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Do you use second-class stamps? You’re going to have to put up with a distinctly second-class service in future – really, more like third.
The future of the Royal Mail’s universal service obligation (USO) is one of those things that feels like it has been talked about, discussed, debated – and complained about, in the case of the Daily Mail – forever.
We’ve been sending fewer letters, and this has made it increasingly expensive to provide a service.
But consumers have also been complaining because of the company’s performance when it comes to meeting its obligations. Those complaints are justified given the number of times the group has failed to hit the (perfectly reasonable) targets set for it by its regulator, Ofcom.
Ofcom’s solution to these problems? Relieve the Royal Mail of its obligation to deliver six days a week. In future, the second-class post will only arrive every other day, and on Saturdays not at all.
The savings the company is expected to reap from this concession are colossal, potentially exceeding £400m annually “with successful implementation”. Given the company’s history, that’s not a gimme.
Ofcom tells us that “this could enable it to improve reliability and redeploy existing resources to growth areas such as parcels”.
Except – and here’s the real problem – those service standards are also being eased. In future, the target for first-class mail will fall from 93 per cent being delivered the next day to 90 per cent. Some 95 per cent of second-class mail should be delivered within three days, down from 98.5 per cent.
True, these are only small reductions. But given the enormous windfall the Royal Mail is set to reap from the end of six-day-a-week deliveries, it is far from unfair to ask why the company is receiving any concessions at all when it comes to its targets.
“The proposed new targets would remain high by international standards,” says Ofcom, in anticipation of just such a criticism. “For example, Germany’s three-day target is 95 per cent, Spain’s is 93 per cent, and Norway’s and Poland’s are 85 per cent.”
I sometimes wonder who is responsible for putting this sort of stuff together because that’s like a school child telling his mum that Susie’s parents only ask her to hand in 93 per cent of her homework on time while Dean’s only ask for 85 per cent. The answer is the same for child and national postal service: in this house, you file your homework on time. We’re not here to debate what goes on in other countries. What matters to the British consumer is what happens in Britain.
And those consumers, I would submit, have every right to feel cross. Consider that the price of a first-class stamp has risen five times in under three years. The most recent increase in October has taken the cost to £1.65, nearly twice what people were paying in March 2022.
There is a price cap on second-class stamps, which will remain in place. But a standard letter weighing up to 100g will still set you back 75p, while for larger letters of up to 100g, it’s £1.55. A universal service? Doesn’t that imply something affordable? Those aren’t quite luxury prices, but that’s where we’re headed.
Change was always coming. The numbers are undeniable.
Twenty years ago, Royal Mail was delivering 20 billion letters annually. That number has fallen to 6.6 billion while the Royal Mail is anticipating that it will be down to 4 billion within the next few years.
Even if you take those projections with a pinch of salt (and I do), the decline that has already taken place has dramatically changed the economics of the universal service.
Ofcom didn’t need its weak bleating about what other countries do. Rising costs and falling volumes have made for an unsustainable situation even after the sharp price rises post users have suffered. But Royal Mail, which is in the process of being taken over by the Czech billionaire Daniel Kretinsky, has still done a poor job of living up to its responsibilities.
Ofcom itself notes that it has levied £16m in fines in total. Fining is a somewhat counterproductive exercise given that it will inevitably restrict the money available to fund improvements, but those penalties were richly deserved. Ofcom simply could not allow the Royal Mail to get away with the shabby service it has been offering.
I fear the regulator has been far too accommodating when it comes to the future of the USO. The reaction to its plans, which are now out for consultation, has been less than stellar, to say the least. The Post Office, which was carved out from the Royal Mail when it was privatised, worries about the impact on its branches. The Greeting Card Association has launched a petition and is agitating among MPs in the hopes that they’ll kick up a fuss.
The regulator urgently needs to prove it can force improvements from this business or it will find its own feet held against the fire. Deservedly so.
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