Royal Mail criticises regulator’s proposals

Royal Mail has criticised proposals drawn up by industry regulator Postcomm, claiming they would lead to the “inexorable decline” of the postal operator.

Postcomm has recommended price caps on the cost of stamps, meaning that first-class stamps could rise to no more than 34p and second-class stamps to no more than 23p by 2010.

The regulator’s proposals, which are out for consultation for the next three months, also highlight service standards, which include a performance target of delivering 99% of all mail every day.

Nigel Stapleton, chairman of Postcomm, said that the proposals would offer customers a better deal and secure the universal postal service. The mail market will be fully open to competition from January 2006.

Royal Mail said that Postcomm’s proposals would threaten the universal service and encourage “widespread cherry-picking” by the company’s rivals. The firm said that the proposals “tilt the playing field massively in favour” of their rivals, regardless of whether those companies are efficient or not.

Royal Mail Chief Executive Adam Crozier said: “Royal Mail has consistently said it welcomes competition as long as it is fair. But with just over six months to go before the postal market is open to full competition, the regulator is proposing a pricing regime that starves Royal Mail of investment, denies us flexibility against competitors who can charge what they like and puts a brake on further improvements in quality.

“Royal Mail has been asking Postcomm to take off the handcuffs and let us compete. Instead, they’ve put us in a straitjacket.”

Royal Mail chairman Allan Leighton said: “These proposals will literally starve Royal Mail of vital investment and so wreck the quality of service we have fought so hard to improve. We cannot accept them. It’s as simple as that.”

Royal Mail said that unless the proposals are “substantially changed”, it would have "no alternative" but to go to the Competition Commission.

(KMcA/GB)