Royal Mail boss gets a licking from regulator over stamps

Nigel Stapleton, the postal regulator, has turned up the heat in his spat with Royal Mail over stamp prices by claiming that its chairman, Allan Leighton, has "shot himself in the foot" with his latest arguments.

Nigel Stapleton, the postal regulator, has turned up the heat in his spat with Royal Mail over stamp prices by claiming that its chairman, Allan Leighton, has "shot himself in the foot" with his latest arguments.

The chairman of Postcomm angered Royal Mail last week by announcing plans to cap rises in stamp prices at 4p over the next five years.

This promoted an angry response from Mr Leighton, who said that this would "starve Royal Mail of vital investment" and "wreck the quality of service". He threatened to refer the matter to the Competition Commission.

But Mr Stapleton said that Mr Leighton had, "shot himself in the foot because Royal Mail's argument was so weak.

"His response was entirely predictable. There were no new facts in the Allan Leighton press release. This is the second price review that Mr Leighton has been through with us. I am surprised that Royal Mail does not better understand where the regulator has to come from. We are controlling a monopoly. I am confident that, on the basis of what we have seen from Royal Mail, we would be supported by the Competition Commission."

Under Postcomm's proposals, Royal Mail would be allowed to make an 8 per cent return on its investment, compared to 10 per cent for companies entering the UK market, like Deutsche Post and TPG, the Dutch operator.

Mr Stapleton gave two reasons for putting a cap on Royal Mail's stamp price.

First, he said, the 8 per cent return reflected the fact that, "Royal Mail is less efficient than its competitors and has a very narrow product portfolio. It's like comparing chalk with cheese".

Second, he dismissed Royal Mail's claims that it urgently needed to invest in its network, by claiming that the company still hadn't spent money from its previous settlement. "They have a cheque from us for £40m which has not been spent," he claimed.

Mr Leighton, however, argued that Royal Mail should be allowed the same rate of return as its foreign competitors. "How are we supposed to compete if they are allowed bigger margins than us?" he asked.