The Chancellor George Osborne is expected to announce in his Budget this week that the government will take responsibility for all of Royal Mail's pensions, removing one of the biggest obstacles to privatisation of the company.

Richard Hooper, who published a government report on the future of British Postal Services in 2010, said that the modernisation of Royal Mail was key to his previous report.

He said that there needed to be a removal of the "albatross of the pension deficit" as he recommended in his report.

"There is no question that if the Royal Mail fully modernises, which means cutting out a huge amount of cost because of the falling level of letters" then it can be a sustainable business, he said.

He went on to say that the internet is bringing people to online retailing where "the Royal Mail is brilliantly positioned" to deliver shopping services.

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