Prime Minister David Cameron has insisted he wants to protect rural postal services after the boss of Royal Mail warned they were facing a major threat.
The Conservative leader intervened after Royal Mail chief executive Moya Greene said the emergence of rival delivery firms was making the universal service “unfinanceable and uneconomic”.
She told Westminster’s business committee that new firms were able to focus on more densely-populated and profitable areas, piling the pressure on her company.
“If you allow cherry-picking in the urban areas you undermine the economics,” she said.
“It siphons off very quickly a lot of revenue, more revenue than can be offset by even very vigorous efficiency measures, and it makes the universal service unfinanceable and uneconomic.”
At prime minister’s questions, Mr Cameron was challenged by Argyll and Bute MP Alan Reid to pledge to protect the service, which ensures customers in all corners of the country are served at the same price.
He responded: “I know how important the universal service obligation is, particularly in constituencies such as my honourable friend’s, which includes so many islands and far-flung communities. It is very important that it is maintained.”
Speaking afterwards, Mr Reid said: “The law requires Royal Mail to fulfil the universal service obligation – that is, to deliver mail to every premises in the country and collect mail from every post box six days a week.
“It is vitally important for rural areas like Argyll and Bute that this is never watered down in any way, so I’m pleased that the prime minister agreed that it is very important that it is maintained.”
Labour’s shadow trade minister Ian Murray called on ministers to urgently clarify what action they would take to secure the service.
“This stark warning from the chief executive of Royal Mail will be deeply worrying for the millions of consumers and small businesses who rely on Royal Mail’s six-day delivery and essential services,” he said.
“Labour warned that David Cameron’s Royal Mail fire sale would put vital services at risk, and Moya Greene’s evidence today has confirmed our worst fears.
“It comes after taxpayers were short-changed by hundreds of millions of pounds by the botched sale.”
Ms Greene had earlier told MPs that the universal service obligation, which does not apply to rival firms, costs £7.2billion a year to finance.
She added Royal Mail had already suffered a “structural” decline of between 4%-6% in the volume of letters it handles every year.