LONDON (Reuters) - Prime Minister Gordon Brown's government faced on Tuesday a major revolt among his supporters and a union threat of a strike over plans to sell a stake in postal services operator Royal Mail.
Michael Connarty, a Labour MP, said the proposal would be "political suicide" for the government and could sink its chances of winning the next general election, due by June 2010.
The government, battling to combat the banking crisis and a recession, lags the Conservatives by around 12 points in the opinion polls.
The government confirmed it would introduce legislation permitting the sale of a minority Royal Mail stake on Thursday in the Lords.
At a packed rally near parliament, more than 500 postal workers heard a succession of speakers denounce the proposal.
"We are up for modernising the Royal Mail, but we will not stand by and see the industry privatised," Billy Hayes, general secretary of the Communication Workers' Union (CWU), which represents many Royal Mail workers, told the rally.
Hayes' deputy, Dave Ward, said that if the government pushed ahead, the CWU might have to end its affiliation with the Labour Party, which depends on unions for much of its funds.
"If it means that at some point in this campaign ... our members have to take strike action to defeat this (plan) we will be doing that," he said.
In December, Business Secretary Peter Mandelson welcomed an approach by Dutch logistics company TNT to take a minority stake in Royal Mail.
In parliament, 145 MPs, mostly Labour, have signed a motion opposing the part-privatisation of Royal Mail.
Labour has a working majority of just 63 in the Commons so is likely to depend on support from the Conservatives to get the legislation through.
The government hit back by stressing the seriousness of Royal Mail's 5.9 billion pound pension fund deficit and warning that its services could be jeopardised if it were not modernised.
Opponents said the government was proposing to shoulder Royal Mail's pension fund liabilities and suggested there was no need to sell part of the company.
However, Mandelson said the two things went together. "If the taxpayer is going to pay for the pension fund deficit, the taxpayer must get back a full, improved letters service in return," he said in a statement.
Adam Crozier, Royal Mail chief executive, told a parliamentary committee that Royal Mail could prove attractive to private equity investors despite the economic downturn.
Bringing in outside expertise as part of a package that included equity capital and commercial opportunity was "the quickest and best way" to change Royal Mail's culture, he added.
He said Royal Mail needed hundreds of millions of pounds of investment, but would not give an exact figure.
Opponents of the plan fear part-privatisation could endanger Royal Mail's commitment to deliver mail at the same price to everyone, even in remote rural areas.
(Additional reporting by Adrian Croft, editing by Will Waterman)