Postage Rates May Rise by 12%

Hi Guys,

I have managed to get my hands on a computer for an hour so I thought you may like an update on my progress here in the UK and some idea when I may be back online.

On the 17th of this month I go in to hospital for the first part of my operation. A follow up op should be carried out soon after (I hope). Due to the nature of my condition I have been advised not to fly so it looks as though I am stuck here in the UK untill the doctors give me the go ahead. I have been informed I could be back in Spain before Christmas, but this is not set in stone.

Whilst online I thought you may like some news I have come across.

Be prepared to pay more for your stamps next year

Royal Mail may increase its prices by up to 12% across all regulated products and the cost of first class stamps may increase 5p to 46p, and there could be a 4p increase in the cost of a second class stamp to 36p.

UK postal regulator Postcomm, have announced the introduction of what it described as a 'lighter touch regulatory regime' which will give the Royal Mail greater commercial freedom. In addition, the removal of retail price controls from all packets and parcels weighing more than 500 grams.

Royal Mail will also be given greater freedom to compete in the pre-sorted bulk mail market, where the company has lost significant volumes to competitors. The changes follow a review of
prices and regulatory controls for 2011-12.

However, Postcomm warned that Royal Mail must provide greater transparency of its product costings, an area that the regulator been critical of in the past, and that Royal Mail should begin preparing new financial statements to reassure customers and competitors that there is no inappropriate cross subsidisation.

Postcomm also announced that once it has considered the views of interested parties, it is minded to accept Royal Mails request for price increases to help maintain its modernisation programme, required to safeguard the provision of the Universal Service.

Robert Hammond, head of Post and Digital Communication at Consumer Focus warned:

"Many customers will be extremely disappointed that stamp prices are likely to rise by ten percent next year, particularly as prices have already risen by double the rat of inflation in the last five years.

"Customers are being asked to pay for Royal Mails modernisation programme and will clearly expect to receive a more efficient, effectve and competitive service in return. Consumer also can be expected to bail out an inefficient Royal Mail forever. Royal Mail must earn the trust and loyalty of its customers."

Nigel Stapleton, Chair of Postcomm, said: This package forms the bedrock of a much needed new, lighter touch regulatory framework. We welcome the development of competition in parts of the postal market and where this is clear we want to ensure that Royal Mail is free to compete on a level playing field with its competitors. Our proposals form an important package of measures which need to be taken together; it would not be in the best interests of customers to grant Royal Mail this greater flexibility without appropriate safeguards to ensure it is properly accountable to all its customers, particularly in demonstrating that no unfair cross subsidies
exist.

In May this year Postcomm set out proposals for the introduction of the first phase of a new regulatory framework for the postal services market to replace the structure that has been in place since 2006. Postcomm said that Royal Mail still retained market power in major segments of the postal market and that well over half of Royal Mails revenue comes from these markets.

The Royal Mail still handles 99% of letter volumes over the final mile.

Postcomm said in areas of growing competition it intends to give Royal Mail greater commercial freedom and is proposing the following deregulation:

* Substantial deregulation of packets and parcels weighing more than 2 kilograms

* Retail price controls will be removed from all packets and parcels weighing more than 500 grams, and in parts of the pre-sorted bulk mail market

* Royal Mail will be given greater freedom to compete in the pre-sorted bulk mail market, where the company has lost significant volumes to competitors.

Postcomm also pointed out that the Hooper Report, published in December 2008 and updated in September 2010, highlighted the threat to the Universal Service if Royal Mail fails to modernise and tackle its long standing inefficiency. In 2007, Royal Mail quantified its level of inefficiency
compared to the other three largest European postal operators at 40%.

The pace of modernisation since then has increased but it is still behind plan and
securing its financial benefits has been made more difficult because of the
accelerating pace of decline in mail volumes.

As part of its May 2010 consultation, Postcomm proposed a roll forward of the existing price control, and Postcomm confirmed today its intention to proceed, giving Royal Mail the
flexibility to increase the prices it charges customers from April 2011 on average by 7%, which would mean it could realise up to £280 million in additional revenues.

More recently Royal Mail informed Postcomm that it requires additional funding for its modernisation programme.

Postcomm said that it understood the potential negative impact that price increases may have on customers and on the market, but said price increases would probably be required in 2012 given the reduction in mail volumes since the last price control review.


Nigel Stapleton, Chair of Postcomm, said: There is broad consensus that there is a risk to the Universal Service unless Royal Mail quickly becomes a lot more efficient. To help fund Royal Mails modernisation, Postcomm has allowed Royal Mail to increase the prices of stamped mail by double the rate of inflation over the past five years. Postcomm therefore welcomes Royal Mails decision to complete its modernisation programme as fast as possible but regrets that the company is unable to do so without making further demands on its customers.

Following a two-month consultation, and further due diligence of Royal Mails plans, Postcomm will make a final decision on Royal Mails application. Taken in conjunction with our decision to roll forward the price control for 2011-12, this could mean price increases of up to 12% across all
regulated products.

Take care all, and Larry, thanks for keeping us informed (again) with your Machin related posts since I have been away.

.....Roy