UK Royal Mail staff share transfer still on the cards
Ministers have signalled they could allow Royal Mail to transfer shares to its employees, following a government review into the future of the state-owned postal services operator announced yesterday.
The government has decided against setting up the widely expected independent review of Royal Mail's future once the postal services market is opened up to full competition on January 1. Alan Johnson, the trade and industry secretary, told MPs yesterday he had decided instead to appoint Sir George Bain, the former head of the London Business School, to work with him in examining these issues.
This internal review could give the green light to Royal Mail's proposal to transfer a significant ownership stake to its staff, Mr Johnson suggested. He told MPs he was "not ruling out" an employee share trust. The minister was challenged by Geraldine Smith, the Labour MP, who argued that such a move would break the party's manifesto assurance that it had "no plans to privatise" Royal Mail. A partial sale through an employee buy-out "would be privatisation by the back door and I'm very alarmed to hear you say you have not ruled it out," Ms Smith said. But Mr Johnson responded flatly: "I disagree with you on the issue of employee share ownership."
Many Labour MPs share Ms Smith's view – 90 have now signed a parliamentary motion opposing any dilution of the government's 100 per cent shareholding in Royal Mail. But Mr Johnson expressed "surprise" he was being asked by his party's backbenchers to rule out employee shares, saying: "In all my time as the leader of the Communication Workers' Union, I looked for ways in which the employee could have a bigger stake and a bigger involvement."
Royal Mail's future ownership is not the only issue the internal review will consider. The company argues it needs to invest at least Pounds 2bn to modernise its infrastructure and also hopes to persuade the government to move its historic pension liabilities to the state balance sheet. Royal Mail is also locked in a dispute with Postcomm, its regulator, over proposed price controls to 2010, which the company has claimed would send it into a "spiral of decline".
The Conservatives, whose support could be crucial to achieving the parliamentary approval needed for any change in Royal Mail's ownership, were critical of Mr Johnson's approach. David Willetts, the shadow trade and industry secretary, told the Financial Times that the employee share ownership scheme appeared to be an "elaborate mechanism to get round their pledge on privatisation. It seems to be driven by the need to work within the terms of the manifesto, rather than what's best for the Royal Mail."
Mr Willetts said the Conservatives backed employee share ownership but would want any scheme to ensure Royal Mail was accountable to either the government or investors, rather than in some form of governance "limbo." He characterised the government's approach as a "dreadful muddle".
Royal Mail welcomed the government announcement, saying that it looked forward to "contributing fully to the work Sir George and the secretary of state are initiating today".
However, the CWU, the largest union for Royal Mail workers, said it remained opposed to any move to reduce the state's 100 per cent shareholding in the company and would review its links with Labour if the government pursued this route.
MPs to review Royal Mail's future NEWS DIGEST
Financial Times UK, London Ed1, Sec. NATIONAL NEWS, p 2 07-21-2005
By By JEAN EAGLESHAM
MPs are to conduct a review into the Royal Mail's future after the postal services market is opened up to full competition, it was announced yesterday.
The review by the trade and industry select committee parallels a government-commissioned review into the same subject which was promised in Labour's general election manifesto but has yet to be announced. Peter Luff, Tory chairman of the committee, said the future of the state-owned postal operator was such a big issue it demanded an inquiry by the MPs, even if the government was setting up a separate investigation. The committee has invited written evidence by September 30 and said it would set dates for oral hearings after that deadline.
Jean Eaglesham
