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60p stamps: a price too high?

Royal Mail has announced the cost of a first -class stamp will go up from 46p to 60p and second-class from 36p to 50p. Photo: Rui Vieira/PA Wire

Moments after they were allowed to do so by the regulator, Royal Mail announced that stamp prices will go up. Not a little, but a lot. The cost of a first-class stamp will go up from 46p to 60p and second class from 36p to 50p.

The union says it is the "inevitable" cost of more competition and privatisation.

The regulator Ofcom says the price increase is the way to guarantee the future of a universal service, as the Royal Mail struggles with the reality that we send far fewer letters, and that number is bound to keep falling.

But this price rise must also be seen in the context of the gradual move towards privatisation. The increasing freedoms the regulator has given Royal Mail over price are a reflection of the fact the company is well set on that road.

Royal Mail boss, Moya Green, said today her expectation was that the business will be sold off in the first part of 2014, although it is not "impossible" that the deal could take place next year.

It is this weekend that the Post Office, which will stay in public hands, officially separates from the rest of the Royal Mail Group, making the group more attractive to potential buyers.

The transfer of the pension fund to the Government's books also happens this weekend, again making it more saleable.

But Royal Mail is already having to deal with more and more challenges from competitors. TNT, the Dutch company which is likely to be bought by the American giant UPS, has already tried out traditional postal deliveries in Liverpool and has recently announced it will extend that service to parts of London.

Both TNT and DHL have been moving into the more profitable parts of mail delivery - bulk mail. For example, TNT already delivers for Barclays, Lloyds, Sky and BT and has recently won a contract from Tesco. Today, they would not comment on the Royal Mail price increases.

Yet although the Royal Mail hopes the price increase will put their business on a more secure footing for the future, there is surely a risk that it will accelerate the decline in volumes of mail we actually put in the post.

Does the company really think that consumers will put up with an increase of 70 percent in the price of a first class stamp since 2003?

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