Royal Mail first class stamps to hit £1?

Updated: 
The Save Our Royal Mail campaign group says the cost of a first class stamp could hit £1 within three years. Worries are mounting that a privatised operator would not retain the Royal Mail's current VAT-free status, therefore pushing up prices.

Another example of a soon-to-be privatised business supplying higher prices, and possibly lower standards?

Save Our Royal Mail, launched by the CWU, contends that consumers and businesses could see prices rise if a privatised operator does not retain its current VAT-free status.

Royal Mail has countered the campaign's suggestion, saying that its status is dependent on HMRC, and nothing to do with ownership. A spokesperson said: "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."

Sell-off?

Vince Cable has been preparing the way for a Royal Mail sale for some time, claiming falling volumes of post and capital investment pressure all point, logically, to a sell-off. Fattening the goose the price of a first class stamp soared last year, from 46p to 60p.

A sell-off would likely see big job losses, though Royal Mail has cut more than 40,000 jobs in the last decade. There would likely be question marks over how long a Saturday post service would be retained (longer term digitization could mean, some industry experts have suggested, a postal service being reduced to two or three times a week).

Although the Royal Mail claims lower post volumes have eroded revenues, Royal Mail has also changed the way it measures overall volumes. The old method was based on weight; this was then switched to a reduced estimate - contested by unions - about how many letters went through each post box.

Profits vs service?

"Privatisation is an old fashioned idea and poll after poll has shown the UK public don't want their mail service sold off to become profit, rather than service, driven," says Billy Hayes, general secretary of the CWU union.

"Everyone, including millions of small businesses, would be hit by rising prices and by the undoubted reduction to the one price goes anywhere, next day delivery, universal service."

Royal Mail have refuted the campaign's claim: "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."

"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.
"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."

What do you think? Should the Royal Mail be privatised? Let us know in the comments.

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