Government to press ahead with Royal Mail sell-off

A report originally commissioned by Gordon Brown – and updated for the coalition government – said “urgent action” was needed to protect the postal service.

Former Ofcom director Richard Hooper, said the Royal Mail’s financial situation had got even worse since his original report in 2008, and warned that its growing £10bn pension deficit was unsustainable.

Mr Hooper said the number of letters being sent was declining faster than he had predicted, and was expected to fall even further over the next five years.

He said private funding was the only way to raise the cash needed to continue modernising the service.

Mr Hooper recommended that the government should take over the pensions deficit.

Business Secretary Vince Cable said the report showed the Royal Mail was “facing a combination of potentially lethal challenges”, and said he would be putting forward new legislation, possibly as soon as next month. Mr Cable promised employees would have a “real stake” in the future of the business.

“We are determined to safeguard Royal Mail for the future and help it tackle these challenges. We will come forward with new legislation in the autumn. It will draw heavily on Hooper’s analysis and recommendations and the government’s wider objectives, including the need for employees to have a real stake in the future of the business,” he said.

Dave Ward, Deputy General Secretary of the Communications Workers Union, told Channel 4 News the union will launch a major public campaign to explain to oppose the privatisation.

“We don’t need to go down this route. Once you bring in a culture of profit before service, you’re going to see damage to the postal service. It’s not in the interest of the country or customers in the local community.

He said that while strikes are not yet planned, the CWU is ready to fight to keep the Royal Mail in public hands.

“The report is completely misrepresenting what the problem is. If the government deal with the pension and the issue of competition, which they’re vowing to do, the argument to hand the company over to private investors is absolute nosense. It will bring the demise of the postal service in the UK,” he said.

Two years ago, the CWU managed to fight off Lord Mandelson’s plans to part-privatise the Royal Mail with the backing of Labour MPs.

Billy Hayes, the head of the CWU, warned privatisation would be “devastating”, and said “closures, cuts and profits will rule, while customers, small businesses and taxpayers lose out”.

Mr Hayes said the union feared the government was also plotting to seize the £26bn in pension assets.

Union leaders fear that privatisation will not just mean widespread cuts to jobs and services – but could also put at risk recent progress on pay and conditions after a series of strikes.

The recent dispute was resolved by a three-year pay deal and an agreement to keep at least 75 per cent of the workforce in fulltime employment.

Paul Reuter, national officer of Unite, which represents 15,000 Royal Mail managers, said the majority of people want the Royal Mail to stay in public hands.

“They are not prepared to see the postal service that they are very proud of disintegrate into a free-for-all for the private sector, which will cherry pick its way to profit. Unite members at the Royal Mail will vigorously campaign to protect the service and their jobs,” Mr Reuter said.

Labour leadership candidate Ed Balls said despite the deficit, the Royal Mail should remain in the public sector.

“There are big challenges ahead, but Royal Mail and the CWU have made massive strides to agree tough modernisation plans which should be allowed to continue.

“Rather than squander the public service ethic of the workforce, the right solution now is to make a modernised Royal Mail work as a 21st century public service,” he said.