Labour's plans to allow private companies into the postal market descend into farce
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Consignia, the state-owned mail company formerly known as the Post Office, has been accused of deliberately stamping on its competition. The accusation comes from AICES, the trade body that represents companies which include the giants DHL, FedEx, TNT, UPS and Hays. The body is incensed because Consignia is suing potential rival Hays although the Government and the European Union is committed to deregulation.

"AICES is extremely disappointed that Consignia's first reaction to the prospect of competition is to contact the lawyers," said a spokesman. "Its action appears to be more concerned with putting off potential market entrants than any real concern about the long-standing added-value services that are being provided by competitors." He said they were not prepared to comment on the details of individual cases, but Consignia's legal action would "harm consumers and businesses who increasingly desire a choice of services".

Consignia launched legal action against Hays in July, accusing the support services company of trying to cream off valuable parts of the post business and being in breach of the Postal Services Act. The case, to be heard in the High Court, has been deferred until October.

Yet the issue of whether Hays should carry out these services is still being mulled over by the industry regulator, PostComm.

Last Wednesday, Hays moved closer to winning three licences to deliver certain mail services in the UK, after PostComm ended the consultation period on its application. Consignia refused to comment on the contents of its response. But it is understood that Consignia complained that if Hays was granted the licences then it would be essentially cherry-picking the most profitable delivery services in the country, while Consignia was still required to run the more unprofitable ones.

A Consignia spokesman denied that the company had deliberately attempted to prevent competition through its legal action.

"Everything we do is in the best interests for our 27 million customers in providing a universal service," said a spokesman for Consignia. "That is always our starting position. But we are worried about companies cream-skimming, picking out the most profitable services."

The spokesman said that if Post Comm allowed companies to "cream-skim" then it would not be able to guarantee a universal postal service or price.

PostComm's views on the subject are revealed on its website. It discusses the claim that competition will mean Consignia's revenues will be hit, while its costs will remain the same. "Consignia's ability to recover these costs will be as much in its hands ... as it is in the hands of its competitors," says the company's entries on the website.

Consignia is required to pay the Government, its sole shareholder, 40 per cent of its post-tax profits, with a minimum payment set at £93m.

In Consignia's last financial year, the company made just £172m post-tax profit, requiring it to pay the government the mandatory dividend.

Hays spokesmen have declined to comment.