Mail row ‘makes sell-off harder’

The row over plans to part-privatise the Royal Mail is making it harder to find a firm to buy a stake, business secretary Lord Mandelson has admitted. The row over plans to part-privatise the Royal Mail is making it harder to find a firm to buy a stake, UK business secretary Lord Mandelson has admitted.

He criticised the "shrill" nature of the debate and union "propaganda" that "foreigners" would own Royal Mail.

The government says Royal Mail needs a private partner to help fund and drive through much needed modernisation.

Many Labour MPs oppose it. Labour peer Lord Clarke, an ex-postman, said he would fight the bill "to the last".

But after hours of debate – in which the Conservatives and Lib Dems indicated they would support the bill at this stage – he withdrew his amendment to "kill off" the plans.

He said he had been in politics long enough to know he could not "possibly win a vote in this House" – but pledged to continue campaigning against the Postal Services Bill, which will now go to committee stage for detailed examination.

A Commons motion against the plan has been signed by 174 MPs – 144 of them Labour – and it is opposed by the Communication Workers Union (CWU) which wants the Royal Mail to remain entirely in public ownership.

Opening the debate in the House of Lords, Lord Mandelson told peers the Royal Mail was now "balance sheet insolvent" and faced "stark" challenges.

"We should be under no illusion that attracting the right partner – or indeed any partner – will be easy," he said.

"While we believe the company has a profitable long-term future if the correct decisions are taken, the shrill nature of some of the current debate is making it harder to make this case to potential partners."

There was an industrial relations "challenge" at Royal Mail, which he said was "characterised by a lack of trust and engagement".

The "embarrassing truth", he said, was that in 2007, Royal Mail accounted for 60% of all days lost to industrial action in the British economy.

Royal Mail "lags behind" European competitors, he said, and did not make sufficient profit to modernise its services – for example by investing in machines instead of sorting post by hand.

The government wants to sell a stake in the Royal Mail, to help fund modernisation but insists overall its ownership will stay in public hands.
Meanwhile it would take on responsibility for the pension scheme, the deficit of which was "already massive", Lord Mandelson warned.

He told peers that the exact size of the stake to be sold off would not be set out in the bill "before commercial negotiations take place". But he said ministers expected it to be "around 30%".

Lord Mandelson said the Royal Mail would remain in public ownership adding: "There is no question that either the Post Office or Royal Mail will be under the control of 'foreigners' or anyone else, other than the government as the CWU's propaganda claims."

He told peers having a private partner would not threaten the universal service obligation to deliver to all homes.

But Labour peer Lord Clarke argued it would open the door to full privatisation.

He said: "I believe the bill as it stands is unnecessary, not in the best interests of the Royal Mail or the British public."

He said the government's plan had been clouded by "misinformation", "camouflage and smokescreen" in an effort to "care and frighten postal workers".

The Royal Mail was making a £1m profit a day and the universal service obligation was already protected under existing legislation, he said.

Peers were told delivering a 100g letter in Holland cost twice as much as it did in the UK – yet that was being held up as an example of a good service by ministers.

"Political interference" over the years had stopped the Royal Mail being able to change their pricing, he added.

Lord Hunt, for the Conservatives, said his party supported the Bill in principle, saying the universal service obligation had to be at the heart of any reform.

But he said his party would seek "substantial changes" to the bill, adding: "Ministers sat on their hands for 10 years and then produced a rushed job of a Bill which raises more questions that it answers."

Lord Razzall, for the Lib Dems, said there were certain guarantees his party wanted to see in the Bill but they accepted the need for change.

He asked Lord Clarke: "If there isn't a problem with the Royal Mail, can you explain to me why the extensive lobbying we have all received from the CWU and related organisations didn't come in the form of letters, it came in the form of emails?"

The Communication Workers Union boss Billy Hayes said Lord Mandelson's comments added "nothing new" and Royal Mail could modernise in the public sector – with a new regulatory framework.

"The flaw in this Bill is the privatisation element – why nationalise the pension debt and privatise the company's profit?," he said.