Royal Mail may appeal against 'tariff basket'

Royal Mail is considering an appeal to the Competition Commission after its regulator indicated a new package of price controls yesterday. The organisation had begged Postcomm to change its mind on original proposals, which pegged a penny increase on first- and second-class stamps to a complex formula to keep it from raising the average price of products. Yesterday’s revised proposals involved a “tariff basket” form of price control, which means that almost all Royal Mail services will still effectively be price-capped. Allan Leighton, chairman of Royal Mail, said yesterday that it would take 28 days to respond to the proposals. “The question Royal Mail’s board now faces is: do these complex and tight price control proposals give us sufficient financial headroom over the next three years?” he said. “If the answer is no, then our ability to provide a one-price universal service will be destroyed and we will have to trigger a reference of the proposals to the Competition Commission.” Amicus, the management union for Royal Mail, expressed concerns that the price cuts would force the organisation to shut its final salary pension scheme. Graham Corbett, who heads Postcomm, said yesterday that the regulator had taken advice from independent pension consultants. Asked whether he thought Royal Mail would accept the proposals in return for the stamp price increase, he said: “It would be a tremendous pity if they decided not to”, and added that the average length of time for a competition inquiry would be six months. On Mr Leighton’s complaints about the proposals being complex and tight, he said: “Monopolists always feel that they don’t have enough flexibility. There is nothing a monopoly would like better than to be able to charge what it likes. I don’t think Allan Leighton is any different from anyone else in that.” The Royal Mail’s monopoly on letters costing under a pound to post is being phased out by the regulator, and the organisation is still losing money. Mr Leighton said that more than half of the pounds 750m cash from the stamp price increase would be eaten up by inflation. “The rest comes with strings,” he added.