Royal Mail to set first class stamp price

A radical shake-up of the postal market is set to herald an increase in the price of stamps in a bid to safeguard the six-day-a-week universal service, it was announced today.

Ofcom, the industry's new regulator, unveiled a raft of proposals aimed at giving greater commercial freedom to the Royal Mail, including handing the firm the power to set the price of first class stamps - currently among the cheapest in Europe at 46p.



The regulator is proposing a cap on second class stamps of between 45p and 55p, compared with the current 36p, but the price will also increase in line with inflation.



The Royal Mail described the new approach as "significant", while the Communication Workers Union said the current regulatory regime had finally been recognised as a "failure".



Ofcom said its proposals, which are subject to an 11-week consultation, were aimed at protecting the universal service obligation (USO) under which the Royal Mail has to deliver to any address in the UK for the same price, six days a week.



Without regulatory changes, there was a risk that the USO would not be delivered to the same standard, it was warned.



Ofcom chief executive Ed Richards said the Royal Mail had been under "inexorable pressure" in recent years because of falling mail volumes, which has seen the number of letters delivered every day slump by 22 million to 62 million between 2006 and 2010, contributing towards a loss of £120 million last year.



Consumers have also switched from first to second class mail - now posted in equal numbers - while stamp prices have lagged behind inflation for almost 20 years.



The price of a first class stamp in the UK is among the lowest in Europe at 46p, compared with 69p in Italy, 67p in Denmark and 60p in Greece, while service targets are among the highest, Ofcom pointed out.



The Royal Mail's target of delivering 93% of first class mail within a day of posting compared with "much easier" levels such as 90% within three days in Spain, while the target of delivering 98.5% of second class post within three days was stricter than in other countries including Germany and Italy.



Mr Richards said the universal service was not financially sustainable, adding that regulation needed "radical reform".



He refused to be drawn on how much Royal Mail could increase the price of a first class stamp but warned of the danger of pricing it so high that consumers would either switch to second class, or to other forms of communication.



Mr Richards said he expected the Royal Mail to think "very carefully" about prices because there was no point in seeing them "hammered up", only for people to stop buying them.



Royal Mail said the proposed new approach from Ofcom was a "significant step" towards securing the future of the six-day-a-week, one-price-goes-anywhere universal service to 29 million UK homes and businesses.



Chief executive Moya Greene said Royal Mail has been stressing the need for a different approach as the old regulatory framework has "accelerated" its financial decline.



Ms Greene said: "We welcome Ofcom's major review of the UK postal sector. This document merits a great deal of attention. We will give it just that before coming to our considered view on the new framework Ofcom is proposing. It is clear, however, that the Ofcom proposals are a significant step towards securing a sound and sustainable universal service.



"The proposals are timely too as radical action is needed now given the ongoing decline in volumes and revenues and the inability to cover the costs of our universal service activities."



Royal Mail said it will give its detailed view on Ofcom's proposals before the consultation ends in early January.



The Communication Workers Union described the proposals as a "radical change" and welcomed the recognition of "major failures" in the previous approach.



General secretary Billy Hayes said: "These appear to be major deregulatory steps from Ofcom and we broadly welcome this signal of a radically different approach to regulation which has finally been recognised as a failure.



"We do have reservations over the impact on consumers, and we'll be looking closely at the details of the proposals before making our submission to the consultation. The principle of a universal service with affordable and equal access to everyone is hugely important and we want to see it robustly maintained."



Mike O'Connor, chief executive of Consumer Focus, said: "This could be the biggest shake-up to the mail market that we have ever seen and we must ensure the right balance between putting Royal Mail on a stable footing and ensuring value and service for consumers.



"Mail services are going to get more expensive for consumers. While the unit cost of a stamp may seem small, consumers have a right to expect value for money for all services."



The average household spends around 40p a week on post, compared to around £30 on electricity, telephone and gas services.



Ofcom said its proposals, likely to take effect next spring, would last for seven years, with the possibility of reassessing second class stamp prices after two years.





A spokesman for TNT Post, a leading competitor of Royal Mail, said: "To enable end to end competition to take place in the UK, the Government needs to level the competitive landscape in terms of VAT immediately, as currently Royal Mail is exempt from charging VAT on business mail services, unlike its competitors.



"We are concerned however that Royal Mail has more freedom to price at individual customer level and need to analyse the detail of the proposals."

PA

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
video
Life and Style
tech
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
film
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Extras
indybest
News
Albus Dumbledore, the headmaster of Hogwarts School of Witchcraft and Wizardry has been the teaching profession's favourite teacher
education
Sport
Luis Suarez looks towards the crowd during the 2-1 victory over England
sport
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
News
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sport
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Sport
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

SQL Report Analyst (SSRS, CA, SQL 2012)

£30000 - £38500 Per Annum + 25 days holiday, pension, subsidised restaurant: C...

Application Support Analyst (SQL, Incident Management, SLAs)

£34000 - £37000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Embedded Software / Firmware Engineer

£40000 - £45000 per annum + Pension, Holiday, Flexi-time: Progressive Recruitm...

Developer - WinForms, C#

£280 - £320 per day: Progressive Recruitment: C#, WinForms, Desktop Developmen...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform