UK Royal Mail accepts price control

Royal Mail said yesterday it was “minded to accept” the final version of a four-year price control to 2010 that was proposed by its regulator this week. The state-owned postal operator said it would inform customers next week of price changes taking effect next month.

The move represents a softening of the negotiating stance adopted by Royal Mail, which had earlier signalled it would reject the price control unless the government first agreed to its request for Pounds 2bn of state money. Negotiations with ministers over this funding are still continuing.

Postcomm, the regulator, has relaxed some important elements of the controls during its consultation. In particular, it has agreedto allow the company to charge up to a penny extra on stamps if its Pounds 4.25bn pensions deficit increases to more than Pounds 5.9bn. This would mean first-class stamps would rise from 30p to 37p by 2010.

The Tories also revealed yesterday that the Post Office was “surprised and disappointed” at the government’s decision not to renew its contract to fund the Post Office card account, which is used by 4.3m people to receive state benefits. In a letter, Alan Cook, managing director of the Post Office, said he was also disappointed that the Department for Work and Pensions had begun pilots on moving people away from the account, even though the contract ran until 2010.

Royal Mail Price Controls
[17/03/2006]
Following Postcomm’s announcement this week of changes to their price control proposals, Royal Mail has now seen some of the detail of those proposals and is minded to accept the price control – pending agreement on the formal amendment to its licence.

Royal Mail expects to see the final licence by the end of March and to inform its customers next week of changes in pricing which will take effect in early April.

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