The government should take responsibility for the Royal Mail's £8bn pension deficit, Richard Hooper says.
In an updated version of the report he wrote 18 months ago, Hooper claimed the Royal Mail's pension shortfall was "even more unsustainable" than 18 months ago.
Hooper - who also argues for part-privatisation of Royal Mail to "inject private sector disciplines into the business" - said the government, and therefore the taxpayer, should take on responsibility for the deficit to allow modernisation to take place.
Business secretary Vince Cable (pictured) said: "This update reaffirms the findings of Richard Hooper's original report and the views he has given me during the course of the summer. He paints a very clear picture - Royal Mail is facing a combination of potentially lethal challenges - falling mail volumes, low investment, not enough efficiency and a dire pension position.
"We are determined to safeguard Royal Mail for the future and help it tackle these challenges. 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."
Hooper's recommendations are broadly in line with those made in his 2008 report, when he claimed the deficit was making it "difficult" for the company to compete effectively.
"It is a barrier to external investment by a strategic partner and inflates prices," he added.
Hooper says only government money can tackle the deficit: "The introduction of private sector capital is by itself far from sufficient to secure the future of the universal postal service.
"Its future depends just as much on resolving the closely connected issues of the pension deficit and the need to transform postal regulation."
Speaking at the launch of the updated report today, Hooper said: "If all the recommendations in my updated report are implemented without further delay, and Royal Mail modernises to best in class with management, workforce and unions working together, then despite the very real market difficulties the company has a healthy future.
"Building on its unique ability to visit 28 million addresses on a daily basis, it can aspire to be the delivery company of choice for a wide range of physical mail from letters to parcels."
A Postal Services Bill will be introduced during this session of Parliament. The government said it will help to safeguard the future of the Royal Mail and the Post Office network - giving employees a secure future and consumers and businesses a service they can continue to depend on.
However, the Communication Workers Union accused the government of trying to "get their hands on pensions cash".
CWU deputy general secretary Dave Ward said: "We fear the pensions of our members will be at risk under privatisation. Everyone hears about the deficit, but there is over £26bn in assets which belongs to the postmen and women who have paid their contributions every week of their working lives.
"We will never let the government get its hands on that money for anything other than what it's intended - to pay for the retirement of hard-working postal workers."
The Hooper report also reveals Royal Mail Pension trustees tabled a 38 year deficit reduction plan to the Pensions Regulator (TPR). Hooper says the "unprecedented" length of the repayment period led the regulator to flag up its "substantial concerns" over the Royal Mail's plans.
Hooper adds: "The agreement is now subject to a formal review by TPR.
"TPR has wide-ranging powers that could extend to imposing a new and more difficult recovery plan, with unknown consequences for the affordability of the deficit repayments.
"The review by the TPR compounds the problems already associated with the pension deficit."
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