Only privatisation can save Royal Mail, warns expert

ROYAL Mail must be privatised to preserve the universal postal service, according to a government-commissioned report to be released this week.

The report's author, Richard Hooper, a former deputy chairman of Ofcom, says that only private investment can save the Royal Mail and the UK Government must act swiftly before potential bidders are put off.

Hooper's report will also warn that falling custom and a 10 billion pension black hole threaten the survival of the postal service.

His recommendations will revive the political row over whether foreign companies should be brought in to save Royal Mail.

Former business secretary Lord Mandelson put forward the Postal Services Bill during the last government. It proposed a one-third sell-off of the postal service, a move fiercely opposed by the Liberal Democrats at the time.

The coalition government now intends to introduce its own version of the bill, which was dropped by former Prime Minister Gordon Brown in the face of much opposition.

Hooper, who was commissioned by Lord Mandelson to review the future of Royal Mail, has produced an updated version of his report for Prime Minister David Cameron. He will warn that the pension deficit must be addressed if the universal postal service is to survive.

Ministers will use the report to argue that the case for privatising part of the service is even stronger than when Lord Mandelson introduced the Postal Services Bill proposing a one-third sell-off.

Liberal Democrat backbenchers now have to decide whether to back their coalition minister on the issue.

Some Royal Mail supporters have argued that the long-term decline in postal volumes can be eased by the rise in parcel business as more people shop on the internet. Hooper says that confidence is misplaced.

His report details a record decline in postal volumes of 7.3 per cent in 2009-10 and he argues that such falls could become the norm for the next five years. In order to deal with the pension deficit, restructure the business and ease the potential burden on public spending, Hooper will say private investment and corporate financial expertise are more essential than ever.

It remains to be seen whether Labour will oppose part-privatisation after previously arguing that the service's future depended on elements of the service being handed over to private hands.