Tories set to revive part-sale of Royal Mail

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A Conservative government is likely to implement plans shelved by ministers this week to part-privatise Royal Mail, rather than sell off the postal operator in its entirety, Tory insiders said on Thursday.

Ken Clarke, the shadow business secretary, is ideologically supportive of full privatisation. But the opposition party is wary of committing to a measure that attracts such widespread public opposition. David Cameron may instead back a manifesto pledge to implement the package, put on ice by the government, of part-privatisation married to a taxpayer-funded pensions bail-out.

The decision this week to suspend the legislation to effect these changes, until “market conditions” ease the sale of a 30 per cent stake in Royal Mail, creates a potentially serious problem for an incoming Tory government.

If – as expected – Gordon Brown decides to take no action this side of a May general election, the next government will face an immediate pensions crisis at the state-owned company.

Royal Mail has until June 30 next year to agree with its pension trustee a plan for repaying the pensions deficit, which is expected to balloon to £9bn ($14.7bn) or £10bn.

Lord Mandelson, the business secretary, is under pressure to agree to some interim action to support the scheme, rather than just leaving Royal Mail in limbo pending the election. Compass, the leftwing pressure group that backed the mass revolt by Labour MPs against part-privatisation, reiterated on Thursday its call for Royal Mail to be made a not-for-profit company, with taxpayers funding the pension bail-out.

Jane Newell, the pension fund trustee, said on Thursday she was “very disappointed” by the deferral of the legislation and she was seeking meetings with Lord Mandelson and Royal Mail as a “matter of urgency” to agree a way forward for the scheme.

Richard Hooper, whose independent review formed the basis of the government’s proposals, warned on Thursday that Royal Mail’s “tremendous problems” had actually worsened in the six months since his report. “If you have a £9bn or £10bn pension deficit, you are in financial trouble,” he told the BBC.

Donald Brydon, the chairman of Royal Mail, warned earlier this year that the company could be forced to close its final-salary pension scheme if the part-privatisation did not go ahead.

But the government said on Thursday that it would not fill the “black hole” in the company’s pension without the part-privatisation.