Mandelson defends Royal Mail plan

Lord Mandelson: 'The Royal Mail is in danger of running out of money'

Business Secretary Lord Mandelson has defended plans to sell 30% of Royal Mail, insisting its overall ownership will stay in public hands.

Some 125 Labour MPs oppose the scheme, fearing full privatisation and job cuts and citing Labour's election pledge to keep the service public.

Lord Mandelson said he was "absolutely clear" it would stay publicly owned.

But he told the BBC that new investment was sorely needed as Royal Mail "was in danger of running out of money".

While he said he was sorry for the "political pain" that the proposals were causing in Labour ranks, he vowed not to "walk away" from the plans.

Political fight

The government says the Royal Mail needs new investment in technology to survive.

Ministers insist the plan, due to be introduced in the House of Lords on Thursday, is not a sell-off but a "partnership" which maintains Labour's manifesto commitment to keep the Royal Mail in public ownership.

A total of 145 MPs have signed a Commons motion opposing the move.

Union boss on sell-off 'scare'

The BBC's political editor Nick Robinson said there was disagreement on Tuesday over how the bill should be presented to Parliament at a meeting of a Cabinet sub-committee, responsible for legislation, chaired by Harriet Harman.

Although ministers deny any differences over the substance of the bill, Nick Robinson said there was anxiety about the prospect of a political fight the government may struggle to win.

Lord Mandelson said the taxpayer could not be expected to fund potential liabilities in the region of £8bn without seeing an improvement in the performance of the company.

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

In a letter to Lord Mandelson, Jane Newell - the chair of trustees of Royal Mail's pension scheme - warned its deficit could rise well in excess of its current £5.9bn, should a stake not be sold.

But the Communication Workers' Union said the publication of the letter was an effort to "scare" MPs into voting with the government.

Ministers have given themselves a couple of months to try to win the argument with almost 140 rebel Labour MPs Nick Robinson BBC's Political correspondent Read Nick's thoughts in full Postman speaks of pension woes Postal workers on the protest

Chief executive Adam Crozier told the Commons business and enterprise committee on Tuesday they were facing "rapidly declining" volumes of letters posted - with an 8% drop predicted next year.

When the pension deficit was revalued, it was expected to reach between £8bn and £9bn, he said.

He added: "The simple fact is the business doesn't generate enough cash to fund the investment required to modernise the business and ensure the future of the USO (universal service obligation)."

Job losses

Shadow business secretary Ken Clarke, a former postal minister who failed to persuade Margaret Thatcher to privatise the service when she was prime minister, said most Conservatives would vote with the government.

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He urged Lord Mandelson not to "cave in" and said matters had got worse over the past decade and Royal Mail now faced a "serious financial crisis".

"We have the interests of the postal service and public in mind and we will vote in line with the policy of part privatisation," he said.

Unions argue the Royal Mail made a healthy profit in 2008 and can thrive in its current form.

They are worried about possible job losses and the impact of the private sector involvement on the universal service.

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