Government wants to sell off half of the Royal Mail

JUST OVER half the Royal Mail and Parcelforce would be sold under the Government's favoured option set out yesterday in a Green Paper on postal services.

The most politically sensitive privatisation of them all would see a 51 per cent share flotation of the two Post Office businesses - but would involve three legally binding commitments: daily delivery of letters and parcels to every UK address, a 'uniform and affordable' price structure, and a nationwide network of post offices. The Queen's head would continue to appear on all stamps.

Post Office Counters, the third main Post Office business, would be retained in the public sector and allowed to diversify into new services such as bill payment.

While calculated to placate Conservative backbenchers concerned that a wholesale privatisation would threaten rural sub-post offices and lead to price rises, the package announced by Michael Heseltine, President of the Board of Trade, fell on stony ground elsewhere, with some business leaders urging a complete sell-off.

Labour pledged a summer offensive against the plan - although it made no express commitment to returning the services to the public sector. Alan Johnson, general secretary of the Union of Communication Workers, warned of job losses and a public outcry against a 'privatisation too far'.

The Institute of Directors called for a 100 per cent privatisation of both the Royal Mail and of Post Office Counters.

Michael Heron, the Post Office chairman, said: 'This shareholding partnership option is bold, imaginative and very much in tune with the public's desire to see a strong link maintained between government and Royal Mail.'

The paper, out for consultation until 30 September, includes two further options - greater commercial freedom within the public sector, or a 100 per cent share sale.

It promises that there is 'no possibility' of VAT on stamps for letters or parcels. It also proposes 'significant' investment in automation of benefit payments and other transactions.

Receipts from the flotation, possibly worth pounds 1bn, could be of some use to a Government looking for pre-election tax cuts. But ministers know they must tread carefully over a proposal that arouses strong feelings. It was rejected by Baroness Thatcher when she was Prime Minister. It has taken two years to reach the stage of a consultation paper, and is by no means certain to find its way into this autumn's Queen's Speech.

A deep Cabinet split between 'radicals' wanting more privatisation and 'consolidators' keen to avoid further controversial legislation led to the 51 per cent compromise, which key ministers including Douglas Hurd, the Foreign Secretary, eventually backed.

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