Backbench revolt is in the post as MPs begin Royal Mail battle

Published on Saturday 10 January 2009 13:52

THE revolt against plans to privatise Royal Mail will begin in earnest this week when rebel Labour MPs table a motion opposing the move in the House of Commons.

Labour backbencher John Grogan will lay down an Early Day Motion in protest at the Government's plans to sell up to a third of the postal service, claiming it contravenes a Labour manifesto pledge to keep Royal Mail in public hands.

The motion is expected to attract widespread support after a Government report, which recommended forming a "strategic partnership" with a private sector firm, was met with fury in Parliament before Christmas.

Compass, the left wing think tank, estimates as many as 100 Labour MPs are likely to join the campaign which will force the Government to rely on support from the Conservatives to push the reforms through.

Opponents to the plans say Royal Mail, which posted an operating loss of 3m for its letters and parcels business in 2007, can return to profitability through internal cost-cutting and the introduction of better technology.

But the Government is keen to push through recommendations by former Ofcom chairman Richard Hooper to allow a company from the private sector to buy a stake of between 25% and 33%.

In a report published last month, Hooper warned Royal Mail would not survive under its current structure, and it would be in the best interests of the business, employees and taxpayers to secure a capital injection from the private sector.

Business Secretary Lord Mandelson has appointed the investment bank UBS to help the department for Business, Enterprise and Regulatory Reform in its search for a buyer. The Dutch operator TNT Post has already expressed an interest in buying a stake, and it is thought CVC, the private equity group which owns stakes in several foreign mail operators, is also likely to make an approach.

It is understood Mandelson may try to appease the rebels, who fear the stake will be the first step towards full privatisation, by offering a statutory guarantee that no more than a third of the service can pass into private hands.

But the Communication and Workers Union (CWU), which is helping to coordinate the rebellion, says it is folly for the Government to consider privatisation of any kind during a period when it has been forced to bail out private banks and possibly also car manufacturers. "We are opposed to the privatisation of any part of the Royal Mail," said CWU spokeswoman Sian Jones.

The motion will be tabled just days after John McFall, chairman of the Treasury Select Committee, proposed turning the Post Office into a state bank which would kick-start lending to businesses and households.

With UK banks continuing to withdraw credit lines, McFall urged the Government to create a state lender to get the economy back on track. "The Post Office, having secured a vote of confidence from the Government with the renewed Card Account contract, now needs to transform itself into a full provider of financial services," he said. "What better way to set it on this route, than to provide it with responsibility for realising the Government's lending ambitions?"

The Post Office is excluded from Mandelson's part-privatisation proposals.