Royal Mail on the mat for private buyers

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The Royal Mail has been in the hands of the British state since Charles I set up Britain’s postal delivery service in 1635, but that is about to change.

Maintaining the service and its 160,000 workers in public ownership has long been a totemic issue for the left-leaning Labour party, which has run the country for the past 12 years.

Even Margaret Thatcher, the Conservative prime minister who dominated British politics in the 1980s, said privatisation of the Royal Mail was a step too far.

Not for much longer, however, as the government pushes ahead with a plan to sell 30 per cent of the business to the private sector.

The man behind the scheme is Lord Mandelson, the former EU trade commissioner who is now the UK business secretary. He is one of the most powerful figures in Westminster but deeply unpopular with the left wing of the Labour party.

Lord Mandelson insists that an outside investor is needed to bring capital and business experience to the group, which has long been a byword for inefficiency and industrial strife. Companies thought likely to bid include TNT of the Netherlands and De Post-La Poste of Belgium.

The quid pro quo is that the government will take responsibility for the group’s pension fund, which is an estimated £9bn ($13bn, €10bn) in deficit.

But more than 130 Labour members of parliament have signed a motion criticising the part-privatisation and many are expected to vote against their own government over the issue.

Ministers are worried, with one aide telling the Financial Times that defusing the revolt was akin to “turning around a tanker”. There are also fears that the Communication Workers Union, which is implacably opposed to the deal, will withdraw its funding to Labour – worth up to £1m a year – at its autumn conference. The party is dependent on the unions for the vast bulk of its funding.

Lord Mandelson hit back over the weekend as he accused the CWU of “scare tactics” and “propaganda”.

The business secretary believes he has compromised with a promise not to sell more than half of the Royal Mail.

He will also relax regulatory price controls on the state-owned postal operator to make it more profitable. But critical MPs said the group would not need an injection of private money if it could charge more.