VAT plan 'could add 5p to first-class stamp'

The European Commission faced criticism from consumer groups yesterday over proposals that would impose VAT on national postal services, including stamps.

The move, which critics say would add 5p to the cost of a first-class stamp in the UK, is designed to create a level playing field for postal services.

At present state monopolies are exempt from VAT but that is not the case for the growing number of private firms that operate postal services.

Yesterday the EU commissioner for the internal market, Frits Bolkestein, disputed claims that his plan would mean a big hike in prices, arguing that customers already pay "hidden" VAT on post office transactions. "The proposal would make the VAT system fairer and level the playing field for all operators, leading to improved postal services for everyone," Mr Bolkesteinsaid.