How Does A Great Institution Die?

Aditya Chakrabortty writes:

How does a great institution die? In the same two stages as Hemingway believed people went bankrupt: gradually, then suddenly. Entire decades may pass in which a vital service or a venerable organisation undergoes deep cuts, blundering reforms, and erosion as slow and unremarkable as that of a coastline. Then one day – snap! It breaks, for ever.

This is what’s happening right now to one of our oldest and most essential services. An institution that binds the country together, and daily and almost invisibly helps to define it.

I’m not talking about the NHS, the BBC or state schools. Those parts of society make far more dramatic incursions into our lives. The hospital that delivered your baby, the black screen that brought you Del Boy and Rodney, the teacher who coaxed you through your ABCs: no wonder any big change prompts loud debate. Not so the flap in your front door through which burst bright cards at Christmas, those magazines and guilty eBay purchases, the sad tidings from family on the other side of the world. Not the system that devised the postcode in which you are right now, nor the 115,000 jolly red boxes that stake out the territory of the UK. 

The Royal Mail dates back more than 500 years to the reign of Henry VIII. For most of our lifetimes it promised to get a first-class letter from your nearest postbox in Hove to your intended’s front door in Aberdeen by the next day – and it kept it. That is a piece of public sector magic, less dramatic than life-saving surgery certainly, but based upon vast infrastructure and a formidable workforce ethic. WH Auden knew that, and marvelled at the night train carrying “Letters for the rich, letters for the poor/ The shop at the corner, the girl next door.” Even Margaret Thatcher understood it, which is why that inveterate privatiser snubbed all those people in the 1980s urging her to flog off our postal service. 

Yet for years, the Royal Mail has been undergoing the most serious and profound decline, most of it far from public view. Now it stands on the brink of outright extinction. And how it has got here is a tale that, with grim suitability, is a story in microcosm of how many aspects of British life have been devalued and degraded – even while those at the top have made a killing.

Last week, Ofcom suggested the postal service could shed its legal duty to deliver letters six days a week and go down to only three. Although the regulator claims its “priority is to look after you”, the primary beneficiary of its proposal would be Royal Mail’s management and shareholders, who could save £650m. Yet there was little outrage. Instead, if you listened to the phone-ins or read the papers, what came back was a long sigh of resignation. You certainly heard it from the Guardian’s own letters page: “Deliver three days a week? If only! Where we live, in north-west London, you’re lucky if you get mail delivered one day a week … A once-edible birthday present that was sent on 9 January still hasn’t arrived.”

“Here in Portsmouth we are already on a three-days-a-week (or fewer) delivery schedule … My retired parents, in a more rural location in Norfolk, don’t get deliveries more than once a week. They’ve taken to driving over to the local office every couple of days and collecting their mail. Even then letters are being lost for weeks.”

Those readers are on to something. Our postal service has been run down gradually for so long that the public can no longer rely upon it. The Royal Mail has missed its key legal targets on daily delivery, on special delivery and on first-class delivery not just once, or twice – but every year since 2017. For a long time, it has declined gradually – and what lies ahead may be very sudden.

In this story, there’s enough blame to go around between at least three Westminster parties. As the internet and email took off, Tony Blair’s New Labour hadn’t a clue what to do with our post offices or mail delivery. David Cameron just wanted to sell whatever was left of our national assets, including our forests. Then there were the not-so-useful idiots among the Liberal Democrats, whose Vince Cable promised that privatisation would have as its “overarching objective” the protection of the daily delivery of letters. The sale of the Royal Mail, about 10 years ago, was badly bungled: it was sold far too cheaply, as the National Audit Office and others noted, and the financiers who got in on the deal filled their boots. The chief advisers included Lazard, which took a £1.5m fee for its poor advice. Its independent sister company, Lazard Asset Management, bought millions of shares when trading began and sold the lot within 48 hours, generating an £8m profit. There was no conflict of interest, Lazard pointed out. Just a very bad taste in the mouth of the taxpayer.

Then followed the familiar tale of workers getting laid off, and top managers getting drafted in from businesses that have nothing to do with mail. The last CEO, Simon Thompson, was formerly a marketing man at Honda. His operations head was from Honda. His head of HR had worked in soft drinks, while his pointman on industrial relations came from easyJet. Thompson left last year, after being dismissed by a select committee chair as “clueless”, and presiding over massive industrial action. Naturally enough, he is due a payoff of up to £700,000. The new boss is Royal Mail’s fourth in four years and is on a total annual package of £1.5m. The median postal worker is on about £33,000.

One of my friends has been a postie for about 40 years. When he joined, it was considered a good, steady job with a smart uniform, some local status and a degree of autonomy on your round. Last year, MPs found that postal workers are now monitored by digital tracking devices that alert managers to when they take too long, even if it’s just to use the loo. At the same time, they were reportedly told to treat letter delivery as bottom of their list of priorities, beneath more profitable parcels.

From Thatcher onwards, the Tories have justified privatisation as bringing in essential investment. A good story, if true – which it is not in the case of the Royal Mail. According to analysis conducted for me by the Common Wealth thinktank, whatever investment has been made in Royal Mail over the past decade, it has been dwarfed by the amount paid out to shareholders. (Full disclosure: I am on Common Wealth’s voluntary advisory panel.) About £2bn has been given to shareholders since 2013, equivalent to 60% of its profits after tax. Says Chris Hayes at Common Wealth: “Since privatisation, Royal Mail has been slowly bleeding cash to shareholders, while service quality has palpably deteriorated. Shareholders had never been necessary to Royal Mail’s viability prior to privatisation and have been jeopardising it since.”

And yet Royal Mail retains a vast infrastructure, a knowledgeable workforce and a degree of trust for which other couriers would kill. It could be used to deliver NHS prescriptions or allied with a banking service. It is instead being turned into the least effective and most expensive of all the gig-economy delivery sector – an Amazon Subprime.

How does a great institution die? The same way as a country sinks into complacent underachievement: with false promises from its politicians, with poor management by its corporate leaders, with a lazy regulator – and moneymen who rake off as much as they can before running for the exit.