Royal Mail may be able to set prices

Ofcom, the industry’s new regulator, revealed a number of proposals aimed at giving greater commercial freedom to the Royal Mail, including handing the firm the power to set the price of first class stamps – currently among the cheapest in Europe at 46p.

The regulator is proposing a cap on second class stamps of between 45p and 55p, compared with the current 36p, but the price will increase in line with inflation.

The Royal Mail described the new approach as “significant”, while the Communication Workers Union said the current regulatory regime had finally been recognised as a “failure”.

Ofcom said its proposals were aimed at protecting the universal service obligation (USO) under which the Royal Mail has to deliver to any address in the UK for the same price, six days a week.

Without regulatory changes, there was a risk that the USO would not be delivered to the same standard, it was warned.

Ofcom chief executive Ed Richards said the Royal Mail had been under “inexorable pressure” in recent years because of falling mail volumes, which has seen the number of letters delivered every day slump by 22 million to 62 million between 2006 and 2010, contributing towards a loss of £120m last year.