Watchdog saves Royal Mail with stamp price increase

Postal regulator PostComm is expected to throw a lifeline to financially stretched Royal Mail this week in the form of an unexpectedly generous agreement on future stamp prices.

In its final price review, to be unveiled on Wednesday, it is thought PostComm will say it has heeded warnings from Royal Mail chairman Allan Leighton about the state-owned operator’s financial plight, particularly its pounds 4.2 billion pension deficit. Last month Leighton told the Trade and Industry Select Committee that the deficit made Royal Mail technically insolvent.

While the price control cov ers a range of prices, the key measure is the first class stamp. PostComm’s initial proposals, published in June, indicated an increase from 30p to 34p between 2006 and 2010.

Royal Mail argued at first for 47p, but reduced this to 39p. It is understood that PostComm, under chief executive Sarah Chambers, has accepted that Royal Mail’s ability to discharge its ‘one price goes anywhere’ duties could be compromised by too harsh an agreement. It is thought that she will announce the price will rise to 36p or 37p with the increase being ‘front-end loaded’. This would mean that Royal Mail would get the money earlier to address its pension difficulties.

The independent consumer watchdog Postwatch has repeated its advice of last year that people should post Christmas mail early using second-class stamps because of the marked deterioration in the first-class service over the holiday period.