Tuesday, May 20, 2008

Stamp duty

Our local Post Office depot closed earlier this year, and collecting parcels or mail that needs signing for – which we do about once a week – now means one stop on the train, and juggling time off work.

Royal Mail is fast running out of solid ground under it, like the polar bears. Branches of Post Office are closing up and down the country – which, one claimant argues, is a breach of human rights.

There was also a story a couple of weeks ago that, since 2006 and the end of Royal Mail’s 350-year monopoly on delivering post in this country, nobody’s actually come forward to try to compete.

It’s apparently just not worth their while; the volume of letters is declining at the same rate as the polar icecaps. And of course, the postal regulator thinks the solution to this is privatisation.

The mail system we understand today is a Victorian invention – Rowland Hill’s revolutionary “Post-office reform: its importance and practicability” was published in 1837, the year Victoria gave up being a princess.

Hill begins his argument for reducing the cost and complexity of the postal system with some numbers. Taxing postage is counter-productive, he says. The tax deters people from using the state-owned mail, and fewer people using the system means less revenue to the state overall – Hill himself quotes a loss of some half a million pounds for 1835 on page 2.
“The loss to the revenue is, however, far from being the most serious of the injuries inflicted on society by the high rates of postage. When it is considered how much the religious, moral, and intellectual progress of the people, would be accelerated by the unobstructed circulation of letters and of the many cheap and excellent non-political publications of the present day, the Post Office assumes the new and important character of a powerful engine of civilization; capable of performing a distinguished part in the great work of National education, but rendered feeble and inefficient by erroneous financial arrangements.”

Rowland Hill, “Post-office reform: its importance and practicability” (1937), p. 7.

Admittedly, Hill argued that the system would probably be better administered in private hands:
“There cannot be a doubt that if the law did not interpose its prohibition, the transmission of letters would be gladly overtaken by capitalists, and conducted on the ordinary commercial principles, with all that economy, attention to the wants of their customers, and skilful adaptation of means to the desired end, which is usually practised by those whose interests are involved in their success.”


But, since there is a monopoly, he argued, the state had a duty to make the system work, to make it work well, and to maximise revenues. And, because it had a monopoly, the costs would be easily spread across the whole country. In fact, if you had a national network anyway, the difference in cost of sending a letter 100 miles rather than 10 was almost negligible; either way, it was still even less than a penny.

So Hill rather brilliantly argued that you would raise revenues by at least quartering the price of postage (from the usual 4d) – and paying the fare in advance of posting, to avoid people cheating the system.

“I therefore propose –
That the charge for primary distribution, that is to say, the postage on all letters received in a post-town, and delivered in the same, or any other post-town in this British Isles, shall be at the uniform rate of one penny per ounce ; – all letters and other papers, whether single or multiple, forming one packet, and not weighing more than one ounce, being charged one penny ; and heavier packets, to any convenient limit (say one pound,) being charged an additional half penny for each additional half ounce.”

Ibid., pp. 33-34.

While Hill also called for a “great increase” in the number of receiving houses, he argued that a uniform rate of postage would make their job easier and more efficient: letters would either be paid for or not, so they’d just need distributing. It’s not dissimilar to recent discussions of micropayments: if there’s a system of handling them cheaply and efficiently, then there’ll be enough of them to make it pay.

And Hill’s brilliant system worked.
“In 1839 on average each person in the UK received just 4 letters a year. That figure doubled in 1840 to 8; in 1871 it was 32; by 1900 it had almost doubled again to 60.”

Simon Eliot, “Aspects of the Victorian Book – The Economic and Social Background to Victorian Print Culture: postal system”.

(See the graph at the foot of the page for the extraordinary scale of that…)

The Penny Black, the world’s first postage stamp, was issued on 6 May 1840. Soon there were wildly exciting technological developments like envelopes and, in 1843, Hill’s mate (and something of a hero of mine) Henry Cole invented the Christmas card. Hill, still the radical pioneer, was suggesting outlandish things like people having letter shaped holes in their front doors to make delivering post that much easier.

“Reducing the cost of mail would be a boost to literacy and democratise the use of the post,” says the British Postal Museum and Archive – arguing that Hill’s changes to the system were a deliberate social reform. But cheaper postage (and speedier services when post got sent my rail and, in London, it’s own private underground train) benefited everyone: the workings of business, of Empire, of news and thought and science were all given a great push.

