Royal Mail sell-off plan shelved

Part-privatisation of the Royal Mail will not go ahead as planned because of the depressed state of the economy, Business Secretary Lord Mandelson has announced.

Lord Mandelson told the House of Lords that there was "no prospect" of the sale going ahead in the current economic circumstances.

A delay in the controversial sell-off, which is opposed by many Labour MPs, had been expected after Lord Mandelson said on Monday his Postal Services Bill was being "jostled" for space in the legislative programme.

He told peers that the state of the economy made it "impossible" to obtain value for money for the taxpayer.

But he claimed: "When market conditions change, we will return to the issue."

Ministers had argued that private sector money was needed to secure the future of the Royal Mail, which is facing a pension deficit of up to £8 billion.

They hoped to find a private partner willing to take a stake in the company to fund much-needed modernisation. But the plan ran into difficulties when the main suitor, Dutch postal operator TNT, indicated that its interest was cooling over the valuation put on Royal Mail.

Meanwhile, ministers faced bitter opposition from the Communications Workers Union (CWU), which threatened to vote on disaffiliation from the Labour Party.

And Prime Minister Gordon Brown was facing the prospect of large-scale rebellion at the second reading of the Postal Services Bill in the Commons after 150 of the party's backbench MPs signed a parliamentary motion opposing the sell-off.

CWU general secretary Billy Hayes said: "The Government has not only looked at market forces but has listened to the British public. Privatisation was a deeply unpopular suggestion from day one."

"Privatisation was a deeply unpopular suggestion from day one.

"We now look forward to resolving issues which remain around pensions, regulation and modernisation.

"The CWU is as committed as anyone to improving industrial relations in Royal Mail. Now that this uncertainty has been lifted, there is a great opportunity to step up a gear in modernising Royal Mail in the public sector."

Lord Mandelson told peers that the Government remained "convinced" that the partial sell-off proposed in Richard Hooper's report into the Royal Mail "offers the best chance for securing the universal postal service while protecting Royal Mail pensions".

But he added: "We have thoroughly tested the market to see who is interested in partnership, but economic circumstances, I need hardly point out, are extremely difficult.

"I have always been clear that we would only do a deal with the private sector if it represented value for money for the taxpayer.

"Our market testing has shown now is not the time to sell a minority stake in Royal Mail."

Conservative business spokesman Lord Hunt told peers that by putting the part-privatisation into "cold storage", the Government was "putting the trustees of the Royal Mail pension plan in an impossible position".

Liberal Democrat business spokesman John Thurso said: "This is an humiliating climbdown for the Government. It is quite clear that Gordon Brown no longer has the political will to fight the unions and opponents on his own backbenches.

"The Government first told us that the plans were being postponed because there wasn't time to debate them. Now we hear that market conditions are the reason. They really should make up their minds.

"Starting this process without being able to finish it has left Royal Mail in limbo, the regulator stranded and caused a lot of unnecessary damage.

"The result of this dithering is regulatory hiatus, uncertainty over pensions and stalled modernisation. These issues will not go away and Lord Mandelson must now explain how the Government will deal with them."