Row grows over Royal Mail plans
There was angry condemnation of the government's plans at the rally
Postal workers have been protesting in Westminster as the row grows over plans to sell off 30% of Royal Mail.
Ministers say the company cannot survive as it is and needs to be part-privatised to pay for modernisation.
But 125 Labour MPs oppose it, fearing full privatisation and job losses, and argue Labour made an election pledge to keep the Royal Mail in public hands.
Meanwhile, trustees of Royal Mail's pension fund warned it faces disaster unless the sale takes place.
Hundreds of postal workers and members of the Communication Workers' Union attended a rally at Methodist Central Hall in Westminster.
BBC political correspondent Ben Wright said there was angry criticism of government policy, some calls for the union to sever its links with the Labour Party and claims that workers were being "blackmailed" by linking the pension deficit issue to the part privatisation.
The government has proposed taking over responsibility for the pension scheme as part of the proposed sell-off package.
In a letter published by the government, Jane Newell, the chair of trustees of Royal Mail's pension scheme warns the deficit was likely to rise well in excess of its current £5.9bn, should the sale not happen.
But the Communication Workers' Union said the publication of the letter was an effort to "scare" MPs into voting with the government.
Its leader Billy Hayes said it was a "scandal" that the chairman of the pension trustees was "interfering" in politics.
He told Sky News: "The government is saying they want a foreign company to run the post office, which is ridiculous. We could be faced with a situation where the Royal Bank of Scotland is nationalised and the Royal Mail is privatised."
Gordon Brown may face the largest backbench rebellion of his premiership on the bill, due to be introduced to Parliament on Thursday, and may have to rely on Conservative and Liberal Democrat votes to get it through.
Labour backbencher John Grogan said three cabinet ministers had told him they opposed the plan and told the BBC: "Is this the time for the Labour government, which is going through hard times at the moment, to completely split the Parliamentary party down the middle?
"Over 100 Labour MPs have signed a motion against these proposals - it's going to be Peter Mandelson against a big bulk of the Parliamentary Labour Party."
Business Secretary Lord Mandelson has also come under fire for choosing to introduce the bill to press ahead with the plans in the House of Lords.
SNP postal affairs spokesman Mike Weir said he was on a "collision course" with his own party adding: "It would be disgraceful if he is plotting to by-pass the Commons in an attempt to avoid embarrassment."
The government says the Royal Mail needs new investment in technology to survive.
Chief executive Adam Crozier told the Commons business and enterprise committee on Tuesday they were facing "rapidly declining" volumes of letters posted - with an 8% drop predicted next year.
When the pension deficit was revalued, it was expected to reach between £8bn and £9bn, he said.
He added: "The simple fact is the business doesn't generate enough cash to fund the investment required to modernise the business and ensure the future of the USO (universal service obligation)."
Ministers say the plan is not a sell-off but a "partnership" which maintains Labour's manifesto commitment to keep the Royal Mail in public ownership.
The prime minister's official spokesman said the government was committed to ensuring a publicly owned Royal Mail and maintaining the "universal service" obligation to deliver to every UK home.
But asked whether it could guarantee jobs would not be lost, he said that was a matter for the company which takes it on.
So far 145 MPs have signed a Commons motion opposing the move - 125 of them Labour.
Tory MP Daniel Kawczynski told the BBC he would vote against the plan, because he was concerned deliveries to rural areas, like his Shropshire constituency, would be under threat if Royal Mail was run by a private company.
But shadow business secretary Ken Clarke, a former postal minister who failed to persuade Margaret Thatcher to privatise the service when she was prime minister, said most Conservatives would vote with the government.
He urged Lord Mandelson not to "cave in" and said matters had got worse over the past decade and Royal Mail now faced a "serious financial crisis".
"We have the interests of the postal service and public in mind and we will vote in line with the policy of part privatisation," he said.
Ministers have given themselves a couple of months to try to win the argument with almost 140 rebel Labour MPs
BBC's Political correspondent
Unions are staging a rally against the plans. They argue the Royal Mail made a healthy profit of £255m in the last nine months of 2008 and can thrive in its current form.
They are worried about possible job losses and the impact of the private sector involvement on the universal service.
Former cabinet minister Peter Hain told BBC Radio 4's Today programme he was worried the plan could "open the door to full-scale privatisation in the future".
Labour MP Geraldine Smith said that as the government had agreed to take on the pension deficit it was "crazy" to "keep the liability and give away the most profitable parts of the business to a foreign competitor".
But Postal Affairs Minister Pat McFadden told the BBC the pension fund deficit was 75 times the company's profit and Royal Mail could not afford to pay down the deficit and fund the modernisation needed - such as automating services.
"We will not privatise the company but what we want is to bring in the experience to drive forward that change precisely so we can continue the universal service for the future," he said.
Dutch postal operator TNT is the only firm, so far, to have publicly expressed interest in buying a chunk of Royal Mail.