Department for Business, Innovation and Skills
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Government to secure future of Postal Service

Government to secure future of Postal Service

DEPARTMENT FOR BUSINESS, ENTERPRISE AND REGULATORY REFORM News Release (2009/42) issued by COI News Distribution Service. 26 February 2009

The Government today published a Bill and detailed policy statement to secure the future of a successful publicly-owned Royal Mail.

Business Secretary Lord Mandelson said the Postal Services Bill is vital to maintaining the six-day-a-week, fixed price 'universal postal service', which is under threat.

The Bill keeps the post office in public ownership, while allowing for a strategic partner to bring experience and investment to transform the Royal Mail, with the Government taking on its pension deficit.

Business Secretary Lord Mandelson said the Government's plan was the only credible option to save the Royal Mail, which has been severely affected by decreasing mail volumes due to the rise of email and online technologies.

"Our policy will keep Royal Mail in the public sector and this legislation makes this clear. The Royal Mail will run out of money to sustain its current universal, six day service unless its pension fund deficit is solved and its business transformed.

"Faced with this challenge, I am determined to protect the universal service and secure Royal Mail's future.

"The public deserves the best possible mail service. And if we are asking the taxpayer to take on Royal Mail's huge pension deficit, it must deliver a full, improved letters service in return.

"Royal Mail is lagging behind its international counterparts and this needs to change. A partnership must not just bring access to capital, it must bring expertise. A partner experienced in driving forward change in postal companies will help transform it."

The Government's policy will:

* Enable a fund to be created, if it should be necessary to do so, to support the provision of the universal service.

* Allow for private sector investment for a minority shareholder to modernise the company, but with a firm commitment that the Royal Mail remains publicly owned. Primary legislation will be required for any future changes.

* Allow the Government to take on the pension deficit. This will secure staff's historic pensions, which the pension trustees have confirmed are at risk, while freeing Royal Mail from paying £280m per year to service this debt.

* Appoint Ofcom to regulate the postal services market and make upholding the universal service obligation its paramount duty in relation to postal services. It will regulate to ensure greater benefit for consumers and place postal services in a broader communications market context.

* Retain Government ownership of the Post Office and committing to helping it build a diversified, successful future.

* Ensure the Government's right to appoint the Chair and approve board appointments.

The Government's policy follows recommendations from Richard Hooper's independent review of postal services which reported in December 2008.

The report's stark findings warned that Royal Mail's precarious finances were placing the universal postal service in grave danger, with losses likely to rise. The report found major change is required at Royal Mail to adapt to the structural changes occurring in the market.

However, the report predicts that, with the appropriate action, there is a positive future for postal services, with a range of trends creating new opportunities, including the growth of home-delivered on-line shopping on-line.

Notes to Editors

Access the Government's detailed policy statement at:

Access the Postal Services Bill at

The Hooper Review final report is available at

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