Letter: Canny Churchill

HOW CAN the scrupulous Alan Watkins (11 July) equate the Government's planned Post Office shareholding with the former 51 per cent BP shareholding? In autumn 1914, when BP was in desperate need of development capital, Winston Churchill invested pounds 2m of public money into the company in return for 51 per cent ownership, and for the guarantee of Royal Navy oil supplies in the impending war. He literally "bought" our naval oil supplies, at a time when oil was in its infancy as a propellant, and coal was still king. It was an inspired and creative political coup.

But it was a device of war, a war-time convenience. There was never any political principle behind the move, let alone any socialist principle. It was right that the Government's shareholding position was unwound, whether by Tony Benn or (finally in 1987) by the privatising Margaret Thatcher.

In the case of the Post Office, the use of a PLC is merely a means of relieving the Treasury of any residual "guarantor" function for PO financial liabilities, thus forcing creditors to have recourse only to the assets of the company itself. At the same time, the enterprise remains firmly in the public sector. The device reflects current political preoccupations with limiting "government" financial exposure.

But it is an equally inspired and creative move, sound in company law and socialist practice. We shall surely see the method used much more extensively in future. Alan Watkins should be more careful with his parallels.