Post Office may boost prices: Lure of profits prompts Government to shelve privatisation plan

POSTAL charges may have to rise sharply this autumn to enable the Post Office to meet a threefold increase in its contribution to government funding.

Speaking as the Post Office announced a record pounds 283m profit last year - its seventeenth in succession - Bill Cockburn, chief executive, said that all options were being kept open while a pricing review was completed.

Letter prices have been frozen since September 1991 and the Post Office had given a commitment that they would remain at their current levels of 24p and 18p for first and second- class letters until the end of August.

However, the Post Office is under renewed pressure to end the price freeze because of its increased External Finance Limit target for 1993/4. Under this, its contribution to the Exchequer will rise from a target of pounds 66m last year to pounds 181m. 'Clearly our aim is to put off the need for price increases as long as possible but at the same time we have government targets to meet,' Mr Cockburn said.

The ease with which the Government can tap Post Office profits to help finance the burgeoning public sector deficit has also meant the deferral of privatisation.

With Michael Heseltine, President of the Board of Trade, recovering from a heart attack, Edward Leigh, the pro- privatisation industry minister, sacked in last month's reshuffle, and ministers increasingly jittery about the electoral risks of selling the Post Office, the subject appears to be off the agenda for the foreseeable future.

The Post Office has not been given any date for when the Government will publish its review into the future ownership of the business, even though it has been on Mr Heseltine's desk since February.

Michael Heron, chairman of the Post Office, warned that the delay was causing uncertainty and difficulties in the organisation's forward planning and could undermine the long- term future of the postal network. 'If the Post Office is to continue to operate as a profitable, vigorous, world- leading postal administration, we must have the commercial freedom to raise and invest capital', he said.

The Union of Communication Workers, the main postal union, welcomed the stalling. Alan Johnson, its general secretary-designate, said: 'The Government must now accept that the push for privatisation, which was apparently the obsession of a junior minister, was misguided and that the Post Office must remain an integrated network incorporating letters, parcels and counters.'

Last year both the Royal Mail and Post Office Counters beat their financial targets with operating profits of pounds 252m and pounds 25m respectively. Parcelforce, which was being groomed for sale separately, lost pounds 13m against a target of break-even.

(Photograph omitted)