Staff may be offered shares as part of the government's plan
The government is to go ahead with the privatisation or sale of Royal Mail.
'Failed politics'
Mr Cable said: "Royal Mail is facing a combination of potentially lethal challenges - falling mail volumes, low investment, not enough efficiency and a dire pension position.
"We will come forward with new legislation in the autumn. It will draw heavily on Hooper's analysis and recommendations and the government's wider objectives, including the need for employees to have a real stake in the future of the business," he added.Royal Mail welcomed the report.
"Royal Mail needs a way of getting access to capital, a resolution of the legacy pension deficit and a strikingly different regulatory approach which allows us to compete fairly in an increasingly tough and shrinking market," said a spokesman.
But the CWU's general secretary, Billy Hayes, said privatisation would lead to higher prices for customers and job losses for staff.
"It's the failed politics of history which brought disruption to Britain's utilities and railways and astronomical prices for consumers," he said.
"Dangerously in this case, we fear the government may also be plotting to seize the pension assets."
Pension problem
Mr Hooper's report says industrial relations have improved at the Royal Mail in the past two years and some modernisation of sorting and delivery services has taken place. But he argues that only the private sector can provide the money necessary to continue the modernisation process, at a time when the government is strapped for cash and the Royal Mail cannot generate enough extra cash itself. And he envisages that this will involve closing half of the current 64 big "mail centres" that distribute letters and packets to local sorting offices.
A key feature of the latest recommendations, like those first published in December 2008, is that the Royal Mail's pension scheme, which currently has a deficit of £8bn, should be taken over by the government to relieve the company of making huge extra contributions. The pension problem is mentioned more than 40 times in Mr Hooper's latest 50-page report.
"The introduction of private sector capital is by itself far from sufficient to secure the future of the universal postal service," Mr Hooper said. "Its future depends just as much on resolving the closely connected issues of the pension deficit and the need to transform postal regulation."
Worsening outlook
Last year, the Labour government abandoned its plans, inspired by Mr Hooper's first report, to find a private sector partner for the Royal Mail via a partial sale. Mr Hooper said that in 20 months since that report, the Royal Mail's position had become worse. The decline in the number of letters being sent has accelerated and will not be offset by more parcels being sent, for instance, to internet shoppers, he argued.
"Without serious action, Royal Mail will not survive in its current form," he said.
He demanded urgent changes to preserve the universal service under which letters are delivered for the same charge regardless of their destination in the UK, six days a week
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A new feature of his proposals, supported by the coalition government, is that staff should be given a stake in the company if it is sold or privatised. "It is important that any future employee ownership scheme should be taken forward with the aim of achieving the culture change that is needed within Royal Mail," he said.
"Employee shares could be a powerful force in supporting the company's modernisation and future success."
The government said that the Post Office network would not be included in its forthcoming privatisation plans.
Mr Hooper is a former deputy chairman of the telecoms regulator Ofcom.
Billy Hayes, Communication Workers Union: "The British public don't want privatisation"
(BBC)
(BBC)
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