Lawmakers Protest U.K. Plan to Sell Royal Mail Stake

[TrueBlueTerrier]

http://www.bloomberg.com/apps/news?pid= ... E&refer=uk

By Kitty Donaldson

Dec. 17 (Bloomberg) -- A member of Prime Minister Gordon Brown’s government resigned in protest about plans to sell a share in the state-owned Royal Mail Group Plc, signaling a rebellion within the ruling Labour Party.

“I do not support what looks to me like partial privatization,” Jim McGovern, a lawmaker who acted as an aide to Business minister Pat McFadden, said in a statement. “It simply beggars belief that we would employ a company from abroad to tell the Royal Mail in where they are going wrong.”

Business Secretary Peter Mandelson yesterday said he wants to sell a minority stake in Britain’s 360-year old Royal Mail to lure investment needed to prepare for pan-European competition in the delivery market. The U.K. service is struggling as TNT NV of the Netherlands, DHL Worldwide Express of Florida and Business Post Group Plc siphon off its most profitable business.

Labour lawmakers and the unions that fund the party object to the plan, saying it will lead to the sale of one of the government’s most important services and the destruction of jobs. With Parliament beginning its Christmas recess tomorrow, Mandelson will update lawmakers about his plan in early 2009.

“Unite members have had to bear the brunt of ongoing job cuts for the last five years,” said Brian Scott, assistant national secretary for the Unite union that represents some postal workers. “Unite is opposed to the full-blown privatization.”

Business Squeezed

Royal Mail, with annual revenue of 8 billion pounds ($12 billion), says the Internet is costing it profit of 500 million pounds a year and corporate rivals another 100 million pounds. It has a 7 billion-pound pension deficit and 200,000 workers who walked off the job last year protesting reforms that managers say are needed to keep up with rivals.

Mandelson said the government received an expression of interest from TNT, Europe’s biggest express delivery company, and TNT said it wants to have further talks about a substantial minority holding in Royal Mail.

Apart from former Transport Secretary Ruth Kelly, who resigned on Sept. 24 from Brown’s government to spend more time with her family, McGovern is the first Labour lawmaker to step down since David Cairns quit on Sept. 16. Cairns was upset about Brown’s leadership.

Limited Options

Brown’s options are constrained by his 2005 election pledge to keep the Royal Mail in government hands and by EU competition rules that forbid him from handing cash to the institution. A spokesman for the prime minister said the government must do something to stop the Royal Mail losing money.

“The status quo is untenable, and services would be under threat” without investment, Tom Hoskin, Brown’s spokesman, told reporters in London today. “By acting now we are securing Royal Mail’s future.”

Lawmakers on the Labour benches are worried the government plan will have on jobs and the future capability of the network, which is currently required to deliver to every address in the U.K., no matter how remote.

“This is a massive industry in which 30,000 to 40,000 people have already lost their jobs,” Labour lawmaker Michael Connarty told Parliament yesterday. “I understand that TNT runs on a part-time basis. It brought in technology and paid off all its full-time workers, so that people get 22-hour contracts. Is that the future for post office workers?”

Backbench Unease

During the same debate another Labour lawmaker, Lindsay Hoyle, said he was “not convinced” by the recommendations on the post office made by Richard Hooper in a report commissioned by the government.

“It is not about selling off the silverware and looking for partners,” Hoyle said. “We must charge private companies sufficiently high sums to ensure that Royal Mail makes a profit and is not subsidized by the taxpayer. If we put that right, Royal Mail will begin to make a profit. Let us do it that way, not the privatization way.”

David Curry, a lawmaker from the Conservative opposition, predicted the government would face a rebellion in the lower House of Commons.

“I bet the minister is looking forward to taking this through the House,” Curry said with sarcasm to McFadden.

Former Post Office minister and Conservative lawmaker Edward Leigh goaded the hatred of Brown’s party for the policies of former Prime Minister Margaret Thatcher, who sold off nationalized industries from steel mills to coal mines, allowing companies to cut jobs in the process. Leigh said he welcomed “Labour to the Thatcherite wing of the Conservative Party.”

‘Many’ Concerned

Former Labour minister Kate Hoey asked how the government would “convince the public” and “many” Labour lawmakers “that this is not just the slippery slope to privatization.”

John McDonnell, a Labour lawmaker who contested Brown for the leadership of the party last year, said the plans conflicted with the government’s 2005 general election manifesto pledge not to privatize the Royal Mail.

“No matter how the minister dresses it up, and it conflicts with a commitment to a wholly publicly owned service that we gave that work force,” McDonnell told McFadden.

Katy Clark, who represents a Scottish Labour district, said the Royal Mail workforce is suffering “very low morale.” Government, she said, “must agree that the proposals go against the spirit of the manifesto commitment.”

Labour lawmaker Geraldine Smith said that most of the current financial difficulties facing Royal Mail “stem from the postal regulator exposing it to unfair competition, allowing the vultures to pick clean the most profitable parts of the business.”