Survey: your memories and views on Royal Mail

Up to 50,000 jobs could be lost in a partial privatisation of the Royal Mail that would break up the business and offer parts to rivals.

A report to ministers is thought to recommend opening up to half of the state-owned group to private business and closing half of its 71 mail centres.

The business would be divided into different units, such as collection and sorting, with rival operators allowed to buy stakes. The “last mile” delivery is likely to remain with Royal Mail as a natural monopoly.

Times Archive, 1929: The Post Office from within

The Post Office cannot prosper until it is set free from a form of control which is fatally inappropriate to a commercial organisation

• Post Office and Public

• Letter from the Postmaster General

• The Post Office: Grounds of public discontent

Related Links

• Survey: the Royal Mail - your views and memories

• Postal union vows to fight any privatisation

• Mandelson eyes Royal Mail sell-off

Unions, which are intent on scuppering the deal, have given warning that 40,000 to 50,000 jobs from a total workforce of almost 170,000 could go – a figure considered by ministers to be alarmist.

The report by Richard Hooper, a former deputy chairman of Ofcom, was delivered to ministers last week and will be discussed by the Cabinet this morning. There are likely to be statements later to the Lords and Commons by Lord Mandelson, the Business Secretary, and Pat McFadden, the Post Office Minister.

If the Government backs the changes, as seems likely, it will inflame the postal unions and Labour backbenchers who both want a fully publicly owned Royal Mail.

Lord Mandelson and other ministers are understood to be keen on major reforms. Royal Mail is struggling to keep pace with rival operators in a declining market and is also buckling under the pressure of a pension deficit that is set to double to £7 billion when it is next reviewed in the spring.

The Government is considering whether to take on the liability to bolster Royal Mail’s balance sheet and make it more attractive to commercial investors. Ministers will make clear, however, that the Government will remain the majority shareholder in any future deal.

Royal Mail is already braced for Christmas strikes over a current mail centre closure plan. About 2,000 workers are due to stage a 24-hour walkout on Friday at six mail centres – in Liverpool, Crewe, Bolton, Stockport, Coventry and Oxford.

The Hooper report is expected to caution that Royal Mail’s market is declining rapidly because of e-mail and a contraction in business post due to the recession. Originally the review forecast a 3 per cent fall in mail volumes but it is thought that this has increased to 7 per cent, at a cost of £500 million to Royal Mail over the past few years.

Ministers refused to comment last night on Conservative claims that the Government was threatening a £22 billion raid on Royal Mail’s pension fund. The Post Office has £22 billion in its pension fund but faces a £7 billion deficit. Senior industry sources have suggested that the Government is planning to seize the £22 billion and use it to make it look as though government borrowing figures are lower.

Critics also claim that it will assume responsibility for the Post Office pension liabilities, putting the country further into debt and leaving future generations to foot the bill.

Alan Duncan, the Shadow Business Secretary, said: “People will be appalled that the Government is resorted to raiding pension funds in order to plug the black hole in the public finances.

“I fear the Government is going to steal £22 billion of pension assets, dump the liability as a mortgage on future generations and dress it up as the salvation of the Royal Mail.

“Their plan to steal the pensions assets to help reduce their borrowing figures while taking out a massive mortgage to cover Post Office pension liabilities for 50 years is nothing more than a massive accounting scam.”

Mr McFadden said yesterday that the Royal Mail had to change, saying that it faced significant challenges from competitive new technologies, with a complete revolution in the way that people communicated with each other. “I do not accept it is a dying business but it has to change.” He admitted the the pension fund deficit was “a big issue for the company”.

Labour’s manifesto for the 2005 election is a bar to any proposal to privatise the Royal Mail fully at the moment but the document gives an indication of what the Business Secretary may have in store today.

It stated that Labour would review the impact on the business of market liberalisation, progressively introduced under the Postal Services Act 2000 “and which allows alternative carriers to the Royal Mail to offer postal services”.

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