Royal Mail reveals profits boost - but Vince Cable says 'no alternative' to privatisation

Business Secretary believes organisation faces 'fundamental threat' from email and must be reformed

Business Secretary Vince Cable today insisted there is "no alternative" to controversial plans privatising the Royal Mail.

The organisation faces a "fundamental threat" from email and must be reformed in order to survive, the Liberal Democrat insisted.

But unions have warned that services will go into decline if the business is sold off.

Dave Ward, deputy general secretary of the Communication Workers Union (CWU), whose members will be balloted on the proposals this week, claimed loopholes would allow the universal service obligation to be eroded.

"There are opportunities for them to down dial the terms of the universal service in the future," he told BBC Radio 4's Today programme.

"People who live in the suburbs, people who live in rural areas, people who live in villages will not get the same service under a private company."

His comments came as Royal Mail announced a big jump in profits to £440 million for the year to 31 March, compared with £152 million a year earlier, helped by parcels growth of the face of a continuing decline in letters.

Mr Cable told the programme: "There is no alternative. The point is that it is not this particular government adopting an ideological position. We are following in the footsteps of the last government that recognised that certain things had to happen in order for Royal Mail to survive because it is faced with a fundamental threat to its business from email."

Mr Cable said around 10 per cent of shares should go to the work force.

"It isn't a bribe, but it gives them a stake in the ownership," he added.

The National Federation of SubPostmasters (NFSP) yesterday said the plans should be postponed to prevent an "even deeper crisis" for Britain's post offices.

It is concerned that a privatised Royal Mail would not feel obligated to keep services with the Post Office network.

* The Communication Workers Union (CWU) will this week start balloting Royal Mail workers on whether to boycott the post of rival companies in a move which could lead to millions of items being left undelivered.

Around 120,000 members of the CWU will vote from tomorrow, with the result due on June 19.

Private mail makes up 44 per cent of the daily post bag, so a boycott would leave 26 million items undelivered each day, including energy bills, statements, and business mail contracts won by companies including TNT and UK Mail.

The ballot will also gauge opposition to the plans to privatise Royal Mail and backing for a campaign of refusing to co-operate with new efficiency measures.

Dave Ward, CWU deputy general secretary, said today's results offered more evidence that Royal Mail should be kept in the public sector.

He added: "Improved productivity and modernisation has played a role in these good results. Privatisation isn't necessary and it would destabilise the workforce and the good progress being made. The support of the workforce is crucial to the success of the company.

"Price rises have also clearly played a role in the rise in profits. Fattening the goose in the short term may lead to volume decline as customers seek alternatives. One thing's clear, under privatisation prices would rise further and services would be hit as private companies operate for profit, not for people."