Royal Mail Seeks New Postal Rise to Cover Pensions Shortfall

30 December 2002

Britain's state-owned Royal Mail Group, currently haemorrhaging £1 million daily, is seeking a rise in postal rates to compensate for a £330 million ($528.83m; €507.74m) shortfall in its staff pension fund.

But the ailing giant cannot increase its prices at will – it must first obtain permission from government-appointed postal regulator Postcom which has imposed an three-year price freeze on the operator. The standstill was imposed in tandem with regulatory approval to raise prices of first and second class postal rates in April 2003 by one penny to £0.28 and £0.20 [WAMN: 07-Oct-02].

According to the Royal Mail, the shortfall is due to the sagging fortunes of its two pension funds, themselves affected by the general stock markets malaise.

The funds were valued at a total of £15.6 billion in March but the subsequent nosedive in share prices means that the RMG will have to find another £330m to meet its commitments to current and retired staff.

Said the postal operator, in typical RMG-speak: “We are not asking for another penny on postage but we want the flexibility to be able to do so.” But few doubt postage prices will rise within weeks if Postcom relents.

Royal Mail chairman, the former supermarket boss Allan Leighton and a seasoned tactician, is currently conducting a noisy campaign in the arenas of political and public opinion to win the right of the near-monopoly to hike its prices at will. Leighton’s constant theme is that the RMG will go under unless it is allowed to do so.

Postcom disagrees: “People are worrying that Royal Mail is teetering on the brink of disaster because of what we are going to do to them. But it is not going to happen like that. We are not going to force Royal Mail out of business.”

Data sourced from: Times Online (UK); additional content by WARC staff