Royal Mail bonuses smack of private sector excess

[Danelectro]

I agree that there have been some measures designed to boost the balance sheet but what would be the point of them all being "one off". Do you think any potential investor would be stupid enough to put money into a company that didn't have a viable future business model? IMO Moya did well to obtain the regulatory freedom to allow us to increase prices so that we now make money on our operations. Of course many of those freedoms were granted on the basis of the company being privatised and should it not go ahead we can expect the controls to be reintroduced. I realise it's not a popular view but I'd take Moya as CEO over all of the previous incumbents in my time.

either your being sarcastic or your trying to shine a shite.

[spoodoo]

Notice crammyposty has disappeared on here since he was found out,,,

[Brain Fury]

I agree that there have been some measures designed to boost the balance sheet but what would be the point of them all being "one off". Do you think any potential investor would be stupid enough to put money into a company that didn't have a viable future business model? IMO Moya did well to obtain the regulatory freedom to allow us to increase prices so that we now make money on our operations. Of course many of those freedoms were granted on the basis of the company being privatised and should it not go ahead we can expect the controls to be reintroduced. I realise it's not a popular view but I'd take Moya as CEO over all of the previous incumbents in my time.

either your being sarcastic or your trying to shine a shite.

Perfectly serious.

[fishtank]

I've been waiting ages for this alternative business model to be proposed, and I like it.

So how would it work, bearing in mind the proposal isn't for some utopian workers collective and what would the benefits be over an IPO?

What are the benefits of an IPO?
All we seem to hear is how privatisation will make us more profitable but nobody seems to be able or willing to fill in the gaps as to why that is necessarily so.

I also keep hearing it will allow us to borrow money to invest in new machinery but we've invested before with various levels of success and failure and the thing about borrowing money is it has to be paid back.
Burdening the company with a huge amount of debt does not in itself seem to be a sensible recipe for success.
There is also this vague promise that we can bring in private sector "knowhow" to the company which is kind of like admitting that the present board who were mainly recruited from the private sector don't know what they are doing.

The business seems to be looking at private ownership as if it's some golden ticket to guaranteed success,that just by being "private" we can print money but many more private companies go to the wall than public.

There has to be a sound business plan behind any success and I've yet to see anything beyond "We'll grow the packets and manage the decline in letters" which is more a wish list than a genuine sound business plan.

What benefits will privatisation actually bring to Royal Mail other than the ability to load up the company with debt,bring in some expensive corporate shysters and change the name above the door?
Like Dumbo the flying elephant...I'm all ears.

[Brain Fury]

I've been waiting ages for this alternative business model to be proposed, and I like it.

So how would it work, bearing in mind the proposal isn't for some utopian workers collective and what would the benefits be over an IPO?

What are the benefits of an IPO?
All we seem to hear is how privatisation will make us more profitable but nobody seems to be able or willing to fill in the gaps as to why that is necessarily so.

I also keep hearing it will allow us to borrow money to invest in new machinery but we've invested before with various levels of success and failure and the thing about borrowing money is it has to be paid back.
Burdening the company with a huge amount of debt does not in itself seem to be a sensible recipe for success.
There is also this vague promise that we can bring in private sector "knowhow" to the company which is kind of like admitting that the present board who were mainly recruited from the private sector don't know what they are doing.

The business seems to be looking at private ownership as if it's some golden ticket to guaranteed success,that just by being "private" we can print money but many more private companies go to the wall than public.

There has to be a sound business plan behind any success and I've yet to see anything beyond "We'll grow the packets and manage the decline in letters" which is more a wish list than a genuine sound business plan.

What benefits will privatisation actually bring to Royal Mail other than the ability to load up the company with debt,bring in some expensive corporate shysters and change the name above the door?
Like Dumbo the flying elephant...I'm all ears.

Answering a question with a question? I asked how the CWU's proposal for an alternative to the IPO would work. The pros and cons of an IPO isn't an answer.

As I understand it, even the CWU proposal allows that RM will need to borrow money for investment. Do you not believe that investment is required?

I am interested is in understanding how people think the proposed "not for profit" business model would work in Royal Mail's case. I get the feeling that some think it will bring more job security, better pay and more say in how the business is run. Personally I doubt it but if someone can explain how such a business would be owned, financed and governed I am willing to be persuaded.

