Ministers say Royal Mail needs urgent modernisation
The prime minister has defended the government's plan to sell off 30% of Royal Mail, saying it is the only way to safeguard the service.
Gordon Brown told Labour's policy forum the service's huge pension deficit made outside investment imperative.
Union leaders have strongly criticised the move, but Business Secretary Lord Mandelson accused them of using "scare tactics" which could threaten jobs.
He insisted the government would not back down on the sell-off plan.
Mr Brown was booed by protesters as he arrived in Bristol for the forum.
In his keynote speech, the prime minister said: "I do say to you that guaranteeing a £25bn pension fund, spending £1.5bn on the Post Office network, maintaining a universal service obligation can be achieved if we make the investment that is necessary.
"And that's what's behind our proposals to get someone to help us invest... I know this is difficult but we will continue to talk to address the concerns that people have."
Mr Brown described Royal Mail as "part of the fabric of our country", but said it was losing in the region of 7-8% per year due to new digital technology and faced a constant race to keep the big customers that use Royal Mail services.
But Billy Hayes, general secretary of the Communication Workers Union (CWU), said the government plan would "nationalise the pension fund and privatise the profit".
He told Sky News: "The government seems to have £1.3tn to sort out the banks in this country.
"We have got a situation where The Royal Bank of Scotland is on the verge of being nationalised and we've got the situation where they are suggesting Royal Mail should be privatised and flogged to a foreign multinational.
"I don't want to see Mrs Thatcher's ideas, Conservative ideas, being introduced by a Labour government. Let's be clear: 25%, 30%, Peter Mandelson has talked about 49% owned by a foreign company.
"That's not what people in the Labour Party want, that's not what people in the country want - they want to see a modern Royal Mail."
And Paul Kenny, general secretary of the GMB union, said the Labour Party had agreed in 2004 that the Royal Mail "would continue to belong to the people".
"Lord Mandelson has no democratic mandate whatsoever to change this undertaking," he said. "What he is doing is highly undemocratic and brings politics into disrepute."
In an interview with the Observer newspaper, Lord Mandelson accused union leaders of fighting an "ideological" battle that threatened the future of postal workers.
"I think a lot of the workforce of the Royal Mail won't be thinking of the politics of this, but about their pension and about their job security," he said.
"Both are in danger if we do not sort out the finances of the Royal Mail."
Lord Mandelson also warned Labour MPs that they must not "duck difficult questions and choices".
"Some in the party may be weary of taking decisions, but that simply signals that we're ready for a rest, inviting electoral defeat," he said.
Earlier, Health Minister Ben Bradshaw said it was a "misconception" that Royal Mail was about to be privatised.
He said: "Look, it's important we have a sensible debate on the Royal Mail... but it's important that debate is based on fact rather than exaggeration and dogma."
He said the government was committed to keeping Royal Mail in the public sector, but without some private investment there would be "continued long-term decline" and even full privatisation by a future government.
The key government proposals include:
- Inviting private firms to form partnerships with Royal Mail, including taking up to a 30% stake in its parcels and letters business
- Transferring responsibility for the pension fund, with its £6bn deficit, to taxpayers
- 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
- Excluding the post office network from the changes
The government says it aims to sell off shares in the service by summer 2009 - but it will need EU clearance first and primary legislation will have to be passed in Parliament.
The cash received will be pumped into Royal Mail and Post Offices Ltd and may be used to partially offset the cost of taking over Royal Mail pension liabilities.
More than 130 Labour MPs are expected to vote against the plans when they are debated in the Commons in June, meaning the government may have to rely on the Conservatives and Lib Dems, both of whom back part-privatisation, to get them through.