Royal Mail reported annual profits doubled to £321m yesterday, providing grist to the mill of opponents to the Government's plan to part-privatise the group.
Despite the recession, and a 5.5 per cent fall in the number of letters being sent, overall revenue was up by 2 per cent to £9.6bn and all four core businesses turned a profit for the first time in two decades.
Both trade unions and rebellious Labour MPs – nearly 150 of whom have signed a petition against privatisation – claimed the profits as evidence of the irrelevance of the scheme to sell 30 per cent of Royal Mail to either the Dutch postal group TNT or CVC Capital in partnership with the Belgian post office.
The Communication Workers' Union (CWU) said the figures prove Royal Mail can be a success. Dave Ward, the deputy general secretary, said: "We feel vindicated by today's results for our position on full public ownership for the company. While private mail companies, including TNT, have seen huge profit reductions, Royal Mail's operating profit has doubled."
The Government should back the pensions element of the controversial Postal Services Bill, which offers a taxpayer-funded bailout of the deficit, while dropping privatisation, says the union.
But the Government claims that Royal Mail's profit figures do not undermine the case for private sector capital and expertise, emphasising the relentless competitive pressure from electronic communications and the ballooning pension deficit. Nearly 10 million fewer letters and packages are now sent daily compared with three years ago, and a fall of another 10 per cent is expected this year. The group's pension deficit has more than doubled to £6.8bn in the last 12 months and is expected to rise yet further when it is revalued later this year. A Department for Business source said such a deficit left the Royal Mail technically insolvent, although it is still able to trade.
Lord Mandelson, the Business Secretary, who is spearheading the government scheme, said: "The 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. The need for urgent modernisation and fundamental reform is crystal clear."
The strong profits are also likely to cause a storm over Royal Mail's intended pay freeze for all 181,000 staff. The CWU described the plan as "not defendable" yesterday.Reuse content