ROYAL MAIL’S 200,000 employees are expected to be given a 20 per cent stake in the business in a move that will spark union fears that the organisation is being prepared for privatisation.

The issue is likely to provoke a major clash between unions and the Government at this week’s Labour Party conference.

A government-commissioned review of Royal Mail, headed by Sir George Bain, is expected to recommend employee ownership when it reports next month.

Each employee stands to receive shares worth about £5,000 if the organisation is valued at £5 billion — a figure that Allan Leighton, Royal Mail’s chairman, has often quoted.

Mr Leighton has also asked for at least 10 per cent of the organisation to be offered to outside investors because he believes that Royal Mail desperately needs external financing. However, if he wins this concession, it would cause a storm with the Communication Workers Union (CWU).

The CWU has also objected to employee share ownership because it fears that the move would create a perception of privatisation.

Billy Hayes, general secretary of the CWU, said: “The debate about a 20 per cent share is a red herring because the issue is about new investment and 20 per cent for the workforce would raise no extra money.”

The union will today demonstrate against privatisation at the opening of the Labour conference in Brighton, and will give warning that it will disaffiliate from the party if there are any moves towards a sale.

A split between the CWU, which has 260,000 members, and the Labour Party would be the biggest rift yet between the unions and Labour. Last year the 50,000-strong Fire Brigades Union disaffiliated and the RMT rail union, with 68,000 members, was expelled by the party.

It is unlikely that the employee shares would be traded freely, although some kind of internal market may be organised to put a value on them.

However, the windfalls are a key ingredient in adding to the feel-good factor that Mr Leighton has been attempting to instill in the workforce. This year all postal workers received more than £1,000 in a profit-related bonus.

The Government is also being pressed to shoulder a large part of Royal Mail’s pension liabilities by taking responsibility for the 220,000 existing pensioners in the scheme. That will clear Royal Mail’s books of £1.5 billion of liabilities and make the organisation more attractive to would-be investors.

However, it is not certain whether ministers will want to take on such a liability at a time when they are struggling with other public sector pension provisions and attempting to make public employees work longer before retirement.

Sir George is aiming to report to Alan Johnson, the Trade and Industry Secretary, on October 21, only three months after he began his inquiry.

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