The government has set out emergency rescue plans to save the troubled postal firm Consignia.

Patricia Hewitt's announcement came as the firm announced a major major restructuring programme which will see second deliveries scrapped as 17,000 jobs are lost.

Consignia, which has ditched its rebrand and reverted back to its previous identity as the Royal Mail, says it will save £350 million a year by moving to a single delivery at a consistent time.

The package of plans was set out in the Commons by the trade and industry secretary.

She told MPs that the government had given the green light for Consignia to use £1.8 billion of reserves to fund the "very painful" programme of change.

Mail bosses had to make "very tough decisions" to turn the company around, said the cabinet minister.

"The company is now set on a course for renewal and recovery," said Hewitt.

"It will not be easy but as today's announcement shows it is essential if we are to have a Royal Mail that the workforce can be proud of and that delivers the service that customers deserve."

But she conceded that the announcement would come as a blow to postal workers.

"Thousands of postmen and women now face an anxious and difficult time," she said.

"These decisions are very painful for the workforce, who have shown their commitment to serving the public and who have often been frustrated and angered by poor management and failure to invest in better ways of working."

The shadow trade secretary, John Whittingdale, said the government must accept its share of the blame for Consignia's woes.

"Three years ago, the Post Office was making profits of around £500 million, and the secretary of state was boasting of its golden future as a major global force.

"Today, sadly we see a company which has a steadily deteriorating performance, plummeting morale and industrial relations, and now by its own admission, a daily loss of £1.2 million.

"Over and above management and unions, ultimate responsibility for today's announcement must rest with the government."

Lib Dem spokesman Vince Cable said the government should give the green light to price increases.

"Decades of under-investment, while the Treasury also sucked out 90 per cent of Post Office profits, have left the company with outmoded technology and demoralised management," he said.

"The long predicted crisis in the Post Office Counter network, caused by automatic credit transfer, is almost upon us. The network of Post Offices lost £163 million last year and will lose an additional £400 million next year, with no prospect of alternative income in sight.

"While painful restructuring takes place the government must act. The government should allow the increase in stamp price, which would raise at least £170 million."