Business, Skills and Innovation CommitteeWritten evidence submitted by the Institute of Directors

About the IoD

The IoD was founded in 1903 and obtained a Royal Charter in 1906. It is an independent, non-party political organisation of approximately 38,000 individual members. Its aim is to serve, support, represent and set standards for directors to enable them to fulfil their leadership responsibilities in creating wealth for the benefit of business and society as a whole. The membership is drawn from right across the business spectrum. 70% of FTSE 100 companies and 60% of FTSE 350 companies have IoD members on their boards, but the majority of members, some 70%, comprise directors of small and medium-sized enterprises, ranging from long-established businesses to start-up companies. IoD members’ organisations are entrepreneurial and resolutely growth orientated. Over half of members export. They are at the forefront of flexible working practices and are fully committed to the skills agenda.

Response

The Institute of Directors is pleased that the Business, Innovation and Skills Committee has given us the chance to comment on the proposed privatisation of Royal Mail.

The IoD believes that the Government is right to pursue the privatisation of Royal Mail, which will allow it to modernise, compete and survive. Royal Mail is in good health currently, but it still faces significant challenges as the way businesses and individuals communicate changes over time. Releasing it from public ownership will allow it access the private capital it needs so that it can invest and adapt its service to meet future needs.

In particular, the Institute of Directors notes the conclusions of the Independent Review of the Postal Sector led by Richard Hooper, which suggests that necessary modernisation can only occur via the injection of private capital.

Businesses need and value the universal service, and note that the continuation of that service is enshrined in law, and that withdrawal of the service would require an Act of Parliament. We also note that Ofcom has a primary duty to secure the provision of the universal service, providing a secondary safeguard to the service. Within this framework, we are pleased that Royal Mail will be given the ability to compete in the same regulatory landscape as private competitors, allowing it to challenge those providers for the high-growth areas of the market. Furthermore, a modernised Royal Mail will further incentivise existing private operators to improve their services for businesses and consumers alike.

It is crucial that the privatisation of the Royal Mail delivers value to the taxpayer. We are pleased that the Government has stated this as a priority, and we would expect close monitoring of the process to ensure this positive outcome.

The Institute of Directors is also of the belief that the offer given to Royal Mail employees is sensible and generous. We are particularly glad that current staff will be given the chance to become employee owners, an arrangement which is beneficial to both employer and employee. The IoD believes that threatened strike action would be unjustified, highly irresponsible, and would hit the economy and businesses hard—just as strikes in 2007 and 2009 did. A third strike within six years would serve only to undermine the reputation of the Royal Mail and could, in so doing, mean that the positive outcomes of the privatisation process are lessened by reputational damage.

Conclusion

Royal Mail is a clear example of an organisation which, if it fails to move forward, will be overtaken by the competition, creating a drag on the public purse. It is only competitive forces that will inspire much-needed progress. The Government must hold firm in its commitment to modernising this vital service, allowing it to respond to changing trends in the way businesses and consumers use the postal service.

28 August 2013