Royal Mail admits GBP4.5bn black hole will force up stamp prices
Royal Mail is to force customers to pay for its GBP4.5bn pension fund deficit with plans to raise stamp prices to plug the black hole.
The revelation is contained in minutes of a high-level meeting between executives of Britain’s postal industry, hosted by the regulator Postcomm last month.
Royal Mail insists that no decision has been taken on how to reduce its pensions gap. But at the meeting, Stephen Agar, Royal Mail’s director of regulatory affairs, said: ‘Prices have been too low to fund the deficit. Pensions are a real cost that customers should bear.’
The disclosure comes as ministers are preparing to review proposals by Royal Mail’s chairman, Allan Leighton, for the Government to hand over 51 per cent of the state-owned company to the workers and take on some of the pension liabilities.
But the news that the lion’s share of the pensions gap will be funded by consumers has angered the consumer group Postwatch.
Gregor McGregor, chief executive of Postwatch, said: ‘For 13 years Royal Mail took a pensions holiday [by not paying into the fund]. Then lo and behold they turn around and say ‘oops, we have a deficit’ and ask the customer to pay.
‘If you are Sainsbury’s and your pension fund is short, then you don’t double the price of a tin of beans, you cut the shareholder dividend. In the same way, Royal Mail’s shareholder ” the Government ” must pay for this.’
It is unclear by how much stamp prices will rise to cover Royal Mail’s pension problem. Plans will have to be approved by Postcomm.
A Royal Mail spokesman said that the comments attributed to Mr Agar at last month’s meeting were ‘taken out of context’. However, Mr McGregor, who was also at the meeting, said the minutes accurately reflected what Mr Agar said. Asked how Royal Mail planned to reduce its pension fund deficit, the spokesman said that it wanted ‘pricing flexibility to compete successfully’.
He described pricing flexibility as ‘the ability to relate prices to costs’. And he added that stamp prices were ‘out of kilter with costs’ as Royal Mail made a pounds 235m loss on stamped mail in the year to 31 March 2005.
Royal Mail is also facing flak
over the compensation it pays businesses for poor service. In the year to 31 March 2004, it paid out GBP41.1m to so-called bulk mailers. But with the backing of Postcomm it refused further claims of around GBP45m because the claimants had been slow in settling their mail bills.
Postwatch is now preparing a judicial review against Postcomm, due to be heard in the High Court in December. Mr McGregor said: ‘This is a classic case of a monopolist using the fine print to deny payment.’
Originally, Royal Mail gave its customers 20 days to pay its bills. But Mr McGregor said that the company’s poor delivery record meant that some bills got delayed in the post.
A Postcomm spokes-woman said: ‘We are confident that our interpretation of the [compensation] scheme is the right one.’
