'No prospect' of postal sell-off !

Lord Mandelson: 'Now is not the time to sell a minority stake in Royal Mail'

There is "no prospect" of the partial sell-off of the Royal Mail going ahead in the "current circumstances", Lord Mandelson has told peers.

The business secretary announced in the House of Lords that the state of the economy had made it "impossible" to complete a deal on favourable terms.

The partial sell-off, opposed by many Labour MPs, had been due to go before Parliament before the summer break.

The Tories said the government was in a state of "paralysed indecision".

The shelving of the plan follows Tuesday's partial U-turn on ID cards and a Commons defeat on part of its bill to clean up Parliament.

Lord Mandelson said the government remained convinced that selling off part of the Royal Mail was the best way forward and the issue would be revisited when market conditions changed.

He told peers that under current market conditions it would be "impossible to conclude" the process in a manner which would "secure value for the taxpayer".

BBC chief political correspondent James Landale says: This is a huge setback for the government. Royal Mail part-privatisation was the key litmus test for public sector reform for Gordon Brown's administration. But this is Lord Mandelson recognising political reality - namely that if no-one is going to buy this bit of the Royal Mail, it was simply not worth all the political aggravation and battles with Labour backbenchers that he would face. Ministers are being very open about that - there was no point having a row if the sale were not possible.

"We have thoroughly tested the market to see who is interested in partnership, but economic circumstances, I need hardly point out, are extremely difficult," Lord Mandelson told fellow peers.

He continued: "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."

Ministers say private sector money needs to be brought in to help rescue the Royal Mail as it faces a pension deficit estimated at up to £8bn.

Former postman and Labour peer Lord Clarke of Hampstead said Royal Mail workers and management were "living without certainty" because of the pension deficit.

Lord Mandelson said this "remains a matter for the company and the pension trustees".

For the Conservatives, Shadow Business Secretary Ken Clarke said the government had been left without a credible plan for Royal Mail's future.

"Their policy is to do nothing which they have been telling us for the last few months will be disastrous for Royal Mail," he said.

For the Lib Dems, Lord Cotter said the government was "collapsing from the position" it put forward in support of the bill.

But a spokesman for the prime minister said the government would "return to the issue when market conditions change".

According to BBC political correspondent Jo Coburn, a source close to Lord Mandelson said the business secretary reached the view that creating the controversy made little sense when "we knew we couldn't implement it in the immediate future".

Billy Hayes, general secretary of the CWU union, which was strongly opposed to the proposal, said the government had "not only looked at market forces but has listened to the British public".

The problem for Peter Mandelson is that market conditions were - if anything - even worse on 16 December last year, when he embarked on his adventure to partly privatise this historic public service Robert Peston BBC business editor Read Robert's blog in full

BBC political correspondent Laura Kuenssberg said the government was understood to have had difficult finding a business that would buy part of the Royal Mail.

The business secretary said on Monday that the bill was being "jostled for space" among other legislation ministers wanted to conclude before Parliament breaks for the summer.

Lord Mandelson said on Monday that the partial sell-off would not happen until "later", but the Lords statement is the first time he has confirmed that the part sale will definitely not go ahead in the near future.

There has been growing speculation that the partial sell-off, which is controversial within the Labour Party, will not go ahead before the next election.

More than 140 Labour backbenchers had signed a Commons motion critical of the plan and there had been rumours for weeks that the scheme could be shelved.

BBC NEWS REPORT.