Michael Heseltine, President of the Board of Trade, also made it clear that he believes the Royal Mail will ultimately be privatised.
In evidence to the Trade and Industry Select Committee, the Department of Trade and Industry and the Treasury said the Government could not responsibly give the business the freedom it seeks while it has the advantages of public sector ownership.
Mr Heseltine made clear his anger that his attempt to privatise the Royal Mail last year collapsed. "You only have to look at privatised industries that are world competitive. It is a tragedy that we have constrained the Royal Mail from leading the world," he said.
Mr Heseltine added that he could see no solution to the dilemma facing the Post Office. "I doubt we are able to resolve it because the right solution is to allow the Royal Mail to become a world-class company. It is a solution which I believe will come about in the end," he said.
"Is there a thing called commercial freedom in the public sector? Are these not contradictions in terms? That is the question."
Mr Heseltine said that the select committee's inquiry into the future of the Post Office was "premature" as options were still under discussion. They include some form of price regulation, the creation of a state-owned plc, and involvement in projects under the Private Finance Initiative.
Earlier Michael Heron, Post Office chairman, attacked the Government for failing to respond to the company's latest proposals for its future.
Mr Heron also accused the Government of bleeding the Post Office through the Treasury's annual demands for cash. The cash paid - the External Financing Limit - has risen from £66m in 1992-93 to £226m this year, which exceeds last years profit after tax.
He also reiterated demands that the Post Office should have freedom to raise money, invest as it sees fit, and be allowed to form joint ventures in new markets both at home and overseas.Reuse content