DWP slammed over Royal Mail

The Department for Work and Pensions (DWP) was irresponsible and short- sighted for dropping a GBP12m Royal Mail contract hampering efforts to tackle the firm’s gaping GBP5.6bn pension deficit, a Liberal Democrat MP said.

The DWP, Whitehall’s biggest department, awarded private firm UK Mail with a GBP12m postal contract at a time when the Department for Trade and Industry (DTI) is desperately trying to plug the GBP22bn Royal Mail pension scheme’s deficit.

The government-owned former monopoly has struggled to retain business after postal services were fully opened to competition last year. Since then it’s lost more than 10% of the mail-handling market to private firms.

Alistair Carmichael, MP for the Northern Isles and part of the Liberal Democrat Home Affairs team, said he had huge problems with public money paying private firms to undermine public services such as Royal Mail.

“This is one of the best examples of how far from joined up a government you can find and it doesn’t bode well for the Royal Mail pension scheme,” Carmichael said.

“It seems irresponsible from the DWP to set this example. Here’s the government department responsible for sorting the pensions crisis and it’s pulling the rug from under a company with a major pensions deficit,” he added.

Carmichael was concerned other major Whitehall departments would follow the DWP’s lead, heaping the pressure on the Royal Mail scheme.

He said it will mean less money going into Royal Mail, and it’s taxpayers’ money that pays Royal Mail’s pension deficit.

“The government’s either hostile to the group or criminally reckless in its attitude to them. They know what’s going to happen, but don’t care,” Carmichael added.

The Royal Mail pension scheme is the sixth largest in the UK, with 170,000 active members and 279,000 retired or deferred members.

A spokesman for the DWP refused to comment on Carmichael’s accusations, but said: “Royal Mail continues to be a major supplier for the DWP and it’s only a small contract that has been lost.

“Anything to do with its pension scheme is a matter for Royal Mail. It’s about getting better value for money for the taxpayer and our actions have done this.”

Carmichael argued choosing a private firm over Royal Mail made the DWP’s accounts healthier, but damaged the DTI’s efforts to reduce the pension deficit.

A spokesman for the DTI said: “It’s a liberalised competitive market in which Royal Mail operatives and it has to compete to win contracts. It’s the choice of the individual government departments to decide how best to be efficient and save money.”

Royal Mail said it was unable to comment on individual contract losses, but a spokesman said: “In an increasingly competitive market we are always talking to our customers to develop new products to help them.”