Statement: Review of Second Class stamp safeguard caps

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Statement published 17 January 2019

This document sets out our decision for the continued regulation of Royal Mail’s Second Class stamp prices.

In March 2012, we imposed a price cap on Second Class standard letters. The cap was set for 2012/13, to increase by no more than inflation (CPI) for seven years (the control period). In July 2012, this safeguard was extended to large letters and parcels up to 2kg, and we imposed a cap covering these products, which was also fixed in real terms (at CPI) for the control period. We refer to these prices caps throughout this document as the ‘safeguard caps.’

In 2017, we decided that the approach to regulation we established in 2012 should remain in place until 2022. This included retaining the safeguard caps, which we considered necessary to ensure a basic universal service is available to all at affordable prices; and to ensure that users of postal services, especially vulnerable consumers, are protected from on-going price increases. In that statement, we said we would review the level of the safeguard caps during the 2018/19 financial year.

We have now completed our review and have decided to raise the level of the Second Class standard letter safeguard cap by 5% in real terms, to 65p for the period 1 April 2019 to 31 March 2020.

The precise upper limit of the cap will be set at 65.2p from April 2019, however we note that currently Royal Mail charges in whole pence increments for the Second Class products. Therefore, when describing the level of the cap in our statement, we round to the last whole pence (65p).

We have decided to maintain the current level of the basket cap (increasing it by CPI) for the same period. These caps will ensure that the Second Class products remain affordable to consumers, while also giving Royal Mail an appropriate level of commercial flexibility. Each cap will rise by CPI inflation each year on 1 April until the end of the control period, on 31 March 2024.

Our decision will come into effect on 1 April 2019.