The commercial argument for change is compelling. For all its success, the Royal Mail's core letters business is coming under growing pressure from fax, electronic mail, private couriers and foreign post offices trying to muscle in on the bulk delivery of direct mail. Yet the Mail is starved by the Treasury of capital for new investment and forbidden by the Department of Trade and Industry to go into partnership with private firms or to expand in new businesses. The Post Office must either be given new freedoms in the public sector, or it must be privatised.
At first sight, the public-sector freedom advocated by Labour has its attractions. The Post Office's foreign counterparts, such as Switzerland's, manage both to deliver letters on time and to offer other commercial services across their counters. Yet the British climate seems inhospitable to such hybrids. Were the Post Office to go out into the capital markets on its own, lenders would correctly assume that no government could allow it to go bankrupt. Bold new expansion into new markets carries inevitable risks. As with Concorde, British Leyland and the coal mines, the taxpayer would have to pick up the bill if things went wrong.
Mismanagement by governments is as great a risk. The present administration is milking the Royal Mail to the tune of pounds 230m a year - more than double the dividends that a private equivalent would pay - while preventing it from using its pounds 500m cash pile either to cut the price of stamps or to invest in new technology. Future Tory governments would no doubt do the same; Labour administrations, more keen to cut unemployment than taxes, would be tempted to burden the Mail with surplus workers to keep them off the dole.
A full sell-off, however, would also have drawbacks. It would deprive taxpayers of future increases in the value of the business, and provoke a backlash from 170,000 postal workers and the 19,000 people who run the bulk of Britain's rural post offices. Hence Mr Heseltine's enthusiasm for keeping 49 per cent of Royal Mail in public hands and reserving many more shares for those two groups.
Yet there should be no mistake about the underlying reality. Despite the President of the Board of Trade's claim that this is 'a partnership arrangement of joint ownership', it is a privatisation none the less. A future government could reverse it only by buying back all the floated shares. To win public support, Mr Heseltine will have to think hard about how the new private monopoly is to be regulated and how the interests of consumers are to be protected.