Post Office seeks £2bn subsidy to stay afloat

The Post Office has asked the Government for almost £2bn in subsidy to keep its network financially viable over the next five years, a leaked document obtained by The Independent reveals.

Marked "in strictest confidence", the strategic plan from Consignia, the organisation's new name, seeks a massive public investment to keep rural and urban post offices open.

The draft document outlines proposals to merge urban post offices and create a network of "bigger, brighter and better post offices". It also proposes saving millions of pounds a year by closing smaller offices and making their service available in local shops.

The Post Office's appeal for funding was submitted to ministers last month, before the postal regulator Postcomm sounded the death knell for its historic monopoly. Yesterday the Postcomm chairman Graham Corbett said he was opening up 30 per cent of the Post Office's business to competition from April and the entire postal market by 2006.

Consignia's chief executive John Roberts said that the announcement left the Post Office in the dark. "My concern is that if you get this wrong, there's no going back," he said. "The key thing for us is that we do want to compete, we are going to compete and we will fight very hard in these markets.

"The key issue is that nobody actually knows what the result of this kind of regulatory change is going to be, because nowhere else in the world has anybody tried it this way. "We are all working in the dark."

Critics warned that the regulator's plans could threaten the guaranteed delivery of letters to every address in the country at the same price. MPs of all parties joined countryside groups in expressing concern about the effect of competition on rural post offices.

The Conservative MP Edward Leigh, chairman of the Commons public accounts committee, said he was concerned Consignia was "another Railtrack in the making".

The veteran Labour left-winger Dennis Skinner, MP for Bolsover, asked about procedures for sacking regulators.

"I think this fellow Corbett or whatever his name is has gone too far already," he said. "He's going to become an embarrassment to this Government just like (Chris) Woodhead before. Let's get him out before he causes more damage."

Sir Edward Greenwell, President of the Country Land and Business Association, said: "The first casualty of any postal sell-off will be the least profitable margins, rural delivery services. This would be the straw that broke the camel's back for many rural businesses struggling to keep afloat and it would be a bitter blow to communities on the edge of survival."

The Post Office strategic plan says that for the rural branches to survive they must modernise and install PIN machines and offer new services. "... rural modernisation is essential to the long-term sustainability of a rural network and a reduction in its dependency on the Social Network Payment," the document says.