First-class stamps to rise from 46p to 60p while second-class stamps will go up from 36p to 50p on 30 April
First and second class stamp prices will rise by 30% and 39% respectively at the end of the month to record levels, following an announcement by the communications regulator that pushes the Royal Mail further down the path towards privatisation.
Ofcom paved the way for the price hikes on Tuesday morning by unveiling a new pricing regime for the Royal Mail group, which could be sold or partially floated by the government next autumn.
The communications watchdog lifted price caps on first-class stamps immediately and set a ceiling on second-class stamps for the next seven years as it admitted that competition from mobile phones and the internet was making a universal postal service financially untenable.
The Royal Mail group announced the increases within hours of the Ofcom briefing, stating that first- and second-class stamp prices will rise by 14p, from 46p for first class and 36p for second class, from 30 April. The cost of posting large letters will increase from 75p to 90p for first class and from 58p to 69p for second class.
Moya Greene, the chief executive of the Royal Mail group, said the state-owned organisation had no choice but to push up prices, having lost almost £1bn in its last four financial years.
"We know how hard it is for households and businesses when our economy is as tough as it is now. No one likes to raise prices in the current economic climate but, regretfully, we have no option."
The Royal Mail will go through a series of symbolic changes this weekend, formally separating from a Post Office network that will stay in government ownership and handing over its £9.5bn pension deficit to the state. Both moves, along with price deregulation, pave the way for a flotation.
Announcing the pricing proposals, Ofcom's director of competition, Stuart McIntosh, said the deregulation of first-class stamps was necessary to guarantee the universal postal service provision, a Brussels-enforced mandate that requires the delivery of a postal service to any address in the country six days a week. "The mail services that we have benefitted form over decades and centuries are fundamentally at risk."
He said competition from mobile phones, email and other postal providers such as TNT UK would help prevent the Royal Mail from abusing deregulation, as well the price constraints posed by the second-class stamp ceiling.
"If they set the price very high relative to second-class stamps many people will move from first to second class. This is a constraint on their ability to raise their prices. Also, if they increase their prices it will make the services of competitors more attractive."
Post Office customers on the Caledonian Road, London, were surprised by the hikes.
Carol Gabriel, 61, who was visiting the Post Office with her mother, Sylvia Lucas, 82, said the new first-class price was "a lot of money just to send a letter". She said she would consider sending Christmas cards second class this year: "I might send the cards earlier."
Lucas expressed concerns about privatisation and the potential link to prices. "If someone is going to take it [the Royal Mail] and make more money out of it, we should keep it."
Ofcom said it hads capped the price of second-class stamps to protect "vulnerable" consumers. Over the next seven years, this will ensure that the price of those stamps can go no higher than the consumer price index rate of inflation, with a ceiling of 55p. If, for instance, the Royal Mail pushes the price to 55p next year it can only rise by the rate of inflation thereafter.
The Communication Workers Union, which represents 160,000 Royal Mail staff, said the increases were the inevitable consequence of the move towards privatisation.
"Today's announcement from Ofcom 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. It's an announcement for business not consumers," said Billy Hayes, general secretary of the union.
"Those people who balk at the idea of stamp price rises should understand that it comes directly from government decisions to privatise this industry – just as we've seen massive price increases in train travel under privatisation."
Source: http://www.guardian.co.uk/business/2012/mar/27/cost-stamp-rises-royal-mail-price
Lee Carsley Radio industry Bank of England Argentina Dmitry Medvedev Alex Reid
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