The Conservatives have warned that any increase in the cost of a postage stamp must be met with improved service.

The warning comes as the postal regulator backed plans for a one penny increase in the price of first and second class stamps from next April.

The proposed three per cent increase would boost the Post Office's revenue - and that of its operating company Consignia - by over £500 million over the next three years.

But the regulator, Postcomm, has warned that any increase must be allied with new performance targets and a compensation system.

Peter Carr, the chairman of Postwatch, said the regulator must demand improvements.

""This must be the last time customers are asked to pay more to bail out this monopoly," he said.

"This half a billion pounds represents a leap of faith by customers that Consignia will be able to become efficient, return to profit and provide the service levels they expect."

The Tories warned that the price hike must be accompanied by a real improvement in postal services.

Shadow trade secretary, Tim Yeo, said: "It is vital that these proposed price increases are accompanied by the real improvements in service that we all wish to see.

"Households, small businessmen, and public servants alike are all dependent on Consignia's ability to deliver.

"It seem the government is more than happy to disown their responsibility over the mail service - sadly Patricia Hewitt didn't think the issue significant enough even to mention at the Labour Party Conference.

"They are shirking the challenge of making the industry more efficient and increasing the levels of competition - these are the best drivers of service improvement."