Part of the Post Office may be put up for sale

The outcome of the Government's review into the Post Office is set to emerge soon amid indications that ministers will sanction a public- private partnership as the answer to its calls for commercial freedom. Michael Harrison reports.

Michael Heron, the Post Office chairman, and his chief executive, John Roberts, have been called to a meeting with the Industry Minister, Ian McCartney, in two weeks' time to be told how the Government intends to free the organisation up.

The Government appears to have ruled out a sale of a majority stake in the Post Office. But the prospect of a partial sale, allowing the private sector to take a stake of up to 49 per cent in the business, looks possible.

Mr Heron said yesterday that the ownership of the Post Office was a matter for the Government but he would not object to a solution that left 51 per cent in public hands and allowed the remainder to be sold. An announcement about exactly what form of commercial freedom it will be allowed and the degree of private funding is expected around Christmas.

The priority for the Post Office is to be released from the constraints of the Public Sector Borrowing Requirement, which prevent it from borrowing on the open market to develop commercial ventures.

Mr Roberts said that unless it was removed from the stranglehold of the PSBR then any other changes to the Post Office would amount to little more than "cosmetics around the edges".

The Post Office's contribution to the Exchequer last year reached pounds 500m, including taxes and the "dividend" it pays from profits through the PSBR. Mr Heron said that using the Post Office as a cash cow was no basis on which to run a commercial competitive business.

Commercial freedom would allow the Post Office to set up joint ventures with private operators and even take them over - the privatised Dutch Post Office bought TNT earlier this year.

Meanwhile the Post Office has warned that many businesses, including its own, may not be able to cope with the millennium timebomb and a switch to a single currency at the same time.

Mr Roberts said the Post Office was spending pounds 60m to get its computers ready for the date change in 2000. If it had to prepare for EMU at the same time, a changeover that would require huge retraining of counters staff, then it might be overwhelmed.