Royal Mail critics demand changes at top as Mandelson eyes sell-off

Published on 20/12/2008 14:28

CALLS are growing for a change in leadership at Royal Mail as unions and backbench MPs fight to keep it in public hands.

Unions are pointing the finger of blame at Royal Mail chief executive Adam Crozier and chairman Allan Leighton for the dismal state of the postal service, which is now at risk of part-privatisation.

The Communication Workers Union (CWU), which is threatening to split from the Labour party if Business Secretary Peter Mandelson forges ahead with privatisation plans, said Royal Mail's failures are down to poor leadership. It insists the service, which posted an operating loss of 3m for its letters business last year, can be turned round through internal modernisation and cost-cutting exercises without going to the private sector for cash injections. The union is backed by the SNP, which warned that rural locations in the Highlands and Islands could be the first victims of private sector involvement.

It is expected the Government will face a backbench rebellion in the new year after former Ofcom deputy chairman Richard Hooper recommended in a report on Tuesday that the Royal Mail be allowed to form a "strategic partnership" with a private sector operator.

TNT Post, the Dutch postal giant, has already approached the Government about acquiring a stake of as much as 33%. CVC, the venture capital group which holds stakes in both the Danish and Belgian postal services, is also thought likely to step forward. It is understood the Department for Business, Enterprise and Regulatory Reform is currently considering pitches from investment banks, including Morgan Stanley and Goldman Sachs, to advise it on the deal.

In his report, Hooper said the Royal Mail in its current form is "untenable" and the service would be forced to seek emergency help from the Government without radical and swift policy changes. That would result in a restructuring under European rules, which Hooper described as a "costly and poor" outcome for customers, employees and the taxpayer.

Hooper and the Government insist private sector involvement would only be in the form of a "strategic minority partnership", but unions and backbench MPs have denounced the move as a first step towards full privatisation. They say it is madness that the Government is considering privatisation at a time when it is having to bail out other failed private sector-run industries.

San Jones, spokeswoman for the CWU, said: "You modernise, you can get investment from within the company. There are lots of ways of doing that."

She questioned how Leighton and Crozier have spent a 3.9bn investment from the Government last year, which was intended to modernise part of the sorting system.

As Hooper pointed out in his review, British postmen and women still sort letters on their round in order of house number and street by hand. In Europe, 85% of this is automated to save time and money. Jones said the CWU has repeatedly questioned Royal Mail's management about why that technology hasn't materialised, but has received little response. "Leighton and Cozier have been very damaging to the service," Jones added.

Leighton, who joined Royal Mail in 2002, is due to step down early next year, but unions and rebel MPs are also pushing for Crozier's departure.

Mike Weir, postal spokesman for the SNP, said: "I have no faith in the current senior management. They seem to have pursued a particular style of confrontational management. Really there needs to be a change at the top to give Royal Mail a new direction as a public company.

"There are particular problems in Scotland because of our geography. Businesses in the Highlands and Islands rely on the Royal Mail. They don't have access to alternative carriers. When we are trying to get businesses going in a lot of these areas, this is not the way to go."

Backbench MPs have already begun masterminding a full-scale rebellion for the new year, when Mandelson is set to deliver a full statement on the Government's position. Last week Jim McGovern, parliamentary private secretary to Post Office minister Pat McFadden, resigned over the part-privatisation plans, while former Cabinet minister Peter Hain accused the Government of reneging on a manifesto pledge to keep the Royal Mail in public hands.

But the postal regulator PostComm has backed Hooper's proposals. Nigel Stapleton, chairman of PostComm, also recommended in a report in May that the Royal Mail should be allowed to raise external capital.

Tom Miers, an independent consultant, said part-privatisation will improve services for customers and increase profitability if it is done correctly. "Like we don't have one state monopoly supermarket, we shouldn't have one state monopoly mail service," he said.