[Brain Fury]

She is worth every penny. For a start, on the P739 card she got them to put parcel instead of packet, or was it packet instead of parcel? Then she whacked up the price of stamps to help drive letter volumes down. Next they doubled the cost of packets or parcels, whatever we have to call them to wind up small businesses. All these are one off measures to increase profits and make her look wonderful. I could have done that and I already live here and have a house.

Would you have preferred RM to carry on making losses?

Seeing as the vast majority of those losses were bullshit, clever accounting, yes.
The company has never made that much of a loss, the books have shown what RM wanted them to show.
Masses of equipment were purchased all in one year ( I think 2011 - but not sure) and stockpiled for future use, like PDA's and Vans etc. etc., and that year we made a 'loss' of hundreds of millions. But the assets were sat waiting to be used.
It's like the year RM made it's first major loss, I think about £587m, they banged on about it in WTLL, the look on my bosses face when I pointed out we hadn't lost a bean and it was clever accounting was ace, he said we'd definitely lost money, and we'd go bankrupt soon. That was the year RM bought a German company for £1bn. So, while technically a loss, it really wasn't, it was an investment. Had they not bought it, it would have been a £413m profit.

And even if the losses were genuine, I'd rather stay in Government ownership, as it would give us more security.

Let's say those losses are genuine, they are all aimed at making the company viable for sale, as most of the real necessary expenditure required for investment in the company has already been made, meaning any new owner won't be required to invest heavily in us, merely asset strip and attack our pay/pensions, reduce service, cut jobs, basically just profiteer/maximise profits to their hearts content. At ours and the publics expense.

All the vans, pdas etc weren't bought in one year. There was a stockpile of vans in one year because the roll out of revisions was slower than planned so the first tranche of vans that had already been bought had to be stored. In any case, as you say, these were assets so (apart from depreciation costs) the value of the vans was held as assets on the balance sheet and wouldn't contribute to any loss. We all know that the revisions are still going on and the equipment for these is still being bought now.

I really don't understand why anyone would think that staying in Government ownership is at all secure when under their control we have seen our pension scheme screwed, a total lack of investment in the business, the postal market manipulated so that their own company was shafted in favour of its competitors and 50,000 job losses! Not what I would call security.

You talk like any investment that is required has already been made. Surely you don't believe that? What about new barcoding, tracking and parcel handling technology just as one example. We're already behind our competitors in those areas so don't we need to bring ourselves up to speed? That means investment. So where is the money coming from - not from the Government that's for sure. So the two choices seem to be borrowing it and paying interest or selling shares in the company.

[fishtank]

Answering a question with a question? I asked how the CWU's proposal for an alternative to the IPO would work. The pros and cons of an IPO isn't an answer.

The CWU proposals for an alternative are nothing more than a basic framework,The point I was making is that privatisation plan or IPO is no more a complete business model than that framework.

Any holes there may be in the CWU proposal are equally in evidence with the idea of privatisation which is so poorly planned we don't even know what shape that sale would take yet.

The huge difference is the union is willing to flesh out and fine tune the details of any alternative business model before any transfer takes place whereas the government and the board are riding gung ho towards privatisation without the slightest clue what the repercussions might be for the business and its employees.

[fishtank]

That means investment. So where is the money coming from - not from the Government that's for sure. So the two choices seem to be borrowing it and paying interest or selling shares in the company.

Can you quote anywhere where the government has stated that any money raised from selling shares in the company will be reinvested in the company?
I don't think that's the plan.
The two choices are actually borrowing it from the government at commercial rates which has always been available to us or borrowing it from the banks.
Not really much difference other than the banks are a little less forgiving about default.

[Brain Fury]

Answering a question with a question? I asked how the CWU's proposal for an alternative to the IPO would work. The pros and cons of an IPO isn't an answer.

The CWU proposals for an alternative are nothing more than a basic framework,The point I was making is that privatisation plan or IPO is no more a complete business model than that framework.

Any holes there may be in the CWU proposal are equally in evidence with the idea of privatisation which is so poorly planned we don't even know what shape that sale would take yet.

The huge difference is the union is willing to flesh out and fine tune the details of any alternative business model before any transfer takes place whereas the government and the board are riding gung ho towards privatisation without the slightest clue what the repercussions might be for the business and its employees.

