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Business News 2009
Business News->Royal Mail technically insolvent says Mandelson
Royal Mail technically insolvent says Mandelson

(20 May 2009)

Royal Mail postmanThe Government's Postal Services Bill successfully cleared its third reading in the House of Lords today and will now pass to the House of Commons. Business Secretary Lord Mandelson said "the Government remains convinced that the huge challenges facing Royal Mail must be addressed by a comprehensive package of reform. Letter volumes are expected to fall by as much as 10% every year as people turn to email and other forms of communication, with each 1% fall costing the company around £70m. The company is also technically insolvent due to its volatile multi-billion pound pension deficit." The Bill now passes to the House of Commons, where it will be debated by MPs in early June.

:"This is an important landmark in the Bill's passage through Parliament. The legislation has emerged stronger following the numerous debates in the Lords and the constructive and helpful input from Peers. Royal Mail is facing decline and it would be a dereliction of duty if we did not take action to secure the company's future."

The Postal Services Bill has been strengthened by a number of amendments which the Government made in response to the constructive debate in the Lords. These include:

* Clarity that the legislation allows an employee share scheme to be created, provided that Royal Mail remains publicly owned. The Government believes it is important that employees have a serious stake in Royal Mail's success. It wants to discuss this issue with any partner before deciding how best to incentivise performance and deliver value for money.

* A new requirement for the Post Office to produce an annual report on the breadth and accessibility of the Post Office network. This will ensure that transparent information about how accessible the network is, in particular to small businesses, rural communities, the elderly, people with disabilities and other vulnerable groups, is published every year.

* The Secretary of State must report to Parliament on any sale of shares in Royal Mail. The report would be made after any agreement had been signed and set out the objectives and criteria for any sale and if they have been achieved, and the principal terms.

* A new requirement for Ofcom to report on the cost of fulfilling the universal service obligation (collecting and delivering mail six days per week at a uniform price). Ofcom will also have powers to ensure that the price other postal operators are charged by Royal Mail to access its network, including delivery over the final mile, properly reflect those costs.

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