ANALYSIS: Is Royal Mail guilty of having its cake and eating it?
News that the Government is giving Royal Mail #1.7bn – on top of the recent price control – to update its service and get its pension fund back on track has irked many. But the watchdogs are firmly on-side
The Government’s decision to hand out #1.7bn to Royal Mail has been met with fury from competing postal operators. TNT Post UK chief executive Nick Wells has branded it “murky”, adding: “The game’s not being played on a fair playing field and I’d like to know where the referee is.”
Opposition parties have also hit out at the move. But what do direct marketers think?
One industry source claims Royal Mail is having its cake and eating it: “Postcomm’s recent price control was very generous – we assumed it was set on the basis that there wasn’t going to be any Government aid. For Royal Mail to receive both seems very one-sided.”
But both consumer watchdog Postwatch and industry regulator Postcomm have welcomed the recovery package, which will help plug Royal Mail’s pension fund deficit, totalling #5.6bn, and pay for the modernisation of the service.
A Postwatch spokeswoman explains that the post is not only used by taxpayers; children and tourists both use it on a regular basis. Therefore, it should not be seen as customers paying for the service twice.
She comments: “Postwatch welcomed Royal Mail approaching the shareholder for the investment funding it needs. This is preferable to Royal Mail relying on customers again to pay more.
“Stamp prices are already set to increase above the rate of inflation for each of the next three years. Customers are doing their bit; it’s good news that the shareholder is contributing, too. This investment, of course, also helps operators that use the Royal Mail pipeline.”
When Postcomm set the price control last December, for 2006 to 2010, it claimed the price rises were to “enable the company to modernise its operations, secure its universal service, serve its customers better and help plug its pension fund deficit”. An unprecedented #1.2bn was allowed for Royal Mail to invest in modernising its network.
A Postcomm spokesman defends the Government’s decision, saying: “We’ve always believed the cost should be shared three ways: by the company, the shareholder and the customer. Under the recent price control, we expected Royal Mail to increase its efficiency by 3 per cent – now it should be able to exceed that.”
