Stamp Price Increase Backed By MPs

A First Class Rise: MPs Back Stamp Price Increase

MPs today backed increases in the price of stamps despite expressing concerns about the impact on vulnerable consumers and small firms.

The Business Select Committee said it was "appropriate" for first class stamps to increase above the current 46p, and 36p for second class post.

But the MPs raised fears about the possible effect of higher prices on the amount of mail posted, and the impact on some customers.

The committee also voiced concerns that higher stamp prices could operate as a disincentive to efficiency measures.

An announcement is expected shortly from Royal Mail on higher prices, although the cost of posting Christmas cards will be the same as last year for vulnerable consumers.

Adrian Bailey (Labour, West Bromwich West), chairman of the select committee, said: "There is no doubt that market uncertainty is placing significant, additional pressures on Royal Mail and that some increase in the price of stamps is necessary.

"However, this report highlights the need for Royal Mail to consider robust data on the position of vulnerable consumers and small businesses when determining the future prices of stamps.

"It must also be sensitive to the possible effect on its volume of business and the need for higher prices not to operate as a disincentive against efficiency measures.

"The principle of universal access underpins our mail service and must be maintained at an affordable rate."

Mr Bailey warned that some smaller companies might find higher stamp prices a "real problem" in the current economic climate.

The MPs said stamp prices in the UK were among the lowest in Europe, but had increased from 36p and 27p three years ago.

In consultation with the regulator Ofcom, Royal Mail argued that any price cap should be restricted to second class letters, and set at the 55p upper end of Ofcom's proposed range, while stressing that prices would not necessarily increase to this level.

The Royal Mail is planning to hold Christmas stamp prices this year for around five million people on pension credit and employment and support allowance, but the MPs said they had "substantial concerns" about how the scheme will work in practice.

"Royal Mail will need to reassure us that this initiative will not be open to fraud and will not be introduced as a crude form of means testing," said the report.

The MPs recommended that Ofcom should consider linking any stamp price cap with CPI inflation rather than the usually higher RPI.

A Royal Mail spokesman said: "We know how hard it is to ask for a price rise when the economy is as tough as it is now. Last year our core mail business made a £2 million loss every week. Royal Mail has made a loss on its core mails, including packets, activities of almost £1 billion over the last four financial years. That is not a sustainable position for any business.

"Royal Mail is awaiting the outcome of Ofcom's consultation on its proposals for future regulation of UK postal services before announcing stamp prices for 2012. No final decisions have been made on stamp prices. We will of course inform customers of any changes to stamp prices as soon as we are able to."

The postal organisation said it faced "serious financial challenges", after mail volumes fell by 30% since 2006 and the regulatory regime led to "artificially low" prices.

"Our difficult financial position means that there has been significant under-investment in Royal Mail for a number of years, including in crucial areas like IT where we really lag behind our main competitors.

"We have some of the lowest stamp prices in Europe and amongst the highest service standards. They are very expensive to maintain. To maintain this vital service, price rises are really needed, given Royal Mail's financial position.

"We will be announcing a scheme for this Christmas that will allow the most vulnerable members of society to buy first and second class stamps at 2011 prices. Even though research has shown that postage accounts for a modest proportion of household expenditure for all social groups, we understand that there are some people for whom any price rise will be difficult. It is important to help them at this time."

Communication Workers Union (CWU) general secretary Billy Hayes said: "We welcome the report on stamp prices and the recognition of concerns about pricing from vulnerable groups.

"We believe it's a question of fairness and there's a need to establish a level playing field where competition exists while protecting the universal 'one-price-goes-anywhere' service.

"The CWU will strive to ensure no-one is priced out of accessing the universal service. Our view is that price controls should be maintained in this area to provide adequate protection."

Robert Hammond, of Consumer Focus, said: "Royal Mail faces a huge challenge in turning the business round and maintaining a universal one-price service, but that must not lead to unjustified hikes in stamp prices.

"This is an essential service and the right balance must be struck between the needs of the business and its customers.

"Stamp prices are likely to rise but any increases must be based on a convincing analysis of the market and Royal Mail's costs."

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