Royal Mail needs hundreds of millions of pounds to modernise and keep pace with rivals, despite receiving billions of public money in the past decade, Lord Mandelson told MPs yesterday.

The Business Secretary said that management had been slow to modernise and change was needed at a “gale-force” pace, which having a commercial partner would ensure.

Lord Mandelson reaffirmed plans to sell a minority stake in Royal Mail to a commercial rival despite growing opposition from Labour backbenchers and the unions.

The largest postal union could disaffiliate from the Labour Party over the issue.

The minister entirely supported the Hooper review, which said that Royal Mail needed the extra investment and management expertise that a rival could bring. TNT, the Dutch group that operates in Britain, is the front-runner.

More than 70 Labour MPs have signed a motion against the move.

Lord Mandelson told the Commons Business Select Committee that selling a stake would not flout Labour's manifesto pledge to keep Royal Mail in public ownership.

Opponents of the move say that Royal Mail has yet to spend £600million that it was given in a £3.9billion rescue package two years ago.

The Business Secretary said that the fact that the money had not been spent showed that Royal Mail was slow to modernise.

His comments are a damning indictment of Allan Leighton, who will quit as chairman in March, and of Adam Crozier, the chief executive.

Lord Mandelson said that the problem was not commitment by the Government but Royal Mail's “management, its culture, the ethos of the company including its industrial relations”.

The Government needs primary legislation to sell a stake in Royal Mail. The Business Department is thought to be trying to push it through by Easter.

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