Category Archives: Government

Britain, Business, Government, History, Politics, Society

A Royal Mail sell off makes business sense but there are risks…

ROYAL MAIL PRIVATISATION

In a world that is fundamentally different to that of the 1980s, the announcement by the Government this week that it will proceed with a £3 billion sale of Royal Mail, is the right way forward for the business if it is to survive. Margaret Thatcher baulked at the prospect and was, famously, a privatisation too far. Mrs Thatcher remarked in the Eighties that she was ‘not prepared to have the Queen’s head privatised’. Later, Michael Heseltine, and more recently, Peter Mandelson, had their privatisation plans for Royal Mail scuppered by dissenting MPs in the House of Commons.

Vince Cable, the Business Secretary, however, notified the Stock Exchange this week of the Government’s intention to float the company, which will probably take place in November. The announcement represents a further expression of economic confidence as the economy slowly recovers from a deep and difficult 5-year recession. The privatisations of British Gas and British Airways, some three decades ago, coincided with a rising tide of opportunism. The parallels are noticeable as that is beginning to be felt once more.

The sale of Royal Mail affords something similar, too, to those earlier flotations: the spread of share ownership. More than 15,000 employees are to receive 10 per cent of the shares, with the rest being offered to institutional investors and ordinary members of the public.

While not without risks, the Government’s plan does have much to recommend it. Royal Mail has suffered from both chronic under-investment and deep-rooted inflexibility as the world around it has radically changed. Royal Mail is heavily unionised and has lumbered on, but the effect has been missed opportunities on a vast scale as rivals have been able to compete on the more lucrative parcel-delivery markets, even as the digital revolution and e-mail decimated traditional letter deliveries.

Moya Green, who took over in 2010, has brought Royal Mail back into the black, which was largely helped by the Government’s takeover of its £5 billion pension deficit. Following the flotation and barring unforeseen disasters, the first dividends, totalling £133 million, will be paid in July.

Despite the Government’s plan and opportunity, the Communication Workers Union has responded in time-honoured fashion by threatening to strike. How it envisages industrial action will help its members or Royal Mail is not wholly clear. The CWU will be holding a strike ballot early next month to protest against potential changes in pay and conditions.

Some of the union’s wider concerns will be shared by many, such as the protection of minimal universal services, guaranteeing a six days-a-week service at a uniform and affordable tariff. This has after all been the hallmark of Royal Mail since its inception and is much prized. But the legislation underpinning the privatisation, which passed through Parliament two years ago, protects the universal service and will remain enshrined in law. That guarantee has been reaffirmed by the Government following its announcement to privatise.

The digital and communication revolution has hit Royal Mail hard, with a fall of 10 million in the volume of letters sent daily. That decline has been arrested to some extent because of the huge increase in goods that are ordered online and need to be delivered.

The benefits of privatisation should not be underplayed. A fleeter-footed business, no longer restricted by government investment rules and with access to private capital, will be better placed to undertake the sweeping modernisation and rationalisation the organisation still needs to go through if it is to compete and vie for business successfully. Upon being privatised, Royal Mail would then not have to compete for scarce government funding which it currently does against other government departments and budgets, such as schools, hospitals, and the police.

But there are risks. The most immediate is that the shares are sold too cheaply, repeating the mistakes of previous flotations and leaving taxpayers cheated and resentful. Over the longer term, the challenge will be a regulatory one. Though it is almost certain that the Royal Mail will continue to be bound by the universal service obligation mandating a six-day nationwide postal delivery – bar senior management tinkering with a system that could loosen some of those ties – what is unclear is how such a costly service will be funded in the future. There may be hope that booming business elsewhere, such as through online shopping, will enable cross-subsidy funding. Critics have warned of unaffordable hikes in stamp prices or even state bailouts.

Mrs Thatcher’s unwillingness to sell off Royal Mail was not only a sentimental attachment to tradition, but sprang from a hard-headed assessment of the political pitfalls of tampering with a venerable national institution. While such hazards remain, a flotation of the Royal Mail is the right decision for the Treasury, and arguably the right decision for the organisation.

In predictable style, Labour has denounced the sale – yet, it was the last government that ended the Royal Mail monopoly and opened up the postal market to competition, thereby making the eventual privatisation inevitable.

