Laymakers Say Case for UK Royal Mail Sale Not Made

The British government has failed to make a case for a 30 percent sale of Royal Mail as there is no clarity around how the proceeds would be used, a parliamentary committee said on Wednesday.

A Royal Mail postal delivery van drives past a mail collection box in London, Monday, Oct. 15, 2007. An agreement, brokered on Friday, aims to end a dispute over pay, pensions and working practices. Despite Friday's outline deal, some wildcat action continues around the country. (AP Photo/Kirsty Wigglesworth)
Kirsty Wigglesworth
A Royal Mail postal delivery van drives past a mail collection box in London, Monday, Oct. 15, 2007. An agreement, brokered on Friday, aims to end a dispute over pay, pensions and working practices. Despite Friday's outline deal, some wildcat action continues around the country. (AP Photo/Kirsty Wigglesworth)

The government says it needs private sector investment to modernize the state-owned postal operator, which is laboring under the weight of an 8 billion pound ($11.5 billion) pension deficit, but parliament's business committee said there was a "worrying lack of transparency" around the plan.

Prime Minister Gordon Brown faces his biggest rebellion since becoming leader over the issue.

More than 130 Labour parliamentarians are expected to vote against the plan, meaning the government may have to rely on support from opposition parties to get it through.

The all-party group also expressed concerns that the government was unlikely to get the best price for any stake given the global financial crisis.

"Who in their right mind wants to try to sell a company in the middle of a recession?" Labour committee member Lindsay Hoyle told a news conference. Dutch logistics company TNT has been touted as a possible investor, but itself has been the subject of speculation that it could be in the frame for a bid from FedEx.

Committee chairman Peter Luff said government assessments seemed to contradict the government's assertion that a third party investor was the only way ahead for Royal Mail.

"There seems to be a very clear current, in all the government's back up documentation ... that investment appears to have been planned to be funded through pension reform, regulatory change and cost savings, not from the new capital a private sector investor would bring," he told reporters.

"So either the impact assessment is either badly drafted or it's some kind of smoking gun which undermines some of the claims that appear to be made for the sale in public."

Luff said the government should give as much detail as possible about the agreement with any investor before parliament can approve the deal.

"Both government and Royal Mail are frustratingly coy about the amount of extra investment needed, refusing to be drawn beyond 'hundreds of millions of pounds'," he said.