Post Office sell-off still possible

PRIVATISATION of the Post Office is still on the agenda, its new chairman said yesterday as he urged the Government to give the organisation its commercial freedom.

Speaking as the Post Office announced a freeze on first and second class letter prices until at least April of next year, Neville Bain said the Government's review of the Post Office was examining all means of giving the business commercial freedom.

"All forms of commercialisation including privatisation will be considered," he said.

Margaret Beckett, the President of the Board of Trade, is thought to have opposed any direct sell-off of part of the Post Office. But the Treasury is much keener on some form of partial privatisation which would bring in revenue and allow the Post Office to compete with overseas competitors. A partial sale of up to 50 per cent of the business could raise pounds 2bn.

Dr Bain, who became chairman last week, warned that if the Government continued to milk the Post Office for profit without giving it more commercial freedom, then the value of the business would halve from its present level of pounds 3.25bn in the next five years.

The amount of cash the Treasury extracts from the Post Office through its External Financing Limit is due to rise from pounds 330m in the current financial year to pounds 335m next year and pounds 345m in 1999-2000.

John Roberts, the Post Office's chief executive, said it was disappointing that the review had not yet been competed, adding that he hoped it would be published before the summer recess.

The Post Office is pressing for the right to enter joint ventures with private partners, raise funding on the private market and offer a wider range of services, such as insurance, across its Counters network.

Previously, the Post Office has warned that lack of commercial freedom and increasing cash demands on it from the Treasury would affect investment levels and its ability to hold prices.

Mr Roberts said that the latest freeze on letter prices had been made possible by volume growth and efficiency gains. The amount of post being handled is rising by 4-5 per cent a year while investment in the coming year is likely to be a little higher than last year's pounds 408m.

Letter prices have not risen since July, 1996. The decision to keep them on hold until at least next April means that prices will have stayed frozen for 33 months - the longest period since the 1960s.