Stamps to go up by 3p to fill the black hole in RM finances

[TrueBlueTerrier]

Stamps to go up by 3p to fill the black hole in Royal Mail finances

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Royal Mail is planning shock increases in the cost of postage, with first class stamps rising by 3p, amid claims it is facing financial disaster.

The controversial proposals are designed to rake in more than £100million from customers in a year.

The record increases have been sanctioned by the industry regulator Postcomm as an urgent measure to fill an enormous black hole in Royal Mail's finances.

First and second class stamp prices will go up in April

It is claimed that unless the price hikes go ahead, the organisation will be unable to meet its obligation to provide a doorstep service to every home and business in the land.

However, the official customer body, Consumer Focus, slammed the proposals as a 'low blow' and warned they would drive people away from using the post.

Postcomm has accepted a plea from Royal Mail that the situation is so serious that it is necessary to tear up an existing regime that caps price rises.

It has decided to allow a 3p increase on a first class stamp, which would take up the price from 39p to 42p - a rise of some 7.7per cent.

The second class stamp would go up by 2p to 32p, which equates to 6.6per cent.

Royal Mail is also pushing for big increases in other postal charges - an average rise of 4.7per cent - that will hit both ordinary families and businesses.

These is likely to mean that Special Delivery, parcels and PO Box addresses will be more expensive.

News of the price rises, which would come into effect in April, comes as the postal system has been brought to its knees by a series of rolling strikes.

Postal services across the country have been severely disrupted while there is a backlog of mail running to tens of millions of items.

Some 130,000 members of the Communications Workers Union(CWU) are currently being balloted on calls for an all-out national strike.

The crisis in the nation's postal services is to be the subject of an emergency debate at the Labour Party conference in Brighton today.(wed)

The Royal Mail claims its income has been devastated by a combination of the strike and a massive shift by consumers and businesses to email and internet transactions.

Details of the proposed increases have not been announced by the Royal Mail. Rather they are buried in a document on the website of Postcomm.

The chief executive of Consumer Focus, Ed Mayo, said: 'This is paying for failure.

'The only reason that to hike up the price of a stamp is because Royal Mail has failed to modernise as a business.

'As a consumer watchdog, we do accept that the public is switching away from using the mail service, but increasing the price of stamps is not the answer. It can only make it more likely that mail volumes decline.

'This looks like an attempt by the regulator to tear up the rules in order to let Royal Mail charge us more for stamps. This is a low blow from a regulator whose job it ought to be to protect the public.

'The price has increased year on year with no sign of an improvement in the service. More recently its been getting worse than ever.

'Delivery times have become erratic and we've got the prospect of a national strike at Christmas to look forward to.

'Royal Mail had better have a really good explanation for any increase, but consumers will take some convincing.'

The Daily Mail has learned that Royal Mail chiefs wrote to Postcomm on September 8 pleading for the right to impose inflation-busting price rises.

The plea may well surprise customers, for as recently as May, the organisation reported that its annual profits almost doubled last year.

The state-owned firm made a group-wide operating profit of £321m in the year to March 31, up from £162m a year ago.

At the same time, tens of thousands of staff have lost their jobs in a mordernisation programme designed to make it more lean and efficient.

However, the Postcomm document argues that the finances of the Letters side of the business are in a mess. Specifically, its income from mail is £1billion less than expected over the last three years.

It points out: 'Royal Mail has lost 9per cent of its mail volumes over the three year period to April 2009, largely through shrinkage of the total market including 20per cent of stamped mail.

'Postcomm estimates that this decline in volume has resulted in Royal Mail's revenues for the year 2008-09 being approximately £1 billion lower than if volumes had stayed constant over this period.'

It adds: 'Letters business profits have fallen in this period from over £300 million in 2005-06 to approximately £50 million in 2008-09, and mail volumes have consistently declined with a total reduction of around 2 billion over the same period.'

The regulator justifies its support for the price rises, saying: 'Royal Mail Letters' finances are weak and deteriorating.'

It states the price rises are vital to ensure the survival of the doorstep service, saying: 'Postcomm believes that these proposals will discharge its statutory duties by balancing the overriding requirement that Royal Mail can continue to provide the universal postal service.'

And the regulator adds: 'If the proposals are agreed ...Postcomm estimates that they will enable Royal Mail to earn up to an additional revenue of approximately £100m to finance the universal postal service in 2010-11.'

As far as the impact on the public is concerned, Postcomm says it takes the view 'there is no material detriment'.

The shocking depiction of the Royal Mail's financial position appears to be at odds with the massive rewards handed out to its chief executive, Adam Crozier, and senior managers.

Mr Crozier has been identified as Britain's highest paid civil servant after picking up a package worth more than £3million in one year.

Postcomm has made clear it supports the price rises which will be given the formal green light following a period of consultation over the next four weeks.

Given that Royal Mail has been lobbying for the right to impose higher stamp prices, it is expected to implement the maximum possible increases in April. There is a small chance it will phase them in during next year.

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[POSTMAN]

This is sooooo wrong,but hey,that's liberisation for ya.

[jockstrapp]

I thought the strikes were having minimal effect on Royal Fail Or is this just more f#cking lies from :cfo :cfo

[borders]

we have said all along that the people that will pay for this so-called modernisation will be the workforce and the public.

[Big Daz]

100 million is the figure Crozier gave as the loss we make on DSA

Coincidence?

[Lounge Lizard]

"It points out: 'Royal Mail has lost 9per cent of its mail volumes over the three year period to April 2009"
- 9% over 3 years is less than a third of the 10% every year we keep being told.