Royal Mail-(05.01.03)

One feature of regulated industries in the UK is how the regulated firms get other government agencies to support their arguments and government departments to lobby regulators on their behalf. The latest example of this is with Postcomm, where the Dti are publicly stating their concerns about the financial future of the Royal Mail unless the regulator relaxes its prices controls.

One of the main reasons for this is that other sections of government often act in similar ways to how private sector shareholders do to the running of a firm. Whilst they do not get involved with day to day decisions, there is a regular dialogue with the regulated firm about the issues that affect it. As with City investors, where they have some specialist knowledge they frequently do what they can to assist a firm with its problems. In the case of the Royal Mail it is magnified by their being a direct financial loan from the government.

Postcomm still acts independtly in making a decision on the price control. However, the Royal Mail in advance of the review publicly states that it will seek an appeal to the Competition Commission if they do not get the result they feel they need. This statement would presumably not be made without Dti support, given that ultimately the Competition Commission will report its findings back to the Dti!