UK's Royal Mail Rounds on Regulator Over Price Caps

03 June 2005

Royal Mail chairman Allan Leighton, a many-hatted company director and former chief executive of the UK's second largest supermarket chain Asda, has rounded angrily on postal regulator Postcomm.

Leighton is displeased that the regulator has regulated - specifically the Royal Mail's right to charge whatever it likes for its near-monopoly postal delivery service. Postcomm also moots tougher penalties for missing delivery targets.

Postcomm chairman Nigel Stapleton aims to limit the first class basic rate - currently £0.30 a letter - to a maximum of £0.34 for the next five years. Second class mail (£0.21 at present) would be limited to £0.23 over same period.

Stapleton maintains the proposals "build on the momentum already generated by competition" in a "dynamic and growing" market. Leighton sees it differently. "We cannot accept them. It's as simple as that."

"These proposals are a kick in the teeth for our people. They destroy the hard-won gains on quality of service and push Royal Mail back into a spiral of decline," he fumed. "[They will] literally starve Royal Mail of vital investment."

Rooting for the regulator's camp is Peter Carr, chairman of consumer group Postwatch. He strongly urged Postcomm commissioners to resist outside pressure to weaken the proposals.

"This package of proposals for the first time recognises that customers are important," he told the BBC. "It's important that the regulator acts to avoid the monopoly using its power adversely against customers."

Leighton, unmollified, threatens that unless the proposals are "substantially" changed, Royal Mail would refer the matter to the Competition Commission.

Postcomm's proposals embark on a three months consultation process next week. They are likely to please the UK's direct mail industry which, although benefitting from bulk and pre-sortation discounts, is only too aware that standard postal rates form the basis on which such discounts are calculated.

Data sourced from BBC Online; additional content by WARC staff