Royal Mail faces setback on staff share ownership

Royal Mail’s hopes of persuading ministers to back its plans for employee share ownership will suffer a setback next week when a committee of MPs declares it is unconvinced by the scheme.

The Commons trade and industry committee, which publishes on Tuesday the findings of a long inquiry into postal market liberalisation, is expected to be dismissive of the chairman Allan Leighton’s proposal.

The state-owned postal operator, which faces full market liberalisation from January 1, wants to offer employees tradeable shares in the business, but has encountered fierce opposition to the plan from trade unionists and Labour MPs.

Alan Johnson, trade and industry secretary, is open-minded on the scheme, believing it could benefit staff by giving them greater involvement in the business. He would back a plan only if the shares were given free of charge and held by staff in perpetuity. But he is un-likely to make a decision on the issue until well into the new year.

A number of Labour MPs on the committee are be-lieved to be sympathetic to the mail union’s argument that the plan amounted to “creeping privatisation” and would break a manifesto commitment to keep the company in public hands.

It is understood that very few felt there was merit in the scheme, a finding that will disappoint Royal Mail management.

The report is expected to discuss whether the government, which is the sole shareholder in the company, should use taxpayers’ money to reduce the postal operator’s Pounds 4bn pensions deficit, or whether, as ministers believe, the rise in stamp prices proposed by the regulator Postcomm and new savings targets will be adequate.

The shares scheme is one element of the government and regulatory action that Mr Leighton has argued is necessary to tackle the pensions deficit. Ministers have ruled out financial aid to cut the deficit but are prepared to consider a number of options to fund investment in the company.

Royal Mail has maintained it is optimistic it will win government approval for the share-ownership plan, under which staff would be given a one-fifth stake in the company. It says the scheme is not a backdoor route to privatisation and that it would be simple to set up.

The shares, which would be distributed equally to employees, could be traded through a trust, Mr Leighton told the committee in October.

The scheme would need parliamentary approval, however, and the committee’s report will, therefore, be influential. One person familiar with the MPs’ findings said: “It (the employee share-ownership plan) will get short shrift. The unions thought it was privatisation by the back door, and not enough committee members felt otherwise.”

More than 190 Labour backbenchers, more than half the parliamentary party, have signed an early day motion demanding that the government continue to own all shares in Royal Mail.