Buy stamps now to avoid paying more later
Consumers are being urged to buy postage stamps now before prices are hiked up later this year.
While the greeting card industry is awaiting the outcome of Ofcom’s recommendations on the regulation of UK postal services, it is anticipated that Royal Mail’s stamp prices for 2012 will rise sharply later in the year.
Royal Mail has said that no final decisions have been made on stamp prices yet and that they will inform customers of any changes to stamp prices as soon as they are able to.
The fear is that Ofcom’s recommendations will lead to stamp prices being deregulated, sending the cost of stamps soaring with a potentially devastating impact on the greeting card market, particularly on bulk mailings like Christmas cards.
Royal Mail chief executive Moya Greene told MPs yesterday in the Commons' Business Committee that the cost of stamps would have to rise. In addition Royal Mail is hoping to make cheaper stamps available for ‘the most vulnerable members of society’ this Christmas, in effect creating a two-tier stamp price system.
Royal Mail is yet to reveal full details on the scheme, but it did say that anyone who receives Pension Credit, Incapacity Benefit or its replacement, Employment and Support Allowance, will be eligible for the discount. The plans have already come under fire for being ‘unworkable’.
The Greeting Card Association (GCA) has held a series of high-level meetings with Royal Mail recently to discuss ways they can mitigate the potential damage to the greeting card industry. It was also one of many organisations that responded to Ofcom’s consultation expressing concern about the uncontrolled price increases will have on social mail, the greeting card sector and the jobs it supports in the UK.
Sharon Little, GCA Chief Executive said: “We send more greeting cards per person than any other nation, it’s an ingrained part our psyche and an important part of our social communication culture. Receiving a card in the post is a much loved part of every celebration and life changing event.
"There is no doubt that stamp prices are set to rise significantly and that price increases could potentially have a serious effect on the sending of greeting cards by post. We are currently working with Royal Mail on initiatives to ensure that greeting cards remain the heart of the post box.
"We are also strongly advocating that all senior citizens should be included in Royal Mail’s newly announced reduced price stamp scheme for benefits claimants.”
The aim of Ofcom’s proposal is to make Royal Mail’s ‘universal service obligation’ (USO) financially sustainable. This includes the six-day a week letter service, which is among the highest in Europe. Royal Mail letter’s business made a loss of £120m in 2010/11, the cost of meeting current USO standards is around £6bn a year.
A statement from Royal Mail read: “We know how hard it is for businesses when the economy is as tough as it is now. Mail volumes have fallen by 25 per cent since 2006 and the regulatory regime has meant that prices have been artificially low. Royal Mail has made a loss of almost £1 billion over the last four financial years. That is not sustainable for any business so we need to better align prices with the cost of providing our services.
“Since 2006, Royal Mail’s cashflows have been £3 billion less than anticipated. There has been significant under investment in Royal Mail for a number of years. Including in crucial areas like IT where we really lag behind our main competitors. We need to make a commercial rate of return so that we can invest in the business for the benefit of all our customers. This is a painful process of change, but one we are committed to completing.”
Mail volumes have fallen by 25% in the past five years, with the daily postbag falling from 84 million items to 59 million. The Royal Mail expects volumes to decline by around 5% a year for the foreseeable future even though the number of addresses is increasing - up by two million to 29 million since 2003.
Families spend an average of 40p a week on postal services, the Royal Mail estimates, equivalent to 0.1% of average weekly expenditure.