ROYAL MAIL will be forced to lay off 40,000 workers if the postal regulator presses ahead with plans to impose price controls on stamps, Allan Leighton, chairman of the mail group, has warned.

Mr Leighton told Alan Johnson, the Trade and Industry Secretary, that the proposed prices would require “unrealistic” cost cutting that could be achieved only through swingeing job losses, The Times has learnt.

The loss of 40,000 jobs — nearly a quarter of the workforce — would be greater than the cuts made during Mr Leighton’s drive to return Royal Mail to profitability. Then 34,000 jobs were cut over three years.

Royal Mail executives believe that it is unfair for the regulator to attempt to bring its productivity rate into line with Deutsche Post or TPG because those postal companies have benefited from more investment and are more mechanised than the British system.

In May Postcomm, the regulator, announced plans to limit the increase in the price of first-class stamps to 4p over four years starting next spring. That would take the price to 34p.

Royal Mail had argued that the ideal price would be 48p because it loses money on many of its mail services. The organisation claims that it needs to raise revenue for investment because from next January it will face full competition in all its markets. At present rivals compete only in business segments of the service.

Mr Leighton’s appeal to the Government comes as ministers are preparing to launch a review of Royal Mail and as the organisation petitions to be allowed to raise more cash. The review was promised in Labour’s election manifesto and is being seen by many as a platform for debating the future ownership of the organisation.

Hopes that the review would be launched today, on the last day of Parliament before the recess, appear to have faded. There have been fierce disagreements between the Treasury and the Department of Trade and Industry over the future of the organisation, with the Treasury favouring a sale or the introduction of private finance and the DTI insisting on public ownership.

Last night a spokesman for Postcomm said that the regulator’s plans did not necessitate job cuts and that a strategic plan by Royal Mail itself envisaged 30,000 job cuts over five years through mechanisation. He said: “This is not about price control. There are no demands from Postcomm for job cuts. Royal Mail suggested in their strategic plan a reduction in jobs of about 30,000 over five years.”

Billy Hayes, general secretary of the Communication Workers’ Union, said: “Postcomm’s proposals should be put to one side until the Government conducts its promised review into the impact of full competition on Royal Mail.”

Last night the Trade and Industry Select Committee also announced that it would launch an inquiry into the effect of competition on Royal Mail.

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