The Postal Services Bill will see the organisation converted from a public corporation to a public limited company, wholly owned by the government.

The proposed legislation, set out in the government's White Paper in July, will complete a package of reforms aimed at liberalising postal services and giving the Post Office greater commercial freedom.

A Postal Services Commissioner will be appointed to regulate prices and promote consumer interests.

The commission will ensure that the Post Office meets its obligations to provide a universal service at a uniform rate.

It will also have the power to license postal service providers operating in the monopoly area and to introduce greater competition into the market.

Privatisation fears answered

Unions had voiced fears that the move was an attempt to privatise the Post Office, but the Bill answers this with an assurance that the sale of shares will not be allowed without an Act of Parliament.

The Communication Workers Union welcomed the Bill, particularly the pledge not to sell shares without legislation first being passed by Parliament.

The Post Office has been pressing both the current and previous governments for greater commercial freedom to take on competitors in what is becoming an increasingly cut-throat business.

State monopolies are under threat because of European Union deregulation due in 2003, which will open up postal markets to new carriers.

US giants FedEx and UPS have already started to move in on Europe's parcel delivery business, estimated to be worth £17bn.