Royal Mail has been accused by MPs of using its universal service commitment as an excuse to raise stamp prices. First and second-class stamps will rise by a penny to 63p and 54p respectively on March 30, sparking claims that loyal customers are being forced to prop up flagging parcel revenues. An influential committee of MPs said that if Royal Mail wanted to increase profits, it must invest in new technology and focus on efficiency, rather than simply increase prices. First and second-class stamps will rise by a penny to 63p and 54p respectively on March 30, sparking claims that loyal customers are being forced to prop up flagging parcel revenues. Adrian Bailey, chairman of the Business Select Committee, said he was ‘not very pleased’ to hear they had taken the ‘easy option’ of raising stamp prices. Citizens Advice Bureau also urged Royal Mail to ‘focus on making efficiency savings rather than relying upon raising prices’ and expressed concern that consumers were held to ransom because they ‘have no choice but to pay the increased prices’. The cost of posting a large letter weighing up to 100g first class will rise by 2p to 95p. Royal Mail has warned it faces aggressive competition in the parcels market from delivery firm Whistl and called for regulators to rein in its rivals. The company says it is at a disadvantage to competitors because it must fulfil a 175-year-old ‘universal service’ obligation to deliver to all UK addresses for the same price. It said this obligation, which requires it to deliver six days a week to even the most rural communities, could soon become ‘financially unsustainable’ if Ofcom does not impose restrictions on its rivals. But the Business Committee will say today that there is no ‘immediate risk’ to the service and that, far from being a ‘burden’, the service brings ‘revenue and status’ to Royal Mail. A new report says: ‘Royal Mail should not increase postal and packaging prices simply in an attempt either to increase its own profit levels or to protect the Universal Service Obligation, without increasing the efficiency of its operations. ‘While we accept that Royal Mail has done much to improve efficiency, it still has to match the technical innovations introduced by many competitors — innovations that more clearly match the expectations of consumers.’ Adrian Bailey, chairman of the Business Select Committee, said he was ‘not very pleased’ to hear they had taken the ‘easy option’ of raising stamp prices . John Allan, of the Federation of Small Businesses, said the rise in stamp prices would be unwelcome for many companies. He said: ‘While prices have only gone up by a penny, this still represents an above inflation rise. ‘Businesses affected will still have to decide whether to absorb this rise or pass it on to their customers.’ They said they expected Royal mail to use the additional money raised ‘to invest in improving their performance and meet delivery targets’. Mr Allan added: ‘Ofcom should carefully monitor how Royal Mail is doing, and use their powers to fine should customers’ expectations fail to be met.’ Since 1840, everyone in Britain, from the Cornish coast to the Scottish Highlands, has paid the same price to post a letter. Royal Mail says this expensive obligation is becoming increasingly difficult to fulfil because firms such as Whistl ‘cherry pick’ deliveries in more lucrative city locations and can therefore under-cut them on price. But when asked for evidence that it cost more to deliver in certain geographical areas, the company was apparently unable to provide this. Bailey felt the Royal Mail should be trying to make efficiencies instead of raising prices . The report said: ‘We were concerned to note that Royal Mail were unable to provide a regional breakdown of the cost of the Universal Service Obligation. ‘We also surprised to learn that there is no consensus between Royal Mail and Ofcom over what constitutes to cost, revenues and profits of the universal service.’ The report did concede that there could be a future risk to the universal service, however, ‘given the rapidly changing postal sector market’. It said Ofcom, the postal regulator, may need additional regulatory powers to ensure the future of the service. Mr Bailey said: ‘The universal postal service is available to everyone living in every part of the United Kingdom. It is an essential service to many people, especially those living in rural areas, to those less able to travel, to older people, and also to blind and partially-sighted people. ‘While our evidence indicated the universal service is not under immediate threat, we believe Ofcom needs to outline in more detail how it would respond quickly to changes in postal market conditions which may endanger the universal service.’ The Committee also called on Ofcom to help combat any ‘race to the bottom’ with regards to postal workers’ wages. It recommended Ofcom investigates the impact of providing the universal service on workers’ wages and conditions. An Ofcom spokesman said it had the powers to 'step in quickly to protect the needs of UK postal users' if a situation ever arose. Meanwhile, a Royal Mail spokesman said they welcomed the report, and shared in some of the committee's concerns and contribution - including the fact 'Ofcom may not be able to respond fast enough to avoid a failure in the Universal Service, even in the short term'. The spokesman added: 'We recognise and accept the Committee’s finding that Royal Mail has done much to improve efficiency, but there is still more for us to do to match the most efficient postal operators. We are continuing to invest in our business transformation programme and are becoming even more efficient.’ Last year, Business Secretary Vince Cable said Royal Mail should stop ‘whinging’ about its obligation to deliver to all parts of the country and accused it of ‘scaremongering’ by claiming its future was in jeopardy.
First and second-class stamps to rise by penny to 63p and 54p each . Some claim Royal Mail is looking to loyal customers to prop business up . Adrian Bailey, chairman of the Business Select Committee, 'not pleased'
Accused Royal Mail of taking 'easy option' instead of creating efficiencies .