Royal Mail fury at stamp price cap
The Royal Mail has reacted with fury to suggestions from the industry regulator that the price of first-class stamps should be capped.
In its latest recommendations Postcomm revealed that the postal service wanted to raise the price of a first-class stamp by 60 per cent but has said it is determined to limit any cost increases.
It has pledged to limit the rise to 4p over the next four years, to 34p a stamp, while pushing for tougher penalties for missed delivery targets.
But the Royal Mail believes that first-class stamps may need to cost as much as 48p by 2010 if it is to make a commercial profit.
It said that Postcomm’s proposals would lead to the “inexorable decline” of Royal Mail and prevent it competing in the open market.
Royal Mail chairman Allan Leighton said: “These proposals will literally starve Royal Mail of vital investment and so wreck the quality of service we have fought so hard to improve. We cannot accept them. It’s as simple as that.”
It claims they would halve the Royal Mail’s profits, prevent it from reflecting costs in prices, force it to carry rural letters at a loss and allow its competitors to cherry pick the most lucrative sections of the market.
Chief executive Adam Crozier added: “Royal Mail has been asking Postcomm to take off the handcuffs and let us compete. Instead, they’ve put us in a straitjacket.”
But Postcomm chairman Nigel Stapleton is standing firmly by the proposals.
He said: “Our proposals seek to strike an appropriate balance between Royal Mail’s regulatory freedom in a newly liberalised market and the interests of mail customers and rival postal operators. This is good news for domestic customers, who would benefit from a freeze on Royal Mail’s average prices and stronger incentives on the company to improve its quality of service.”
Postcomm suggests the Royal Mail could still make a profit of about £285 million a year under its proposals.
Royal Mail currently charges 30p for first-class stamps and 21p for second-class. The proposed caps are calculated on an inflationary rate of 2.5 per cent.
Postcomm’s proposals will be under consultation for a period of three months from today.
