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Royal Mail sale plans 'delayed'

29 June 09 13:51 GMT

Lord Mandelson has said plans to sell a minority stake in Royal Mail to a private company are being delayed.

The business secretary says the bill which would allow the controversial move was being "jostled for space" in the government's legislative programme.

The bill, opposed by many Labour MPs, was due to go before Parliament before the summer break, but Lord Mandelson said it would not happen until "later".

Tory leader David Cameron said Gordon Brown had "bottled it".

And he offered to let the government use one of the two days set aside for Conservative motions to hold the second reading of the Royal Mail bill.

The Lib Dems said the delay was for political reasons as the government faced defeat if it pressed ahead with its plans.

More than 140 Labour backbenchers have signed a Commons motion critical of the plan and there have also been rumours for weeks that the whole scheme could be shelved.

Depressed markets

But Lord Mandelson has said the company cannot survive without it and he told BBC One's Breakfast that its finances were "reaching crisis point".

In a separate interview with the Financial Times Lord Mandelson said he still hoped to get the necessary legislation on the statute book before the next election.

But, he said, it may be difficult to do so before the House of Commons breaks for the summer, as was originally scheduled.

He told the paper: "I want to retain the slot, but... I have to concede that the original linking of the legislative passage and the bidding process for the strategic partner has been decoupled."

He pointed to the depressed state of the markets, meaning the sell-off was unlikely to raise a substantial amount of money, as another reason for delaying legislation to allow the sale.

BBC political correspondent Iain Watson said any delay in part-privatisation of Royal Mail would boost the morale of Labour Party activists but it was also likely to be seen as a climbdown by political opponents.

Conservative leader Mr Cameron said: "How many times do we hear Gordon say he's going to take long-term decisions? They've completely bottled it on Royal Mail as far as I can see."

'Purely political'

He said he would be happy to give up one of his Opposition days - when the Tories set the issue for debate - to try to get the bill through its next Parliamentary stage.

"The Bill needs to be passed, we support it and we backed it through the House of Lords."

For the Liberal Democrats, Danny Alexander said it was "completely bogus" to suggest there was not enough time to debate the bill.

"This is a purely political decision made because the government is desperate to avoid another humiliating defeat," he said.

"There is one overriding principle determining everything the government is doing at the moment, and that is Gordon Brown's desire to cling to power at all costs."

The government says that the partial sell off of Royal Mail is required as part of measures to tackle the financial position of the company - in particular a pensions deficit said to be near to £8bn.

The inevitable obligation to make increased payments to pay off the deficit might force the Royal Mail to increase its overall contributions to the fund to more than £1bn a year - which would drain all its potential profits for many years.

In June the new chairman of Royal Mail Donald Brydon, threatened to close the scheme even to current staff, if the government did not take over responsibility for the pension fund.

However there was some relief for the Royal Mail, and other employers, recently from the pensions regulator which last week published new guidance on how companies could cope with increased pension deficits during the recession.

This included the proposal to allow such pension recovery plans to be spread over a much longer period - such as 20 years.

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