Page last updated at 08:18 GMT, Thursday, 2 July 2009 09:18 UK

Mail U-turn pressure on ministers

Post box in central London
Plans to sell off part of Royal Mail were opposed by many Labour MPs

The government has denied that its decision to shelve plans to sell part of Royal Mail was taken because of the threat of a backbench rebellion.

Ministers insist it was due to a fall in the value of the postal market and a lack of bidders.

Business Secretary Lord Mandelson announced that the proposal was being put on hold on Wednesday.

He insisted part-privatisation was merely being postponed until market conditions improved.

But the government is being urged to explain how it will rescue the Royal Mail's pension fund.

It had planned to pay off the fund's £8bn deficit, as part of the part-privatisation deal.

But after the deal collapsed, Lord Mandelson said the pension deficit was "a matter for the company and the pension trustees".

The Tories say the pension fund's trustees are in an impossible position.

The partial sell-off, opposed by unions and many Labour MPs, had been due to go before Parliament before the summer break.

'Don't walk away'

A Labour peer, Lord Clarke of Hampstead, urged ministers to "urgently get down to talking" about the pension fund deficit.

But while Lord Mandelson agreed that the pensions deficit was "a huge and growing burden" on the Royal Mail, he said the government "had to be fair to taxpayers".

I don't think the British public want to see their Post Office privatised
Billy Hayes, CWU General Secretary

He added: "[The government] cannot expect them to take responsibility for the deficit if the other challenges facing Royal Mail are not also addressed."

Conservative business spokesman Lord Hunt told peers that by putting the part-privatisation into "cold storage", the Government was "putting the trustees of the Royal Mail pension plan in an impossible position".

But Richard Hooper, the man whose review of Royal Mail last year recommended the part-privatisation, said the company was "in crisis".

"If you have got a £9bn to £10bn pension deficit you are in financial trouble," he told BBC Radio 4's Today programme.

He said industrial relations had got worse and the decline in letter volumes had accelerated in the six months since he completed his report.


He refused to be drawn on why a buyer could not be found, repeatedly saying he did not want to comment on "politics".

BBC Political Editor Nick Robinson said he had "let the cat out of the bag" with this reply - suggesting it was not a commercial decision but a political one to head off a revolt by Labour MPs and trade unions.

BBC Business Editor Robert Peston said that if Royal Mail was a privately-owned company "it would be bust".

CWU postal union general secretary Billy Hayes said the pensions deficit had been "created mainly by a Conservative government" and the Royal Mail was a profitable business

"It is not true to say that the Royal Mail does not make money. It is more profitable than Deutsche Post and in better shape than TNT," he told Today.

He said a low value bid by private equity company CVC had been the only offer on the table, but added: "I don't think the British public want to see their Post Office privatised."

On industrial relations, he said the CWU had offered Royal Mail management a three-month no strike deal to "sit down and negotiate change" but they seemed "unable" to take this up.

But he defended planned strike action in London, saying his members there were seeing "their pay cut completely arbitrarily".

The union plans to hold a series of walkouts over three days later this month in a row over jobs and services.

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