Gordon Brown will press ahead with contentious legislation to part-privatise Royal Mail “within weeks”, despite facing potentially the biggest backbench rebellion of his premiership, according to government insiders.
The prime minister is determined to face down a revolt by Labour MPs and the main postal union, which is threatening to withdraw about £1m a year in support to the hard-up party.
More than 120 Labour MPs have signed a parliamentary motion opposing plans, announced in December, to sell about a third of the state-owned postal operator to an overseas rival, such as TNT, the Dutch company.
Ministers will offer limited concessions to the rebels, including a provision in the bill requiring Royal Mail to remain majority public owned.
Lord Mandelson, the business secretary, is also prepared to review statutory controls on pricing, blamed by many Labour MPs for favouring Royal Mail’s rivals over the British operator.
But the government is adamant that such regulatory changes are not a substitute for part-privatisation.
“We understand this is a difficult discussion for the Labour party to have, and our door is open to talk to MPs about any concerns they have,” Pat McFadden, postal affairs minister, told the FT on Monday.
“But the company is facing big problems on the pension deficit, on the decline in mail volumes, and on the lack of modernisation relative to other postal companies, and that’s why we have to act.”
The determination to push ahead with the sell-off seems to be driven by wider political concerns, as well as the belief that a foreign company’s expertise and capital injection are integral to turning round Royal Mail.
Lord Mandelson is still discussing with the Treasury the extent to which the state will support Royal Mail’s pension liabilities. The government wants taxpayers to take on a significant element of the pension deficit as part of the proposed reforms.
The multi-billion pound liability will leave postal workers enjoying generous final salary benefits, while private-sector workers are increasingly facing curbs. Ministers believe that voters cannot be expected to swallow this without reassurance that the company will be modernised to avoid future losses.
The pensions problem is one factor behind the decision not to delay the legislation. Royal Mail’s pension trustees will recommend this year whether additional measures are needed to deal with the deficit, which is expected to have risen significantly above the £5.9bn estimate of last March.
Lack of progress on the government plans could lead to the trustees demanding higher contributions from the company or more taxpayer funding.
Get alerts on UK politics & policy when a new story is published