Post Office 'will lose millions'

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Pressure group Compass said a financial analysis it had carried out on the likely revenues of a partial sale of the business would see the Treasury net less than half the value it would have secured a year ago.

A 49% sale based on this year's profits would net £1 billion, but the figure would have been £1.9 billion a year ago, said Compass, adding that the one-off windfall to the Treasury would be "wiped out" in less than two years if the Royal Mail stayed wholly publicly-owned.

Compass chairman Neal Lawson said: "We don't doubt the good intentions of the Government to modernise Royal Mail but these figures destroy the rationale for part-privatisation.

"The Government must look at the unexpectedly poor state of the market and come up with a new plan to modernise the Royal Mail that doesn't involve selling shares at rock bottom prices and lose hundreds of millions of pounds in revenues.

"Even if you think it makes sense to sell, it makes no sense now.

"Staying in public hands means all profits are reinvested in the business to modernise it and not paid out as a dividend to shareholders."

Labour MP John Grogan (Selby) said: "I would strongly urge the Government to think again. These figures show the part-privatisation would represent a bad deal for the Government and for the British public.

"Labour MPs will now be even less likely to support part privatisation once they see these figures."

More than 100 Labour MPs have signed a Commons motion attacking the Government's plans, threatening the biggest backbench rebellion against Gordon Brown since he became Prime Minister.