Conservatives pledge support for Royal Mail sell-off

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From The TimesFebruary 25, 2009

Conservatives pledge support for Royal Mail sell-off
(Richard Pohle/The Times)
A postal worker at the rally at Westminster yesterday shows his disdain for the proposed sale of part of Royal Mail
Philip Webster, Christine Buckley and Francis Elliott The Conservatives pledged yesterday to support the Government over the sale of a third of Royal Mail and warned Gordon Brown against caving in to his Labour opponents. In a move that appeared to guarantee that Lord Mandelson, the Business Secretary, would get his way, Kenneth Clarke promised to vote for the part-privatisation plan. Only a handful of Tory MPs would oppose it, he said.

The Shadow Business Secretary’s move was designed to put the Government on the spot, blocking its retreat from the controversial sell-off on the ground that it could not get it through Parliament. The Conservatives made a similar pledge to help Tony Blair on the Bill to introduce trust schools in 2005 and their support was crucial to its passage into law.

Mr Brown and Lord Mandelson face one of the largest revolts since Labour came to office in 1997. More than 125 MPs have signed a motion opposing the part sale, including two ministerial aides who would have to resign if they carried their objections through to a vote.

At least three members of the Cabinet are said to oppose the legislation, which will be introduced in the Lords tomorrow. Ministers have chosen to launch it there to give themselves more time to work on opponents in the Commons.

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Ministers also fear that the Conservative pledge will make it harder to buy off rebels because they may not be able to convince them that their backing is needed to avoid a government defeat. Even so, they are deeply suspicious of Tory tactics, fearing that they might pull the rug from under the Government at a crucial stage in the parliamentary process.

They believe the Tories will try to secure full privatisation of Royal Mail. Inevitably this would be defeated but in the ensuing confusion the legislation might fall. Mr Clarke said that as the Post Office minister he, along with Michael Heseltine, had failed to persuade Margaret Thatcher to privatise the postal service. Royal Mail’s position had worsened over the past decade and it faced a serious financial crisis. “We have the interests of the postal service and public in mind and we will vote in line with the policy of part privatisation,” he said.

John Grogan, the backbench Labour MP for Selby, said three Cabinet ministers had told him that they opposed the plan. He added that UK price controls meant comparisons with other European postal services were less straightforward than supporters of part privatisation claimed.

“When people say that the Dutch or German operators are more efficient because they are more profitable, they do not take into account the fact they charge far higher prices,” he said.

Labour rebels said they would seek to exploit every opportunity to apply pressure on the Government to drop the proposals. Peers were being urged last night to defy convention and vote against the Bill during its second reading. “Peter Mandelson is testing the temperature — we’ve got to make sure he knows it’s scalding,” one said.

Adam Crozier, the Royal Mail chief executive, said that if action was not taken on Royal Mail’s need for cash and its pension deficit, the group faced a “really bloody big problem”.

He told the Commons Business and Enterprise Select Committee that Royal Mail would soon lose £560 million of income a year because of the switch to electronic communication and internet shopping. If the group continued to be responsible for its pension deficit, payments would double from £280 million a year.

Mr Crozier said although the management had reversed losses at the group, “the simple truth is that the business doesn’t generate enough cash to fund the innovation required”. He said in four to five years Royal Mail expected that 75 per cent of its profits would come from parcels rather than letters. Backing the government plan to bring in a minority partner, Mr Crozier said: “What this business needs is equity capital. We don’t need another loan, we don’t need more debt.”

Unions staged a Westminster rally yesterday against the proposals. Billy Hayes, the general secretary of the Communication Workers’ Union, said: “We could be faced with a situation where the Royal Bank of Scotland is nationalised and the Royal Mail is privatised.”

It emerged that at the Cabinet’s legislation committee yesterday Harriet Harman, the Commons leader, raised questions over the Bill’s timetable. Her move provoked suspicions because she has been accused of preparing herself for any future leadership election. It is understood Gordon Brown swiftly insisted that the current plan should go ahead, with the Bill introduced tomorrow in the Lords.

Have your say
I'm just wondering how long it will be before the French or Germans own our postal service having borrowed the money from one of our banks to buy it.

DickW, Aberdeenshire,

The Royal Mail should be kept as a subsidised Public service, a British service. It is only being part privatised to fit in with the EU masterplan of reduced Nation State monopolies as others now in the EU own a bit of our various industries. The UK is being sold out and 'sovietised' by stealth.

Andy, Liverpool, UK

A privatised Royal Mail would no longer be a universal service, and like our other privatised industries we would all pay dearly. As Cameron backs privatisation, as do the LIB dems I have no alternative than to vote BNP at the next election. What is this country coming to...................