Rebels turn up Royal Mail heat

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Lord Mandelson came under pressure from Labour backbenchers last night to reconsider his plans to partprivatise the Royal Mail.

The business secretary defended the policy speaking to scores of MPs at the regular gathering of the Parliamentary Labour party in the Commons.

Though ostensibly at the PLP to discuss general business support, Lord Mandelson faced criticism of the part-sale of the state-owned postal operator.

More than 100 Labour MPs have signed a motion opposing the policy which - they believe - flies in the face of assurances given last year by the government. Two junior aides have, meanwhile, quit their jobs in protest at more than a quarter of the Royal Mail being sold to a foreign rival.

Lindsay Hoyle, MP for Chorley, asked the business secretary why the government would bring in private capital when the business had started to make a profit. "I don't understand why we want to nationalise the debt and privatise the profit," he said last night.

Keeping the Royal Mail in full public ownership was one of the main policies agreed at the "Warwick 2" meeting of Labour policy-makers in the summer. That stance shifted after the return of Lord Mandelson from Brussels and the publication of the Hooper report on the future of the group.

Ministers are likely to guarantee that legislation would expressly rule out a full privatisation of the business - but this is not enough to reassure backbenchers.

One of the rebel MPs said last night that there were strong concerns at ministerial level about the policy. "We are all waiting to see whether members of the cabinet who have expressed reservations in private about this will speak out," he said.

Alan Johnson, health secretary and former head of the Communication Workers Union (CWU), has denied having serious concerns about the policy - although he has urged colleagues to present a "clear and concise case".

One cabinet minister told the FT that the cabinet was united and "very clear" on the policy, which is designed to ensure the financial survival of the business. "There are going to be lots of difficult decisions in this economic climate," he said. The CWU, which has given Labour £5m since 2001, has threatened to withdraw its financial backing. The union said yesterday it would ballot its 240,000 members for disaffiliation if Lord Mandelson pressed ahead with the policy of part-privatisation.

The union has published a poll showing 90 per cent of people opposing any type of sale of the business.

Labour also faces the prospect of having to draw on Tory votes to push the policy through the Commons. The Conservatives, who support part-privatisation, are set to use an opposition debate on the issue tomorrow to try to force a vote on the sale.

The legislation is not imminent but the business secretary is understood to be determined to drive the proposals through. He is convinced that rebels' alternative proposals for saving the technically bankrupt postal operator by changing the pricing system are simply not practicable.