Government bail out of Royal Mail signals need for part-privatisation

3.20.02pm UTC (GMT +0000) Thu 18th May 2006

Royal Mail Post Box

Commenting on the Government's £1.75 billion rescue package for the Royal Mail, Gordon MP Malcolm Bruce said:

"The Royal Mail should be free to raise its own funds and this latest Government bail out demonstrates that it needs proper investment and the freedom to operate commercially. It cannot continue to exist in this hand-to-mouth fashion, constantly relying on help from the Government.

"At a time when Dutch, German and Austrian post office counterparts are moving ahead with privatisation, a part-privatisation of Royal Mail would enable it to access private capital markets to borrow more than £2bn if they so desired and rejuvenate the Post Office network."

ENDS

Notes to Editors:

-The Royal Mail confirmed today it is to receive a £1.75bn package from the government including £900m in the form of a loan with commercial rates of interest, to be repaid by 2013 and £850m from existing Royal Mail reserves, to be put to use towards the pensions deficit now totalling £5.6bn.

-A Liberal Democrat motion on the future of Royal Mail passed during Spring Conference in March 2006 included proposals on:

• The establishment of an investment fund from the proceeds of shares of potentially up to £2 billion which will be put towards modernising branches and providing support in opening new Post Office branches. Start-up investment capital will also be available for sub-post offices wishing to diversify into offering additional services to local communities;

• The Post Office Ltd would be separated from Royal Mail Group- with the retention of Post Office Ltd in the public sector- giving post offices the opportunity to develop new business;

• A statutory guarantee to protect the universal service obligation (USO).