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The owner of Royal Mail has asked the industry regulator to let it reduce deliveries of second-class letters to just two or three days a week, cutting nearly 1,000 jobs and saving £300m a year in the process.
Responding to Ofcom’s consultation on reforming the universal service rules amid declining letter volumes, International Distributions Services (IDS) proposed paring back the daily Monday-to-Saturday second-class service to “every other weekday”.
IDS committed to continue delivering first-class letters from Monday to Saturday, which will relieve publishers and small businesses that have voiced concerns over potential “panicked” cuts.
Ofcom had laid out a series of options for the future of the postal service, including cutting the service from six days to five or even three days, with a more expensive option retained to allow for next-day deliveries. Some of the options would have required altering legislation, which could have proved a slow process in a general election year.
IDS said its suggestions would not require legislative change and it urged Ofcom to “act swiftly to introduce reforms by April 2025”. Under its proposals, a postal worker could deliver on a single route on Monday, Wednesday and Friday, for example, and on another route on Tuesday and Thursday. The speed of the second-class delivery would then depend on when the letter was posted.
First-class letters would probably be delivered using the network of Royal Mail vans used for parcels. Bulk business mail, including utility companies sending bills, would see their deliveries slowed to the second-class speed, arriving within three weekdays instead of two.
Royal Mail said this solution offered “the choice of price and speed”. Consumers have seen stamp prices increase four times in two years, with the latest rise – from £1.25 to £1.35 for a first-class stamp and from 75p to 85p for second class – coming in on Tuesday this week.
The company said the shake-up would cut 7,000 to 9,000 routes, take up to two years to implement and save £300m a year. It assured its heavily unionised workforce there would be no compulsory redundancies and that fewer than 1,000 voluntary redundancies would be required. Some roles may not be replaced.
IDS was responding to a consultation by Ofcom on changes to the universal service obligation (USO), the remit held by Royal Mail to deliver nationwide at one price six days a week. The company is desperate to change the system in the face of declining letter volumes and increased competition in the parcels industry. It began lobbying for reform four years ago, and last year the government rejected its request to drop Saturday deliveries.
IDS’s group chief executive, Martin Seidenberg, who this week poached the Heathrow executive Emma Gilthorpe to run Royal Mail, called the USO “unsustainable”. He said a network that two decades ago handled 20bn letters a year now handled 7bn.
He said on Wednesday: “We have worked hard to come up with a proposal that is good for our customers, good for our people and would allow Royal Mail to invest in products and services that the UK wants … With no need for legislation there is no need to wait.”
Ofcom has estimated that the cost of delivering the USO is between £325m and £675m a year. It has forecast that reducing the number of delivery days could cut costs by up to £650m.
The Greeting Card Association, in its own submission to the Ofcom consultation seen by the Guardian, said stopping delivery of standard letters on Tuesdays or Wednesdays would be far less damaging than a previously mooted plan to drop Saturday deliveries.
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The Liberal Democrats’ business spokesperson, Sarah Olney, dismissed Royal Mail’s proposals as “a slap in the face for families being asked to pay more for less” given the recent sharp rises in stamp prices.
She said: “It risks creating a cost of postage crisis as people feel forced to pay for first-class stamps because second-class delivery days are being slashed.”
Ofcom is expected to continue to discuss the proposals with industry and publish an update in the summer.
Meanwhile, the Telegraph reported that Royal Mail was investigating claims that people had been wrongly fined after being sent letters with barcoded stamps, which were introduced in July. People have complained that they have had to pay £5 penalties to collect post because barcoded stamps were deemed to be counterfeit, even though they were bought from Royal Mail directly.
On Tuesday night Kevin Hollinrake, the Post Office minister, said he had held a meeting with Seidenberg to try to find the source of the problem. Royal Mail said it took the illegal production of counterfeit stamps seriously and that barcoded stamps had significantly reduced stamp fraud since their introduction.
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