Royal Mail jobs 'under threat'

The Royal Mail could lose 20 per cent of its business in the long term if its letter monopoly is suspended again later this month, threatening jobs and profits and forcing up postal prices, MPs are to be warned by Post Office chiefs.

Sir Michael Heron, the Post Office chairman, is to supply the Commons Trade and Industry Select Committee with a confidential financial model it has drawn up showing the potential impact if the Government suspends the monopoly for an extended period.

For every 1 per cent of business the Royal Mail loses, 1,500 jobs will be threatened, Sir Michael told MPs on the committee yesterday, adding that it "would not take a lot" for rival operators to snatch 3 per cent of deliveries if the market was opened up.

Ministers will suspend the monopoly for a period of three months if members of the Communication Workers Union vote for further industrial action in a ballot later this month. The result of the ballot will be known on 29 October.

The series of strikes this autumn by the CWU has so far cost the Post Office pounds 40m in lost business and resulted in its monopoly being suspended for short periods.

However, Post Office executives believe that if the monopoly is suspended for three months then it will open the floodgates as the Government will find it impossible to re-impose the monopoly once private operators are offering rival services.

Local courier firms could enter the market immediately, offering to deliver Christmas post in selected areas, while bigger operators such as TNT would target lucrative customers such as banks, building societies and mail order firms by offering a national service.

In written evidence to the committee, the Post Office says that a three- month suspension would not in itself be "immediately threatening". But it adds that an indefinite suspension resulting in a free-for-all would be "raise the question of how a universal service at a uniform tariff could be funded. Were there to be a long-term suspension of the monopoly then the Post Office would have to price competitively and this would benefit some customers at the expense of others."

Sir Michael also repeated his call for greater commercial freedom, saying it would be a "tremendous step forward" if the Government gave the Post Office the status of a public limited company and freed it from the PSBR so that its external financing limit - its contribution to the Exchequer - instead became a dividend payment set at 40-50 per cent of post-tax profits.

Under current plans the EFL is due to rise from pounds 298m this year to pounds 317m in 1997-98.