Stamp prices riseStamp price increases in April 2006

08 December 2005

The price of a first-class stamp is set to rise next April by 2p to 32p.

The cost of a second class stamp will go up 1p to 22p, with prices hitting 36p and 25p respectively by 2010. Many millions of the resulting revenue will go towards cutting Royal Mail's GBP 4 billion deficit in its pension scheme.

Consumer group Postwatch said it was disappointed that customers are being asked shoulder a high proportion of the pension deficit with an inflation-busting 20 per cent price hike over four years.

Chair Millie Banerjee said: 'This is well in excess of inflation. In return for their cash customers are not being offered any increase in the minimum quality of service targets set down in Royal Mail's licence.'

She added: 'By any measure this is a generous settlement for Royal Mail.'

Less than Royal Mail wanted

But postal regulator Postcomm said the changes would give Royal Mail a much-needed GBP 1.2 billion to modernise. Under the deal, Royal Mail will get an average of GBP 320 million a year towards the pension deficit.

Royal Mail had wanted to push up stamp prices to 39p and 27p by 2010. Postcomm Chairman Nigel Stapleton called the price settlement a 'fair deal for customers'.

He said:'The rises in stamp prices are substantially less than Royal Mail wanted and a little more than we planned. But without a contribution from customers, Royal Mail's weak financial position, brought on by its large pension deficit, would have put its ability to provide the universal service at risk.'

We revealed last week (see 'Related links' below) how one in four consumers had suffered both lost and damaged post in the past 12 months. A further 34 per cent saw their post either go missing or get damaged.

Which?'s Jaclyn Clarabut, who carried out the research, said: 'We found that consumers are getting a second-rate post service so it's disappointing that these price rises haven't come with a pledge to improve and give consumers better value for money.'

Royal Mail has three months in which to accept or refuse the proposed rise. If it refuses, Postcomm will refer the issue to the Competition Commission and prices will be frozen pending its decision.