Royal Mail sell-off is delayed in downturn

Mandelson says taxpayer will not get value for money in current market

By Andrew Woodcock

Published:

Part-privatisation of the Royal Mail will not go ahead as planned because of the depressed state of the economy, Business Secretary Lord Mandelson announced yesterday.

He told the House of Lords that there was “no prospect” of the sale going ahead in the current economic circumstances.

A delay in the controversial sell-off, which is opposed by many Labour MPs, had been expected after Lord Mandelson said on Monday that his Postal Services Bill was being “jostled” for space in the legislative programme.

Yesterday he told peers that the state of the economy made it “impossible” to obtain value for money for the taxpayer. He added: “When market conditions change, we will return to the issue.”

Ministers had argued that private-sector money was needed to secure the future of the Royal Mail, which is facing a pension deficit of up to £8billion.

The plan ran into difficulties when the main suitor, Dutch postal operator TNT, indicated that its interest was cooling over the valuation put on Royal Mail.

Prime Minister Gordon Brown was facing the prospect of large-scale rebellion at the second reading of the bill in the Commons, after 150 of the party’s back-bench MPs signed a parliamentary motion opposing the sell-off.

Communications Workers Union general secretary Billy Hayes said: “The government has not only looked at market forces but has listened to the British public.

“Privatisation was a deeply unpopular suggestion from day one. We now look forward to resolving issues which remain around pensions, regulation and modernisation.”

Lord Mandelson told peers that the government remained “convinced” that the partial sell-off proposed in Richard Hooper’s report into the Royal Mail “offers the best chance for securing the universal postal service while protecting Royal Mail pensions”.

He added: “We have thoroughly tested the market to see who is interested in partnership, but economic circumstances, I need hardly point out, are extremely difficult.”

Conservative business spokesman Lord Hunt told peers that by putting the part-privatisation into “cold storage”, the UK Government was “putting the trustees of the Royal Mail pension plan in an impossible position”.

Liberal Democrat business spokesman John Thurso, MP for Caithness, Sutherland and Easter Ross, said: “This is a humiliating climbdown for the government. It is quite clear that Gordon Brown no longer has the political will to fight the unions and opponents on his own backbenches.

“The government first told us that the plans were being postponed because there wasn’t time to debate them. Now we hear that market conditions are the reason.”

SNP Royal Mail spokesman Mike Weir demanded Lord Mandelson abandon his part-privatisation plans completely.

The Angus MP said: “Privatisation of Royal Mail should not just be put off for another day – it should be ruled out once and for all.”

He added: “This humiliating climbdown, hard on the heels of a U-turn on ID cards, shows the UK Government is in complete chaos.”