Royal Mail: Worth the Price of a Stamp?

March 28, 2012, 2:03 PM GMT+0

John Humphrys discusses the privatisation of the Royal Mail, stamp inflation and the future of 'snail mail'

Anyone who’s ever dithered about whether or not to bung off a quick thank-you note in the post, send a surprise birthday card or (if they were in more aggressive mood) pen a heated letter of complaint, has probably resolved the issue by remarking: “Well, it’s only the price of a stamp.” Not any more. This little expression in our language is likely to bite the dust in the next few years after Royal Mail announced this week a huge hike in the cost of stamps. Most of us will need to think twice now about using the post. But should we care?

From 30 April the price of both a first and a second-class stamp will go up by 14p, to 50p for a second-class stamp and 60p for a first class stamp. That amounts to an increase of just over 30% in the cost of first-class mail and almost 40% for second-class mail. It’s the steepest increase in the cost of sending a letter in thirty-seven years.

The announcement instantly followed a decision by the mail regulator, Ofcom, to lift all restrictions on the price of first-class mail and to limit the cost of a second-class stamp to 55p (index-linked to the consumer-prices index) over the next seven years. The increase is part of a wider strategy to try and turn the Royal Mail from an increasingly loss-making business into a profitable one. Or, to put it another way, into business that can be privatised.

Privatisation of Royal Mail

Over the last few years Royal Mail has gone heavily into the red as a consequence of new competition. This competition has come from other mail delivery companies but especially from changes in the way we communicate with each other. The growth of email, texting and social media has devastated the ‘snail mail’. Since 2006 the volume of letters sent each day by post has fallen by 25%, from 84 million letters a day to 59 million. As a result, Royal Mail has lost about £1bn over the last four years. Ofcom’s director of competition, Stuart McIntosh, said: “The mail services that we have benefited from over decades and centuries are fundamentally at risk.”

Does this mean that the Royal Mail and the universal postal service we have taken for granted are now doomed? The government does not seem to think so. On the contrary, it believes that it is possible to turn the Royal Mail into such an attractive business that it might be possible in the next couple of years or so to sell it and raise about £4bn for the public coffers. The rise in the cost of stamps is part of a plan to bring this about.

This weekend the Royal Mail will be formally separated from the Post Office network, which will stay in public hands. Royal Mail, however, is being made ripe for privatisation. Earlier in the month the government took the decisive measure to help this happen. It announced that the pension scheme for existing Royal Mail workers would be taken over by the government itself. That scheme currently has a deficit of £9.5bn, an albatross which, had it been left hanging round Royal Mail’s shoulders, would have deterred any potential buyers. With the albatross removed and the limit on the cost of stamps eased or removed altogether, the government believes that the Royal Mail will appeal to investors, with its unique place in British life and the brand that gave the world its first postal system.

Our future with 'snail mail'

But how can that be if we’re all going to be hit by this huge rise in the cost of a stamp and if, in any case, everyone is using ‘free’ email instead? The answer seems to be that the future for Royal Mail does not lie with that thank-you note, birthday card or seething letter of complaint. Such ‘social mail’ now accounts for only 10% of Royal Mail business. The rest is made up of correspondence from government, business and charities and from parcel-delivery. The latter, especially, offers a potential for growth as more and more of us do more and more of our shopping online. If we save ourselves the bother of visiting shops by simply clicking on a mouse, we create a market for someone to deliver the goods to our front door. Although the Royal Mail faces strong competition from other delivery companies in this expanding market, there is no reason why it should not compete successfully itself, the thinking goes.

Does that mean no one’s going to suffer from this price hike? Far from it. Many small businesses continue to use the postal service rather than the internet and will feel the effect of the higher prices. So will many older people who prefer to pay their bills by sending a cheque through the post, who continue to practise the dying art of writing a letter and for whom computers and the internet are an innovation too far. As one old lady once said to me: “I’m sick and tired of being told: ‘Visit our website’. I don’t want to visit their bloomin’ website and anyway I can’t!” The greetings card industry is not likely to be best pleased, either.

All change involves some victims, it will be said. So should we care? Many will point out that the days of looking forward to seeing what the postman will bring are long gone. All he delivers now are bills and junk mail. What’s more, this price increase is so sharp everyone will feel forced to revise how they use the postal service and maybe we’ll all say we’ve had enough of scribbling bland messages on Christmas cards every year. The young ‘old’ will soon become email-savvy and we’ll all forget we once lived in a world in which we cadged stamps off each other because we’d forgotten to buy some at the post office.

So is that all it amounts to: the world moves on and we should just get used to it? Or are we seeing the beginning of the end of something we shall miss?

What’s your view?

  • How much will the rise in the cost of stamps affect you (and, if you don’t mind me asking, how old are you)?
  • Have you in any case started to use the postal service less than you used to do?
  • Do you prefer to communicate socially via email, texting or social media, or do you do so only because it is cheaper?
  • Do you think the arguments used to justify the increase in the cost of stamps are convincing or not?
  • Do you support the plan to privatise the Royal Mail? Do you think the Royal Mail has a future?
  • And if the role of the postman as the deliverer of personal correspondence virtually disappears, will you regard that as simply ‘one of those things’ or as something to regret?

Let us know your views.