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Government source throws Royal Mail part-privatisation in doubt

LONDON - The government's plan to part-privatise Royal Mail is "dead in the water" because of the strength of opposition from backbench Labour MPs, according to a report.

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The Sunday Telegraph has reported that the prime minister has been told by his chief whip that the rebellion means he does not have the numbers to get the plans through parliament.

Gordon Brown could still go through with the support of the Conservatives, but the newspaper claims that the prime minister does not want to rely on them to get the deal through.

The newspaper quotes a "leading government source" as saying: "There needs to be a major rethink. The sell-off as it currently stands is dead in the water and what we are trying to do now is spare [business secretary Peter] Mandelson's blushes."

Dutch postal operator TNT and private equity firm CVC have been tipped to invest in Royal Mail if the government is able to make the plans a reality.

However, the opposition has been fierce. As many as 130 Labour MPs have signed an early day motion against the move and the Communications Workers Union has threatened to cut its ties to the Labour Party if the government goes ahead with its privatisation plans.

According to The Guardian on Saturday, ministers are privately suggesting concessions could be made if the MPs and the union abandon their campaign.

The newspaper reported that post office minister Pat McFadden told the rebels that Royal Mail's business was in severe decline and it needed private investment.

McFadden said: "I do not think there is a full appreciation of the problems being faced by Royal Mail. Its pension deficit is 75 times its profits. Mail volumes are falling by 7 or 8% a year, and it has not automated or modernised as much as other companies. We cannot just hope it all goes away."

Separately, TNT Post has said it may be viable for it to establish its own force of postmen in London by 2011 because of the volume of mail it is currently handling in the capital.

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