Co-operative plan for post offices as Government prepares for sell-off

Ministers revealed the plan to stave off future closures by turning the loss-making Post Office network into a mutual as they unveiled controversial plans to privatise Royal Mail.

Postal unions warned of job losses last night after Business Secretary Vince Cable said there would be no upper limit on how much of the Royal Mail – which would be separated from its Post Office arm – will be sold although at least ten per cent of the company will be given to employees in shares.

Mr Cable, publishing the Postal Services Bill, said there would be no objection to a foreign-owned buyer because the Government was not going on a "nationalist jihad".

Ministers declined to say how much money the Government hoped to raise, how much the employee shares will be worth, or how quickly the privatisation will go ahead, although it will not be before next summer.

Under the plans outlined yesterday, Royal Mail would be sold off but the Post Office arm of the business would be separated from it and either kept in Government hands or turned into a mutual structure like the John Lewis Partnership or the Co-operative Group.

Handing over ownership would "empower" the people who knew the business best, said Mr Cable. "We will break the cycle of declining visitor numbers through new ideas and new services to win back customers," he said. "There will be no repeat of the previous government's closure programmes."

Ideas include using post offices as a "front window" for Government services.

Mr Cable said "substantial investment" was needed if the Royal Mail was to modernise at a faster pace and adapt better to the digital age. Around 26bn of pension fund assets will be taken over, but there were 34bn of liabilities, so the Government was not acquiring a "gold mine".

Paul Reuter, Unite's national officer, warned: "If private equity takes an interest in Royal Mail this will only be for short-term profit through asset stripping."