The Royal Mail’s pension trustees have warned that the fund faces ‘very severe’ consequences if the Government can’t sell off part of the company to a private bidder. Lord Mandelson’s Business Department has chosen to leak the letter as it prepares for a showdown with the Left this week over the controversial part-privatisation plan – and with over 100 MPs (mostly from his own side) in opposition to the deal, Mandy needs all the help he can get. But with the unions immediately dismissing the letter as ‘Royal Mail scaremongering’, this is clearly going to need a lot more legwork yet...
In a letter to the Business Secretary (lucky it didn't get lost in the post), the Trustees’ chairman Jane Newell warned that the scheme was already in deficit, while Royal Mail was ‘already balance sheet insolvent’. So if the recommendations of the recent Hooper Review (i.e. part-privatisation) were not implemented, she said, the deficit would balloon way above the £5.9bn Hooper quoted – perhaps to over £10bn, according to an estimate in today’s FT. This could result in the scheme’s 450,000 members seeing their payments slashed in half, and might even force the collapse of the entire company. What’s more, she added, the Pension Protection Fund probably wouldn't have sufficient resources to provide a safety net, particularly after a year in which almost every pension fund has plummeted in value.
However, the unions argue that the problems of the pension fund and the part-privatisation deal are two totally separate issues, with the Communication Workers Union dismissing the letter as a ‘distraction designed to scare MPs’. Part-privatisation wasn’t a way to protect pensions, the CWU said – it was just a way to prepare Royal Mail for a full takeover (and many Labour rebels support this ‘thin end of the wedge’ argument). They’re preparing a mass protest today ahead of Thursday’s launch of the bill in the Lords, in the hope of turning up the heat on Mandelson and co.
For his part, Mandelson insists that selling a piece of Royal Mail – probably to a foreign operator like Dutch firm TNT – is the only viable option, short of a massive injection of public cash. With its traditional revenues dwindling, the argument is that it needs a private partner to help it modernise. But there’s clearly going to be a massive political bun-fight here – 140 MPs have already signed up to a motion criticising the bill, so Mandelson is going to have to find some kind of compromise to get it through. Former minister Peter Hain offered a way forward this morning by suggesting reform of the postal regulator – to stop private sector firms creaming off all the best bits of the business.
Still, if anyone can face down (what's left of) the Left, it's the architect of New Labour – albeit Mandelson makes an unlikely Mrs Thatcher figure...
In today's bulletin:
Royal Mail row escalates as pension fund backs sale
Vodafone adds to gloom by shedding 500 UK jobs
Editor's blog: Trimble's University Challenge to UK economy
Honda engineers new CEO
Books Special: The Secrets of Success in Management, by Andrew Leigh