LONDON (AFP) — The government is being urged to rescue the Royal Mail's pension fund on Thursday after plans to semi-privatise the state-owned postal operator were abandoned.
Ministers had earlier intended to pay off the fund's eight billion pounds deficit, as part of the deal.
Both Labour and Tory peers demanded urgent action over the future of the fund while the CWU union which represents postal workers said it was critical that the government address the issue and not "walk away."
"Changes are needed on modernisation, pensions, regulation and industrial relations which do not need primary legislation but which do need government support," it said.
Business Secretary Peter Mandelson said the pension deficit was "a matter for the company and the pension trustees".
Mandelson on Wednesday had told the House of Lords that "market conditions have made it impossible to conclude the process to identify a partner for the Royal Mail on terms we can be confident would secure value for the taxpayer,"
The announcement marked a major U-turn for Prime Minister Gordon Brown's Labour government -- but the minister vowed to re-visit the issue once volatile economic conditions returned to normal.
"There is no prospect in current circumstances of achieving the objectives of the Postal Services Bill. When market conditions change we will return to the issue," he told the House of Lords.
In December, the government revealed that it had received interest from Dutch company TNT over the proposed partial privatisation of up to 30 percent of the company.
"We have thoroughly tested the market to see who is interested in partnership, but economic circumstances, I need hardly point out, are extremely difficult," he added.
"I have always been clear that we would only do a deal with the private sector if it represented value for money for the taxpayer.
"Our market testing has shown now is not the time to sell a minority stake in Royal Mail."
In December, TNT proposed a "strategic partnership" in which it would hold a "substantial minority shareholding" in Royal Mail.
But the plans hit the buffers when TNT balked at the valuation put on Royal Mail.
Brown told Sky News the decision was taken "partly because of the recession in Britain, but it is also because we had international investors interested at one point, but we have got a recession in the rest of Europe as well."
He was facing the prospect of a rebellion at the second reading of a bill on the proposed changes after 150 of Labour's backbench MPs signed a parliamentary motion opposing the sell-off.
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