The public could be forgiven for having a mistaken idea about Labour’s plans for the Royal Mail. They have been described, wrongly, as privatisation or, failing that, as one politician’s ideological virility test provoking an unnecessary row. Neither is true. Alternatively the question is why now? Change may be needed, the argument goes, but this is causing a quarrel that we don’t need so why not kick it into the long grass?

Although the row over Royal Mail has seemed hugely political, its roots lie less in politics than in the huge technological changes which have taken place in communications over the past decade. And the reason for acting is not to prove anything to anyone, but to save the postal service which is a critical part of the country’s infrastructure.

Labour’s 2005 manifesto committed the government to having a review into postal services. The CWU pressed strongly for this review to take place and it was duly launched in December 2007 when John Hutton asked Richard Hooper to lead a team to look into the issues around postal services and the Royal Mail.

The terms of reference clearly pointed Hooper’s team in the direction of maintaining the universal service as the government was keen to preserve the six days a week one price goes anywhere service which is the foundation of the postal system.

This commitment goes beyond the minimum required by the European Directive on this issue and beyond what happens in many other countries. For example the US Postal Service – which opponents of the government’s plans have urged us to look to as an example to follow – has just asked Congress for permission to drop the Saturday delivery.

Yet Labour does not want to downgrade the universal service. We see it as a vital part of the social fabric of the nation – critical to the public and to the many small and medium sized businesses who rely on the post.

Hooper did not report in a rush. His team held over 200 meetings over a year long period. They talked to workers on the front line both here and abroad, looked at different models around the world and considered the competition Royal Mail faces from new technology and that from other mail companies operating in the UK.

When the report was published in December it painted a picture of a company facing profound problems.

As in other countries, mail volumes are declining in the UK as people choose email, text or social networking sites to communicate. There has been growth in the postage of packets as internet shopping has grown but taking packets and letters combined, the overall effect is a decline of around seven per cent in recent years. It is not a static picture. The decline is accelerating and mail volumes are predicted to fall by another seven or eight per cent this year. We now post 5 million items fewer every day than we did three years ago and each decline by one per cent loses Royal Mail £70 million.

However, unlike other countries, Hooper also found a UK postal service less able to cope with the decline in mail volumes because it was relatively unmodernised, continuing to do much by hand that abroad is done automatically. In fact the final stage of sorting in the UK – the organising of the post into the round to be delivered by the postman or woman – is done entirely by hand, whereas in the most modern European postal service up to 85 per cent of this work is done automatically.

Similarly, Hooper found that the network of mail centres and delivery offices in the UK had remained almost unchanged since the pre-internet age. This matters because it means that in the face of falling mail volumes due to technological change, Royal Mail’s failure to modernise has kept its costs higher than would otherwise be the case and its profits lower.

This in turn reflects a further difficulty for the company, which is chronic industrial relations problems. Everyone says they are up for change, but making it happen on the ground has been painfully slow, despite investment being made available by the government. Attempts to introduce change are dogged by local quarrels, even when agreed to nationally. Two years ago, Royal Mail was responsible for 60 per cent of the strike days lost in the UK economy. Since then, further strike action has been threatened first over changes to the pension scheme and then over the beginnings of the programme of rationalising mail centres. Who is to blame matters less than the effect which is to hold Royal Mail back as a company and weaken its ability to cope with accelerating technological change.

And as if all this wasn’t enough, Royal Mail also labours under an enormous pension fund deficit which has been growing year by year. Three years ago it was valued at £3.4bn. Last year, £5.9bn. And as the recent letter from the chair of the trustees  – published by the government, not leaked – showed that the deficit will, in all probability, be higher when the next revaluation is completed.

This deficit is both a huge drain on the company and casts a doubt over the pension security of the scheme’s members. It means that even if Royal Mail does manage to generate more cash, much of it is swallowed up by paying down the deficit – something that cost the company £280m last year on top of its regular pension fund payments. Secondly, as things stand there is always the real possibility that the trustee feels that the current balance of contributions to benefits is not sustainable and then acts to change that in one way or another.

Finally there is the competition regime introduced several years ago.  Many have argued that this is the real source of Royal Mail’s difficulties, allowing other companies to pick up the cream of the bulk mail business, leaving Royal Mail with the rest. Hooper found that competition had cost Royal Mail revenue but about one fifth of the level lost to new technology. In other words, it is competition from new technologies which is the more fundamental challenge, though there is still a need to change the regulatory system.

The overall conclusion of Hooper’s report was that the status quo was untenable and left as things stood, the universal service was under threat. He set out three key recommendations for change.

The first was to lift the burden of the pension fund deficit from the company. The second was to bring in a partner to help the company modernise – preferably one which had carried through the kind of change Royal Mail has failed to. And the third was to change the regulatory system.

The government’s bill addresses all of these issues. It is not a privatisation. Royal Mail’s status as a publicly owned company will be enshrined in law. The Post Office network will be enshrined in law as being owned by government “in its entirety”. The six days a week universal service will be enshrined in law. And the new regulatory system will have maintenance of the universal service as its overriding priority – dealing with the accusation that up until now, competition has been promoted at the expense of the universal service.

The proposal on the pension scheme is to take over the deficit and run it in a similar manner to the pension schemes for teachers, nurses and civil servants. At a time when controversy about public and private sector pensions has probably never been greater this is a hugely important move. Yet the opponents of the package dismiss it because it is associated also with the powers to bring in a minority partner.

Much of the discussion of all this has been a conversation about ownership between union, parliament and government. Yet at the heart of these proposals is a bargain about service between government, Royal Mail staff and the taxpayer. The taxpayer will be asked to take over the pension deficit offering security for the staff and, in return, Royal Mail will be put on a clear path to modernisation where the universal service can be secured for the public.

We are not starting from scratch. We have tried different models including direct ownership and control, to the more recent attempt at an arms length model. The status quo is a company running out of money to meet its liabilities in terms of the pension deficit and the ongoing need for modernisation – a need rendered more, not less, urgent by the decline in mail volumes.

But, goes the cry, you are nationalising the banks, why bring private capital or management into anything else? Leaving aside the curious point that 70 per cent ownership of a bank is viewed as effective nationalisation, yet 70 per cent ownership of Royal Mail is argued to be effective privatisation, this argument poses a real danger to the left, one that misunderstands why we have intervened so much in markets in recent months.

We intervened in the banks because markets have failed and we want to see them work, not because we suddenly believe that there is never a place in the economy for private investment.

The point of proceeding with this change is not to pick a fight with anyone, but to do what Labour governments should – to see the trends of the future and fashion the nation’s institutions so that they can cope with them in a manner that is in line with our values. The critical point is to maintain the universal service that is the foundation of our postal system. It was at the heart of Hooper’s terms of reference and is at the heart of the government’s proposals.

Any commercial partnership to take Royal Mail forward has to be on the right terms. In the discussion so far there has been little indication of any convincing alternative which will bring about the scale of transformation in the postal service that is needed. Were we not to proceed with this package because the Labour party finds it too difficult there would be both a political and policy consequence. The public expects the government to have the resolve to face up to big decisions put before us and on the substance, Royal Mail would be left with a huge pension fund deficit and a universal service that was increasingly seen as a burden rather than a badge of proud service.

And what then? If this issue is not addressed now, it will surely have to be in the near future. Labour will keep the Royal Mail public. We will keep the Post Office network public. We will secure the pensions of the staff. We will secure the universal service. We will reform the competition system to support the universal service. What would others do?