Tag: Worldwide

The Government is considering a cash injection of more than pounds 2bn into Royal Mail to shore up its ailing pension fund, which has a pounds 4bn deficit.

In a possible double victory for Allan Leighton, the chairman of Royal Mail, ministers are also siding with him in a vitally important dispute between the postal service and its regulator, Postcomm, over the future price of stamps.

“I know it sounds extraordinary given how tight public money is, but we may inject hard cash into the pension fund,” said an official. Ministers have been told by their own advisers that Royal Mail will only have a sound commercial future if the pension deficit is cut to between pounds 1bn and pounds 1.5bn.

Meanwhile, the Department of Trade and Industry and the Treasury are becoming increasingly concerned at Postcomm’s proposal that tariff increases should be kept to the bare minimum.

Royal Mail is under pressure to embark on a fresh round of cost-cutting to shore up its finances, amid signs that senior ministers are reluctant to use taxpayers’ money to plug a massive pensions deficit of more than GBP4bn.

The issue of the state-owned postal operator’s pension liabilities, the full scale of which have been exposed by accounting changes, has complicated an independent review of its future ahead of full market liberalisation in January. It means a decision on a controversial share ownership plan for employees, which has been fiercely opposed by union leaders and many Labour MPs, could be delayed.

Sir George Bain, whose review was commissioned by Alan Johnson, trade and industry secretary, is understood to want clarity on the strategy for tackling the pensions deficit and on future stamp prices before he submits his final conclusions. His report is expected to comment on a proposal by Allan Leighton, Royal Mail chairman, to offer staff shares.