Outlook: Leighton faces plural challenges at Royal Mail

Railtrack victory; Carphone/Snook

There can be no more devastating a lesson in the perils of state ownership than the Post Office, or Consignia as we may soon not have to remember to call it. The company should have been privatised and its markets thrown open to competition years ago, but its historic links to royalty and political sensitivity about the fate of thousands of community post offices has meant that it has limped on in public ownership in a progressively more advanced state of living death.

Starved of investment, milked by government for any available cash it has managed to earn, unable to raise its prices and plagued by some of the most militant union activity in the land, the Post Office is now in a state of near terminal crisis.

Everyone is fed up with it - its employees, its owners, and most of all, its customers, who have been deserting in droves whenever there is a half decent alternative to take its place. With their thousands of job losses, yesterday's restructuring proposals were being described as a black day for Tony Blair and his Government, but the reality is that but for the dead hand of government ownership, all this would have happened years ago and the pain would by now have been out of the way.

Prices have remained frozen in time but costs have continued to rise at a rate considerably above the rate of inflation. Parcelforce hasn't made a penny for fifteen years or more, yet little if any attempt has been made to grip the business and make it move with the times. Express delivery is a growing and profitable market, but Parcelforce has instead continued to concentrate its resources on declining and unprofitable non time guaranteed services.

What's happened at Parcelforce is symptomatic of the rest of the group, whose grossly inefficient practices and systems wouldn't exist at all were it not for the fact that they are still protected by monopoly. Though the government has attempted to limit the opportunity for abuse by forcing the Royal Mail to keep its prices virtually unchanged for the past five years, the damage is there for everyone to see in declining standards of service, under investment and a workforce so demoralised by lack of change that going on strike is still regarded as a worthwhile alternative to working.

The advent of Postcomm, with an eventual brief to end the Post Office's monopoly, has made the task of reform that much more urgent. Postcomm's other obligation is the almost impossibly contradictory one of ensuring that a universal postal service delivered at a uniform and affordable tariff is maintained. It remains to be seen which priority triumphs.

Time is short and the Post Office is being given very little of it. None the less, the turnaround task is not impossible. Allan Leighton, who yesterday confirmed that he is putting his caretaker role as chairman on a more permanent footing, would not have taken on the challenge if he thought it was.

Details of his package are still unknown, but even factoring in generous performance related bonuses on top of the £20,000 basic, Mr Leighton can hardly be doing it for the money. If he can walk the Post Office through the next three to four years, there'll be a gong as well as glory for him at the end of it. Mr Leighton is right to warn that yesterday's restructuring proposals are just the beginning. The Post Office will need to go much further to avoid being wiped out by the giants of Europe and America. Mr Leighton's appointment gives reason to hope it will.

Railtrack victory

When Stephen Byers put Railtrack into administration with the promise that shareholders wouldn't get a penny of taxpayers' money in compensation, this column described it as act of industrial theft and spite which the Secretary of State for Transport would live to regret. Remarkably, given all the U turns, cock-ups and climbdowns that have happened since, Mr Byers is still standing, but his declared policy is not.

The £300m of taxpayers' money that is to be provided to help compensate the shareholders was being billed yesterday not as a U-turn but as a piece of real politik in order to bring about a speedy resolution to Railtrack's administration. Only half admitted to was the City's threat to boycott Government projects, including its precious Public Private Partnerships, or make them more expensive, if the Treasury refused to cough up.

That the administration would get bogged down in a legal quagmire in the absence of compensation was always inevitable. Nor did you need to be an expert in prediction to realise the damage it would do to the rest of the government's private finance initiative. Mr Byers failure to realise either of these things is final proof, if proof were needed, that the Railtrack administration was badly thought through policy on the hoof.

Nobody quarrels with the the proposition that something needed to be done about the railways. But having largely failed to address the problem at all during its first term in office, the government was panicked into a poorly executed sticking plaster solution that in the short term at least seems to have made a bad situation even worse.

Even now, few fully understand what the not-for-profit trust that is meant to replace the hated Railtrack really entails, other than it sounds communitarian and politically correct. It wasn't the profit motive that destroyed Railtrack, but confused priorities and a hopeless muddle over who was meant to be providing the money for vital improvements. The Government may have bought off the most vociferous of its City critics with its £300m bung, but the damage has been done, both to the credibility of its transport policy and to its long term ability to raise private finance.

Carphone/Snook

It was always unlikely that Hans Snook could rest content with alternative medicine and colonic irrigation. Having done more to propagate the benefits and potential of mobile telephony than perhaps any other over the last ten years, he was bound to pop up again somewhere eventually, and so he has.

Carphone Warehouse would like you to think that these days it is much more than a simple retailer of mobile phones, though yesterday's cull of 89 underperforming stores might suggest otherwise. What is true is that on top of conventional retail outlets, Carphone has a growing repeat revenue stream from billing services for virtual network operators as well as a revenue sharing arrangement with all the main service providers. Mr Snook, who took Orange from nothing to vie with Vodafone as the UK's biggest operator, says he found it "irresistible" when Charles Dunstone approached him and asked him to be chairman of Carphone.

The feeling seems to be mutual, for Mr Dunstone, Carphone's founder, reckons he's got the industry's prime catch in Mr Snook. He'll act as a sounding board and mentor in taking Carphone further into the service provision market, says Mr Dunstone. It is rare, and not always the way to corporate success to have two proven entrepreneurs working together under the same roof. But then Mr Snook is an easy going sort and in any case it is not his business, so the chances of a productive combination look good.

j.warner@independent.co.uk