The Royal Mail is to be fined £11.7 million over "serious" breaches of its licence because of the amount of post which is lost, stolen or damaged, the industry's regulator announced today.
Postcomm said it was proposing the financial penalty because of the Royal Mail's failure to meet its obligations to protect letters and parcels and for its poor performance in parts of London.
The postal group has 28 days to make representations to Postcomm about the fine, which is the biggest it has ever faced.
Postcomm said it had uncovered some "serious" shortcomings during 2004/05, when 14.6 million letters, packets and parcels were lost, stolen, damaged or interfered with.
Nigel Stapleton, chairman of Postcomm said: "A regulator's first duty is to protect the interests of customers. Customers are entitled to expect that when they post mail, it will reach its destination.
"Royal Mail is a large and highly decentralised organisation and it is essential there are controls in place to ensure that procedures for protecting mail are being followed across the company."
Postcomm carried out a review which it said found that some important features of Royal Mail's procedures were not being applied across the business.
The most significant weakness was said to be the "poor management" of the recruitment and training of agency staff.
The fine represented 2% of the Royal Mail's operating profit last year, said Postcomm, and included a penalty of £271,000 for poor delivery across three London postcode areas - SE, WC and E - where two million letters were delivered late during 2004/5.
Postcomm said the Royal Mail appeared to have improved its performance " substantially" as a result of its review but the regulator added that it could not ignore the "serious failures" to observe important parts of its licence obligations.
Postcomm said it had relied on media reports during its review.
The regulator said it had found that important features of the postal group's procedures were not being applied across the business.
The framework and information systems that Royal Mail had put in place to prevent the loss, theft or damage of mail were not operating effectively, said Mr Stapleton.
These weaknesses "significantly reduced" the company's ability to protect customers' mail.
"Although Postcomm has observed significant efforts by Royal Mail to improve since our review was completed in May 2005, the fact remains that these shortcomings existed over a prolonged period.
"The level of this proposed financial penalty reflects the Commission's view of the extent and seriousness of the licence breaches.
"I should stress that these are mainly management failings and do not reflect on the dedication and commitment of postmen and postwomen."
The Royal Mail said in a statement: "Royal Mail values every letter and takes the security of the mail extremely seriously.
"The company is currently providing the best quality of service in its history, and the vast bulk of mail arrives safely and on time.
"Postcomm's report concentrates on events that occurred up to two years ago when Royal Mail was going through massive operational change.
"Royal Mail has been working - and is working constantly - with Postcomm and independent advisers to continuously improve the security of the mail.
"While we are always looking to improve further, we believe that our mails pipeline is one of the safest and most secure in the world."
A spokesman said the amount of lost mail had halved over the last three years, with an estimated 99.93% of the 22 billion letters sent in the UK arriving safely.
Last year the amount of mail stolen was around 0.006% of the annual mailbag, with 80% of the stolen mail taken by criminals targeting Royal Mail vans, stealing bags of mail and attacking postmen and women.
The Royal Mail said it estimated that around 200,000 items, or 0.001% of the 22 billion handled annually, were stolen by employees.
The number of casual postal workers has been reduced from more than 25,000 in 2003 to fewer than 1,000 today.
Officials said a substantial internal security team was employed to target the small number of employees involved in criminal activity.
Last year Royal Mail caught and prosecuted 394 employees out of a total workforce of around 200,000.Reuse content