From The Sunday Times December 28, 2008
by Jonathan Oliver, Political Editor

Lord Mandelson is preparing to make concessions over the part-privatisation of Royal Mail after warnings that up to 100 Labour backbenchers will rebel against the government over its plans.

The business secretary is expected to offer a statutory guarantee that no more than about a third of the postal service will be sold to the private sector.

Labour rebels have been concerned that Mandelson’s plan, rushed out just before parliament’s Christmas break, is a “slippery slope” towards full-scale privatisation.

However, last night a senior government source said Mandelson was ready to give ground to the rebels: “The potential for rebellion is huge. There need to be clear reassurances that we have no intention of pushing further.”

Under Mandelson’s scheme, between 25% and 33% ( *For Now just watch this change when things are quieter) of the postal service will go to a foreign buyer. The government would take on responsibility for Royal Mail’s £7 billion pension deficit, making the business more attractive to a potential private investor.

Mandelson believes the injection of private sector capital and management know-how is essential. However, Labour rebels are concerned that the plan breaches Labour’s manifesto commitment not to privatise the service.

Writing in The Sunday Times, Neal Lawson, chairman of Compass, the centre-left think tank, said the party’s unease was shared by senior ministers.

“There was known to be disquiet all around the table when the decision was debated at the last cabinet meeting of the year,” he said. “At least 100 Labour MPs will mobilise against any form of Post Office privatisation.”

The rebels also want private companies using the Royal Mail network to pay higher charges. They claim the access charge is too low, meaning the government is effectively subsidising the foreign-owned delivery companies that “piggy back” on Royal Mail.

In a show of strength, the rebels are expected to table a Commons motion when parliament returns in the new year.

Jim McGovern became the first member of the government to quit over the issue when he resigned last week as parliamentary private secretary to Pat McFadden, the postal affairs minister. The Sunday Times has learnt that other government aides are considering their position.

John Grogan, MP for Selby and one of the rebel leaders, accused the government of betrayal. “A promise is a promise,” he said. “Pat McFadden signed off a policy of a wholly publicly owned Royal Mail just three months ago. There is an alternative public investment programme, which the unions are willing to implement.”

Gordon Brown has a majority of 63, so only 32 Labour MPs need to vote with the opposition for the government to lose. Labour whips believe about two dozen backbenchers would vote against any involvement of the private sector, but more moderate rebels can be won round.

The Conservatives say they support private sector investment but believe the commitment on pension liabilities is “a mortgage on future generations”.

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