Postcomm announces 1p increase in stamps

Royal Mail yesterday indicated that an appeal to the Competition Commission still remained likely after the postal regulator announced an easing of price curbs which it estimated would give the company an extra £750m in revenues.

Postcomm said that the price of first and second-class stamps will rise by 1p in April – equivalent to a 3 per cent increase – but in the following two years Royal Mail's overall prices would have to fall by 1 per cent in real terms. Under its original proposals, Royal Mail would have had to reduce prices by 2.5 per cent in real terms and would have had much less flexibility in raising or lowering the price of individual products.

Graham Corbett, the chairman of Postcomm, described the proposals as "a fair and balanced package" which would enable Royal Mail to meet its universal service obligation to deliver to every address in the country at a uniform price.

But Allan Leighton, the chairman of Royal Mail, struck a more cautious note. Although he "cautiously welcomed" the 1p increase in first and second-class stamp prices from April, he questioned whether the overall package gave the company enough financial headroom. "If the answer is no, then our ability to provide a one-price universal service to the UK's 27 million addresses will be destroyed and we will have to trigger a referral of the proposals to the Competition Commission."

Royal Mail has 28 days to decide whether to accept or reject the price curbs – a time limit which it said it would use to the full given the highly complex and finely detailed nature of the 240-page document issued by Postcomm.

The regulator's proposals also contain some changes to the compensation arrangements for business and domestic customers when mail is delayed. Households will be eligible for a minimum payment of 12 first-class stamps and a maximum compensation of £5. Businesses will get a 1 per cent refund for every percentage point by which Royal Mail undershoots its performance target up to a maximum of 5 per cent.