The crisis at the Post Office generated a fierce debate in the Commons on Tuesday.

The service and Consignia, the company created to run it, has seen losses of more than £100 million in the first half of 2001/02, with still more to come.

Trade and Industry secretary Patricia Hewitt came under pressure from Opposition MPs to explain why a company that was making massive profits five years ago is now haemorrhaging cash at an alarming rate.

She hit back at the Conservatives accusing them of attacking the service and its workers.

"Last week the party opposite attacked the National Health Service and it's staff. This week it's the Post Office," Hewitt said.

The minister said postal workers delivered "an invaluable service" and repeated her department's belief that the key issues centre on improving efficiency and the level of customer service.

"Our goals as a government are absolutely clear. We want a universal service that everyone can rely on and we want a faster, more reliable service and a more effective partnership between management and unions," Hewitt said.

The DTI argues that the Post Office act enshrines the principle of universal delivery - that every postal address in the UK gets a daily visit - it is merely for the company to decide how to most efficiently meet the requirement.

Hopes of turning around the business are pinned on whoever becomes the company's new chairman. Adverts for the post have gone out in the national press and a team of head-hunters has been put in place by the DTI.

The Opposition argues the massive losses are largely the fault of ministers.

Conservative shadow trade and industry secretary John Whittingdale has blamed the government's decision not to fully privatise the company for the "deteriorating'' service. As a result Consignia lacked "the commercial freedom that the Post Office needs'' he said.

"The Post Office has reported its first operating loss for 25 years. In the same period 544 sub-post offices have closed. How could an organisation like the Post Office have been brought so low, so quickly," he asked.

Citing the success of the part-privatised German national post service and the fully-privatised Dutch service in buying competitors, Whittingdale called for Consignia to be put into the private sector so it would be safe from "government interference".

"The problem is that the Post Office is not delivering a sufficiently good service at the moment. I believe that competition would act as a spur to efficiency,'' he added.

For the Liberal Democrats, Dr Vincent Cable, argued the growing financial crisis was being seriously aggravated by government failures. Until a new chairman is found the company will continue to lack direction and the losses will continue, he argued.

"Because of DTI incompetence in starting a selection process, Consignia is still without a chairman. The company is in crisis and lacks leadership but could have to wait another three months before it gets a new chairman. The Treasury continue to demand dividends from an almost bankrupt company. The government is even greedier than the former owners of Railtrack. I want the secretary of state to announce that there will be no dividend demand in 2001/2," he said.

"Ministers must explain how they plan to deal with the problem and ensure that the social commitment to door to door deliveries, and uniform stamp prices, is not lost."