Taxpayers could be on the hook for a multi
Taxpayers could be on the hook for a multi-million-pound bill to help Royal Mail deliver post.
The 500-year-old postal service, which this month became a takeover target, has urged the Government to contribute to the cost of distributing letters.
It has long argued for a change to rules saying it must deliver letters UK-wide for the same price six days a week.
Insiders say the Universal Service Obligation (USO), which costs Royal Mail up to £675 million a year, has made its parent company International Distributions Services vulnerable to a takeover, with the board ten days ago rejecting a bid £3.2 billion bid from Daniel Kretinsky.
Last week IDS urged regulator Ofcom to move faster on reform amid reports the Czech billionaire – who co-owns West Ham Utd and has a stake in Sainsbury’s – was working on a fresh offer.
Struggle: Insiders say the Universal Service Obligation has made its parent company International Distributions Services vulnerable to a takeover
Royal Mail argues the system is outdated as letter volumes have fallen from 20 billion two decades ago to 7 billion. They are likely to fall to 4 billion in five years.
Royal Mail, which was privatised in 2013, is hoping to cut second class deliveries to reduce costs. In the meantime, it has asked Ministers to contribute financially until the rules are reformed, though it would not reveal how much taxpayer funding it was seeking.
Ofcom puts the cost of the obligation at £325 million to £675 million a year. Royal Mail reported a loss of £319 million in the first half of its financial year, following losses of £419 million in 2022/23.
RELATED ARTICLES
- Previous
- 1
- Next
- Royal Mail's £5 fake stamp fines are a cynical way to make... Royal Mail steps up defence in bid battle with 'Czech... Royal Mail to hold fresh talks as Czech Sphinx plots another... Ministers left Royal Mail vulnerable to a takeover after...
Share this article
Share 15 sharesHOW THIS IS MONEY CAN HELP
- How to choose the best (and cheapest) stocks and shares Isa and the right DIY investing account
‘We call for Government to consider a temporary contribution,’ Royal Mail said. ‘The case is even more imperative if Ofcom delay urgently needed regulatory reform until after a General Election, which as Ofcom acknowledges, could lead to “consumers paying higher prices than necessary”.’
Even then, it warned the USO may become unsustainable again as letter numbers continue to decline. At that point the Government may need to pay subsidies on a permanent basis, it said.
Royal Mail also wants Ofcom to assess the costs of the USO every two years ‘allowing for a fair debate about how these costs are rightly met’. That could make it easier for Royal Mail to cut back services. In plans submitted to Ofcom this month, Royal Mail proposed delivering second class letters every other working day.
First class post would still be delivered Monday to Saturday but would cost more, with parcels still dropped off seven days a week.
Royal Mail would also slow delivery of standard bulk business mail, such as bills and statements, to arrive in three weekdays instead of two, saving up to £300 million but costing up to 1,000 jobs.
The postal service said changes must be approved by April next year lest customers face ‘further and significant price increases’.
The Department for Business said: ‘We have no plan to change the USO and any change to Royal Mail’s operation must take into account the impact on businesses and vulnerable consumers.’
DIY INVESTING PLATFORMS > Compare the best investing platform for youRelated articles
Kevin Pillar gets 1,000th career hit in Angels' win at Texas
ARLINGTON, Texas (AP) — Kevin Pillar tucked a keepsake ball into his bag from his 1,000th career hit2024-05-211920s Chicago penthouse hits the market for $4.3m
A 1920s Chicago penthouse with one-of-a-kind features that was once owned by a Hollywood starlet has2024-05-21Prince Harry's new meeting with King Charles shows a thaw in frosty relations, royal experts say
Prince Harry's expected meeting with King Charles in London next week suggests the frosty relations2024-05-21Lady Louise Windsor dons a high
Lady Louise Windsor was spotted mucking in at the Royal Windsor Horse Show this afternoon as her par2024-05-21Elon Musk gets approval from FDA to implant his Neuralink brain chip into a second patient
Elon Musk’s Neuralink has been given a green light to implant its brain chip in a second patient aft2024-05-21Pictured: The remarkable floating 'capsule resort' in Thailand that you can only reach by boat
Here's a holiday stay that might just float your boat.The Phutawan Raft House in Thailand is a remar2024-05-21
atest comment