Doubts intensify about Royal Mail plans

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Published: May 4 2009 03:00 | Last updated: May 4 2009 03:00
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Doubts about the political viability of Lord Mandelson's plans to part-privatise Royal Mail are spreading through government, as the recent bout of Labour indiscipline underlines the political risks of confronting backbenchers.

The business secretary's team are "proceeding as planned" with the core proposal to sell a 30 per cent stake in the state-owned postal operator to a foreign rival, which MPs are due to vote on before the summer.

But Gordon Brown's recent Commons defeat over Gurkhas and the part-climbdown over MPs' expenses has intensified concerns about the Royal Mail stand-off, convincing some senior ministers the government must give way.

Lord Mandelson believes the reforms are essential. He wants the chance to press his case to Labour backbenchers in the Commons, after seeing the positive effect that a "convincing argument" has recently made in the Lords. He still has the backing of Mr Brown, who remains convinced the reforms are urgently required.

But Lord Mandelson is not expected to take it to the wire if opponents were to win their case to delay or to redraw the plan because of the inability or unwillingness of whips to bring round rebels.

The call for a rethink by figures closely involved in pushing the Royal Mail bill reflects fears it will be impossible to pass the proposals without the support of scores of Tory MPs, which will be a heavy blow to Mr Brown's authority.

"We're in listening mode," said a government insider convinced the plans will not survive as they stand. "This needs a consensus."

Amid disquiet among cabinet colleagues, Lord Mandelson seeks to win over the many Labour MPs unhappy about the proposals.

As the bill makes its way through the Lords, the business secretary has drawn up a "John Lewis" compromise, which would see Royal Mail workers become part-owners of the business.

But this offer is additional to the part-privatisation rather than as an alternative model. Any stake offered to existing staff would thus total less than 20 per cent, allowing the government to sell off a 30 per cent stake while keeping the Royal Mail in public ownership.

Yesterday Pat McFadden, the business minister, said: "The legislation has completed its committee stage in the Lords and is proceeding as planned."

A government insider described the campaign against the part-privatisation as "short-termism at its very worst". The actions of unions and backbenchers could have dire consequences, the insider said, as it ran the risk of leaving the job of reforming the Royal Mail to the next Tory government.

So far there is little evidence to suggest opposition on the backbenches is softening. About 150 Labour MPs have signed a motion to oppose the part-privatisation, of which more than half are expected to rebel.

Harriet Harman, Commons leader, and Nick Brown, chief whip, have both privately aired their concerns about the political costs of sticking to the timetable for the bill.

These concerns have been heightened by Mr Brown's first big Commons defeat last week, which was cast as a sign of his authority waning over the parliamentary party.

Copyright The Financial Times Limited 2009