Government rejects Royal Mail compromise plan

Published on Tuesday 5 May 2009 13:07

THE Government remained on a collision course with Labour MPs and unions today over the future of the Royal Mail after rejecting a compromise to its controversial plan to part-privatise the postal group.

The Compass think tank put forward a proposal to turn Royal Mail into a not-for-profit company, in a similar model to Network Rail, rather than selling off at least a third to an overseas competitor.

Neal Lawson, director of Compass, said today that he had held "very constructive" talks with officials in Downing Street and the Business Department, warning that the Government would not be able to win support in the Commons for its Bill without Conservative support.

But Postal Affairs Minister Pat McFadden immediately turned down the idea, saying that Downing Street had dismissed the suggestion as "unworkable and not under consideration".

The minister said the Royal Mail needed "transforming", partly because of its huge pensions deficit, not a "political fix".

He told the BBC Radio 4 Today programme that the Government wanted to keep the Royal Mail publicly owned as well as restoring it to "good health".

He pointed out that for every 1% drop in post volumes, the Royal Mail lost 70 million, adding that the predicted fall was 7%-8% this year.

Mr McFadden acknowledged that more than 140 Labour MPs had signed a Commons motion against the Government's plans, but he said he could not second-guess the Parliamentary arithmetic.

"I understand this is difficult for some colleagues. We did not set out to pick a fight with backbenchers or trade unions, but we have a responsibility.

"Simply to kick it into the long grass would not be a responsible thing to do. We have to transform the Royal Mail and keep it in the public sector.

"We are always happy to talk to people about any suggestion they might have, but it cannot be a political fix."

Billy Hayes, general secretary of the Communication Workers Union, told the Press Association: "The Government says it is happy to discuss alternatives for the Royal Mail, but when presented with a well-argued public model they immediately dismissed it.

"This is not a game of a political fix, it is about the future of our postal service which we all rely on – just look at the delivery of the swine flu leaflet.

"The Government must listen to the public and its own MPs."

Asked if the Government was open to alternative ideas for the future of the Royal Mail, Prime Minister Gordon Brown's spokesman told reporters at a daily Westminster briefing: "We have put forward proposals. These proposals are currently going through the House of Lords and are expected in the Commons later in the summer.

"The key issue with the Royal Mail is how do we address the underlying financial problems the Royal Mail faces? They have a 5.8 billion pension deficit and there is falling demand for their services as a result of email and other forms of communication.

"We are determined to save the Royal Mail, protect the Royal Mail for the future and protect the universal service obligation of the Royal Mail. That's why we've put forward the proposal that we have.

"As Pat McFadden was saying, if there are alternative proposals that secure the financial position of the Royal Mail then let's hear them. We haven't seen them so far."

Amid predictions of a Labour backbench rebellion on a scale that would force ministers to rely on Conservative votes to get the Post Office proposals through the Commons, the spokesman insisted the Prime Minister was "fully confident" in the handling of the Bill by his Chief Whip, Nick Brown.