Post Office blames rise in postage on Treasury

The Post Office yesterday laid the blame for next week's increase in letter delivery charges directly at the door of the Government as it lambasted the Treasury's "cash book controls" which require it to hand over pounds 1m a day in profits, writes Michael Harrison.

Sir Michael Heron, Post Office chairman (pictured above left with John Roberts, the chief executive), said the penny rise in first- and second- class postage from Monday was "wholly unnecessary" from a commercial point view.

"It is necessary solely because of the unprecedented cash demands put on the Post Office by the Government. We would much preferred to have maintained our price freeze for some time to come," he added.

He was speaking as the Post Office unveiled a fall in pre-tax profits for last year from pounds 472m to pounds 422m despite continuing healthy growth in letter volumes and the first operating profit from its Parcelforce business.

The decline was mainly due to a drop in Royal Mail profits from pounds 449m to pounds 411m as it felt the effects of increasing competition from electronic communications, couriers and overseas postal operators.

Sir Michael also ruled out privatisation of the Post Office this decade because of the likelihood that the Conservatives would be out of office or surviving on too slender a majority to risk reviving the idea of selling the business off.

The increase in the cost of a first class stamp to 26p and second class postage to 20p will bring in pounds 150m in a full year, helping the Post Office meet the more demanding cash targets set by the Treasury.

The Post Office is preparing for the imposition of tougher Government performance targets which will require it to cut Royal Mail costs by about pounds 500m over the next three years.

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