UK Royal Mail tells Government to keep mandarins out of review

ROYAL Mail executives are pressing the Government to appoint a senior business figure to head the review into the future of the business. They fear an inquiry led by ministers or civil servants will reduce the prospect of radical changes.

An announcement about the terms of reference and the inquiry team has been delayed by Whitehall in-fighting but Alan Johnson, Trade and Industry Secretary, is anxious to release details before the Commons rises for the summer recess on Thursday.

Royal Mail has lost the battle over privatisation although it remains hopeful of persuading ministers to back a “halfway house” solution based on setting aside 20pc of the equity for employees.

The Government set its sights against wholesale privatisation as part of its pre-election accord with unions, and offered the review to meet Royal Mail concerns about the impact of full-blown competition due to start in January.

Allan Leighton, Royal Mail chairman, has faced opposition from Mr Johnson as well as the Chancellor over his employee share sale plan because it will not provide the capital the business is seeking to fund investment or plug its pounds 2.5billion pension deficit.

Mr Johnson is anxious to avoid any restructuring that would lead unions to accuse him of “backdoor privatisation”. More fundamentally the Chancellor, while recognising the political attraction, sees little financial merit in the employee share scheme.

Royal Mail is seeking help to finance a pounds 2billion investment programme to improve competitiveness and wants the inquiry to address the pension issue as well as to consider its social obligations and the future of rural post offices.

Ministers are showing more sympathy for Mr Leighton’s complaint that the tough price-control package proposed by Postcomm, the postal regulator, will handicap the business in the run-up to liberalisation of the market. The package, which limits the price increases that can be made on stamps, was described as a “kick in the teeth” by Mr Leighton when it was announced in June.

Mr Leighton is pressing for a speedy rather than drawn-out inquiry. He is anxious to see the results before the end of the year.