Michael Heseltine, President of the Board of Trade, insisted that the Government's commitment to a nationwide mail delivery network and uniform postal prices was 'non-negotiable'.
But Labour and the trade unions immediately warned that the review could lead to higher prices, poorer service and cherry-picking of profitable services by private companies.
The decision to examine the sale of the Post Office, which has 197,000 employees, a turnover of more than pounds 5bn and 20,000 outlets, takes the Government's privatisation programme on to a new level.
If it is sold off along with coal and British Rail there will be virtually no state- owned public services left.
The possibility of privatising the Royal Mail also marks a sharp change in government policy. Despite Margaret Thatcher's zeal for privatisation, previous Conservative administrations shied away from the idea of selling letter delivery services because of its electoral liability.
Announcing the review, which is due to be completed by the end of the year, Mr Heseltine said: 'I embark upon this consideration with no preconception as to the likely outcome. In particular, I have formed no views on the question of ownership.
'Options will cover continued public sector ownership as well as private sector options, where I will wish to expore, among other things, the scope for greater employee involvement.'
Robin Cook, Labour's trade and industry spokesman, said he would welcome a review of postal services to the public. But he added: 'The worry is that this review is not about public service but about privatisation. The danger is that the review will sniff out the profitable parts of the Post Office and skim them off for the private sector.'
While maintaining he had an open mind, Mr Heseltine gave a strong hint that he would look favourably on employee and management buyouts of the Post Office's different businesses.
A staff buyout of its parcels division, Parcelforce, is likely to be mounted following an earlier announcement that the business was to be privatised. But Mr Heseltine also disclosed yesterday that two private-sector operators had also expressed an interest in Parcelforce.
Mr Heseltine said the objectives of his review would be to improve the service to customers, to enable the Post Office to compete more widely and to attract new capital.
He also reiterated the Government's intention under the Citizen's Charter to reduce the Royal Mail's monopoly, which currently covers any letter costing up to pounds 1 to post, to a level nearer to that of a first- class stamp.
But he guaranteed that any changes in the structure of the Post Office would not affect postal services to rural and outlying regions, which lose money heavily.
The Royal Mail name would remain, as would the Queen's head on stamps, and measures would be taken to protect the Post Office pension fund from private raiders.
Although the nationwide delivery service would remain intact, Mr Heseltine did not rule out the possibility of first and second-class letter delivery being handled by more than one company.
The decision to press ahead with the privatisation review appears to have stemmed from the big improvement in the Post Office's financial position. Last month it announced a fivefold increase in pre-tax profits to pounds 247m for 1991.
Sir Bryan Nicholson, the Post Office chairman, would not be drawn on his board's response but he said that to be completely divorced from government control would 'give us the commercial freedom that we look for'.Reuse content