MPs condemn Lord Mandelson’s proposals for Royal Mail

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From The TimesApril 1, 2009

MPs condemn Lord Mandelson’s proposals for Royal Mail
Christine Buckley Industrial Editor

Lord Mandelson, the Business Secretary, has suffered the biggest blow yet in his attempts to sell part of Royal Mail, with the Commons Business and Enterprise Select Committee condemning the move as ill-thought-out.

In a report that will be formally published today, the committee expresses concern that the Government will not say how much it expects to get for a 30 per cent stake in the state-owned postal operator and that there is no guarantee that the proceeds from a sale would be pumped back into the struggling business.

MPs also condemn the lack of a figure for investment needed for the business, saying that only “hundreds of millions” had been cited.

The fact that the committee, which is chaired by the Conservative Peter Luff, has unanimously declared that the Government has not “made its case” raises the possibility that the Conservatives, while supporting privatisation, could vote against the plan, using the committee’s report as evidence that the Business Secretary’s plan is flawed.

Mr Luff said that there was an “extraordinary lack of clarity” in the Government’s case for a part-sale, although the need to tackle Royal Mail’s pension deficit and its regulation were urgent. “The committee does not think the Government has yet made its case,” he said. “We agree that the pensions deficit needs to be removed and the regulatory system needs to be reformed as a matter of urgency. However, it does not follow that a part-sale is also necessary.”

However, Mr Luff would not say whether he would vote against the Bill. He said that the committee’s report was being rushed out to allow the Government to make a full response before the Bill’s second reading. He added that he was not confident that the questions would be answered satisfactorily.

The MPs also raise concerns that the Bill would give the Government freedom to sell a greater stake in the future and that Lord Mandelson was reluctant to spell out his intentions. The report says: “The committee is left with the conclusion that either the Government has not fully thought through its position about future share sales or that it has done so and is refusing to reveal its hand.” The select committee is also worried about potential competition issues.

Lord Mandelson said yesterday: “It’s a pity the committee did not take the opportunity to show a sense of vision of the future for Royal Mail but has taken a lowest common denominator approach. This, of course, bridges the differing positions in the committee but does nothing to secure a viable future for Royal Mail.”

The report has been welcomed by the main postal union, which has been waging a vigorous fight against the sale. Billy Hayes, general secretary of the Communication Workers Union, said: “Everyone who looks at this Bill agrees with the need for pension and regulatory change, but as the select committee points out, the case for privatisation has not been made.”

Lord Mandelson has held two meetings with with TNT, the front-runner to take a stake in Royal Mail, according to Pat McFadden, the Postal Services Minister. Mr McFadden said last night that while the Government has received several expressions of interest, no meetings with other potential bidders, such as DHL, UPS or FedEx, had been held.

Letters in numbers

30% Size of the stake in Royal Mail that would be sold

49.9% How much could be sold

60% Royal Mail’s share of strike days in the UK in 2007

£1.2bn Last Government loan to Royal Mail, in 2006. Of that, £600 million is still unspent

Source: Business and Enterprise Select Committee