28 Jul Protecting the Universal Postal Service
Ofcom’s decision to allow Royal Mail greater freedom over its pricing and the subsequent announcement of postal rate increases has caused outcry from consumer and small business groups. However, Paul Galpin, Managing Director, P2P Mailing, points out that change is necessary if the Universal Postal Service is to be protected.
Commentary about Royal Mail’s price rises has been wide and varied, but much attention has been given to fears that mailing could become too expensive for vulnerable members of society and companies that rely on the postal channel to conduct their business.
Nevertheless, the vast majority of the organisations raising these concerns have also recognised the fact that Royal Mail is struggling financially and that measures need to be put in place to protect it. The rise of email, amongst other factors, has caused the UK’s letter volume to decline 25% since 2006. Simultaneously, the number of addresses which Royal Mail delivers to has grown from 27 million to 29 million since 2003. In short, people are using the mail service less and yet there are more places to deliver to. It logically follows that if these trends continue (which they are likely to do) Royal Mail will continue to struggle and the Universal Postal Service – which allows items to be delivered to all corners of the UK for one standard cost – will be put at risk.
In an attempt to help strengthen Royal Mail, in March 2012 Ofcom gave the organisation control of its own pricing. This prompted announcements of a 30% increase in cost of 1st Class postage and a 38% increase in the cost of 2nd Class postage. A safeguard cap on the cost of 2nd Class letters and 2nd Class large letters and small parcels was put in place in a bid to avoid the service becoming too expensive for vulnerable customers.
Coverage of these changes and their consequences has tended to confuse the two distinct parts of Royal Mail and to treat them as one. The arm of the business that handles bulk mail, can work competitively. Indeed, greater competition will encourage Royal Mail to improve its service to compete with other providers. Under Ofcom’s proposals, Royal Mail has been given the freedom to set its own wholesale prices for other operators using its last mile network to enhance its competitiveness.
The second part is a public service which allows members of the public to send letters and parcels to all parts of the UK for a set price. This part of Royal Mail will never be profitable. By the very nature of the beast, money will not be made from a service where it costs the same to send a letter to the Outer Hebrides as to the next street. Yet it keeps our remote and rural communities equitably in touch with metropolitan wealth, and in these days of online shopping, means that everyone has access to the same range of goods and services.
Whilst many organisations are rightly concerned about the effects of rising postal prices on the poor, the elderly and the vulnerable, if changes had not been made in a few years the Universal Postal Service would have been placed in great jeopardy. Preserving this precious service is important to equality across the UK, and it will always be something that has to be subsidised out of the public purse, unless the remote, the poor and the disadvantaged are to be discriminated against.