First-class stamps to rise 4p

ROYAL Mail has been given the go-ahead to increase stamp prices by up to 4p. The cost of sending a first-class letter is expected to rise from 30p to 34p while a second-class item will go up from 21p to 23p.

The increases - to be phased in over a four-year period - brought immediate condemnation and demands that services are improved first.

Despite complaints about services, the regulator Postcomm said first class stamp prices can increase by 1p a year between 2006 and 2010. Second-class stamps can increase by 2p over the period.

Peter Carr, chairman of the consumer watchdog Postwatch, said: 'Any increases are outrageous unless minimum service standards are at least achieved. That's what the customer is paying for.'

Critics claim stamp prices have already risen sharply in recent years, adding to costs for small businesses and consumers. Nick Goulding, chief executive of the Forum of Private Business, said: 'This is like a tax on small firms. It just adds insult to injury.'

Postcomm defended the allowance, claiming it has protected consumers from the first-class price rise of 18p to 48p requested by Royal Mail. It said the deal meant the company will have to cut other prices if it increases first or second-class stamp costs.

Postcomm's plans will go out to consultation until November but Royal Mail said it expected prices to rise. Royal Mail, which has said service is now the best it has been in a decade, believes the proposed price rises are actually too little. It says stamp prices in the UK are among the lowest in Europe and claims to lose money on every first and second-class letter posted.

The regulator also unveiled service penalties which could cost the Royal Mail up to £280m in refunds if it missed performance targets. That would be handed back to customers in the form of lower prices.

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