Opposition mounts to UK Royal Mail ownership proposals

The Royal Mail is facing growing political opposition to its proposals to transfer its ownership from the

state to its employees, only days before a government-

commissioned review that will determine the postal operator's future ownership.

A parliamentary motion calling on ministers to ensure the Royal Mail remains publicly owned with "all shares continuing to be owned by the government" has been signed by 57 Labour MPs.

This suggests Tony Blair, the prime minister, could struggle to get the parliamentary approval needed to part-privatise the postal operator by giving a 51 per cent stake to staff. The government has a majority of only 67 in the Commons and the Tories have said they are "sceptical" about the part-privatisation plan.

Gordon Brown, the chancellor, and Alan Johnson, the trade and industry secretary, discussed the Royal Mail's future during a private meeting yesterday. Mr Johnson is due shortly to announce an independent review, headed by a senior business figure, into the future of the Royal Mail after the postal services market is opened up to full competition on January 1.

Adam Crozier, Royal Mail chief executive, said the review needed to address the "problems and challenges" facing the company. These included a "desperate need for investment" if the company were to maintain its three-year turnround from huge losses to profitability in the newly liberalised market, he said. Other challenges cited by Mr Crozier included the Royal Mail's multi-billion pound pensions deficit and the contentious price controls recently issued for consultation by Postcomm, the regulator.

The Royal Mail has been wary of going public on its proposals to generate billions for investment in new technology by giving a substantial stake to its employees and persuading the Treasury to transfer the company's historic pension liabilities to the state's balance sheet. Mr Crozier said the decision on the company's future rested with the government, adding "what we need them to look at is what they feel they can do as our shareholder".

He argued that the "scale of the challenges is so great that the only way we can really meet them is by engaging and involving our people in a real way". But he declined to be drawn on whether some form of employee share ownership was essential to achieve such engagement, saying: "It's a matter for the shareholder to decide what they feel they can do." Mr Johnson is expected to keep his options open until the forthcoming review has reported. But the former postman cannot prevaricate indefinitely. By November, Postcomm is due to finalise regulatory controls that will set the price of stamps and many other Royal Mail products until 2009-10.

The regulator has said it will take the conclusions of the review into account in finalising these controls, which will have a significant impact on the Royal Mail's profitability.

The government has maintained an ambivalent stance on the share-ownership plan. Its general election manifesto this year said it had "no plans to privatise" the Royal Mail. Barry Gardiner, an industry minister, expanded this stance in a written answer this week, stating "neither do we have plans to issue shares (in the Royal Mail) to employees or others". But an absence of "plans" does not bar ministers from subsequently deciding to do something. And Mr Johnson, in a Financial Times interview in May, did not rule out a future Royal Mail structure "that wasn't privatisation but had a greater mutuality in a co-operative way".