Public Money to Counteract Pension Deficits

Public Money to Counteract Pension Deficits

	Published : Mon, 24 Oct 2005 20:00 By : James Rowe Print this Story

Postal major Royal Mail is all set to revamp its cost cutting strategies to improve its financial condition. The financial deficit of the Royal Mail pension scheme has risen to the tune of 4 billion pounds. Royal Mails ambitious plans have created uproar among the lawmakers in Britain who are vehemently opposing the use of taxpayer’s money to cover the huge pension deficit.

Liberalisation comes with its own advantages and disadvantages. Thorough analysis of the state of financial affairs of the postal major paints a very poor picture of the pension liabilities. A lot is left to be desired.

Royal Mail had drawn a wide range of plans which included providing stakes to employees in company ownership. In other words, it would simply mean owning a considerable number of shares. The chairman of Royal Mail Allan Leighton proposed to give 20 percent stake to employees in the business. This decision by the chairman caused uproar among the lawmakers and union leaders. Many MPs from the Labour party also opposed this decision. Many even denounced this move as illegal.

The state trade and industry secretary, Alan Johnson wants Royal mail to clearly spell out its agenda for countering the deficit. He was also concerned about the stamp prices.

The chairman Allan Leighton has painted a very grim picture. He feels that the regulatory board and the government have a huge role to play in helping Royal Mail tide over its financial crisis. He feels that the rise in stamp prices is inevitable and it would be in the interest of all if the regulatory board allows the increase. This would greatly help in dealing with the deficit.

The postal prices are determined by the regulatory board. In case the regulatory board is unable to resolve the crisis, the government must step in and bear the deficit. The deficit over a period of six months has risen to 4.5 billion pounds from 2.5 billion pounds. The increase in deficit is mainly due to the change in accounting rules.

The condition is likely to deteriorate unless the government or the regulatory board steps in. One method of reducing the deficit is to pump public money in to the pension fund. This was stated by the Department of Trade and Industry. But the ministers are reluctant to use the taxpayer’s money to reduce the deficit.

Ministers feel that the industry should find means and ways to tide over difficult times. The government cannot be roped in every time to tide over the crisis. The postal major will really have to revamp its core strategies if it has to compete with its competitors. The output is not up to the mark. To stay in the market as a key player in postal business, Royal mail would have to increase its annual savings and work efficiency.