As a result, and with Hill’s reforms being quickly adopted abroad, the world became a smaller place; our conversations became more widespread, diverse and quicker.

It’s no wonder that many commentators feel Hill’s postal system has been undone by the Internet – which, since 1990, has had just as huge an impact on worldwide work and natter. But the Internet is not the guilty party; the killer has been choking Hill’s system since long before 1990. Hill argued that the system would work because Royal Mail had its monopoly, and it is whittling away that monopoly that is causing the harm.

Telegrams, phonecalls and later faxes and pagers all competed with old-fashioned post; the speed and convenience of modern technology making many kinds of letter redundant. No longer would a courting couple arrange their dates by post; instead they’d enrage their parents by spending all night saying nothing down the phone.

But until (relatively) recently these technologies were no threat to Hill’s system because they too were part of Royal Mail’s monopoly. With its Victorian communication network set up, Royal Mail was inevitably in the best place to nurture the nascent technologies of telegraph and phone. Telegrams were sent and received from the local Post Office, and via cables that swam from Porthcurno in Cornwall, they reached the whole of the world. Britain’s telephone network was run by the General Post Office until 1980 – when British Telecom was created.

Now I’m not arguing that the telephone lines be renationalised. (But I can see an argument for making letters and parcels part of BT’s licence, that they’re as much “telecommunications” as telephone lines and broadband.) I’m just making the point.

But where the Royal Mail really was screwed was by being split into three. They separated the businesses of delivering letters, delivering parcels and operating post offices in 1986.

Oddly, Rowland Hill might have approved of this split. Having outlined his proposals for the fee of “an additional half penny for each additional half ounce” on parcels, he conceded his own doubts:

“The charge for weights exceeding one ounce should not, perhaps, in strict fairness, increase at so great a rate ; but strict fairness may be advantageously sacrificed to simplicity ; and it is perhaps not desirable that the Post Office should be encumbered with parcels.”

Hill, p. 34.

And yet, I’d argue that the parcels – and post that needs signing for – is the profitable bit. It’s the service you pay a premium on, and it’s the bit phone, fax and email can’t do. Tellingly, Parcelforce doesn’t have a monopoly on this stuff and – as Hill did sort of predicted (see above) – capitalists have skilfully, economically made parcels big business. There are expensive, elaborate advertisements for why one courier’s that millisecond quicker or how you can follow the progression of what you’ve sent to the square quantum particle.

And it’s simple to see why: the transmission of abstract ideas can be done in the electronic ether, as fast and free as available technology; but you’re always going to need someone to shift physical stuff.

And the Internet, I’d argue, has increased the postage of physical stuff. People shop online and then have their wares sent to them from all over the country and even from abroad. They swap stuff, they auction stuff, they send gifts to the people and communities they met online. All the stuff you can’t just do by talking, that needs someone getting off their arse.

It’s difficult to quote any numbers when the infrastructure is in bits, but without competing couriers paying for lavish advertisements, or even paying separately and on top of each other for their networks to have the same reach, surely it’d be cheaper for all of us to send stuff. And, on Hill’s model, that means we’d do it more.

Dividing the postal system up ever further is just slash and burn economics; you strip out the bits of an ecosystem that will yield short term returns, but you do so at the expense of that system having a future.


Paul Rhodes said...

I thought the profitable bit was the business mail - which subsidised the door-to-door delivery business. Ending the monopoly made no difference to the basic residential service, because it's not profitable and not easy to make it so as a universal service. But private mail companies have been able to cream off the business-to-business and business-to-consumer accounts, just contracting the final door-to-door bit of the process back out to Royal Mail; so they've lost the profitable bit of the monopoly without being able to lose the loss-making obligation to universal doorstep delivery.

0tralala said...

That's a good point, and I should have spelt out earlier that the-stuff-needing-signing-for (in which I'd include the b2b and b2c accounts) is the carry over of the postal system as it was pre-Hill.

Prior to Hill, post was mostly the province of the titled and rich, because the common folk couldn't afford it. And Hill's great genius was to point out that a monopoly meant everyone could share the benefits (and costs) of a better system.

So I'd still argue that splitting these things out of the monopoly is still slash and burn economics.

Le Mc said...

It's going the same way here. My dad works for the US postal service.