Exclusive:Exclusive: calls for Royal Mail to be brought back into public ownership as Ofcom announces investigation

Royal Mail could face a significant penalty over failures to meet delivery targets last year, after the regulator announced it has launched an investigation.

Campaigners and MPs have called for Royal Mail to be brought back into public control in order to restore service levels and so that future profits can be reinvested in the system rather than handed out to shareholders.

The Ofcom investigation comes off the back of a recommendation by the Business, Energy and Industrial Strategy (BEIS) committee after it heard evidence that the company was not prioritising its obligation to deliver letters six-days per week to all UK addresses.

Royal Mail has been beset with issues amid a long and bitter industrial dispute and could face another investigation from the Information Commissioner’s Office over its use of employee data to track performance.

A number of Labour MPs say the privatisation of Royal Mail has been “a disaster” and the company should be held to account for its failings, but it is unclear whether the party’s leadership backs renationalising the postal service.

Why is Ofcom investigating Royal Mail?

Royal Mail fell short of its performance targets across the 2022 to 2023 financial year for first and second class mail and deliveries.

Less than three quarters of first class mail was delivered within one working day across the year, significantly less than the target of 93%. There were also issues with second class mail, with 90.7% delivered within three working days, compared with the target of 98.5%.

Ofcom said it takes quality of service very seriously and could fine Royal Mail if it cannot reasonably explain why it missed the targets, but the pandemic can longer be used as an excuse for poor delivery performance.

It added: “In deciding whether the company is in breach of its obligations, we will consider if there were any exceptional events – beyond the company’s control – that may have explained why it missed its targets.”

Last year, an investigation into its missed targets was closed after the regulator ruled that greater staff absences and social distancing regulations resulting from Covid had impacted service.

It also decided not to open an investigation into Royal Mail’s service levels during the 2020 to 2021 financial year because of the “uniquely difficult circumstances” of the pandemic. But the regulator did hand out a £1.5 million fine for not delivering first class mail on time during the financial year ending 2019.

The probe follows last week’s news that boss Simon Thompson will step down by the end of the year. His departure was announced weeks after a lengthy dispute with the main postal union came to an end.

Labour MP and former Royal Mail employee Kate Osborne has criticised the company over its failure to meet its obligation to deliver letters, describing this as “part of their deliberate running down of the service”.

She said: “It was a mistake to privatise it and since its privatisation Royal Mail has not been well managed, for many in rural communities, particularly the elderly, our posties are a lifeline, their failure to deliver letters has real consequences for many, I hope Ofcom hold them to account for their deliberate failings so far and ensure that it is not allowed to happen again.”

“Simon Thompson is walking away with bonuses and a big pay off, £547 million has been paid out to shareholders  - yet the company deliberately failed the public and attacked workers pay and conditions – they need to be held to account and the postal service should be renationalised.”

Grant McPherson, chief operating officer of Royal Mail, said: “Improving quality of service is our top priority. We are committed to accelerating Royal Mail’s transformation and restoring service levels to where our customers expect them to be.

“We’re sorry to any customers who may have been impacted by our performance during a year that has been one of the most challenging in our history. With the plans we have in place to drive service levels and reduce absence, we hope and expect to see further progress in the coming months.”

Last month, Royal Mail agreed a deal with the Communication Workers Union (CWU) which would see staff get a 10% salary increase over three years and a one-off payment for employees. The firm said it hopes the agreement will reduce absences, spread out workloads, and rapidly improve quality of service. The proposed deal will be put to a ballot of union members in the coming weeks.

A CWU spokesperson said: “Under a business mantra of ‘our company to run’, Royal Mail’s corporate leadership have created disaster in Britain’s postal industry.

“They have bullied their employees, abandoned any sense of duty to customers and behaved recklessly in the pursuit of cost-cutting and profiteering. Workers, customers and the wider community deserve so much better, and serious scrutiny is needed.”

Privatisation has been ‘a disaster’

A number of Labour MPs still back renationalising the policy, in line with a pledge in the 2019 manifesto to bring rail, mail, water and energy into public ownership.

During his leadership campaign, one of Keir Starmer’s pledges was to continue with this policy, although he has since distanced himself from it, while shadow chancellor Rachel Reeves is thought to be against nationalisation in most cases.

Last year’s Labour conference saw a motion proposed by the CWU calling for Royal Mail to be brought back into public ownership. The motion passed, but the party has not commented on the issue.

Ian Lavery, who sits on the BEIS committee which recommended that Ofcom investigate Royal Mail, described the privatisation of the company as “a disaster on its own terms, and said “any responsible government would take it back into public hands as a point of urgency”.

He added: “Royal Mail not only delivers us our letters and parcels but provides a vital and unique community service that is at risk so long as it stays under private ownership. We cannot let this creed of privatisation rip an even bigger hole in the heart of our communities for the sake of another zero on the end of the bonus cheques of the ultra-rich.”

Cat Hobbs, Director of public ownership campaign group We Own It said: "What do we have to show for a decade of privatised Royal Mail? An unreliable service. Underpaid posties. Doctors’ letters and employment documents arriving late.

"We shouldn’t have to cross our fingers every time we pop something in the post box, or worry that birthday cards won’t get there on time. But who’s not worrying? The shareholders of Royal Mail. They have made over £1.9bn in dividends since privatisation. This is money that could have been spent improving the service for the benefit of the public.

"It’s time to take Royal Mail back into public ownership, so it can do what it’s there to do: deliver to every address in the UK at the same price and standard.”

Richard Burgon has also backed renationalisation, citing public support in various opinion polls and saying that under its current leadership Royal Mail is being “undermined by corporate greed and mismanagement”.

He said: “If we are to protect the universal service that Royal Mail has provided for centuries, it’s clear it needs to be brought back into public ownership where it can serve the public and not just act as a cash cow for private shareholders. Poll and after poll shows that's what the vast majority of people want to happen and that's what's should be done.”