Stamp price hikes the first step to a private Royal Mail

From the end of April it will cost at least 50p to send a letter (Rex Features)

The Royal Mail came a step closer towards privatisation yesterday as it was granted the freedom to set the price of stamps, leading to record costs for posting a letter.

First and second-class stamps for standard letters will both increase in price by 14p, upping their cost to 60p and 50p from the end of April, amid warnings from the postal service that its universal service would be in "peril" otherwise.

The postal sector's regulator, Ofcom, said the measure was needed to preserve the principle that post can be delivered to any address in the UK for the same price.

"This is a very high-quality, cherished service, but it needs to be paid for," said Royal Mail chief executive, Moya Greene. She added that that it was under threat from "declining volume, e-substitution and ever-increasing competition", factors which have led Royal Mail's core services to lose £1 billion over the last four years. The company is £1.7bn in debt, with a £9.5bn deficit in its pension fund. The Government has agreed to clear £1bn of the debt and take on the pensions deficit, but it is eyeing a potential £4bn windfall should it choose to sell off the business to the private sector.

Ofcom has imposed a cap of 55p on the cost of second-class stamps for the next seven years. Nevertheless, unions warned the changes would make the service less affordable to vulnerable customers who rely on the service most.

Billy Hayes, general secretary of the Communication Workers Union, said: "Today's announcement is the natural progression towards full competition and privatisation of postal services where customers pay more and efficiencies are sought in the interests of profit, not services."

Ian Murray, shadow Postal Affairs minister, said: "An increase in the price of stamps will hit the elderly, vulnerable and millions of people who rely on the postal service, including small businesses and charities."