The Labour rebellion over plans to part-privatise Royal Mail risks endangering jobs and pensions and could help the Conservatives win the next general election, Business Secretary Lord Mandelson warned yesterday.
Critics of the proposed sell-off reacted with anger at Lord Mandelson's comments, warning that the plans stood no chance of being passed without the Government being forced to rely on Conservative support.
Harriet Harman, the Labour deputy leader, fuelled speculation of a Cabinet split, saying there had been "robust discussion" about the plans.
The rebels said that more Labour MPs were likely to join 137 of their backbench colleagues who have signed a Commons motion opposing the part privatisation. Compromise proposals aimed at turning Royal Mail into an independent public-sector corporation modelled on the BBC or Network Rail will be published next week. Downing Street sources attempted to play down the row, insisting that ministers' doors were open to discussion with rebel MPs about the future of Royal Mail.
Lord Mandelson enraged opponents of part-privatisation, using a newspaper interview to accuse critics of "scare tactics" and warning that Labour risked losing the next general election if it "ducks difficult questions and choices".
He told The Observer: "A number of Labour MPs who do not have an ideological fixation one way or the other nonetheless say to me: 'Why now? Why invite controversy and disunity?' And my answer is that, as the Government, we cannot duck difficult questions and choices. Some in the party may be weary of taking decisions but that simply signals that we're ready for a rest, inviting electoral defeat.
"They may succeed in defeating the legislation," he said. "But in the process they'll defeat the turnaround in finances. They will defeat our ability to sustain the universal service. They'll defeat the pension bail out."
Geraldine Smith, the Labour MP for Morecambe who has spearheaded the rebel campaign, said she was "astonished" at Lord Mandelson's remarks. "It shows how out of touch Peter Mandelson is if he thinks we have to privatise Royal Mail to win the next election. How can that be for real?"
Support among rebel MPs is "pretty solid", she said, adding that ministers "have absolutely no chance of getting this through Parliament without relying on the Tories".
Neal Lawson, the chairman of the campaign group Compass, which has led opposition to the sell-off, said more Labour MPs were likely to add their names to the rebel motion. "The idea that going down this track is going to help us win the general election flies in the face of the evidence. The idea that anyone who tries to stand up to the Government is damaging its prospects is wrong. They put these proposals on the table without building a consensus."
Ms Harman appeared to distance herself from Lord Mandelson's comments, calling for a "calm debate" on the future of Royal Mail. She told the BBC: "We have to take some action. Most of the action is, people agree with, there is an element which is controversial and we need to go about that with a calm debate, respecting each other's point of view, reaching agreement."
George Osborne, the Shadow Chancellor, told the BBC's Politics Show: "If Peter Mandelson gets on and does the right thing, he will have our support."
He added: "Harriet Harman was lukewarm in her support. She couldn't be pressed to say, I actually back these proposals. So there's a lot of division in the Cabinet. The Conservative Party will do the right thing. We won't just be the opposition party for the sake of it. We will support the part-privatisation of Royal Mail."