MPs attack plan for Royal Mail share payouts

The government should reject Royal Mail’s proposals to give up to 20% of the company’s shares to employees, an all-party committee of MPs has concluded.
The trade and industry committee said Royal Mail’s arguments about motivating staff “lacked robust evidence and were little better than mere assertions”.

Senior managers at Royal Mail, led by the chairman, Allan Leighton, have insisted the share scheme should be an integral part of its business plan. The group needs to tackle a huge pension fund deficit and invest in automating its letters business, through a combination of government support and higher stamp prices.

In its latest report on Royal Mail, published today, the committee said it was “surprised to hear that the management of Royal Mail has placed conditions on agreeing to the government’s financial package (in the form of a proposed employee share scheme) given that the company is technically insolvent because of its pension liabilities.
“The committee hopes the government does not accept these conditions and believes there are far more straightforward ways to improve motivation, such as adapting the current profit sharing scheme.”

The MPs also called on the government to protect the post office network. The committee wants ministers to decide now what action to take when the £150m-a-year subsidy for rural offices runs out in 2008 and the Post Office card account, through which pensions and benefits are paid, ends in 2010.

“If the government fails to act, the network and all the benefits it provides for communities could be lost forever.”