Royal Mail can be categorised as one of the foundation stones of the modern British state, one that can trace its origins to 1516, when Henry VIII established the office of Master of the Posts. For it to remain an important part of the national story, it now needs to be a commercially viable venture that is ready and willing to compete in a market with far different demands and pressures.

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Government, Politics, Russia, Syria, United States

The West should pursue punitive strikes in Syria…

‘RED LINE’ POLICY

Following Russia’s proposal on Syria aimed at monitoring and destroying Bashar al-Assad’s stockpile of chemical weapons, President Obama suspended a congressional vote to authorise the use of force against the Syrian regime.

But that proposal looks overly optimistic and unrealistic. Not only do the U.S. and Russia disagree over enforcement mechanisms if the Syrian regime fails to comply – the United States and her allies want a resolution provisioning the use of force in the event of non-compliance, the Russians do not – but the operational and technical challenges associated with destroying these weapons in a risky and volatile conflict zone should not be interpreted as something that will happen with unqualified ease.

Western military intervention has not, therefore, been averted and still remains a probable scenario. That has to remain an option that can still make an important contribution to the Syrian conflict, as well as beyond it.

Those desperate despots and tyrants around the world must be sent a message, namely that the use of chemical weapons will not be tolerated or permitted. Where this horrific form of weaponry is used the international community must insist it has the right to act. America’s ‘red line’ policy is once again being called into question.

Critics point out it is the numbers killed, rather than the means through which they are killed, that should constitute the ‘red line’ for the international community and those who are in support of humanitarian intervention. That, however, misses the logic, purpose and the devastating impact of chemical weapons use.

Recently on this site an article was posted concerning how history is littered with examples of chemical weapons being used during warfare (see article). Chemical weapon attacks in modern times can be traced to World War I. More recently they were used in 1988 in the Iraqi Kurdistan town of Halabja. These lethal and macabre attacks not only kill quickly and with an immediate impact on the local population, but they also inflict terror and have long-term consequences. They have the capacity to dramatically reduce enemy morale and fix a permanent physical and psychological scar on the local population. Chemical weapons inflict long-term injuries to its victims and can affect future generations in the form of birth defects and other disabilities. In Halabja, Hussein’s forces killed at least 5,000 men, women and children almost instantly. Thousands more continue to suffer today.

Chemical weapon attacks are not simply about destruction but about inflicting long-term, immeasurable and sustained pain and horror on a population. By their very nature, the use’ of chemical weapons are indiscriminate with their targets and their reach goes beyond the boundaries of the battlefield.

On the battlefield, they have the capacity to alter the balance of a conflict and offer a strategic advantage, especially in localised conflicts. Whilst it is certainly questionable that the limited use of chemical weapons will change the direction of the conflict, there effectiveness in urbanised and local areas should not be underestimated. Syria is engaged in a localised conflict where battles are taking place between disparate rebel forces and regime loyalists in an array of towns and cities.

Yet, if chemical weapons were used in a more consistent and sustained fashion and throughout the towns and cities embroiled in the conflict, then the entire balance of power could be altered to favour the regime.

Hesitation over military action is also based on the premise that the West would be supporting and fighting alongside radical al-Qaeda factions that dominate and comprise the Syrian opposition. That, though, misses two important aspects: firstly, that it would be against Western interests to have a rebel victory at a point when the West has very limited influence on the ground and, secondly, victory would put these radically inspired al-Qaeda elements in a position where they would come to dominate the Syrian state. That would be catastrophic for regional and global security and for the interests of both the West and the broader international community.

It has been made clear by President Obama (along with a British declaration) that any military strikes will not be aimed at removing the Assad regime (which otherwise would amount to ‘regime change’) or afford the rebels any meaningful victory. Instead, they say, strikes would be ‘punitive’ in their nature, giving in-effect Assad a bloody nose. Hence, Western action that aims to deter further chemical weapons use would not be instigated to bolster or afford rebel forces any meaningful victory.

The use of punitive and symbolic military strikes does not have to mean that diplomatic efforts should be put aside. The form of military intervention proposed by the US/UK, despite both powers having temporarily drawn back, can realistically be combined with diplomacy. The U.S. and Britain have repeatedly stated that the only outcome to this conflict can and must be a negotiated political settlement.

