13 October 2010 Last updated at 08:14 ETShare this page
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Royal Mail privatisation bill unveiled by Vince Cable
The government says the Royal Mail needs both outside investment and expertise
Business Secretary Vince Cable has said that private buyers will be allowed to own up to 90% of Royal Mail, while the Post Office may be mutualised.
He was giving details of the Postal Services Bill which will pave the way for Royal Mail's privatisation.
Mr Cable made clear that the government would not oppose a foreign company buying up the Royal Mail.
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Royal Mail staff will be offered at least 10% of the shares in the company, but unions oppose the privatisation.
The Post Office network, which is not included in the sell-off, may be turned into a mutual like John Lewis, he said.
The Royal Mail's pension fund - which has a substantial deficit - will also not be included in the privatisation, and will instead be taken on by the government.
Mr Cable said last month that he had come to his decision after an independent report said the postal service's outlook had worsened.
Continue reading the main storyRoyal Mail's woes
- Pension deficit up from £2.9bn in 2008 to £8bn in 2010
- Size of daily mailbag down from 84m in 2005 to 71m in 2010
- Losses at Royal Mail Letters grew to £333m, from £200m last year
- Global mail volumes predicted to decline by 25-40% by 2015
Source: Hooper review 2010
This review by Richard Hooper, a former deputy chairman of communications regulator Ofcom, concluded that the Royal Mail's universal postal service could only be maintained through an injection of private sector money and expertise.
The key detail expected to be announced in the bill is whether the government proposes that the Royal Mail be sold to a private company or companies, or in a public share sale instead - which would probably mean the existing management remaining in control.
The main postal workers' union, the CWU, says that privatisation of the Royal Mail would lead to higher prices for consumers and job losses for staff.
The Royal Mail has 176,000 employees.
"Mr Cable made clear that the government would not oppose a foreign company buying up the Royal Mail."
