Royal Mail privatisation plans 'dead in the water'

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The planned partial privatisation of Royal Mail is "dead in the water" after Gordon Brown was warned there was little or no chance of getting the controversial move through the House of Commons.

Scores of Labour MPs have pledged to vote against the sell-off in a humiliating rebuff to Lord Mandelson, the Business Secretary.

The Sunday Telegraph has learned that the Prime Minister was warned by Nick Brown, the Chief Whip, that he "did not have the numbers" to get the measure through.

The search is now on for a face-saving exit strategy for Lord Mandelson, who is said to have badly misjudged the mood on Labour's backbenches.

A possible deal would see the Government write a guarantee into legislation that Royal Mail would never be totally privatised - but ministers fear even that would not be enough to satisfy the rebels.

A leading Government source said: "There needs to be a major think. The sell-off as it currently stands is dead in the water and what we are trying to do now is to spare Mandelson's blushes."

The sale of a minority stake in the Royal Mail was first proposed last year by a review carried out by Richard Hooper, a former civil servant, and was enthusiastically endorsed by Lord Mandelson.

However, the Business Secretary has since held a series of bruising meetings with Labour backbenchers, more than 100 of whom have signed a Commons motion attacking the move, which they see as the first step towards a full sell-off.

The Communication Workers Union - the sixth largest union in the country - has also warned it will sever links with Labour if the plans go ahead, threatening the party with a damaging and costly split in the run up to the general election.

Lord Mandelson was said by some MPs to have wrongly thought he could achieve the part-privatisation, a long-cherished dream dating from his time as Trade Secretary in the late 1990s, on his return to the Cabinet.

A leading rebel MP said: "Peter miscalculated and got the mood wrong. Ten years ago it was much easier to get this sort of radical move through. The parliamentary Labour party was much more supine then than it is now, and of course our majority was much bigger."

Labour has a Commons majority of 67 - meaning that just 34 of the party's MPs could defeat a government measure as long as all opposition MPs also voted against it.

The Prime Minister backed Lord Mandelson's plan, but is not thought to want to risk a damaging Commons defeat after being informed by Nick Brown of the full scale of the revolt.

To be sure of winning he would need to rely on Conservative votes, something he is not thought to be willing to do. The Tories have said they support part-privatisation in general terms, but have not committed themselves to backing the Government in a vote.

Nick Brown and his team of government whips were alerted to the strength of opposition in Labour's ranks during their recent - successful - move to win a vote on plans for a third runway at Heathrow Airport.

Pat McFadden, the postal affairs minister, said: "We know people feel very strongly and our door is always open to MPs to talk about this. But the situation is very serious and that is why we have to act."

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Ministers will have to ditch plans for the partial sale of the Royal Mail because of the opposition of Labour MPs.

Gordon Brown has been told any attempt to push the legislation through the Commons will be defeated by up to 80 Labour rebels. It means the Government will have to drastically water down the proposals, or scrap the sell-off completely.

A defeat would be a major blow for Business Secretary Peter Mandelson who is masterminding reforms of the Royal Mail.

But a senior Government source said: "The plans are effectively dead in the water."

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By Eddie Barnes Political Editor
PLANS to part-privatise the Royal Mail were on the verge of collapse last night as Labour MPs warned ministers that the moves will "split the party down the middle" if they go ahead.
The 130 rebel MPs say that ministers will have to rely on Conservative support if they want to push the measures through.

Business Secretary Lord Mandelson has warned that the deal must go ahead or the service will be fatally undermined.

Post Office minister Pat McFadden added yesterday that the Royal Mail was set to lose 7% of its letters business this year, leading to further losses.

But the rebels say they are not going to give in, leading to claims that Labour chief whip Nick Brown has warned he cannot get the votes required.

One of the leading members of the group, Scots Labour MP Michael Connarty, claimed last night that the party would only be able to win a vote on privatisation by relying on the Conservatives.

He said: "They will lose unless the Tories come in behind them which would be unforgivable and a serious breach of trust. It would be a suicide note for us."

McFadden said yesterday: "I do not think there is a full appreciation of the problems being faced by Royal Mail."

Central to the problem is its pension fund deficit of between £7bn and £9bn.