Royal Mail's war with regulator intensifies

Postcomm, the post regulator, has written to MPs accusing the Royal Mail of “straightforward scaremongering” over proposed controls on the price of a stamp. The row broke out after Royal Mail wrote to all 659 MPs warning that the new price regime would “choke the company” and the universal one-price service. In the letter Martin Stanley, the chief executive of PostComm, dismisses the Royal Mail as being far too pessimistic about the price control, which would let the price of first and second class stamps rise by 1p now, but would then freeze average prices until March 2006. Allan Leighton, the chairman of the Royal Mail, said: “Ours is a business in crisis, we’re taking this very seriously. From those comments, PostComm is not.” Leighton, who is taking legal advice and may sue the regulator, believes the proposed price controls are “regulation gone mad”. The Royal Mail has written again to MP’s who received PostComm’s letter. The new letter says: “When Allan Leighton says PostComm’s plans will destroy the one-price-goes-everywhere universal service which only Royal Mail provides, he is not making baseless claims in an attempt to grab headlines.” The tit-for-tat letters underline the sharp deterioration in the relationship between Royal Mail and the watchdog. Insiders say that Leighton, who is in the throes of a sweeping restructuring of the loss-making company, is becoming increasingly frustrated at PostComm’s actions. He believes the planned control would wipe out pounds 460m of revenue and wipe out any benefit from the initial price rise. Royal Mail, which faces increased competition in the letters market, is still losing pounds 1.2m a day. It believes the frozen “average price” proposed by the regulator would exacerbate those losses and threaten Leighton’s recovery plan. Meanwhile Royal Mail is also beginning to write to individual MPs about the proposed closure of a third of the UK’s urban post offices. Although the plans have been public for some time, many MPs remain unaware of the impact on their constituencies, some of which could lose up to 10 local branches.