The “historic” privatisation of Royal Mail was yesterday approved by the UK Parliament but willeffectively cost the government a massive £10 billion (€11.3 billion) in state aid that will
require EU approval.As expected, the House of Commons approved amendments made to the Postal Services Bill in theHouse of Lords last month and the bill is now due to gain Royal Assent within the next week or so.The European Commission will then have to approve the large-scale state aid before the law can beimplemented.
The key elements of the bill are to sell a stake of up to 90% in Royal Mail to a privateinvestor to generate urgently-needed fresh capital and to give at least 10% of shares to employees,to separate the retail network Post Office Ltd, with 11,500 branches, into a mutually-ownedorganisation, to transfer the heavy pensions deficit, estimated at about £8.4 billion, to thegovernment and to ensure ‘lighter’ regulation.
The Minister for Postal Affairs, Ed Davey, confirmed to the House of Commons that the governmentintended to take on Royal Mail’s historic pension deficit with effect from March 2012 as part ofthe preparations for a sale of the company. He also revealed that the government wanted torestructure the company’s balance sheet, and take over its £1.7 billion of debts with theGovernment. This measure, taking the overall cost of Royal Mail privatisation to about £10 billion,had not been previously known.
“Ministers believe that for Royal Mail to be on a sustainable commercial footing going forwardthis will need to be restructured and Royal Mail’s level of debt will need to be reducedsubstantially,” the Department for Business, Innovation and Skills (BIS) stated.
The British government said it would submit a formal state aid notification to the EuropeanCommission in the next few days and hoped for approval by March 2012.
At the same time, work to establish a new regulatory framework for postal services is alreadyunderway. Regulatory responsibility will be transferred from Postcomm to Ofcom and Ofcom willlaunch a consultation in the autumn with a view to establishing the new regulatory framework inspring 2012.
Business Secretary Vince Cable said: “Today marks a significant milestone for Royal Mail.Legislation has now been agreed that will help tackle the huge challenges facing the company.Passing the legislation, reforming regulation, getting state aid approval, tackling the pensiondeficit – these are all vital steps that will provide momentum towards a sale of Royal Mail. Theywill also give the company the security and certainty it needs to press ahead with its essentialmodernisation programme.”
Postal Minister, Ed Davey, added: “Today is unquestionably a major step forward in protectingour universal postal service and our Post Office network. We have worked extremely hard to ensurethe best possible outcomes for the taxpayer and the dedicated employees of Royal Mail and the PostOffice up and down the country. At least 10% of the shares in Royal Mail will go to its employeesas part of the sale process. Royal Mail’s staff will get secure pensions. And the proposed supportwill ensure that the company is on a sound commercial footing and can operate on a level playingfield.”
But postal union CWU, which has campaigned against privatisation, said it was “a sad day for theUK postal service” and claimed that the government had put services and post offices “at risk infavour of private capital”.
Billy Hayes, CWU general secretary, said: “Today is a sad day for the UK postal service. Thedays are numbered for the post office network, postal deliveries and services as we know them. Howthe government can call breaking up and flogging the Royal Mail ‘securing the future of postalservices’ beggars belief.”
He stressed that the CWU would continue to campaign against privatisation. “A buyer is yet to befound and despite the uncertainties ahead the CWU will be here throughout to fight for the jobs ofpostal workers and the services they provide to customers and communities across the UK,” headded.
