Royal Mail sell-off plans hit buffers

The government may decide this week whether it will continue with its controversial sell-off plans for the Royal Mail, after early offers fell short of expectations. It is thought that the highest offer to have been made so far is by private equity company CVC Capital Partners, who has bid £2bn for a 30 per cent stake in the company.

Although sources say that the offer might be some way below this level. The bid puts it ahead of rival TNT, the Dutch postal company, which is competing for a stake. Last month Deutsche Post pulled out of the bidding process.

However, whether or not a minority stake is sold off this time, the government is likely to continue with its postal services bill, meaning privatisation will still be possible at some time in the future.

The bill is not without controversy, with a rebellion led by Labour MPs in parliament and vocal unease being expressed by the Communication Workers Union over possible job losses.

The second reading of the bill is due on June 9th , although there are reports that this date may be delayed, and it will not pass without support from a number of conservative MPs.

The sell-off is complicated by the Royal Mail’s £6.8bn pension scheme black hole, which the government has had to promise it will fund. The deficit is due to reach £9bn later this year and the government’s bail-out will need European commission clearance.

The business secretary said yesterday of the privatisation plan that "Mandelson and the cabinet are not for turning. The government is going to proceed with this legislation."

WHAT THEY ARE SAYINGZoe Wood, the Guardian: "The showdown over Royal Mail's part-privatisation is shaping up to be 'Gurkha 2' as battle lines are drawn ahead of next week's key debate in the House of Commons. Like the Gurkhas, the Royal Mail is a national treasure - it just costs a lot more to keep. Without government subsidy - and the closure of nearly 2,000 post offices - it would still be loss-making. For the last six months the government has been trying to sell a 30 per cent stake to a private investor but the credit crunch means it's a bad time to sell anything, let alone a hornet's nest like the Royal Mail."

Mark Kleinman, Daily Telegraph: "At the rate that talks are progressing, an unaddressed letter would have more chance of arriving at its destination before a solution to the funding crisis facing our national postal service is found. And yet selling a stake to CVC is fraught with political danger. The scale of the backbench rebellion has already prompted Gordon Brown, the Prime Minister, to rethink the entire plan, and signing a deal that might ultimately further enrich a handful of private equity managers is hardly a recipe for appeasement." ·