Page last updated at 22:06 GMT, Monday, 23 February 2009

Royal Mail plans to be unveiled

Royal Mail van enters sorting office
Many Labour MPs say the plan will threaten the integrity of Royal Mail

Controversial government proposals to sell off part of the Royal Mail will be introduced in Parliament on Thursday.

Ministers want to sell a stake of about 30% to the private sector to help pay for the modernisation of the service.

The plan faces opposition from a large number of Labour MPs with one describing it as "political suicide".

Unions plan a protest against the plan but this comes amid fresh warnings about Royal Mail's ability to meet its pension liabilities without a sale.

In a leaked letter, the trustees of the Royal Mail's pension scheme said its deficit is likely to rise well in excess of its current 5.9bn should the sale not happen, with potentially "devastating consequences" for the business.

The government has proposed taking over responsibility for the pension scheme as part of the proposed sell-off package.

The letter's publication will be seen by some as a warning to potential rebels about the consequences of any opposition.

In December, Business Secretary Lord Mandelson endorsed the recommendations of an independent report which called for a minority stake in the business to be sold off.

He said Royal Mail could not survive in its current form, due to severe financial constraints and falling demand for sending letters, and needed fresh investment in technology to prosper.

'Unpopular'

He denies the plan amounts to a sell-off of the business, saying it will be a "partnership" which maintains Labour's commitment at the last election to keep Royal Mail in public ownership.

But unions will stage a mass protest on Tuesday against the plans, which they say are "deeply unpopular".

"We urge the government to take responsible action and respond to the justified concerns of UK citizens who do not want to see this valuable public asset carved up," said Billy Hayes, general secretary of the CWU union.

Labour MPs will be astonished that the government has chosen to rush through this legislation without consultation
John McDonnell, Labour MP

Unions point to the fact that Royal Mail made a profit of 255m in the last nine months of 2008 and argue that it is healthy and can thrive in its current form.

The protest will come on the same day as Royal Mail bosses are grilled by MPs on their plans for the company.

The plans could potentially result in the largest backbench rebellion of Gordon Brown's premiership.

Unless Labour rebels are persuaded to back the measures, the government may have to rely on opposition MPs' support to get them through as the Conservatives and Lib Dems back the move in principle.

Threat to jobs

Union leaders and MPs are worried about the threat to jobs in the event of part-privatisation and the impact of private sector involvement on the Royal Mail's "universal service" obligation to deliver mail to every UK home.

Michael Connarty described the plan as "political suicide" while John McDonnell said it would result "in significant job losses and attacks on the working conditions of postal workers".

"Labour MPs will be astonished that the government has chosen to rush through this legislation without consultation and in breach of the manifesto on which they were elected," he added.

Business Secretary Lord Mandelson speaking about the plans in January

Ministers say they are committed to the universal service but argue that Royal Mail is less competitive than its European counterparts and needs to improve its performance in order to safeguard its long-term survival.

They have also called for a "fresh start" in industrial relations after 2007's damaging strike which cost it millions of pounds.

Dutch postal operator TNT is the only firm, so far, to have publicly expressed interest in buying a chunk of Royal Mail.

Other proposals would see the government take over responsibility for funding the Royal Mail's large pension deficit.



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