British govt to rule out Royal Mail privatisation
The government is set to rule out the privatisation of Royal Mail when it announces the terms of reference for a review of the postal business, the Sunday Telegraph reported.
'He will make it clear that we are not privatising,' a colleague of trade and industry secretary Alan Johnson reportedly told the paper.
Royal Mail's board continues to hope for permission for the transfer of 20 pct of the business into the hands of its employees — and possibly up to 49 pct, the paper added.
Ministers shy away from Mail privatisation Leighton retains hopes that 20pc stake could be transferred to employees as Government backs his stand against regulator
Sunday Telegraph (UK), Sec. City, p 001 07-17-2005
By BY ROBERT PESTON
THE GOVERNMENT is set to rule out the privatisation of Royal Mail when it announces the terms of reference for a review of the postal business.
Alan Johnson, the trade and industry secretary, is intent on honouring the spirit of commitments not to sell Royal Mail that the Government made to trade unions in the "Warwick Agreement'' before the general election and which it repeated in its election manifesto.
"He will make it clear that we are not privatising,'' said one of his colleagues.
Despite Johnson's seemingly unambiguous position, Royal Mail's board continues to hope for permission for the transfer of 20 per cent of the business into the hands of its employees – and possibly up to 49 per cent. Although it originally wanted 51 per cent transferred to staff, it would regard a lesser transfer as an acceptable transitional measure.
"What is completely clear is that we won't get 51 per cent,'' said an executive close to Royal Mail. "That will allow ministers to say that there will not be a privatisation. And it's fine for us because we can wait to get the rest.''
Meanwhile, the Treasury and the Department of Trade and Industry are backing Royal Mail in its fight with Postcomm, the regulator, over tough new price controls.
"Postcomm's recent proposals were crazy,'' said one minister. "They were demanding unrealistic levels of efficiency from Royal Mail. It means that we would have to pay for tons of investment and get nothing in return.
"Why should we as the shareholder in Royal Mail be penalised to that extent? We've got to be allowed to make some money.''
Allan Leighton, Royal Mail's chairman, will be delighted that the Government is backing his battle with Postcomm. And it is understood that he remains optimistic that Johnson will allow a partial transfer of Royal Mail's shares into the hands of employees.
However, a government member said that Leighton's hope might be dashed. "Negotiations are at a delicate stage,'' said a minister. "Papers are whizzing around between the DTI, Treasury and No 10.''
What concerns the Treasury is that Leighton's scheme to transfer shares to employees raises far too little cash for the company and its employees. "This business requires capital and Leighton's proposal does not provide nearly enough of that,'' he said.
As a result, the Treasury will argue that if there is to be any kind of transfer out of state hands, it may have to involve an element of a conventional privatisation – with shares going into the hands of outside shareholders, not simply employees – to allow serious amounts of cash to be raised.
"What you will probably end up with is an impasse,'' said an official. "Johnson says there can't be anything that looks like a privatisation. Leighton says his employee-ownership scheme should satisfy Johnson. But the Treasury says that Leighton's scheme doesn't work and that if there is to be any kind of share transfer, Johnson may have to be braver and allow a proper share sale.''
In the end, the attitude of the chancellor will be pivotal. One of his colleagues said that he did not expect Gordon Brown to put pressure on Johnson to go for an explicit privatisation.
The DTI is hoping to finalise the terms of its sweeping review of the postal market this week. The Government announced that it would hold such an investigation in its general election manifesto. The pledge to conduct a review was originally inserted as a device that might allow the Government to back away from its promise to trade unions not to privatise Royal Mail. However, it is now possible that it will have precisely the opposite effect.
The manifesto pledge says: "We will review the impact on the Royal Mail of market liberalisation, which is being progressively introduced under the Postal Services Act 2000 and which allows alternative carriers to the Royal Mail to offer postal services.''
