Up to 800 unprofitable post offices should be amalgamated with retail services or established as Government services outlets, according to an official report to be published this week.
No details of costs were provided in the interdepartmental report, which was brought to Cabinet last Friday by the Minister for Public Enterprise, Mrs O'Rourke. But the Government sanctioned an investment of only £10 million in An Post's services instead of the £70 million sought by the company over a three-year period.
The Government is anxious to keep all 1,800 post offices open, even though half of them conduct only 4 per cent of the company's business.
The Government appears determined An Post will use its reserves of £170 million for this purpose, rather than receive a large subvention from the State.
The chief executive of An Post, Mr John Hynes, is to meet officials from the Department of Public Enterprise this week to discuss what has been described as "a crisis in the post office network". He has argued that because half of An Post's outlets are loss-making - and cannot be closed because of a Government decision - the State should subsidise them directly.
Last year, industrial relations consultant Mr Phil Flynn reported to Mrs O'Rourke that the post office system was technically insolvent and would quickly become bankrupt without a change in the way it was funded. The "only real option" was for the State to pay a subvention, he said. The Minister for Finance, Mr McCreevy, is understood to have resisted this.
Subsequently, Mrs O'Rourke established a study group drawn from six Government departments to devise a strategy to retain the post office network. Its report will be published within the next few days, according to reliable sources, and will urge that small post offices be amalgamated with commercial enterprises or established as Government services outlets.
Defending the decision to provide only £10 million, in spite of the findings of the Flynn report, Government sources said the company had significant reserves of £170 million which could be used to sustain the network, rather than for capital projects.
They also argued for further economies within the postal system, changes in work practices and the provision of more services. Some of the biggest losses in the postal network were being incurred in large towns and cities, they said.
The interdepartmental report recommends an expansion of existing services, and the merger of small post offices with a local shop or other commercial outlet. Where that isn't possible, a Government services outlet should be established to include the post office. Services would vary but the report said it was important to retain the idea of State involvement and commitment in peripheral and deprived rural areas.
In the past year, An Post has taken over bill-paying services from the banks in return for a sizeable subvention. But this new income will be insufficient to stem losses. Ms O'Rourke has urged that the range of services, particularly electronic, should be expanded. An Post resisted this on the basis it would be uneconomical and, given the imminent deregulation of the services, could only be justified on the basis of a direct Government subvention.