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Canada Post letter carrier Danny Dodds delivers the mail on Dec. 11, 2013, in Ottawa.

Dave Chan/The Globe and Mail

The Conservative government's decision to approve major cuts at Canada Post was driven by concern that the Crown Corporation was just months away from becoming a major drain on Ottawa's bottom line.

For years, Canada Post has operated at arm's length from the government on the understanding that it would remain self-financing and not cause the government any political or fiscal headaches.

But Conservative sources say signals from Canada Post during the fall that its worsening finances could prompt a call for direct financial help was a key factor in the decision to approve the restructuring plan.

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"We want a balanced budget and any unexpected cash calls on the bottom line certainly are going to be of a concern," said one government source.

Recent experience had shown the fiscal damage that can be caused by surprise losses at arm's-length bodies like Atomic Energy of Canada Limited and VIA Rail, where Ottawa has stepped in at times to contribute hundreds of millions in support. The government is hoping that by acting now to approve the restructuring plan and by offering temporary pension-contribution relief, Canada Post may be able to avoid asking Ottawa for money in 2014.

Finance Minister Jim Flaherty is forecasting a $3.7-billion surplus for 2015-16, but the Parliamentary Budget Officer recently warned that there are several factors that could put that surplus in doubt. That suggests Ottawa's balanced-budget plans are not as solid as the government would like, increasing pressure to avoid new costs.

The decline of mail service has been obvious for years. But the speed of the revenue loss throughout the current year was worse than Canada Post expected. The company's Sept. 28 third-quarter report warned that losses to date were higher than they "would have liked." Over the first three quarters of this year, the company had lost $134-million.

It warned next year would be even worse, with a cash shortfall poised to "increase rapidly," meaning it would need Ottawa to waive the company's pension obligations and possibly provide money to Canada Post.

Privately, Conservatives say reforming Canada Post is not an issue they intend to politicize. Rather it is seen as a problem that the government has to manage.

Lisa Raitt, the minister responsible for Canada Post, has declined interviews since Wednesday's announcement by Canada Post. Government House Leader Peter Van Loan did insert some politics into the issue during a Parliament Hill news conference on another matter.

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"I can certainly tell you my constituents do not have door-to-door delivery already," he said, before comparing his suburban riding of York-Simcoe in the 905 area code to downtown Toronto.

"There was a time when the city of Toronto was going through some rationalization, trying to figure out how to deliver services and the good people of Rosedale did not like the idea that no longer would the garbage man come up to the side of the house to take the garbage," he said. "It was going to have to be like it was for everybody else in the country. They'd have to get it at the end of the driveway. For most Canadians in the country already they're getting their mail through super boxes."

The decision to end home mail delivery will affect about five million residences, primarily in older urban neighbourhoods. Those areas tend to be represented by the NDP or the Liberals, while Conservative support is concentrated in suburban and rural ridings.

NDP MP Olivia Chow said the government should not be pitting Canadians against each other.

"I think politicians that try to divide, whether it's the suburbs versus urban centres or urban centres versus rural Canada, that kind of divisiveness is completely uncalled for and destructive," she said.

Ms. Chow said Canada Post has generally avoided deficits and should be focusing on raising new revenue to address current shortfalls.

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"At no point have I seen options that say 'Here's how we could increase our revenues,' " she said.

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