Page last updated at 13:54 GMT, Tuesday, 5 May 2009 14:54 UK

'No political fix' on Royal Mail

Postal workers in sorting office
The government plans to sell off a large minority stake in Royal Mail

A compromise deal suggested as a way to avoid a damaging Labour revolt on Royal Mail is not being considered, Post Office minister Pat McFadden said.

He said proposals to turn it into a not-for-profit company like Network Rail were just a "political fix".

The government's plan to sell off a 30% stake in Royal Mail remained the "most convincing" option, he said.

But Labour backbencher John Grogan said ministers would have to compromise to win over more than 100 Labour rebels.

The government's plan is opposed by 148 Labour MPs - many of whom may rebel in the vote, which could take place next month, raising the prospect of the government having to rely on Conservative votes to get its measure through.

'Difficult' choice

Post Office minister Mr McFadden told BBC Radio 4's Today programme the government's plan to sell off a stake in Royal Mail was the "most convincing plan that has been put forward so far".

He said the not-for-profit proposal - put forward by the left wing campaign group Compass - was "driven by the politics of finding a solution around a political fix, rather than the transformation that's needed".

I would say to Gordon Brown and his government: 'Don't go faint hearted on this. Do what's right, the Conservatives will support you'
David Cameron

The proposal "underestimates the challenges faced by Royal Mail" - such as the rapidly declining volume of letters posted, he said.

Mr McFadden said he was happy to talk through other ideas but the government's plan offered a "comprehensive" solution to transform Royal Mail and deal with its pension deficit.

"I understand this is difficult for some colleagues. We did not set out to pick a fight with backbenchers or trade unions, but we have a responsibility," he said.

"Simply to kick it into the long grass would not be a responsible thing to do."

'Kamikaze move'

The government argues that Royal Mail's multi-billion pound pension deficit and the increasing popularity of e-mail means it cannot survive in its current form and needs outside investment.

But its critics, including the Communication Workers' Union, say the government's plan would "nationalise the pension fund and privatise the profit".

So far 148 Labour MPs have signed a motion signalling they oppose the plan.

Nick Robinson
The vote on part-privatising the Royal Mail will be a test of Gordon Brown's leadership and authority but not in the way some are suggesting
Nick Robinson
BBC political editor

And following a week in which the government lost a Commons vote on the Gurkhas and had to water down its expenses proposals, there was much speculation about Gordon Brown's authority at the weekend.

Labour backbencher John Grogan told BBC Radio 4's World at One there was a "question mark" over the government's plans regarding competition law - particularly if TNT, a big player in the UK's bulk business market, took a stake in Royal Mail. He said the postal regulator had told him there were "potential grounds for concern".

And he said he believed there could be up to 90 Labour MPs voting against the government.

While the vote could be held soon after the European and local elections on 4 June, he told the BBC: "I think it would be a kamikaze move quite frankly on behalf of ministers to bring it back then.

"The government has had a rough few weeks, we're approaching elections. A deal has got to be done between ministers and backbenchers."

Lib Dem opposition

Compass chairman Neal Lawson told the BBC the group's proposal was "to try and find a way out of this mess".

"At the moment they can't get it through Parliament with the support of Labour MPs," he said.

"I think they know there's a political problem, given last week, given what is likely to be unsatisfactory results in June."

The Guardian had reported aides to the prime minister were talking to Labour rebels about Mr Lawson's proposal.

But a Downing Street spokesman said: "We do not believe his alternative is workable and it is not under consideration."

Conservative leader David Cameron said his party would support the government's part-privatisation plan, which they believed was "right".

He told the BBC: "I would say to Gordon Brown and his government: 'Don't go faint hearted on this. Do what's right, the Conservatives will support you in the division lobbies to get this through Parliament."

But the Liberal Democrats, who have put forward their own proposal for ownership to be shared between the private sector, Royal Mail employees and the government, say they will not back the bill in its current form.

Spokesman John Thurso told the BBC: "This bill does not cover the key issues and in particular, the key issue of the Post Office network - it does not offer the Royal Mail the secure future we would like to see and therefore, we will be voting against it."

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