ANOTHER VOICE
Some advanced thoughts on the Post Office from the inventor of the Penny Black
CHARLES MOORE
The Government is wondering whether to privatise the Post Office. This would probably involve breaking down the Post Office's letter monopoly. Here is an argu- ment for doing so: the end of the monopoly would mean:
The removal of an offence from our statute book and the probable rise of a wholesome competition wherever the service is per- formed with less than the greatest efficiency and cheapness; a competition which, more perhaps than other external circumstance, would tend to compel the department to have due regard to simple merit in its officers, and economic efficiency in all its arrangements.
Another practice threatened by privatisa- tion is cross-subsidy of a loss-making part of the operation — such as delivery in remote areas. Such cross-subsidy has been repudiated thus:
From the first, I have held that every division of the service should be at least self-support- ing, though I allowed that, for the sake of simplicity, extensions might be made where there was no immediate expectation of abso- lute profit. All beyond this I have always regarded as contrary to the true principles of free trade, as swerving into the unsound and dangerous practice of protection.
Both these quotations come from the writings of Rowland Hill, inventor, in 184.0, of the penny post. One suspects his shade will be constantly invoked on the other side of the argument, so it is interesting to know why he thought as he did. It might provide ministers with some useful ideas.
Hill was one of a large family of educa- tionists and improvers of mankind who opposed entrenched privilege and did well out of the Great Reform Bill. He saw the dissemination of knowledge and the intro- duction of economic laissez-faire as the keys to popular emancipation. He tried to apply these principles to the Post Office, giving it 'the new and important character of a powerful engine of civilisation; capable of performing a distinguished part in the great work of national education, but ren- dered feeble and inefficient by erroneous financial arrangements'.
The pre-Hill postal system was not a free market. It was an inefficient government monopoly, established in the 17th century. Hill was what is nowadays called a supply- sider. He argued that a uniform, cheap postal rate — the penny post — would cause so many more people to use the ser- vice that the revenue would rise. The cost of post was a tax, going to the Exchequer, so his proposition resembled that made by so many Americans in the 1980s. His doc- trine, rather like the famous Laffer curve, was that 'the increase in consumption is inversely as the squares of the prices', i.e., cut the postage from sixpence to one penny and you get 36 times more traffic.
Like those Americans, Hill was over- optimistic. It was not until 1863 that the Post Office recovered the level of revenue which it had attained in 1839. But he was also incredibly tenacious. He was still there in 1863, still arguing, still pushing on with `my plan'. He was a high-handed, difficult man. Trollope, who worked in the Post Office, wrote him a memo complaining of ambiguities of style in his definition of the duties of postal surveyors. 'You must be aware, Mr Trollope,' Hill replied, 'that a phrase is not always intended to bear a lit- eral construction. For instance, when I write to one of you gentlemen, I end my letter with the words "I am, Sir, your obedi- ent servant", whereas you know I am noth- ing of the sort.' Trollope thought Hill was `unfit to manage men or arrange labour'.
Hill's economic theory of the Post Office never really worked, but his zeal trans- formed it from being an arm of the tax- gatherer to a great national institution, which spread the idea of Britain as a coun- try which was both modern and efficient, and friendly and intimate. As often hap- pens, sentiment and romance gradually came to cluster round what was originally conceived most prosaically. 'Perhaps this difficulty [the problem of buying an entire stamped envelope] might be obviated,' wrote Hill, 'by using a bit of paper just large enough to bear the stamp, and cov- ered at the back with a glutinous wash, which the bringer might, by applying a little moisture, attach to the back of the letter . . ' Thus was the Penny Black born.
What should happen now? The Post Office is one of our more efficient public bodies, for its pride, despite a rough period in the 1970s, has survived. It has claims to be the best postal service in the world. In the second half of last year it delivered 91.5 per cent of first-class letters the day after they were posted — its best result ever, and the best in the EEC. Its profits, though nat- urally artificial because of monopoly, do not seem to be won at appalling expense to the customer.
It is even, in a sense, competitive, since, although there is no direct competition for letters, there is the constant pressure of alternative forms of communication, notably telephones and faxes. There is also no monopoly for letters costing more than a pound, and that figure was hit upon in 1981 and so has been much eroded by infla- tion. Yet all through the 1980s, Royal Mall business increased.
If everything is so good, then, why change it? There are some obvious reasons why change would be dangerous. There are so many things for people to worry about. Would their local Post Office counter close? Surveys suggest, apparently, that people actually like queueing there. What of paying the same price for letters every- where? No one wants to change that. What of Mrs Thatcher's objection when she was Prime Minister that you shouldn't privatise because it is the Royal Mail and stamps have the Queen's head on them? With so many dogs snapping at the Government's heels, it must be tempting to let this sleep- ing one lie. But to do nothing would be cowardly. There is so much to be gained. First there is money for the Exchequer. That could be as much as £5 billion, though probably less. Then there is popular ownership. If I were a Tory politician my mouth would be watering at the thought of so many post- men becoming little capitalists. And then there is what the Post Office itself wants. As an entity owned by the Government, its borrowing is part of government borrowing and therefore part of the PSBR. This, and the constraint of a strict statutory regime, prevent the Post Office from taking advan- tage of the expertise in which it leads the world. British stamps are the only stamps not to state their country on them: that Is because we got there first. We know this field. When we are selling our telephones all over the world, it is absurd not to be selling our postal services. Best of all, the privatisation of the Post Office could prove that good business and the public good can work together, just as Rowland Hill believed. I do not see why the Queen cannot grace the emblems of a pri- vately provided service, so long as that ser- vice performs publicly regulated duties. We have already seen bits of the Post Office float away, to the general benefit. One is Girobank. The other — telephones — is one of our best and biggest businesses. It is time for a Victorian spirit of improvement.
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