Home deliveries under threat as Consignia slashes costs

House-to-house postal deliveries will be under threat if the Post Office fails to make profits, Consignia has admitted.

The company has already been looking at new ways of getting post to people. They include scanning business mail in sorting offices and sending the contents electronically to home computers or setting up pick-up points at railway stations so people can collect their own mail on the way to work. It plans to launch pilot schemes to test these and other strategies in the New Year.

Consignia, as the Post Office is now named. insists it has "no plans" to end house-to-house delivery – universal service is enshrined in their licence. But bosses are concerned that if the company cannot make a profit, having sustained losses of £281m in its first half-year trading, they will have to look for a "new model".

The company has been told to cut costs by 15 per cent, which could mean up to 30,000 job losses, a prospect that has already led to confrontation with workers.

"If we don't reduce our costs, if we don't get back to profitability, then increasingly we will find it difficult to provide the universal service," a Consignia source said.

Vincent Cable, the Liberal Democrat trade and industry spokesman, said the post office faced a "looming disaster".

He criticised the low borrowing limits of £75m a year imposed by the Government – the sole shareholder – and the pressure from the European Commission and Postcomm, the UK regulator.

"The Government has failed to give Consignia the necessary freedom to operate as an independent publicly owned corporation," he said. Describing it as "in no-man's land – neither a commercial operation nor a public service", Mr Cable said there was now "a serious threat to basic services such as house-to-house delivery, uniform tariffs and the network of sub-post offices."

Consignia chief executive John Roberts stunned postal workers and trade union bosses last week when he told a Commons select committee the post office faced up to 30,000 job losses.

A strike threat immediately followed, prompting Mr Roberts to water down his comments, insisting that was the upper limit, and agreeing that there would be no compulsory redundancies. Union leaders are meeting Consignia management this week to continue negotiations.

But questions are also being asked about how much the Government knew about the plans. Last week, Tony Blair said it had not been consulted on the proposed cuts, saying: "It is not a matter for the Government; it is a matter for the company and the unions."

A day later, the Department for Trade and Industry admitted that ministers were aware of the plans and were told of them in October. "Though regrettable, the 30,000 figure is not a surprise," a spokesman said.