The chief executive of the postal service Consignia bowed to political and union pressure yesterday by agreeing not to accept a 10 per cent pay rise.
John Roberts, who was in line for a £20,000 increase, taking his basic salary to £225,000, said he had waived his entitlement because of the "perilous state" the company was in.
Consignia, which changed its name from the Post Office a year ago, is losing £1.5m a day and is facing the threat of a national postal strike after rejecting a 5 per cent pay demand from the unions.
Jerry Cope, Consignia's managing director for mail services, also agreed not to accept a 10 per cent pay increase which would have taken his salary to £154,000.
The decision by the two Consignia bosses not to take their pay rises helped to avoid a breakdown in delicate talks taking place yesterday before the conciliation service, Acas, over the pay claim lodged by the Royal Mail's 145,000 workers.
Consignia's remuneration committee recommended the pay rises last October and they were approved by Patricia Hewitt, the Secretary of State for Trade and Industry, on the grounds that other less senior executives were being brought in on higher salaries than the chief executive.
But Ms Hewitt's office made it plain last night that she did not believe the pay rises were appropriate in light of the deterioration in Consignia's performance. "She is strongly of the view that they should forgo the pay rises," said an aide.
Mr Roberts issued a statement saying: "The debate about levels of pay within Consignia is legitimate, but our priority is the pay of postmen and women. The business is in a perilous state and the key issue for all of us is affordability. We will address these issues when the company can afford it and not before. Jerry Cope and myself have therefore decided not to take pay increases at this time."
Billy Hayes, general secretary of the Communications Workers Union, said: "Common sense appears to have prevailed. However, if the DTI is prepared to agree inflation-busting increases for postal bosses, I see no reason why the department should not also support our case for a 5 per cent pay rise for postal workers."Reuse content