40p to post a letter, Consignia's warning if rival firms move in

FIRST-CLASS stamps could leap in price to 40p and second class to 30p if mail delivery is opened up to greater competition, says Consignia.

The company, formerly the Post Office, claims that would be the result if rivals are allowed to operate in the profitable business mail market.

“At the moment letters sent from one side of London to the other subsidise Auntie Joan’s letter to the Shetlands, ” said a Consignia spokeswoman.

“But if we lose all the cheaper mail, the ability to subsidise will obviously be hit.

“To cope with this and to stick to a universal price for letters sent all over the country we would have to put the price of stamps up.”

The company has already complained that it costs 28p to deliver a first-class letter which carries a 27p stamp.

The price of posting a letter has risen only slowly over the past decade. In 1989, a firstclass stamp cost 20p and the present cost has not changed since April 2000.

The current price of a second-class stamp, 19p, is the same as in 1993.

Consignia’s projected figures will form part of a key submission to the industry regulator Postcomm, which authorises price increases.

Postcomm announced plans last month to allow competition from April 1 in the bulk mail market – large deliveries of 4,000 or more items such as interest rate increase notices from banks and building societies.

Consignia says the threat of a 40p stamp is based on events in Sweden after its postal industry was opened up to competition.

The company spokeswoman said: “If the Postcomm proposals go through, we are in uncharted waters but the experience in Sweden leads us to conclude that prices could go to 30p and 40p.”

However Postcomm say it would not allow such dramatic price increases.

Spokesman, Chris Webb, said: “They can’t put the prices up without asking us.

“We think Consignia can make considerable savings throughout the organisation. They have already announced savings of £1.2billion by next year.

“If they become a lot more efficient we think there’s no need to raise the price of stamps.

“In looking at an application for an increase in the price of stamps we look at whether by not granting it Consignia would not be able to carry out its obligations under its licence to provide a universal service.

“Our view is that the universal service makes a profit at the moment and we don’t think this would be any different when competition comes in, because it will become more efficient.”

Consignia was forced to drop a request for a 1p stamp price rise last June after Postcomm pointed out it had pledged there would be no increase in the first two years of the licence.

Postcomm intends to get rid of the mail delivery monopoly completely by March 2006. The first phase, from April, will open up 30 per cent of the bulk mail deliveries market to other companies.

Phase two, from April 2004, will further open the bulk mail market including lowering the threshold to circulars of 500 to 1,000 letters.

And by the end of March 2006, all remaining restrictions in the mail delivery business will be abolished.