The telecoms regulator Ofcom has set out two primary options to secure the future of the UK’s postal service, particularly around cushioning the significant cost of Royal Mail in delivering a universal service.
Under the Universal Service Obligation which hasn’t changed since 2011, Royal Mail has to offer letter deliveries six days a week and parcel deliveries five days a week. A two delivery speed service includes first class (next day) and second class (within three days).
Today, Ofcom has proposed to change existing first and second class business products so that most letters are delivered in up to three days or longer, with a next-day service still available for any urgent letters.
The second option includes reducing the number of letter delivery days from six to five or three. However, with this option, it would require Government and parliament to change primary legislation.
Ofcom suggested that if letter deliveries were reduced to five days, Royal Mail could achieve a net cost saving of £100m – £200m. If it moved to three days, the figure would be closer to £400m – £600m. Meanwhile, if the vast majority of letters were delivered within three days, it could achieve net cost savings of up to £650m.
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Post service and standards
Fewer delivery days could still meet most people’s needs, with nine in 10 saying reliability is important for letter deliveries, compared to 58% for delivery on Saturdays.
It found that eight in 10 people say some things will always need to be sent by post. And three quarters of those say they rely on the post for letters.
But, as part of Ofcom research, users were open to reducing some services and standards – particularly for letters – in the interests of keeping prices down and only paying for what was required. They were also prepared to pay a premium for a faster service for occasional urgent items.
However, last year Royal Mail was hit with a £5.6m fine for failing to deliver post on time.
“Under any scenario, Royal Mail must modernise its network”, Ofcom stated as it confirmed: “We will continue to hold Royal Mail to account and expect it to turn things around as a matter of urgency”.
Ofcom also confirmed that in order to make sure the universal service remains affordable, it will continue to retain a safeguard cap on second class letters. This means on average, the price of second class stamps can rise by no more than inflation – as measured by the Consumer Prices Index.
It is based on the September CPI figure from the previous year, with changes coming into effect from 1 April the following year. Ofcom confirmed figures are rounded down so if the exact cap based on CPI would see the price rise to 75.9p, it would see users pay 75p as rounded up to 76p would take the figure above the cap.
Universal service is ‘out-of-date’
Melanie Dawes, Ofcom’s chief executive, said: “Postal workers are part of the fabric of our society and are critical to communities up and down the country. But we’re sending half as many letters as we did in 2011, and receiving many more parcels. The universal service hasn’t changed since then, it’s getting out-of-date and will become unsustainable if we don’t take action.
“So, we’ve set out options for reform so there can be a national discussion about the future of universal post. In the meantime, we’re making sure prices will remain affordable by capping the price of second class stamps.”
‘Proposals should tackle cause of persistent failings’
Morgan Wild, interim director of policy at Citizens Advice which is the statutory advocate for postal consumers, said: “Given Royal Mail has failed to meet its targets for nearly half a decade, it’s clear the current Universal Service Obligation (USO) is falling short of its fundamental purpose: safeguarding consumers. Any changes must prioritise their needs, not Royal Mail’s bottom line.
“We agree that improving reliability is essential. Late post has real consequences – people miss vital medical appointments, legal documents and benefit decisions.
“Cutting services won’t automatically make letter deliveries more reliable, so we must see proposals to tackle the cause of Royal Mail’s persistent failings. Ofcom and the Government have to spell out how any revised USO will start to deliver for the millions of us who rely on it.”
Ofcom is inviting views on the proposals by 3 April 2024 and expects to provide an update in the summer.
