Post Office weighs asset sales or borrowing to meet postmaster pay target

The Post Office is considering selling assets or taking on new borrowings to help deliver an ambition to boost sub-postmasters’ pay by £120m this year, its chairman has said.

Sky News has learnt that Nigel Railton, who was confirmed as the state-owned company's long-term chair last week, told thousands of branch managers that it had ring-fenced £86m so far to increase their remuneration.

In a speech delivered in Chesterfield, Mr Railton is understood to have told sub-postmasters that the Post Office's board was redoubling its efforts to meet the target of up to £120m for pay rises.

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The company was exploring options including additional cost-savings, further asset sales, sale-and-leaseback opportunities, and borrowing options, he told them.

One source said Mr Railton had said on Wednesday morning that without actions already taken by Post Office management, sub-postmasters would be left with pay increases this year of just 2%, rather than the 20% it had now secured.

The progress towards its £120m target comes just three months after the Post Office chairman was forced to deliver a bleaker prognosis to thousands of sub-postmasters keen to have their faith restored in the scandal-hit company.

In March, Mr Railton said he had yet to gain certainty from Whitehall about a £120m increase for this year.

"Our funding discussions are positive and ongoing, but I want to be honest that we are operating in a challenging financial environment," he told them at the time.

The Post Office is reliant on funding from the government, and last November outlined plans for an ambitious transformation of its business, which includes a substantial number of job cuts.

It remains hopeful of making up the £34m shortfall to reach its £120m target, according to insiders, as it seeks to rebuild its public and internal reputation in the aftermath of the Horizon IT scandal.

A Post Office spokesman confirmed Mr Railton's remarks on Wednesday.