mail staff.

Were Royal Mail a meticulous and efficient organisation, there undoubtedly would be more outrage at Cameron’s proposals. However, the relentless inefficiencies in service delivery and unjustified strikes explain a general lack of public concern at the present time. Whether Cameron chooses to make it an issue on which to stake his reputation depends upon some public furore developing, otherwise the political debate, like Royal Mail, will soon be redundant.

Author: Stefan Lang

An interested observer of current affairs, researcher and writer

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