Royal Mail expresses ire over Postcomm’s proposals |
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Wed, 01 Jun 2005 18:30
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The Royal Mail was stunned by the proposals of the industry regulator Postcomm, which has said that the price of a first-class stamp may rise by just 1p a year to reach a maximum of 34p over the next four years. This proposal comes as a body blow to Royal Mail, which had celebrated record making profits of £537m just last month.
Royal Mail is advocating increasing the rate of a first-class stamp to 48p; a price, which it says will allow the loss-making letters segment to make a commercial profit. Royal Mail says that these guidelines would lead to its "inexorable decline", besides threatening its ability to deliver letters to every address for the same price. At the same time, it vowed to fight the proposed price caps.
Royal Mail Chairman Allan Leighton said, "These proposals will literally starve Royal Mail of vital investment and so wreck the quality of service we have fought so hard to improve. We cannot accept them. It's as simple as that. Royal Mail's postmen and postwomen have achieved a fantastic turnaround and are now delivering the best quality of service in a decade. These proposals are a kick in the teeth for our people. They destroy the hard-won gains on quality of service and push Royal Mail back into a spiral of decline."
| Reacting to these proposals, Royal Mail's chief executive, Adam Crozier, said, "With just over six months to go before the postal market is open to full competition, the regulator is proposing a pricing regime that starves Royal Mail of investment, denies us flexibility against competitors who can charge what they like and puts a brake on further improvements in quality." He added that the company had been asking Postcomm to take off the handcuffs and allow it to compete. " Instead, they've put us in a straitjacket," he said.
Postcomm has also proposed the introduction of four new performance standards, under which Royal Mail will be required to meet the target of delivering 99 per cent of mail every working day. Postcomm's chairman Nigel Stapleton said, "Royal Mail still has over 99 per cent of the letters market, but even limited competition so far in the marketplace has made the company more efficient. This is good news for domestic customers, who would benefit from stronger incentives to improve its quality of service. If it continues to improve its efficiency, this price control will enable the company to earn attractive returns and at the same time pay down progressively its £4.5bn pension deficit."
But Royal Mail is in no mood to listen. The company warned that it would have to approach the Competition Commission unless these proposals are altered substantially.
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