Watchdog wants Royal Mail shake-up

A "radical transformation" of the Royal Mail is needed, Postcom has told a Government review.

The postal regulator said the Royal Mail needed access to private funds to help it restructure, raising the spectre of privatisation, which would prove hugely unpopular among Labour MPs and trade unions.

Postcom said partnerships with the private sector, similar to those in other European countries, could help prove efficiency and help the universal service, which guarantees that letters are delivered anywhere in the UK for the same price.

The regulator said there was a need for more transparency about costs, and warned that the Royal Mail's letters business would decline speedily unless action was taken.

The comments have been made in a submission by Postcom to a government review of the postal market, which has already warned that opening the industry to competition has not benefited consumers.

Postcom chairman Nigel Stapleton said: "Postcom's primary duty is to protect a universal postal service. A high-quality universal service must be maintained, and Postcom is determined to do all we can to ensure it continues to meet the needs of customers.

"The company needs access to private capital to fund and incentivise a radical transformation of the business.

"Postcom wants to see government and Royal Mail embrace a partnership approach with the private sector to secure a universal service valued by all users and provided at least cost, without public funding.

"Royal Mail can only provide an internally-funded universal service if it has the funding to restructure and become the best-in-class operator that it aspires to be, and if it is no longer saddled with having to pay down an enormous pensions deficit."

Mr Stapleton said nobody wanted to see the universal service becoming an ever-greater burden on the taxpayer. Postcom pointed to postal services in Denmark and Sweden as possible models for the UK, where the state and employees own part of the company.

A spokesman for the Communication Workers' Union said: "This is just Postcom's submission to the Government. If this was to be endorsed, it would be a political football.

"This is just another example of Postcom overstepping its remit."

A spokesman for the Department for Business, Enterprise and Regulatory Reform said: "The review is independent of Government. Ministers look forward to receiving the panel's recommendations later in the year.

"It is not for the department to comment on points made in submissions to the panel at this stage, or second-guess the panel's views."

© Independent Television News Limited 2008. All rights reserved.