Imagine the outcry if the Government increased fuel duty by 50 per cent.
Now imagine instead of fuel the ‘commodity’ is postage stamps – two rather different entities, granted – but both essential items which most small businesses have no alternative but to use.
This is exactly what could happen if Royal Mail gets its way with the industry regulator, Ofcom. Last month the company submitted plans to have decision making powers on pricing transferred from the regulator to Royal Mail executives.
It would allow the company to go ahead with radical price hikes which could see the price of a second class stamp rocket by as much as 50 per cent. That’s potentially a second class stamp costing 55p as opposed to 36p now – a huge increase by anyone’s standards.
Other proposals being considered are no-limit increases for the price of first class stamps until as far ahead as 2018, which again would not require Ofcom approval.
Royal Mail is in trouble – it’s no secret – their letter business last year making a loss of £120 million. It says the extra cash from pushing prices up – again – will help it make the major reforms required of it.
And what kind of improvements in service can we expect to see if postal charges go north? Will the Royal Mail be reintroducing second post – a concept few under the age of 30 will be familiar? Will they begin treating first class post posted on weekends as genuine first class items and not just second as is currently the case? Or will they be lauding first class post as next day delivery?
Answer for all three – very unlikely.
Royal Mail wants to increase costs purely to balance their budget, with no outlined idea on how the level of service for its customers would be improved.
We know business is the core client area of the Royal Mail today, so it’s therefore quite clear where any substantial price increase in the cost of sending letters or packages will be felt the sharpest. That’s why we’ve told Ofcom that agreeing to Royal Mail’s demands would simply create another cost barrier for small firms who can ill afford more price hikes.
While we understand Royal Mail is currently a loss-making organisation and action needs to be taken to address this, we don’t believe constant price rises are the way to tackle the issue.
Constantly increasing prices is no way to reform a service, and could actually reduce the number of customers using the postal service. Royal Mail needs to improve its efficiency, but not by crude price hikes.
