Post Minister is confident Queen will keep her head

The Government is in talks with Buckingham Palace after it was discovered legislation paving the way for a sell-off failed explicitly to guarantee the practice, raising fears it could disappear.

But Ed Davey – who discovered the loophole – said he was sure a solution would be found before the Bill finishes its passage through Parliament.

Under the Postal Services Bill, private and potentially overseas buyers will be allowed to own up to 90 per cent of the Royal Mail, with at least 10 per cent of shares going to employees.

Mr Davey denied reports there was "anger" at the Palace over the omission of a safeguard for the Queen's head and suggestions it could try to delay the legislation until after the Queen's 2012 Diamond Jubilee.

While the Bill contains a clause giving the Queen a veto over any use of her image on stamps or other products, it does not insist that her head be shown.

Mr Davey said he queried the lack of specific protection with officials months ago but was told it was not being sought by the Palace and that dropping the monarch's image would be "commercial suicide".

Unhappy with that answer, Mr Davey said, he initiated talks with the Palace – which were "positive and friendly" – to decide how to firm up the protection.

"Any company would be absolutely stark staring mad to decide not to have the Queen's head on its stamps," he said, pointing out that there was no such guarantee in the previous Labour government's draft Bill.

"I was told we did not need it but I said several months ago I was not happy with that. I'm extremely confident that the Queen's head will remain on our stamps."

Shadow Business Secretary John Denham said the legislation was deliberately vague.

"They are not leaving glaring loopholes like this for no reason. They think the fewer strings they attach, the more money they will get from a foreign buyer," he said.

German and Dutch operators are expected to be leading bidders in the sell-off.

"The fact that they have not bothered to protect the monarch's head on our stamps just shows how desperate they are to sell Royal Mail off as quickly as possible and for as much cash as possible."

Business Secretary Vince Cable told BBC1's Andrew Marr Show: "We have thought very hard about how we protect the brand – the Royal Family.

"There is, within the legislation, provision to stop the abuse of it. It has now been pointed out that there's nothing specifically to stop whoever runs the Royal Mail in future dropping the royal head.

"I think it is unlikely they would because it is a very powerful brand but we will talk to the Palace about whether any further changes need to be made."