UK price curbs ‘will stamp out 40,000 postal jobs’

ROYAL Mail today warned it will have to axe 40,000 jobs if the postal regulator goes ahead with its plan to impose price controls on stamps.

In a report, chairman Allan Leighton told Trade and Industry Secretary Alan Johnson the proposed prices would result in “unrealistic” cost cutting and could only be achieved by massive job losses.

Royal Mail bosses believe it is unfair for the regulator to bring its productivity rate in line with rivals Deutsche Post or TPG, as those postal companies have received more investment and are more mechanised than the British system.

The job losses – representing nearly a quarter of Royal Mail’s workforce – would be more than the cuts of 34,000 made by Mr Leighton three years ago in order to return the group to productivity.

Mr Leighton’s appeal to the Government comes at a time when ministers are planning a review of Royal Mail and as the organisation tries to raise more cash.

In May, the postal services regulator Postcomm said it planned to curb the increase in the price of first-class stamps to four pence over four years from next spring, taking the price to 34p. Second-class stamps would increase by no more than 2p over the same period to 23p.

But the postal company has argued the ideal price would be 48p because it loses money on many of its mail services.

The organisation claims it needs to raise revenue for investment because, from next January, it will face full competition in all of its markets. At the moment, it only has rivals for the business part of its service.

Last month, Postcomm said the proposed price caps were “challenging” but insisted they offered customers a better deal and would secure the so-called universal service, under which the Royal Mail delivers post to the UK’s 27 million addresses for the same stamp price.

At the time, Mr Leighton hit back, saying: “These proposals will literally starve Royal Mail of vital investment and so wreck the quality of service we have fought so hard to improve. We cannot accept them. It’s as simple as that.”

A spokesman for the regulator claimed Postcomm’s plans did not require job cuts, while a strategic plan by Royal Mail itself saw 30,000 job cuts over five years through mechanisation.

“This isn’t about price control,” he said. “There are no demands from Postcomm for job cuts.”

The review of the Royal Mail was promised in Labour’s election manifesto and is being seen as a platform for debating the ownership of the group.

But hopes that the review would be launched today, on the last day of Parliament before the recess appear to have faded.

Meanwhile, the Trade and Industry Select Committee announced that it would launch an inquiry into the effect of competition on Royal Mail.

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