Leading article: Private capital, public interest at Royal Mail

The part-privatisation of the Royal Mail, announced by the Business Secretary Vince Cable yesterday, needed to satisfy three objectives. First, it had to prevent a further deterioration in the quality of service upon which businesses and individual consumers rely. Second, it had to minimise job losses while guaranteeing staff pensions. And third, it had to protect the taxpayer from the possibility of another costly bailout, at a time of chronic public indebtedness. Mr Cable's plan, just about, managed to achieve all three.

No timeline for the sale has been announced (though we know it will not happen before next summer). But the plan does hold out the prospect of years of decline finally being reversed.

As part of the deal, the state will take over responsibilty for the Royal Mail's pension fund, which at present has a deficit of £8bn. But the pension black hole has not been the sole, or even the main, cause of the Royal Mail's woes.

The previous government's decision to allow private sector companies to compete in the business mail market since 2006 has hurt the Royal Mail's bottom line. A militant workforce, in full voice yesterday, has doggedly resisted the action needed to improve efficiency, whether in the form of modernising working practices or the amalgamation of mail centres. And overall mail volumes have been sliding thanks to the growth of email – and will continue to do so.

Radical action is required to meet these challenges. The private investors who will be invited to take a share in the business should be able to impose financial discipline and push through the necessary structural overhaul. If the universal service provision is maintained (as it should be), the Royal Mail can once again be synonymous with high quality service provision.

Mr Cable's announcement that the Post Office network, which is not included in the sell-off, might be mutualised, dovetails with wider Coalition objectives of promoting civic engagement and is welcome. So is the decision to offer Royal Mail staff 10 per cent of the shares in the newly-listed business.

Of course, part-privatisation is no panacea, as the struggles of the rail industry over the past 17 years have demonstrated. But when there is no alternative, as has been true of Royal Mail for many years now, the public interest lies in an infusion of private capital and management expertise. The question now becomes: who shall provide it?