Wednesday, 4 November 2009

A Public-Private Partnership not the right way ahead for Royal Mail

Chris Colvin today posted a very well argued article on the Guardian's Comment is Free site suggesting that part-privatizing the UK's beleaguered postal service, Royal Mail through some kind of Public-Private Partnership (PPP) would be a poor idea. The argument runs that part-privatization could be attractive to a government, either Labour or Conservative, because theoretically it would allow for some immediate reduction in national debt while improving productivity. Colvin mentions that PPP has a very poor record in the UK, with companies keen to take on contracts for government without bearing the risk related to them, resulting in moral hazard. This certainly seems to have been the issue with previous PPP projects; the London Underground (LU) was forced by central government to outsource maintenance and infrastructure upgrades to two private companies, Tube Lines and Metronet in 2003. Metronet entered administration in 2007, a failure blamed on poor corporate governance, and its activities have since been absorbed back into LU. The UK National Audit Office reported earlier this year that the failure may have cost the taxpayer as much as £410m. Such a failure in the postal system could end up being even more costly to the public, perhaps more so than managed decline in the public sector.

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About Me

London, United Kingdom
I'm Lecturer in Management at The York Management School, at The University of York, UK. I teach strategic management to undergraduate and masters students, as well as running the masters dissertation module. My research focuses on business and management history.