Don't you think that 7 years after the legislation that made attempts at privatisation of RM inevitable and 2 years after the Postal Services Act we are entitled to expect the CWU to come up with something better than an 11th hour "framework" for a model that "reinvests profits in the company like Network Rail"? Actually I am sure they have but I'm interested in how people on this board that apparently like this alternative model see it working.

I think we know how an IPO works even if we don't know when it will happen (I'm betting mid-January) or how much of the company will be offered (definitely more than 50%).

[TrueBlueTerrier]

Haven't heard Unites/CMA proposals yet they are against privatisation but haven't come up with any ideas I am aware of.

[Brain Fury]

Haven't heard Unites/CMA proposals yet they are against privatisation but haven't come up with any ideas I am aware of.

I thought your OP expressed the CWU's proposal. I just wondered how people who apparently like this proposal would see it working in practice, why it would be better than an IPO and whether Network Rail was really a "perfect example". Personally I think the last thing any Government wants is another Network Rail.

[Brain Fury]

That means investment. So where is the money coming from - not from the Government that's for sure. So the two choices seem to be borrowing it and paying interest or selling shares in the company.

Can you quote anywhere where the government has stated that any money raised from selling shares in the company will be reinvested in the company?
I don't think that's the plan.
The two choices are actually borrowing it from the government at commercial rates which has always been available to us or borrowing it from the banks.
Not really much difference other than the banks are a little less forgiving about default.

Fair point about the the money raised from shares. I don't expect RM will see any of that. No doubt that's one of the drivers for the Government's decision anyway.

However won't borrowing from the Government increase public sector borrowing? That's almost certainly not an option the Government would support. Don't think we can borrow from the financial markets while we're Government owned can we?

[UnhappyGremlin]

She is worth every penny. For a start, on the P739 card she got them to put parcel instead of packet, or was it packet instead of parcel? Then she whacked up the price of stamps to help drive letter volumes down. Next they doubled the cost of packets or parcels, whatever we have to call them to wind up small businesses. All these are one off measures to increase profits and make her look wonderful. I could have done that and I already live here and have a house.

Would you have preferred RM to carry on making losses?

Seeing as the vast majority of those losses were bullshit, clever accounting, yes.
The company has never made that much of a loss, the books have shown what RM wanted them to show.
Masses of equipment were purchased all in one year ( I think 2011 - but not sure) and stockpiled for future use, like PDA's and Vans etc. etc., and that year we made a 'loss' of hundreds of millions. But the assets were sat waiting to be used.
It's like the year RM made it's first major loss, I think about £587m, they banged on about it in WTLL, the look on my bosses face when I pointed out we hadn't lost a bean and it was clever accounting was ace, he said we'd definitely lost money, and we'd go bankrupt soon. That was the year RM bought a German company for £1bn. So, while technically a loss, it really wasn't, it was an investment. Had they not bought it, it would have been a £413m profit.

And even if the losses were genuine, I'd rather stay in Government ownership, as it would give us more security.

Let's say those losses are genuine, they are all aimed at making the company viable for sale, as most of the real necessary expenditure required for investment in the company has already been made, meaning any new owner won't be required to invest heavily in us, merely asset strip and attack our pay/pensions, reduce service, cut jobs, basically just profiteer/maximise profits to their hearts content. At ours and the publics expense.

All the vans, pdas etc weren't bought in one year. There was a stockpile of vans in one year because the roll out of revisions was slower than planned so the first tranche of vans that had already been bought had to be stored. In any case, as you say, these were assets so (apart from depreciation costs) the value of the vans was held as assets on the balance sheet and wouldn't contribute to any loss. We all know that the revisions are still going on and the equipment for these is still being bought now.

I really don't understand why anyone would think that staying in Government ownership is at all secure when under their control we have seen our pension scheme screwed, a total lack of investment in the business, the postal market manipulated so that their own company was shafted in favour of its competitors and 50,000 job losses! Not what I would call security.

You talk like any investment that is required has already been made. Surely you don't believe that? What about new barcoding, tracking and parcel handling technology just as one example. We're already behind our competitors in those areas so don't we need to bring ourselves up to speed? That means investment. So where is the money coming from - not from the Government that's for sure. So the two choices seem to be borrowing it and paying interest or selling shares in the company.

