Royal Mail may slap 2p on stamps

THE price of sending a letter is to rise by up to 2p next year. This would take the cost of a first-class stamp from 28p to 30p and second-class from 21p to 23p.

At the same time, Royal Mail will give a 1p discount off postage to firms using prepaid envelopes or franking machines instead of stamps.

Critics say the public will be paying for the discount scheme with dearer stamps.

The rise, which is yet to be announced officially but will take effect in April, was condemned by consumer and business groups.

They pointed out that Royal Mail has consistently failed to hit any of its performance targets - one in ten first-class letters fails to arrive the next day.

Peter Carr, chairman of the consumer watchdog Postwatch, said: 'Royal Mail can't keep putting up prices as fast as the standard of service keeps falling. They must get standards right first so customers get value for money and the service they deserve.'

Under the new pricing structure, Royal Mail could increase first-class prices to 30p for customers using stamps and to 29p for those using pre-pay or machines.

Alternatively, it could raise the price to 29p for those using stamps but maintain it at 28p for others using pre-pay or machines.

At the moment, 210,000 firms use franking machines while 27,000 use pre-paid mail.

Royal Mail says it wants to cut the £247m losses incurred on personal letters, greetings cards and other stamped mail.

It claims to lose 5p on every first-class letter posted and 9p on every second-class item.

The losses reflect the fact that Royal Mail has costs in designing and printing stamps, operating post offices, selling stamps through other outlets and collecting letters from post boxes.

Chief executive Adam Crozier said: 'These discounts will help a great many of our customers, especially small to medium-sized businesses, who frank their mail or prepay their postage.'

Business groups warned that most small firms choose to use stamps and cannot afford to lay out cash for a franking machine.

David Bishop, of the Federation of Small Businesses, said: 'What they are telling firms is that the only way to keep prices down is by investing in expensive equipment. Very few firms have this option.'

Since May last year, second-class mail has risen by 2p and first-class by 1p. Royal Mail says that stamp prices in the UK are among the lowest in Europe.

The cost of posting a first-class letter is 45p in Spain, 78p in France, 79p in Holland, 94p in Germany and £1.12 in Italy.

Royal Mail said the price changes would mean that the overall cost of the full range of its products would fall.

Earlier this year it announced a £220m profit - its first for four years.