Cabinet row may scupper Royal Mail sell-off plans

A FRESH Cabinet tussle is looming over whether the Government should press ahead with privatising the Royal Mail in the light of mounting opposition from Tory activists and the Ulster Unionists.

There is now a distinct possibility that, following Cabinet discussions after next week's party conference, the measure will not, after all, find its way into this year's Queen's Speech.

The latest signs of revolt over the most politically sensitive privatisation have come with a union- commissioned Mori poll which suggests that 57 per cent of Tory constituency chairmen would back keeping the Post Office together but giving it greater commercial freedom.

Such heavy support for that option - the first of three outlined in a Green Paper last July - is a blow to the Cabinet 'radicals' Michael Heseltine, the President of the Board of Trade, and Kenneth Clarke, the Chancellor.

To placate Tory backbenchers and Cabinet opponents fearful of the effect on rural offices, Mr Heseltine has already been obliged publicly to favour the second option - a 51 per cent flotation of the Royal Mail and Parcelforce while retaining Post Office Counters within the public sector - instead of a complete sell-off.

Privatisation of the Post Ofice was spurned even by Margaret Thatcher, but ministers in favour were already preparing to fight their corner yesterday.

One suggested that the arguments against the move, which could raise pounds 1bn in the quest for pre-election tax cuts, were largely 'emotional'. Intending Tory rebels should be knocked into line by the Whips, he said: 'We haven't yet begun to see the scale of competition the Post Office will face in the future. The politics are quite difficult in the short term, but the disadvantages of not (privatising) will be far harder to bear.'

But David Hunt, Chancellor of the Duchy of Lancaster and the minister who chairs the Cabinet committee examining the service, may urge caution on the Prime Minister.

A source close to Mr Hunt said: 'Unless you explain a radical policy and convince people, there is a risk at this stage in a Parliament.

'If we are not getting the message to Westminster colleagues and constituencies in the country about a 51 per cent measure, then PR presentation is breaking down.' He said Mr Hunt would make clear that any final package 'must include a sales message'.

The poll, coinciding with the end of three months' consultation on the Green Paper, shows that more than half the 148 constituency chairmen questioned by Mori had sitting Tory MPs, and nearly half the chairmen said they were certain or fairly likely to contact their members over the issue.

The nine Ulster Unionist MPs have formally told Mr Heseltine that they are opposed to the 51 per cent sell-off, while at least seven backbench Tories are hostile. One additional rebel could be enough to defeat the Government.

While rebels were eventually faced down over Maastricht and pit closures, John Major may not want to risk further warfare on a proposal that arouses such strong public feelings which would be heavily exploited by Tony Blair's new-look Labour party.

Bill Cockburn, the Post Office's chief executive, has warned that option one, also favoured by both Labour and the Liberal Democrats, would condemn the Post Office to slow decline.

Labour argues that subsidy from the Royal Mail to post offices would fall dramatically, threatening the break up of the network of rural offices.