Mandelson defends Royal Mail privatisation

[TrueBlueTerrier]

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Business secretary attacks critics of plan after postal service doubles annual profit to £321m

Terry Macalister
guardian.co.uk, Thursday 14 May 2009 12.58 BST


Lord Mandelson was locked in a verbal battle with his critics tonight over the wisdom of privatisating the Royal Mail, after the state-owned operator reported a doubling of annual profits to £321m.

The business secretary said Royal Mail's headline financial results masked a wider and deepening problem with the state-owned company, highlighted by almost a £4bn increase in its pension deficit to £6.8bn.

"Today's figures show that while the headline profits are in the millions, the pensions deficit is in the billions and confirms that the Royal Mail remains in a precarious financial position," he said.

"With today's results confirming that the pensions deficit has doubled this year and that mail volumes are expected to fall by as much as 10% every year, the need for urgent modernisation and fundamental reform is crystal clear," he added.

Lord Mandelson has consistently argued that Royal Mail needs to bring in private capital to reinvigorate an organisation in desperate need of cash and innovation to help it compete in a deregulated letters market.

Sources inside the business department said Royal Mail was "technically insolvent" due to the scale of its financial needs and said the profits would be wiped out once tax and other issues were taken into account.

But unions and others opposed to the privatisation seized on the latest annual profit figures as proof that there was no justification for bringing in a private company such as TNT of Holland or CVC Capital.

"We are delighted with the scale of the profits which show that Royal Mail can be successful in the public sector," said the Communication Workers Union.

The left-leaning thinktank, Compass, which has also been campaigning against the sell-off scheme, said Lord Mandelson must now ditch his plan. "Part-privatisation of Royal Mail makes no political or organisational sense, we now know it makes no financial sense," said Neal Lawson, its chairman.

"The government must stop their scare stories to bully MPs into backing their out-of-date proposals. These figures will swell the number of Labour MPs to vote against part-privatisation," he added.

Adam Crozier, the Royal Mail's chief executive, confirmed that all four of the core business areas were now in profit for the first time in two decades despite challenging trading conditions, but he pointed out that mail volumes were falling fast.

The Royal Mail's letters division – its biggest operation – was back in the black this year, said Crozier, "despite accelerating mail volume losses which mean the business is now handling 10% fewer letters and packets than a year ago".

The mail boss pointed out that the group was now both profitable and meeting its quality targets compared with as little as seven years ago, when it was losing more than £1m a day. But the financial position has partly been built on the back of 5,000 jobs being cut in the past year and the closure of 1,800 post offices.

The changes would need to accelerate if it was to "offset the challenges we face and continue to provide our customers with an affordable and high-quality universal service," said Crozier. The "universal service" is the Royal Mail's guarantee to deliver to all addresses in the country for the same price.

Royal Mail also saw a net cash outflow of £373m over the past year as money was pumped into automation and other efficiency measures, while the pension deficit widened from £2.9bn to £6.8bn.

Compass said that Lord Mandelson was deliberately talking down the business to keep his privatisation scheme alive. "Postal service minister Pat McFadden talked about Royal Mail's falling revenues and limited profits. Their case has now been busted wide open," said Lawson.

In a report just three weeks ago Compass, working with City analysts, estimated Royal Mail's annual profit would be £250m. "To that we added the £280m cost of the pensions deficit and the £100m in subsidies to the likes of TNT to use the Royal Mail postal infrastructure. We now know the true profit figure to be £321m. That could mean a total annual profit of £701m," added Lawson.

The government, reeling from a string of political setbacks, has been in private talks with backbenchers over Royal Mail in a bid to prevent another possible defeat for Gordon Brown in the House of Commons. There has been talk of turning Royal Mail into a not-for-profit company along the lines of Network Rail rather than selling a stake in it to a private company.

[k979aaa]

It is almost the same amount of profit he made from his second home before he had too resign before his other indiscretions before his appointment too the E/U and his other as yet investigated indiscretions!. THEIR IS ONLY ROOM FOR ONE SWINE AT A TIME WHEN HE HAS HIS SNOUT IN THE TROUGH!. :mfo :mfo :mfo

[BELIAL]

So £701 million profit and you could add to that £68 million in slave shares to give you £800 million profit .AH but times are hard so no more money for the monkeys and they must do more

[k979aaa]

So £701 million profit and you could add to that £68 million in slave shares to give you £800 million profit .AH but times are hard so no more money for the monkeys and they must do more

The thing is he will pocket £1 billion out of the pensions and sale of royalmail if not more. :mfo

[k979aaa]

So £701 million profit and you could add to that £68 million in slave shares to give you £800 million profit .AH but times are hard so no more money for the monkeys and they must do more

The thing is he will pocket £1 billion out of the pensions and sale of royalmail if not more. :mfo

Oh forgot to add it is in the rules and it is essential maintenance. :mfo :mfo :mfo