Mandelson offers olive branch to Royal Mail rebels

Thursday, 26 February 2009 11:55 AM

The government has published the bill to privatise 30 per cent of the Royal
Mail with Lord Mandelson, the business secretary offering a potential olive branch to those within his own party opposed to the plan.

In a move which somewhat wrong-footed many MPs Lord Mandelson introduced the bill to the House of Lords yesterday evening, perhaps in an attempt to avoid further protests today following the mass rally outside Westminster earlier this week.

The plans are bitterly opposed by unions and more than 130 Labour MPs have signed a Commons motion opposing the proposals.

The Royal Mail's huge pension deficit and competition from e-mail mean the postal service will never be profitable in its current form, according to the government.

Lord Mandelson's proposals include:

Inviting private firms to form partnerships with Royal Mail, including taking a minority stake in its parcels and letters business

Tackling the pension fund deficit

Transferring regulation of the service from Postcomm to Ofcom

A new fund to protect the universal postal service, which may be at risk from private competition in the future

Keeping local post offices in public ownership

But in response to significant opposition to the plans the business secretary has included a pledge within the legislation that the government maintain its majority stake in the Royal Mail meaning any future government wishing to privatise the postal service would have to do so through primary legislation.

Lord Mandelson argues that his proposals for the modernisation of the Royal mail are the only way to protect a universal postal service, which sees letters and parcels delivered to 99 per cent of homes in the UK.

Publishing the postal services bill he writes: "The policy we are proposing will keep the Royal Mail in the public sector, while equipping it for modernisation."

The Royal Mail's pension deficit, believed to be £8bn, is expected to grow "significantly," he says, and "swallow any profits that the company might make in the future".

But "tackling pensions on their own would not be a panacea for Royal Mail's difficulties".

Industrial relations within Royal Mail must also improve, he adds, pointing out that in 2007 60 per cent of days lost to strikes in the entire UK economy were down to postal workers.

The plan is based on recommendations by the 2007 Hooper review which also proposes a new charging regime for private firms wanting access to the Royal Mail network.

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