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Royal Mail Freedom To Set Postage Prices?



According to a report by the Daily Telegraph moves to let Royal Mail have the freedom to set its own prices would prove controversial, particularly at a time when stamp prices are just about to rise by around 12%, well above the rate of inflation.

The argument goes that, by setting prices itself, Royal Mail would be able to strengthen its finances and fight the threat of electronic communications in addition to the huge pension fund deficit problem it faces.

A statement by Postcomm argues: "This consultation takes place in a context of unprecedented volume decline in the postal sector. The volume of mail processed by Royal Mail has fallen by 20 per cent since the current price control was implemented in 2006 and this trend is expected to continue."

"As a result Royal Mail’s finances are weak. Even if Royal Mail’s historic pension deficit is assumed by the government, as proposed by the Postal Services Bill 2010 currently before Parliament, it still needs to improve its cash flow from its revenue from customers significantly to cover its cash costs, and for the universal service to be sustainable, it is vital that efficiency is improved. "

"In that context, there is a fundamental question over the role of regulation and whether controls of the kind that we have employed up to now remain suitable."

The Telegraph report says any regulatory change would not come in to effect until next year following the substantial price increases this year which sees the price of sending first-class letters rise from 41p to 46p (12% increase) and second class stamps increase 4p to 36p (12.5% increase).

Consultation will continue until Ofcom, which is widely expected to take over as postal regulator from Postcomm, will publish its final proposals on the future regulatory framework in September.




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Royal Mail Freedom To Set Postage Prices?



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