Leading Article: Mandelson's delivery fails to meet the post

AS A FORMER TUC official, Peter Mandelson understands his former employers well enough to know that advocating Post Office privatisation yesterday would not have been a good idea. But the Secretary of State for Trade and Industry's dismissal of recent press reports was less than categorical. "No decisions have been taken to privatise the Post Office," he said in an aside to the delegates in Blackpool. To which the temptation is to respond: "Well, they should have been."

The Post Office is the largest commercial enterprise left in the public sector, the sole significant survivor of the family silver. It stayed in the state sector partly because of the Queen's head on the stamps and the word "Royal" on the red vans, a tribute to Margaret Thatcher's pragmatism in the face of public sentiment. Michael Heseltine's attempt, after her removal, was then defeated by the Post Office unions, who proved to be cannily effective lobbyists. But the logic of private-sector disciplines and opportunities cannot be held back for ever - and it would have been braver of Mr Mandelson to use his speech yesterday to begin to make that case to representatives of the Post Office's employees.

There can and should be much debate about the best way to introduce private- sector disciplines and private-sector finance into the Post Office. But there should be no argument about the principle. Indeed, almost all the Conservative privatisations were flawed. Assets were sold too cheaply; monopolies were sold off intact or as duopolies; and regulators were (and still are) too weak. But the programme has been hugely beneficial to the economy as a whole, and to the employees of former public-sector bodies.

It is important, therefore, that it should be done carefully. It may be that contracting out services may be the best model, rather than, as the Post Office management would prefer, selling the whole business. Sub-post-offices are, after all, effectively contracted out to self-employed shopkeepers. In addition, for public relations purposes - and Mr Mandelson made a nice self-deprecating reference to his expertise in this area - it may be that the word "privatisation" should not be used.

Letter post is both a natural monopoly and - to some extent - a social service. But, as the Prime Minister has said in relation to local government, what matters is not who provides a service but how well it is provided. Each user of the Post Office has a different view, but the reality is probably that, while many aspects of the service are good, such as Sunday collection and twice-daily deliveries, some remain poor, such as parcels and forwarding. But all aspects could be improved, and competition and private finance are the best incentives.

Labour's manifesto was curiously worded, saying that the party "opposed" privatisation in the past. As for the future, it said only: "We will ensure that self-financing commercial organisations within the public sector - the Post Office is a prime example - are given greater commercial freedom to make the most of new opportunities." Call it greater commercial freedom or privatisation, what matters is that the Post Office, and especially its workforce, becomes flexible enough to adapt to changing markets. It has become a much more efficient organisation recently, but it cannot rely on the growth of junk mail to continue unabated in the era of e-mail and the Internet. Mr Mandelson put it in the most general terms: "We must make change our friend, not our enemy."

He should have been more explicit, and told the unions that this will mean finally shedding the labour movement's sentimental attachment to the idea of government needlessly running profitable commercial services.