I didn't mean all equipment was bought in one year, but in successive years.
And they were stockpiled. My own manager told me that there was a huge amount of vans parked up waiting to be used. It had nothing to do with any delays, it was just a way of showing more expenditure in the accounts to show a loss. I know they are assets and would be shown, but it still allowed them to claim the company was loss making. Just like the first year we lost money after buying a German company for £1bn, they announced a loss of something like £587m, and made no mention of the extra asset they had bought. It's all bollocks.

The total lack of investment in the business is entirely the fault of successive Governments, who spent years creaming the profit out to use to top up the public purse, whilst RM simultaneously took a pension holiday that was in part responsible for the mess the pension fund is now in. The other reason for that is Tony Blair and Gordon Browns decision to tax pension funds to the tune of £5bn plus per year, whereas they had previously been tax free, which contributed greatly to the black hole. Pension funds fates were sealed with the economic meltdown, but it wasn't as responsible as RM and Labour were.

The postal market was manipulated deliberately to drive RM into the s**t in order to force through privatisation. They have had a one track mind on this for years, and have done everything and anything to try and ensure it happens.

Not all the required investment has been made, and at no point did I say nor suggest that, you've read between the lines, added 2 and 2 and come up with 9. I do believe that a larger proportion of the necessary investment has been made. But the private sector is not the only place to get capital, and I don't believe there is no reason RM cannot access it whilst still in Government hands, they have plenty of assets they can put up as collateral after all. The Government can also negotiate a much better rate on behalf of the company.

As Ft says, there has been no announcement that finances raised from an IPO would be reinvested, in fact I think it is 100% probable that all money would go straight into the public purse, to be subsequently used to bribe voters for their support in an upcoming election.

I've said before, all they really need to do is reinvest the profits, they just announced £440m of profit, not even the shower that run us can turn that level of profit into a loss in 12 months.

Why are Cable, Fallon, Moya and the Government convinced that the only option is privatisation? Why is that the only answer? Have they even considered other possibilities? I think not, because the real reason for privatisation has nothing to do with requiring investment, it's about raising money for the Government, and lining the pockets of their mates.

[cloherty1976]

I remember in the 80s and 90s we used make losses regularly

[Brain Fury]

She is worth every penny. For a start, on the P739 card she got them to put parcel instead of packet, or was it packet instead of parcel? Then she whacked up the price of stamps to help drive letter volumes down. Next they doubled the cost of packets or parcels, whatever we have to call them to wind up small businesses. All these are one off measures to increase profits and make her look wonderful. I could have done that and I already live here and have a house.

Would you have preferred RM to carry on making losses?

Seeing as the vast majority of those losses were bullshit, clever accounting, yes.
The company has never made that much of a loss, the books have shown what RM wanted them to show.
Masses of equipment were purchased all in one year ( I think 2011 - but not sure) and stockpiled for future use, like PDA's and Vans etc. etc., and that year we made a 'loss' of hundreds of millions. But the assets were sat waiting to be used.
It's like the year RM made it's first major loss, I think about £587m, they banged on about it in WTLL, the look on my bosses face when I pointed out we hadn't lost a bean and it was clever accounting was ace, he said we'd definitely lost money, and we'd go bankrupt soon. That was the year RM bought a German company for £1bn. So, while technically a loss, it really wasn't, it was an investment. Had they not bought it, it would have been a £413m profit.

And even if the losses were genuine, I'd rather stay in Government ownership, as it would give us more security.

Let's say those losses are genuine, they are all aimed at making the company viable for sale, as most of the real necessary expenditure required for investment in the company has already been made, meaning any new owner won't be required to invest heavily in us, merely asset strip and attack our pay/pensions, reduce service, cut jobs, basically just profiteer/maximise profits to their hearts content. At ours and the publics expense.

All the vans, pdas etc weren't bought in one year. There was a stockpile of vans in one year because the roll out of revisions was slower than planned so the first tranche of vans that had already been bought had to be stored. In any case, as you say, these were assets so (apart from depreciation costs) the value of the vans was held as assets on the balance sheet and wouldn't contribute to any loss. We all know that the revisions are still going on and the equipment for these is still being bought now.

