Well it’s probably more than that. The government wants to bring private sector investors into the Royal Mail, ostensibly to encourage finance and new methods, but it is looking increasingly likely that the real purpose is to plug a gap in the pension fund.
The Royal Mail pension fund deficit is "significantly larger" than the £5.9bn in the Hooper Review, according to BBC News, who say they have seen a letter from the pension fund trustees. In the letter the chair of trustees, Jane Newell, warns that the deficit is so big that the Pension Protection Fund would struggle to support it. She says that the part-sale of Royal Mail is the only way to save the fund. Or in other words if the government won’t fund it some other mug will have to be found. The government is about to discover that in the real world, companies aren’t that stupid.
The BBC call the shortfall “bigger-than-expected”, which is a shame because I seem to remember the directors of the Royal Mail declared a big profit and asked for bonuses all around the boardroom a few months ago. Last year’s profit was made in part by not providing adequate funds to make up the deficit on the pension fund. Of course one of the reason’s for the deficit is the fact that pension funds are no longer entitled to a credit for tax withheld at the basic rate on dividends. Somewhere in the back of my mind, I seem to recall Gordon Brown had a hand in that.
UPDATE: It looks as though the value over £5.9 billion is closer to £9 billion. Which puts the Royal Mail's £1 million a day profit in perspecitive. At that rate it would take 30 years to clear the pension deficit, not that the government will do so because they need the cash.