Royal Mail is to press ahead with a scheme to give "phantom shares" worth up to £5,000 to each of its employees after the Government formally vetoed a plan to hand 20 per cent of the organisation to its employees.
The decision, which was announced to a committee of MPs by the Trade and Industry Secretary, Alistair Darling, is a blow to the Royal Mail chairman, Allan Leighton, who had personally promoted the scheme to give equity to its 190,000 employees.
Mr Darling told the Commons Trade and Industry Select Committee that there would have been an upfront cost to Mr Leighton's proposals which would have hit the public finances and said it would have taken 18 months to get the necessary primary legislation through Parliament.
"I couldn't agree to an employee share ownership scheme", Mr Darling said. However, he added that he backed moves to allow Royal Mail workers "to benefit from the rising value" of the state-owned postal service.
A Royal Mail spokesman said: "We will shortly agree with the Government a John Lewis-type scheme which will give our people 20 per cent of the economic value of the company and will be worth up to £5,000 per employee. These phantom shares will perform as normal shares and will be tradeable within the company."
MrDarling said: "Given the scale of the challenges in front of the Royal Mail, it is only right there should be some reward for employees."
It is unclear what the initial value of the shares will be and it is not thought that Royal Mail will pay a dividend on them. Crucially, they will not carry any voting rights, nor will it be possible to sell them to anyone outside Royal Mail.
Unions welcomed the move as "great news" for postal workers, saying Mr Leighton's original plan would have been tantamount to back-door privatisation of Royal Mail. "The Government is keeping its manifesto commitment on public ownership of Royal Mail," Billy Hayes, the general secretary of the Communication Workers Union, said.
However, the Liberal Democrats attacked it as a "cowardly move" which could seriously destabilise the company.
Approval for the phantom share scheme will pave the way for the Government to go ahead with a £2bn financial rescue of Royal Mail, which is designed to provide money for investment, fund post office closures and ease the £5.6bn deficit in the organisation's pension fund.
Royal Mail is facing increasing competition from private sector companies and has recently lost a string of lucrative bulk mail contracts for BT and the Department of Work and Pensions to rival operators.Reuse content