Royal Mail sell-off to go ahead

THE PRIVATISATION of the Royal Mail is due to be confirmed by Cabinet ministers tomorrow, leading to a pounds 1bn stock market flotation, and possible tax cuts, before the next general election.

The compromise proposal to sell off about 50 per cent of the Royal Mail and Parcelforce - the letter and parcel delivery services - follows months of ministerial infighting. Post Office Counters will not be privatised. The sale is likely to secure a place in the 1994-95 legislative programme.

Yesterday, leaders of 160,000 postal workers accused the Government of betraying a 'critical public service' and warned of price rises. Alan Johnson, general secretary of the Union of Communication Workers (UCW), said that while there was a clear need to give the service a far greater degree of commercial freedom, that could be done without selling it to the private sector.

Protection for rural sub-post offices will be underpinned by plans to give them freedom to widen their commercial activity to offer other services, which could include banking.

The receipts from the privatisation could also help pre-election tax cuts. Kenneth Clarke, the Chancellor, promised in his annual speech to the CBI last night that tax cuts 'will come on to the agenda again - but only when we have got the other things right'.

Mr Johnson argued that the legislation for the privatisation could be defeated in the House of Commons. An opinion poll of a sample of 52 Conservative backbenchers, commissioned by the UCW, showed that 15 per cent of the MPs want it stopped altogether. That would translate into a defeat for the Government.

'This announcement will prove to be political and electoral suicide for the Government. All indicators show that privatisation of the Post Office would be monumentally unpopular with the British people,' said Mr Johnson.

He warned that the 'second delivery' would come under attack and differential pricing according to status or location would be introduced. 'That means price rises for consumers across the board,' he said.

The privatisation will reflect a qualified but significant victory for Michael Heseltine, President of the Board of Trade, who has overcome objections from Cabinet colleagues to the plan, long sought by the Post Office itself.

Detailed agreement has yet to be reached at tomorrow's meeting of an ad hoc committee of senior Cabinet ministers, but the issue, which provoked a serious Cabinet split between 'radicals' in favour of more privatisations and 'consolidators' keen to avoid further controversial legislation, has been resolved.

Key ministers, including Douglas Hurd, the Foreign Secretary, opposed to a total privatisation of the Post Office, have now agreed in principle to sell off about 50 per cent of the shares in the Royal Mail and Parcelforce.

Mr Heseltine is pressing for 51 per cent of the shares to be sold. And while some ministers would still prefer the flotation to be limited to a 49 per cent share, they are expected to encounter stiff opposition from the Treasury, which had been arguing for a 100 per cent privatisation.

Mr Clarke made it clear during ministerial discussions that the greater commercial freedom and borrowing powers recommended for the Post Office would not be granted by the Treasury without privatisation.

The decision is the final break with a pledge given by Baroness Thatcher when, during the 1987 general election, she stunned right-wing Tory radicals by delaring that the 'GPO - the Royal Mail would not be privatised'. She added: 'People feel very strongly about it and so do I'

One argument advanced against the original plan for 100 per cent privatisation of the Royal Mail was that it would be unwise to sell off the relatively popular Royal Mail when it was Post Office Counters which attracted most public criticism. Privatisation of the counters service has long been ruled out for the current parliamentary session because of rebellion it was bound to provoke among Tory MPs fearful for the future of Britain's 19,000 sub-post offices.