Postal workers have been protesting in Westminster as the row grows over plans to sell off 30% of Royal Mail.
Over 120 Labour MPs oppose it, fearing full privatisation and job losses, and argue Labour made an election pledge to keep the Royal Mail in public hands.
Business Secretary Lord Mandelson said it was "absolutely clear" that the service would remain publicly owned.
But he told the BBC that new investment was sorely needed as Royal Mail "was in danger of running out of money".
Amid a row over the scale of Royal Mail's pension deficit, Lord Mandelson said the taxpayer could not be expected to fund potential liabilities in the region of £8bn without seeing an improvement in the performance of the company.
Hundreds of postal workers and members of the Communication Workers' Union attended a rally at Methodist Central Hall in Westminster.
BBC political correspondent Ben Wright said there was angry criticism of government policy, some calls for the union to sever its links with the Labour Party and claims that workers were being "blackmailed" by linking the pension deficit issue to the part privatisation.
The government has proposed taking over responsibility for the pension scheme as part of the proposed sell-off package.
In a letter to Lord Mandelson, Jane Newell - the chair of trustees of Royal Mail's pension scheme - warned the deficit could rise well in excess of its current £5.9bn, should the sale not happen.
But the Communication Workers' Union said the publication of the letter was an effort to "scare" MPs into voting with the government.
Union boss on sell-off 'scare'
Its leader Billy Hayes said it was a "scandal" that the chairman of the pension trustees was "interfering" in politics.
He told Sky News: "The government is saying they want a foreign company to run the post office, which is ridiculous. We could be faced with a situation where the Royal Bank of Scotland is nationalised and the...