Mandelson fails to quell Royal Mail revolt

A backbench Labour revolt against the Government's plans to part-privatise Royal Mail is growing, despite efforts by Lord Mandelson to defuse it.

The Business Secretary sought to reassure anxious Labour MPs yesterday by expressing regret at the way the postal market was opened up to competition in 2006. "I am not an unqualified admirer of all aspects of the regulation and liberalisation of this market," he said, adding that "adjustments" could be made. But his olive branch appeared to cut little ice with Labour backbenchers, of whom 71 have signed a Commons motion opposing plans to sell a minority stake in Royal Mail, warning that it "would risk fracturing one of Britain's greatest public services".

As The Independent revealed last month, the number of Labour rebels is expected to rise to more than 100, leaving Gordon Brown facing his biggest revolt as Prime Minister. The critics who have gone public include former ministers Malcolm Wicks, Frank Dobson and Michael Meacher. They are thought to have the backing of John Prescott, the former deputy prime minister.

Geraldine Smith, MP for Morecambe and Lunesdale, who tabled the motion, said that in recent years Royal Mail had been exposed to "ever-increasing, unfair competition" by the watchdog Postcom. She said that several "high-profile" Labour MPs were now working behind the scenes to persuade ministers not to press ahead with the recommendations of an independent report by Richard Hooper last month.

John Grogan, the MP for Selby, another signatory of the motion, said that Royal Mail still had £600m from a £1.2bn Government-agreed loan to modernise the sorting offices. "It is surprising that two years later only half of this money has been spent. There is no need for private capital," he said. Lord Mandelson told the Commons Business Select Committee that the sale of a minority stake was not a prelude to full privatisation. He insisted that Royal Mail needed a new partner to bring in the "hundreds of millions of pounds" it needed in new investment as well as a "gale force of fresh air" into the organisation's management and culture.

"If we want the Royal Mail becoming a real serious player in that international market, then we have got to see it, in my view, teaming up with another postal operator," he said.