Royal Mail: a remission, but for how long?

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Perhaps the sole benefit from the last week's calamity is that the Government recognised that pushing through the Post Office Bill (Lords) was now impossible - for the moment. It could be forced through on Tory votes, but the fissures that would spark in the PLP where morale is now rock-bottom could re-open the leadership question almost before the last near-lethal bout of turbulence had subsided. So it has been postponed, but not abandoned. It will still be introduced into the Commons for second reading in the autumn, or even in the summer before the recess if the political atmosphere improves (some hope). But even an autumn revival of the Bill is an insanely risky course given the numbers in the PLP ranged against, as even the Whips freely admit. Brown is thus caught in a classic pincer movement - between dependence on Mandelson who allegedly saved his premiership (or so Mandelson and some elements in the media would have us believe) and vulnerability to the PLP where a 50% rebellion on this issue (on the Whips' calculations) could be the final straw that broke the Government's back. Could Brown be so foolhardy as to risk it?

The purported reason for the Government's delay in coming forward with the Bill in the Commons is that the price offered by the bidders was too low. TNT (Dutch) proposed less than £2bn, CVC (private equity) £1.5bn, while Deutsche Post (German) is mired in such trouble it couldn't make an offer at all. The Government had hoped for £3bn, so the bids were certainly embarrassingly low, but that has never stopped UK Governments in the past from going ahead with privatisation out of ideological fixation. It is more likely that the real block was the political numbers and the extreme weakness of the Prime Minister. If he couldn't reshuffle his own Cabinet, he certainly couldn't take on the PLP in probably the biggest revolt since 1997 (not excluding the Iraq War).

Is there any give in this situation? The simplest situation would have been to shift Mandelson, but Purnell's resignation blocked the reshuffle that was planned. So could the Bill instead be modified just enough to persuade the parties to compromise? The CWU is now offering a parallel track approach along these lines. It proposes establishing the Royal Mail as an integrated company limited by guarantee with no share capital, which would permit the company to become self-financing once the removal of the historic pension deficit allowed it to retain an additional £280m capital per year for the next 14 years. On the other hand they accept that resolution of the pensions black hole could be linked to negotiations and final agreement on modernisation and improved industrial relations, thus placing a necessary discipline on all parties. This proposal would have the further advantage that it would avoid the likely split between Royal Mail and Post Office Counters if privatisation went ahead since under the present Bill a private partner could well support alternative providers for the service currently received from Post Office Ltd.

If the Government was minded to reach agreement, such an approach could well offer the basis for a negotiated compromise. The block is Mandelson: having reached a deal with Ken Clarke that he could count on a 3-line Tory vote in support so long as the essentials remained unchanged, and having now an armlock over the PM, it is difficult to see much room for manoeuvre. Nor on the other side is there much sign of flexibility when already 170-plus Labour MPs have told the Whips they intend to vote against second reading. The stage is set for an epic showdown - a change of Prime Minister or a change of Secretary of State at BERR or an early election or part-privatisation withdrawn from the Bill on the grounds (ostensibly) that economic conditions wer not right - a delay that could prove interminable like the withdrawal of 42 days detention without charge after a similar deadlock.