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Royal Mail - your views and memories

Plans to allow foreign investors to take a stake of up to one third in the Royal Mail threaten to provoke one of the most substantial backbench revolts against Gordon Brown.

The Dutch postal giant TNT became the front-runner for a new “strategic partnership” with the publicly owned mail business after Lord Mandelson, the Business Secretary, welcomed its expression of interest.

Claims by Lord Mandelson and Pat McFadden, the Post Office Minister, that Labour’s manifesto pledge not to privatise Royal Mail was being honoured were rejected by Labour MPs in the Commons.

The Conservatives, enjoying the discomfort of ministers, promised to back legislation that will implement it, almost certainly next year. Mr Brown has given the proposals his full support.

The announcement came after the publication of a report by Richard Hooper, a former deputy chairman of Ofcom. It proposed that the Government should step in to reduce Royal Mail’s pension fund deficit, which is expected to reach £7 billion next spring.

The report said that new minority owners could offer the “confidence, experience and capital” needed to carry out vital changes. Describing Royal Mail in its present form as “untenable”, the report added that its universal service was under threat without modernisation.

Lord Mandelson said that he would welcome interest from “other credible partners”. The private investment is likely to be between 25 to 30 per cent of Royal Mail’s value, officials say.

Allan Leighton, the chairman of Royal Mail, has previously valued it at £5 billion but there has been no independent evaluation and market conditions have deteriorated since.

TNT said that further steps depended on full implementation of the proposals, including changes to regulation and the Government paying off much of Royal Mail’s company pension liabilities. “Assuming the Government implements these recommendations, I think that exploring a strategic partnership with Royal Mail makes a lot of sense for both our companies,” Peter Bakker, the TNT chief executive, said.

The Royal Mail’s pension deficit was £3.4 billion in 2006, but it is widely thought to have doubled since then. The deficit was “large, growing and volatile”, according to the report, and Lord Mandelson said that it was almost impossible for the business to manage.

The report said: “Each year, on top of its regular £500 million contribution to the pension fund, the company is having to find an extra top-up of £280 million to plug the deficit. These payments look set to rise substantially when the fund is revalued next year.”

Lord Mandelson said: “I believe that Royal Mail and the postal market can thrive in the future — provided that decisive action is taken now. Without far-reaching change, the opportunities brought by technology will become overwhelming threats.”

Adam Crozier, the Royal Mail chief executive, welcomed the report, saying he believed that it would help to secure the one-price-goes-anywhere service. “Our initial view is that the proposals offer a strong and secure future for Royal Mail and Post Office Ltd, and the ability to invest in the best interests of their people and their customers,” he said.

Alan Duncan, the Shadow Business Secretary, said: “The Government is trying to strike a desperate deal to see them through the next election. They are trying to look like the saviour of Royal Mail, but are doing so in flagrant breach of their election manifesto and by raiding the pension fund to bail out government borrowing.”

Virtually all the Labour MPs who spoke in the Commons voiced misgivings. Lindsay Hoyle said that new technologies might have reduced the amount of letters being sent, but the numbers of packages and parcels had “substantially increased”. Bulk mail was having a “free ride at the expense of taxpayers”, he said. “Put that right and that’s when [Royal Mail] begins to make a profit. Let’s do it that way, not the privatisation way.”

The former Cabinet minister Peter Hain asked whether legislation was required to allow a competitor to take a stake in the firm. “Doesn’t that open the door to full-scale privatisation against the wishes of our party and our Government?” he said. The “real villain of the piece” was not the threat of technology but the problem of unfair competition rigged against Royal Mail in favour of private competitors, he added.

The main postal union is planning a strike on Friday over mail centre closures. Billy Hayes, the general secretary of the Communication Workers’ Union, said: “It is incredible that the British Government, which has led the world in overhauling banks, need another European postal service to rescue the Royal Mail.”

George Thomson, the general secretary of the National Federation of Sub-Postmasters, said: “Sub-postmasters are ever more dependent on Royal Mail transactions, with over a third of [the Post Office’s] and subpostmasters’ income now coming from mail services. To lose some or all of that work would be catastrophic.”

The sorter

Ron Eastham, 59, has worked at the sorting office at Nine Elms, southwest London, for nine years. He said: “It’s tough work, standing for hours at a time, sorting and stamping 2.25 million letters and parcels a day.

“Of course I’m worried about the changes. Closing mail centres will reduce the service to the customer. It will cut jobs dramatically and reduce pay for those kept on. I know that the postal system is quite inefficient but sometimes we get the post in at 9pm and are told to sort it by 10pm. They could implement earlier collection times. The thing that really annoys me is that our managers continue to get bonuses of £5,000 a year. We don’t get any extra because we didn’t meet our quotas. If we’ve failed, what justifies them to get paid more?”

The driver

Terry Moyse, 33, started working for the Royal Mail at 15 and collects post in southwest London.

“I start at midday. I collect from postboxes and businesses and the little post offices, although they’ve been shutting down. I’ve collected from some customers for 12 years. They trust me. If they give TNT the collection that’s all gone.

“We keep being told that we’ve got to look after the customers but it seems that management is doing everything possible to reduce the quality of our service. We all know that times are changing and we’ve got to make sacrifices. We’re willing to change, but when you have firms leaving you every week because we don’t have the manpower to collect their mail efficiently, something’s gone wrong.”

The postman

David Dowling, 43, a postman in York for 24 years, started working for the Royal Mail when he was 19.

He said: “Privatisation would mean the whole ethos of the service would change.

“At the moment, we are publicly owned and publicly accountable. If we are sold off to a private company, they will not care about the public, they will only care about making money. We are worried that 450 of the jobs in the sorting office in York could go, and the work will be sent to a larger office in Leeds. They say that there won’t be compulsory redundancies, but it is scary, and you can’t help feeling worried. I start work at 6am every day, delivering post until 2.30. I am finding that as I get older it is getting harder — they expect a lot more in the same amount of time and a lot of people are struggling.”

The sub-postmaster

Jo Dixon, 49, is sub-postmaster of a rural post office in Allendale, Northumberland. He said: “If Royal Mail is privatised, it could affect the frequency of collections. If these become very infrequent, it lowers the value of the service I provide through the post office.

“There could be alternatives to privatisation: increased efficiencies within Royal Mail, for example. If there does need to be a dramatic change at Royal Mail, why don’t they do that without selling the business? If it is about economies of scale, why don’t they think about acquiring volume from partial acquisition of a competitor rather than the other way around?

“It is shortsighted to sell it to a private company who may be overstretched and then go bust — and what do you do then?”

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