THE Royal Mail chairman’s hopes of raising private investment for the organisation have been dashed by the Trade and Industry Secretary, who will use legislation to sanction shares only for employees.

Allan Leighton had wanted to bring in investment in return for a 10 per cent holding in Royal Mail, in addition to giving a 20 per cent stake to its employees.

However, Alan Johnson, the Trade and Industry Secretary, has told The Times that the Government would consider only employee ownership of the state-owned organisation in a share trust.

Mr Johnson said that Mr Leighton had done “a tremendous job” at Royal Mail, but added: “Whatever idea he had, he understands completely that we will not privatise Royal Mail . . . We are looking at a share trust and that is the only thing we are looking at in terms of the ownership of the company.”

Despite the veto on raising private cash, Royal Mail executives believe that they will get the £2 billion equity injection that they need from the Government.

Mr Johnson said that legislation would be needed to give employees a stake in the business, but that the new laws would make clear that there would be no privatisation of Royal Mail.

The minister, a former general secretary of the Communication Workers’ Union (CWU), said that his message to his old union was: “No one is threatening you here. This is about giving you a bigger stake in the industry.

“We will need legislation and that legislation will be quite clear.”

However, the CWU reacted angrily to confirmation that an employee share-ownership programme was likely to go ahead. Billy Hayes, the union’s general secretary, said: “Any issue of private shares is privatisation and is a betrayal of the public trust in the election manifesto.”

Mr Johnson is keen to increase employee involvement in the business and believes that this can be done through a share trust.

The minister dismissed union concerns that if employees were to have a stake in the business that would affect the union’s ability to negotiate pay deals, because managers would talk about the stake as a benefit. He said: “That it will interfere in pay, that it will reduce their wages, is actually utter rubbish.”

Mr Johnson also added to the pressure on Postcomm, the regulator, to revise earlier pricing proposals. “I think Postcomm will be reflecting very carefully since they put out their initial proposals,” he said.

Postcomm’s initial pricing proposals, which were issued in June, planned to limit the rise in stamp prices to 4p for first-class stamps within three years, taking them to 34p, whereas Royal Mail is campaigning for a price of at least 39p.

Nigel Stapleton, the chairman of Postcomm, has told the Commons Trade and Industry Select Committee that pricing plans are likely to be revised.

Postcomm is to meet to discuss its final proposals on Thursday — the day that Royal Mail is expected to announce a profit increase for the half-year of between 10 and 15 per cent.

The regulator is expected to make final proposals by the end of the month. After that, the Government is expected to make a statement on the postal organisation’s future before the opening of the market to full competition in January.

Mr Johnson has been advised on Royal Mail’s future structure by Sir George Bain, the former head of the Low Pay Commission. Discussions have been dogged by Treasury concern about pumping public money into the postal group.

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