Document-Genetics-GlobeRoyal Mail dismisses claims of stamp price increase

2nd May 2013

Royal Mail has dismissed as "pure speculation" claims by campaigners that privatising the postal service will see the price of a first-class stamp rocket to nearly £1 within three years.

The Save Our Royal Mail campaign has warned that the price of first-class mail is set to increase because competing mail operators are likely to challenge Royal Mail's VAT-free status under European law.

Last spring the Royal Mail raised the cost of a first-class stamp by 30%, its biggest price rise for 37 years, taking it from 46p to 60p. The move was seen as pushing the organisation closer to privatisation and raised fears over the impact on small businesses and elderly people. Royal Mail sparked accusations of "profiteering" when it capped the number of stamps shops could buy in before the price rises came into force.

Save Our Royal Mail, which was set up by charities and pensioner groups to fight the likely sell-off, and is co-ordinated by the Communications Workers Union, said that if 20% VAT were added it would lift the price of a first-class stamp to 72p. If Royal Mail then raised the price a further 30% it would be 94p by 2015. Even if VAT was not applied the campaigners said the price for consumers sending a first-class letter – which is not capped by the regulator Ofcom – "would likely hit a pound in three/four years, assuming two increases within that period".

Under the new pricing regime also set out last year, first-class prices will no longer be set by Ofcom, although for second-class it introduced a seven-year price cap of 55p, index-linked to the consumer price index rate of inflation.

Mish Tullar, Royal Mail spokesman, said the campaigners' key claims were based on "pure speculation" and a misunderstanding of the current regulatory regime. He said: "Stamp prices, whether set under public or private ownership, are subject to significant competitive pressures.

"Customers have many alternatives to the post and there are now many postal providers. It is pure speculation to suggest that stamp prices could reach £1 in the next few years – in fact, in 2013 there was no increase in the price of first-class or second-class stamps."

He insisted that UK stamp prices "are among the best value in the EU. In five of the six weight steps for first-class and second-class mail, the cost of UK stamps are ranked in the bottom half of prices when compared with other European countries. In some cases, the UK is the cheapest."

VAT exemption was a matter for HMRC, he said, but was currently safeguarded: "VAT exemptions for core postal service delivery products such as stamps, by universal service providers (USP), are in place in the vast majority of EU countries under the European VAT Directive. Under the Postal Services Act 2011, Royal Mail is the USP in the UK. The VAT exemption would apply regardless of whether Royal Mail was in public or private ownership. Similar VAT exemptions are in place for universal service products in Germany, Austria and the Netherlands. In each country the USP is privately owned."

The warning from Save Our Royal Mail came as it launched a new website and an online petition to 'Stop the £1 stamp and protect our postal services'. It said: "Not everything in life should be defined by its monetary value. Royal Mail is part of the fabric of the nation – we don't want to see it ripped apart. If the Royal Mail is sold off at affordable prices, rural services and free postal services for our service men and women as well as vulnerable groups will disappear. The aim of our campaign is to persuade politicians that they must act now and guarantee that these vital services do not disappear.

A spokesman for the Department for Business Innovation & Skills said: "Royal Mail will continue to be the designated universal service provider regardless of its ownership. An ownership change would not, therefore, trigger a change in the current VAT exemption which applies to first- and second-class stamps as part of the one price, anywhere service."

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