The following correction was printed in the Guardian's Corrections and clarifications column, Friday 21 May 2010

This story referred to "Labour's attempts to privatise the postal operator". The Labour government's plan was for part-privatisation: it aimed to inject private capital up to a 49% stake.

The government is preparing for another potentially explosive confrontation with the postal unions by attempting to privatise Royal Mail, the Guardian has learned.

Vince Cable, the business secretary, is determined to press ahead with a restructuring of the group, which could embroil the government in a dispute with the Communication Workers Union.

Cable has asked Ed Davey, his fellow Liberal Democrat and junior minister at the business department, to prepare the plan in detail. It is understood that the plan will be unveiled by David Cameron and Nick Clegg today as part of the full coalition agreement.

Royal Mail is expected to post a fall in annual profits as a result of last year's strikes.

Cable believes that while Royal Mail remains in state ownership it cannot compete in a liberalised postal market. Ministers are also anxious about Royal Mail's pension deficit, expected to be formally revalued at £10bn next month.

Cable is mindful that Labour's attempts to privatise the postal operator, led by his predecessor Lord Mandelson, failed last summer following a backbench revolt by more than 120 Labour MPs and a campaign by the CWU.

Unions and other campaigners argue that Royal Mail, as a provider of an essential public service, should remain in state ownership. The Lib Dem election manifesto said they would sell 49% of Royal Mail to free up funds for investment in the business. Employees would own half of the remainder in a trust and the government would keep the rest.

It is thought the Lib Dems believe that such an employee trust would help smooth the way for the privatisation, although the CWU is likely to oppose this. The Conservatives had advocated a straightforward sell-off of Royal Mail.

Work has begun to find common ground between the two approaches and the details will emerge over the next few months. The company made an operating profit of £184m in the first six months of the year, up slightly on the previous year. But the industrial dispute over Royal Mail's modernisation which led to national walkouts last autumn, dented profits in the second half.

The last three months of the financial year, which ends in March, saw an improvement in performance after the CWU and management agreed to work together to modernise the business.

The CWU has argued in the past that the government has talked down Royal Mail's financial prospects in order to justify its argument that it needs private sector capital and management to turn it round.Royal Mail's bosses have also been bullish about the prospects for its parcel delivery business to offset the structural decline in its letters business.

But politicians and Royal Mail are aware of the pressing need to put the group on a stable footing. Next month, its pension trustees must present a "recovery plan" to the government demonstrating how the deficit can be plugged. Royal Mail cannot afford to fill the gap although the pension trustees may propose a temporary solution. The government is likely to offer to meet workers' retirement benefits if privatisation goes ahead, as Mandelson did last year.

A majority of Tory and Lib Dem MPs back some form of privatisation, cancelling out any potential Labour opposition.

But this fresh attempt will also revive last year's auction process to find a buyer which was far from straightforward. When Mandelson shelved the auction last summer and, with it, the privatisation process, he blamed the failure of bidders to make a decent offer rather than the Labour backbench rebellion. But bidders, such as Dutch postal group TNT, were put off by the likely industrial relations dispute they would face as potential part-owners.

Meanwhile David Cameron and Nick Clegg will describe the coalition agreement tomorrow as a "historic document" as two parties come together for the first time in more than half a century to agree a joint programme for government. But at the joint launch of the document they will warn of tough decisions ahead as the coalition makes measures to reduce Britain's record £163bn deficit its biggest priority.

"Difficult decisions will have to be taken in the months and years ahead; but we will ensure fairness is at the heart of those decisions so that all those most in need are protected," the prime minister and his deputy write in the foreword to the 30-page coalition agreement.

"Working together, we are confident that we can take the country through difficult times to better days ahead."

The document, modelled on the programmes for government agreed between the various coalition parties that have governed Germany for decades, is broken down into 32 separate sections.The two party leaders gave a taste of their different styles of leadership yesterday as they consulted their parties. Clegg and his fellow Lib Dem ministers presented the document to a meeting of their parliamentary party last night where MPs and peers were taken through the document page by page.

Cameron used a meeting of the Tory parliamentary party to announce an immediate ballot to limit the power of backbench Tory MPs. In a move condemned by right wingers, who said Cameron was behaving like a North Korean leader, Tory MPs were asked to approve a change that will allow ministers to attend meetings of the backbench 1922 committee. This was a source of trouble for John Major when he had a wafer thin majority between 1992-97.

The full coalition agreement today follows the publication last week of a smaller seven-page document. Tories and Lib Dems said that last week's agreement, which covered the deficit and taxation, was designed to tackle the more difficult issues. They said the full agreement would cover the less contentious areas.The Tories are pleased that two main planks of their manifesto – welfare and schools reform – have survived largely intact. Private and voluntary groups will be given a greater in placing the long term unemployed back into work on a payment by results basis. Royal Mail is still searching for a new chief executive after Adam Crozier left to run ITV last month. The group, which has appointed headhunting firm Egon Zehnder to lead the search, did not expect to select a new chief executive until the outcome of the general election – and the new government's plans for Royal Mail – became known. It is being run by chairman Donald Brydon in the interim.