Competition `Could raise cost of first-class stamps by 3p a year'
THE PRICE of a first-class stamp will have to rise by up to 3p a year if the postal regulator presses ahead with “fast-track” plans to open the market to competition, Consignia warned yesterday.
In its formal response to Postcomm’s proposals, the state-owned postal service called for an immediate 1p rise in first and second class letter prices and a much more gradual introduction of competition.
Allan Leighton, chairman, said that if Postcomm’s proposals went ahead unchanged and 30 per cent of the market was opened to competition from next month, then the postal service could be jeopardised. “Our key concern with Postcomm’s analysis is that there is a real risk that our ability to continue to provide our social obligations – the one price goes anywhere universal postal service – will be undermined.”
Mr Leighton said the 1p rise in postage was needed to help fund Consignia’s “renewal plan”. It is currently losing pounds 1.5m a day and has announced plans for up to 30,000 job losses from the 220,000-strong workforce in a bid to save pounds 1.2bn a year.
Postcomm is proposing to scrap entirely the Royal Mail’s monopoly over letters costing less than pounds 1 to deliver and instead license rival operators to compete, starting with bulk mail. Thirty per cent of the Royal Mail’s market would be thrown open immediately, a further 30 per cent in two years and then from 2006 there would be complete liberalisation.
Consignia said it wanted competition to be introduced more gradually in line with liberalisation moves taking place elsewhere in Europe. This would mean reducing its monopoly to letters weighing less than 100 grams – the equivalent of a 41p stamp – from next January and then reducing the threshold further to 50 grams from 2006.
The consumer body Postwatch attacked Consignia’s proposals saying they meant “pay now, competition later” for customers. Gregor McGregor, Postwatch’s chief executive, said: “Consignia is in a financial mess of its own making. It has lost control of its costs. Customers should not be expected to bail out a failed management. Competition is not, as Consignia suggests, a threat to the provision of a universal service but a failing monopoly is. Customers need the freedom and choice that the progressive opening of the marketplace will offer over the next four years.”
Consignia insisted, however, that Postcomm’s proposals were based on an “unsubstantiated and simplistic analysis” of the marketplace carried out by Andersen, the consulting arm of the disgraced audit and accountancy firm.
As a minimum, Consignia would have to put up prices by 1p a year to ensure it had sufficient income to maintain the universal service but this could easily rise to 2p or even 3p.
Postcomm said it would take Consignia’s response into account along with all the other replies it had received to its consultative document. The regulator is expected to announce its decision in May although the earliest that a new entrant could be licensed would probably be next January.
Meanwhile the Royal Mail announced selective price rises from 4 July for a range of inland services including packages weighing more than 350 grams, standard parcels and guaranteed next-day Special Delivery service. The price rises will be below the rate of inflation and the first for two years.
