Regulator defied as Royal Mail plans price rise
Allan Leighton, the chairman of the Royal Mail, raised the stakes in his battle with Postcomm yesterday with plans to increase some delivery charges in defiance of Postcomm’s wishes.
Price rises are being imposed on airmail postcards, letters, printed papers and small packets. The cost of sending parcels weighing more than 350 grammes will also rise. Postcomm has said that it wants to curb prices on airmail and parcels to compensate for allowing the price of first and second class stamps to rise by 1p each. However, the loss-making Royal Mail has complained that any move on those services would cut Pounds 460 million from its sales.
The price increases, ranging from 1 per cent to 5 per cent, are controversial because they come just weeks before final pricing plans for Royal Mail are due to be announced by the regulator.
Mr Leighton is strongly opposed to some of Postcomm’s price cap proposals, and has vowed to fight any curbs all the way to a judicial review if necessary. It is possible that his decision to act now is because his position has been bolstered by the recent backing of the Department of Trade and Industry.
The DTI has told Postcomm, which is an independent regulator, that price caps on items such as airmail could wipe out the benefit of a penny increase on stamps.
Royal Mail said yesterday that it could not afford to wait for the regulator’s pronouncement. A spokesman said: “We submitted our pricing requests to the regulator nine months ago; we can’t go on waiting.” The organisation denied that the price increases were a deliberate provocation.
But Tim Yeo, Conservative Trade and Industry spokesman, said: “The timing of this does look like it is a provocation. While we generally believe that a competitive market should ensure competitive pricing, the timing and context of this looks like Royal Mail is testing the regulator. Along with the backing from the Government this does put pressure on the regulator but it is important that regulators remain independent.”
A standard airletter will rise 5 per cent from 40p to 42p. The cheapest stamp to Europe will increase from 37p to 38p.