I really don't understand why anyone would think that staying in Government ownership is at all secure when under their control we have seen our pension scheme screwed, a total lack of investment in the business, the postal market manipulated so that their own company was shafted in favour of its competitors and 50,000 job losses! Not what I would call security.

You talk like any investment that is required has already been made. Surely you don't believe that? What about new barcoding, tracking and parcel handling technology just as one example. We're already behind our competitors in those areas so don't we need to bring ourselves up to speed? That means investment. So where is the money coming from - not from the Government that's for sure. So the two choices seem to be borrowing it and paying interest or selling shares in the company.

I didn't mean all equipment was bought in one year, but in successive years.
And they were stockpiled. My own manager told me that there was a huge amount of vans parked up waiting to be used. It had nothing to do with any delays, it was just a way of showing more expenditure in the accounts to show a loss. I know they are assets and would be shown, but it still allowed them to claim the company was loss making. Just like the first year we lost money after buying a German company for £1bn, they announced a loss of something like £587m, and made no mention of the extra asset they had bought. It's all bollocks.

The total lack of investment in the business is entirely the fault of successive Governments, who spent years creaming the profit out to use to top up the public purse, whilst RM simultaneously took a pension holiday that was in part responsible for the mess the pension fund is now in. The other reason for that is Tony Blair and Gordon Browns decision to tax pension funds to the tune of £5bn plus per year, whereas they had previously been tax free, which contributed greatly to the black hole. Pension funds fates were sealed with the economic meltdown, but it wasn't as responsible as RM and Labour were.

The postal market was manipulated deliberately to drive RM into the s**t in order to force through privatisation. They have had a one track mind on this for years, and have done everything and anything to try and ensure it happens.

Not all the required investment has been made, and at no point did I say nor suggest that, you've read between the lines, added 2 and 2 and come up with 9. I do believe that a larger proportion of the necessary investment has been made. But the private sector is not the only place to get capital, and I don't believe there is no reason RM cannot access it whilst still in Government hands, they have plenty of assets they can put up as collateral after all. The Government can also negotiate a much better rate on behalf of the company.

As Ft says, there has been no announcement that finances raised from an IPO would be reinvested, in fact I think it is 100% probable that all money would go straight into the public purse, to be subsequently used to bribe voters for their support in an upcoming election.

I've said before, all they really need to do is reinvest the profits, they just announced £440m of profit, not even the shower that run us can turn that level of profit into a loss in 12 months.

Why are Cable, Fallon, Moya and the Government convinced that the only option is privatisation? Why is that the only answer? Have they even considered other possibilities? I think not, because the real reason for privatisation has nothing to do with requiring investment, it's about raising money for the Government, and lining the pockets of their mates.

I agree with a lot of what you say about the the actions of successive Governments. That's how we got to where we are now regarding privatisation but to stop it would mean undoing all those decisions. We can't just stop as we are, Government owned and with private companies as competitors. I have also agreed with Ft about the proceeds of the sale although in the scheme of things £3 billion isn't much to the Government.

Your manager's explanation of the situation with vans is wrong. Delays to revisions were the reason for the stockpile of vehicles in 2011 and the surplus was reduced asap and not repeated. Of course the vans were bought in successive years - that's when they were required for the revisions. It started in 2010 and is still continuing now.

Also wrong is the idea that the expenditure allowed RM to claim a loss in that year. As I explained, the value of vehicles and other capital equipment is shown on the business balance sheet as assets. The cost of the equipment is depreciated over a number of years. This means the expenditure on it doesn't impact on the profit or loss in the year of purchase and the cost is spread evenly over the life of the equipment.

The larger proportion of the investment in new delivery methods has probably been made but that doesn't mean that other investment isn't required. I don't think any of us is in a position to say how much investment will be required in future but it's not about a single year. It would be nonsensical for a business to plan a long term investment strategy on profits alone. Nobody can predict what profits will be over say the next 5 years and if that will generate enough cash to cover the cost of investments.

As far as I am aware the only place RM can access capital while in public ownership (other than the alternative model proposed by the CWU) is from the Government. That means increased Government borrowing and they are not going to do that. The Hooper reports of 2008 and 2011 recommended the injection of some form of private capital. I prefer an IPO rather than a block sale to an investor or competitor.