Leading Article: Stamp out the rebellion

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John Major must be tempted to forget about Post Office privatisation for the foreseeable future. At least 20 Conservative backbenchers are said to be seriously unhappy about the Government's preferred option: selling 51 per cent of Royal Mail and Parcel Force, but keeping PO Counters under public control.

The rebels fall into two groups: those who believe that a relaxation of Treasury rules would allow the Post Office to act more commercially while keeping the organisation in the public sector; and those who are worried about the future of sub-post offices and rural post offices under the Heseltine plan. The President of the Board of Trade will thus have a prolonged fight on his hands in the Commons this winter if the decision to include Post Office privatisation in the Queen's Speech is confirmed.

Why should the Government embark on a course of action that will devour parliamentary time and expose divisions on the Conservative benches? The reason is that the alternatives to the Government's preferred plan would condemn the Post Office to decline. These alternatives are either to do nothing or to relax the Treasury's artificial accountancy rules so that the Post Office becomes free to invest and borrow wherever it sees sound commercial opportunities. That freedom would need to include the ability to form joint ventures.

The Post Office's core letters business is coming under pressure from fax, electronic mail, private couriers and foreign post offices, which are free to offer commercial deals on the delivery of bulk mail. Running hard to stay on the spot, it is ill-equipped to meet the challenges of the information society.

Superficially, the public sector freedom advocated by Labour and the Tory rebels might seem attractive. After all, a number of continental post offices operate on this basis. But these countries mostly have state-owned telephone companies, which they are now being obliged to privatise in order to avoid a severe loss of competitiveness in a vital and growing industry.

Postal services are not quite as close to the leading edge of the information revolution as telecommunications. But this is an industry that requires the rapid assessment of commercial risk, the ability to make international alliances and the freedom to make mistakes. Inside the public sector, a better financed Post Office would still be second-guessed by those whose job it is to hold the public purse strings. Its activities would still, quite properly, be a matter for such watchdogs as the Public Accounts Committee. In short, it could not operate as a commercial business.

The real problems upon which Government should focus are how and where to allow competition in the various postal businesses and how properly to regulate those parts of the business in which competition is impossible. The Heseltine approach will allow the Post Office to embark on this course. The Government should persist.