Mandelson moves to privatise Royal Mail

"Lord Mandelson faced an angry backlash... after he opened the door for a part-privatisation of the Royal Mail", say Andrew Porter and Jon Swaine in The Daily Telegraph. The Business Secretary agreed with an independent review by Richard Hooper of Ofcom that the delivery service should "forge a strategic minority partnership" with a private company, with the Dutch postal firm TNT in pole position for a deal that could be worth £3bn.

Mandelson's rejection of suggestions that 50,000 postal jobs could be at risk as "wild, alarmist talk", and his claim that the British government was "saving Royal Mail by investing in its future", cut little ice with his party's backbenchers. Left-winger John McDonnell retorted that: "this is a privatisation beyond what even Thatcher achieved. Labour MPs are angry at what will be interpreted by postal workers as a complete betrayal. Gordon Brown should not underestimate the opposition this will unleash among MPs, trade unions, postal workers and communities." And on cue, general secretary of the Communications and Workers Union, Billy Hayes, said that: "what we are seeing here is the nationalisation of the debt and the privatisation of the profits. I find it incredible that at a time when the government has bailed out the British banks it cannot bail out the postal service".

But "privatisation has always been the Post Office's best hope of a viable future", says Jeremy Warner in The Independent. "Yet Labour, though not Mandelson, has always been vehemently opposed to it, believing it would undermine what remains of the rural and urban network of Post Offices and destroy the universal delivery service". There's still something to be said for these arguments, as without massive state subsidy, the "universal service obligation" is almost unsustainable amid growing electronic communication and intense competition for the most profitable postal business. "However, it's equally certain that without action, Royal Mail would have become an unsustainable burden on the taxpayer, culminating, as the Ofcom review says, in abject disaster for the company."

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"It's clear that something had to give," agrees The Times. The Royal Mail loses 6p for every letter sent, and mobile phone and e-mail usage means that five million fewer letters were sent in 2007 than a year before. Meanwhile, the £22bn pension scheme has a black hole exceeding £7bn, which taxpayers will now underwrite. And industrial action has become far too common. Hence Hooper's damning conclusion: the Royal Mail is antiquated and "untenable" in its current form. The promise to deliver any letter anywhere in the country for a single price which began in 1840 with the founding of the penny post is no longer feasible "without serious reform". While job losses are "of course regrettable, the trade unions are wrong to demand that employment be guaranteed".

The Hooper report does give the impression "that postal workers are overpaid, work-shy luddites", says Andrew Sparrow in The Guardian, with Royal Mail employees wasting up to three hours a day on tasks that are automated in Continental Europe. Indeed, Lord Mandelson's speech went down "far better with Tory MPs than with Labour". Edward Leigh, the Conservative right winger, "said he welcomed New Labour to the Thatcherite wing of the Conservative party. Ouch."