Page last updated at 15:19 GMT, Thursday, 26 February 2009

Labour postal rebellion growing

Lord Mandelson on modernisation plans

A rebellion by Labour MPs opposed to the part-privatisation of Royal Mail is growing, with more than 60 now urging the government to rethink its plans.

They have signed a Commons motion calling on ministers to abandon plans to sell a minority stake in Royal Mail.

The government says such a deal would give Royal Mail much-needed cash while still leaving it in public ownership.

Business Secretary Lord Mandelson told the BBC there was "no question" of the organisation being fully privatised.

Funding modernisation

Among the 66 MPs who have signed the early day motion is former ministerial aide Jim McGovern who quit the government last month in protest at the plans.

The Conservatives and the Liberal Democrats both, in principle, support part-privatisation as a way of helping to modernise the service, but are worried about Royal Mail's future profitability and government support for its pension scheme.

In recent years it [Royal Mail] has been exposed to ever-increasing, unfair competition by the regulator
Geraldine Smith MP

Last month an independent review of Royal Mail advocated the sale of part of the business, a proposal endorsed by Lord Mandelson.

He told BBC One's Breakfast programme: "The Royal Mail will remain in the public sector. There is no question of privatising the Royal Mail.

"What we want to do is to introduce a minority stakeholder - I mean an experienced postal operator from somewhere else in Europe - to team up with the Royal Mail to bring much-needed investment for modernisation and increased efficiency, but also management expertise to enable the Royal Mail to become strong and viable and a real postal player in the future."

'Gale force'

Dutch firm TNT, one of Royal Mail's main rivals in the UK postal market, is believed to be the frontrunner to acquire the stake - which could be between 25% and 30%.

Appearing before the Commons business select committee, Lord Mandelson said private sector expertise would blow a "gale force of fresh air into the management and control of the Royal Mail".

He added that a full privatisation was a "bad idea", as it would "undermine" the organisation's "universal service", and that there would be "no slippery slope" towards it.

Part-privatisation is opposed by unions and many Labour MPs, making this potentially the largest backbench revolt Gordon Brown has faced since becoming prime minister.

The early day motion, to be put before Parliament on Wednesday, will say the plans "risk fracturing one of Britain's greatest public services" and notes Labour members backed the "vision" of a wholly public service at last year's party conference.

'Most respected'

Other former ministers to sign the motion include Frank Dobson, Malcolm Wicks and Michael Meacher.

One of the rebels, Geraldine Smith, said Royal Mail's status as one of the UK's "most respected" public bodies must be safeguarded.

"In recent years it has been exposed to ever-increasing, unfair competition by the regulator," she added. "Part-privatisation is not the answer."

Another rebel, John Grogan, questioned why Royal Mail needed additional financial support when it received a 1.2bn state loan to upgrade its sorting network as recently as 2007.

Royal Mail sorting office near Bristol
Reforming the Royal Mail remains highly controversial

Ministers say a commercial partnership will strengthen Royal Mail financially and enable it to offer new services in a competitive postal market while leaving it in public hands.

But critics believe the sale will set a dangerous precedent, one that could ultimately threaten Royal Mail's universal service obligation to deliver mail to every address in the UK.

'Public commitment'

Welcoming the parliamentary motion, the Communication Workers Union said it "reflected the opinions" of most British people.

"The Labour Party has a clear commitment to a wholly publicly owned Royal Mail," said its general secretary Billy Hayes.

"The Royal Mail is a successful and vital public service which does not need private capital to ensure modernisation."

Any rebellion may be tempered by the likelihood that both main opposition parties are likely to broadly support the government on plans to reform Royal Mail.

The Conservatives have described the part-privatisation as a "step in the right direction" but say urgent reform is needed to make sure core Royal Mail services are protected.

The Lib Dems have called for new entrants to the market to be allowed to compete fairly with Royal Mail.

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