Military strikes, it is argued, will induce Assad into negotiating. But this has to be coupled with an effort to force rebel forces to also sit down at the negotiating table. That seems unlikely to happen at this stage, given that Assad has immense regional support as well as important proxy support from Russia. Rebel forces themselves are divided on the issue and do not operate under one unified banner.

But military strikes will show a willingness by the West to act that goes beyond the current conflict in Syria. The West is not currently in a position to topple Assad through extensive use of its military capacity (such as deploying ground troops), but it can and should still send a message to the Assad regime that it will act in the face of chemical weapons usage. That message would also resonate to other existing and future despots of the world.

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Britain, France, Government, Middle East, Politics, Russia, Syria, United Nations, United States

The U.S. holds fire by giving a Russian-backed proposal a chance over Syria…

SYRIA

The diplomatic momentum over Syria in the last 24 hours has surpassed all expectations and has been quite breath-taking. Events may have unfolded through an inopportune comment made by the U.S. Secretary of State, John Kerry, during his visit to London at the beginning of this week.

A week in politics is a long time, or so it’s said. No more is this evident than in America where, one minute, President Obama was preparing to tour the US talk shows to appeal for Congressional and public support for air strikes; the next, he was actually on those talk shows, airing qualified support for a Russian proposal to place Syria’s chemical weapons stocks under international control and supervision. The Congressional vote, which was widely seen as a make-or-break for Mr Obama, has been shelved, and France has been working hard in delivering a draft UN Security Council resolution that aims to put the Russian proposal into effect.

Startling, because, in just 24 hours, we have gone from the tense threshold of unilateral U.S. military action and a Cold War-style US-Russia rift to a proposal on which almost everyone can agree – the exception being possibly Syria’s anti-Assad opposition.

The French draft resolution is said to provide not only for the weapons stocks to be controlled, but destroyed, and for any breach to be met with ‘extremely serious consequences’.

If those consequences are assumed to include military action, if non-compliance was forthcoming, there is a risk that the resolution will attract a new Russian veto. The West should be wary of Moscow’s proposal that may have been conjured up to head-off U.S. air strikes, by merely serving as a delaying tactic. An apt tactic some may say, presaging months of Iraq-style disputes about access and monitoring.

But from another perspective it hardly matters why the international appetite for a military response is so small – however limited in intent and however heinous the crime that inspired it.  That could be put down to the ‘war weariness’ of campaigns in Iraq and Afghanistan, much of which still colours the political debate. But it may also be due to the difficult geopolitics surrounding Syria, a conflict recognised as being far too complex for punitive resolution.

If democratically leaders cannot convince their electorate on something as grave as peace and war, it will be time for them to pause and consider whether another answer might be found.

Any solution that deters outside military intervention, while removing the insidious threat of chemical weapons, would surely benefit everyone, no more so than the escalating numbers of Syrian civilians who find themselves in the middle of a war zone.

Any UN-sponsored agreement along the lines of a credible Russian proposal could help to open the way for wider talks. While this may be premature by jumping ahead to soon, the priority must be to ensure that the diplomatic process is not written off at a whim before it has been given a real chance to start.

The off-the-cuff remark by John Kerry in London does appear to have opened the door to a diplomatic resolution of the stand-off over Syria’s deployment of chemical weapons. In what was deemed a half-hearted suggestion by Mr Kerry that Bashar al-Assad’s arsenal be placed under international control and destroyed, the response was so swift that it is inconceivable not to see some choreography at work (or else just sheer relief).

Vladimir Putin picked up on the idea, and immediately pressed the Assad regime to agree. Washington said that if Syria did comply it would put on hold plans for a military strike in retaliation to the atrocity in Damascus last month. The United States, Britain and France have now tabled a resolution in the UN Security Council.

Nonetheless, sceptics are entitled to be suspicious. Why, for example, has Mr Putin, for so long the barrier to any action against Assad, turned peacemaker? Is this a delaying tactic to protect his Syrian ally, or one that is aimed in further undermining the already weak public support in the West for military strikes?

And, how will it be possible to logistically verify the destruction of the chemical weapons while civil war rages on in Syria? Will Assad call a ceasefire to allow inspectors to do their work, and if so will the rebels agree to one? The highly complex process of confirming whether Syria has complied would be fraught with difficulty, and could take several years to complete.

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