Trade and industry secretary Patricia Hewitt described 15,000 job losses at Consignia as a "turning point" in the postal service's fortunes.

In a statement that sought to place the blame for the job losses on the Conservatives, Hewitt said that the restructuring was needed because of Parcelforce's "failed business model".

Announcing the permanent appointment of Alan Leighton as Consignia's chairman, the industry secretary said he would "get a grip" on the future of the company and "transform the Post Office's performance".

The government is also to forgo its entitlement to a dividend this financial year, releasing an extra £64 million for the company.

Speaking over sustained Conservative uproar, Hewitt said the Post Office used to be admired across Europe, but other postal services had modernised and invested during the 1980s and 1990s.

"But successive Conservative governments didn't care about improving delivery. They allowed the Post Office to stagnate and starved it of investment."

The restructuring of the company would result in a more efficient service, said Hewitt, but she warned there could be worse to come.

"There will be further, unavoidable, job losses over the next three years," she told MPs.

The government would do what it could to support those who were losing their jobs.

"I am confident that the path we are pursuing is the right one. Great commercial freedom, strengthened management, universal service enshrined in primary legislation...Today marks a turning point for the company," she said.

"I know that today's news will come as a blow to many workers, but these changes, painful as they are, are unavoidable. Today must be the first step towards renewal and towards creating a postal service that justifies the pride and lives up to the expectations of the millions of people in Britain who depend upon it every day."

Responding for the Conservatives, John Whittingdale said the statement was "a humiliation for the government".

Placing the blame squarely on ministers, he said the decline had happened "in the last two years".

He blamed "constant interference from ministers" for undermining the company's commercial freedom and said the government should have acted sooner.

Whittingdale also urged a delay in opening up the market to full competition until the restructuring had been completed.

And he said that the people losing the jobs were "having to pay the price for her and her government's incompetence".

Liberal Democrat spokesman Vincent Cable welcomed the government decision not to take a dividend, but said it would be a "very small" amount compared with the £2 billion taken out of the company over the last decade.

He called for Consignia's private sector competition to face a "levy" to fund the universal delivery obligations.

Rural fears

There has already been strong criticism of the plans from the Scottish and Welsh nationalists, amid fears that rural services will be hardest hit.

The Scottish National Party's chief whip in Westminster, Pete Wishart, accused Tony Blair of "washing his hands" of the job losses.

"The run-down of our postal services and the loss of thousands of jobs - with no guarantees against compulsory redundancies - are the price of Tony Blair's Thatcherite economic agenda," he said.

"The Post Office is a central public service in the public sector - it is high time that the government accepted responsibility for the enormous damage that their policies are doing."

Plaid Cymru's economic development spokeswoman in the Welsh assembly, Elin Jones, also warned of a further deterioration of postal services in Wales.

"If Consignia continues to make huge losses, it will be impossible to stop price increases, closure of post offices and access to services," she warned.

"The national assembly should be demanding that the present high standard of our postal services are not compromised and are available to everyone, regardless of where they live at an uniform cost."