Business secretary resolute on Royal Mail sale

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Lord Mandelson insisted that the government would not falter in its plans to sell a stake in the Royal Mail to the private sector, in spite of fears that the move could be defeated in the House of Commons.

“Mandelson and the cabinet are not for turning,” the business secretary said on Sunday in a BBC interview when asked about rumours of an imminent U-turn. “The government is going to proceed with this legislation.”

Speculation has grown that the possible promotion of Lord Mandelson to foreign secretary – in a cabinet reshuffle that could come as early as Friday – would en-able the government to drop the unpopular policy.

John Grogan, a leading backbench rebel, said this would allow a new business secretary “to do a new deal with backbenchers” without the government losing face.

But Lord Mandelson rejected this idea and refused to comment on the reshuffle speculation. “It is essential to do two things: one, keep the Royal Mail in the public sector – and we will – but secondly, make the changes that transform the business to enable us to sustain the better delivery service for the whole of the future,” he said.

CVC Capital Partners, the private equity group, has emerged as the frontrunner to take a big minority stake in the postal operator.

The group is understood to have proposed buying 30 per cent of Royal Mail in talks several weeks ago with senior ministers, including Lord Mandelson. However, the offer is thought to be significantly lower than the £2bn cited in a newspaper report on sunday.

The talks were attended by Stephen Lovegrove, the former Deutsche Bank executive, who took over last year as head of the Shareholder Executive, a body designed to improve the financial performance of public sector businesses.

The government still faces a vote by MPs this summer on the bill to enable a private sector operator to buy a minority stake in the group. However, Lord Mandelson indicated that this might be delayed from the expected date of June 9.

CVC’s preliminary proposal puts it ahead of rival bidder TNT, the Dutch postal operator.

TNT’s main interest is in buying only GLS, Royal Mail’s profitable parcels arm, rather than taking a stake in the whole group.

Opposition from backbench MPs and trade unions to the part-privatisation has already put off some bidders, including Deutsche Post, which last month pulled out of the process.

However, CVC would be a controversial investor in Royal Mail, as private equity groups are viewed as financial bogeymen by many MPs and union leaders.