Mandelson fuels Royal Mail speculation

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http://www.ft.com/cms/s/0/654cbd62-9fbe ... ck_check=1

By Jean Eaglesham

Published: October 22 2008 00:59 | Last updated: October 22 2008 00:59

A crucial review on the future of Royal Mail is set to be delayed, Lord Mandelson suggested on Tuesday, as he fuelled speculation that the loss-making postal operator would be privatised.

The Financial Times’ revelation earlier this week that the business secretary supported in principle the partial privatisation of Royal Mail caused a furore among unions and Labour MPs, who see public ownership of the company as a totemic manifesto commitment.

But Lord Mandelson told MPs on Tuesday: “I didn’t find the report in the Financial Times alarming in any way.” The business secretary in 1998 proposed allowing the private sector to take stakes in Royal Mail, before losing his job as trade and industry secretary. In evidence to the business select committee on Tuesday, he said the company was still in urgent need of reform.

“I remain strongly committed to Royal Mail. What I want to see is it being efficient, modernised [and] viable,” said Lord Mandelson. “It’s a tough challenge but one I come back to after 10 years being away and I’m up to the job.”

He refused to set any deadline for publishing a government-commissioned review of the postal services sector by Richard Hooper, the former telecoms regulator.

The Hooper review, which will set the context for government decisions on Royal Mail’s future, was expected to report to ministers earlier this month.

However, Lord Mandelson told the committee on Tuesday: “I may ask Richard Hooper to widen his review to examine additional factors ... I’m not prepared to put a timetable on publication.”

The business secretary admitted that the Hooper review’s initial findings earlier this year “paint a rather stark picture of the huge challenges facing Royal Mail”.

But he appeared sceptical in response to calls from Labour MPs to apply tougher pricing controls to Royal Mail’s rivals.

The two principal problems facing the state-owned operator – a reduction in the overall volumes of letters being sent and a huge pensions deficit – “are not down to regulation”, said Lord Mandelson.

The Communication Workers Union reacted to this week’s FT story by warning Lord Mandelson of the “clear commitment from the Labour government to keep Royal Mail in the public sector”.

Copyright The Financial Times Limited 2008