Royal Mail Is Undermining The Postal Service

Royal Mail is undermining the postal service, and this is how it is doing it.

International Distribution Services PLC, the parent company of Royal Mail, published its half year results on 17 November 2022.

As several news outlets commented, the section that deals with Royal Mail contains an unwelcome proposal. It is that “Government has been approached to seek an early move to five day letter delivery, whilst we continue to improve parcel services”

Royal Mail has a legal obligation to deliver mail, which is enshrined in the Postal Services Act 2011. This sets out the obligations of Royal Mail as the designated Universal Service Provider (USP) in the UK. Under the Act, Royal Mail is required to do a number of things

It is to provide a postal service that is accessible to all, regardless of location or ability to pay. This means delivering mail to every address in the UK, six days a week (Monday to Saturday). And it means giving access to post boxes and post offices.

It must meet ‘quality’ of service standards for the delivery of mail, including delivery times and accuracy.

Next, it must charge reasonable and affordable prices for its services, while also covering its costs and providing a reasonable return on investment.

And it must be financially sustainable, meaning that it must generate sufficient revenue to cover its costs and invest in its infrastructure and services.

Finally, it must contribute to broader social and economic objectives, such as promoting social inclusion, supporting small businesses, and reducing the environmental impact of its operations.

So how is it doing?

Royal Mail has an obligation to deliver first class mail the next day. In fact, for the past three months it has a success rate of only just over 50%. Also, as of 3rd of April 2023 it proposes to increase the cost of First Class letter stamp by 15p. That will bring the cost of to send a letter to £1.10p. And the price of a Second Class stamp will by 7p to 75p.

A stamp costing more that £1.00 is a regressive tax that hits the poorest hardest. How is that providing a service that is accessible to all, regardless of location or ability to pay?

How did we get here?

The history of Royal Mail and the Post Office go back to the 1500s. It started with the establishment of the office of Master of the Posts by King Henry VIII. The function of the office was to manage the Royal Mail. Under this centralized postal system couriers carried letters and parcels between London and other parts of the country.

A hundred years later Charles I established the Royal Mail as a public service for all citizens. It was a system of postmarks to ensure that letters were properly stamped and paid for.

This was followed in the mid 1600s by the establishment of The General Post Office (GPO) as a government department. It was responsible for managing the Royal Mail as the sole provider of postal services in England.

In 1870 the Post Office became a separate government department responsible for postal, telegraph, and telephone services.

Then in 1969 the Post Office was restructured as a public corporation, separate from government, running its own affairs. And in 1981 the Post Office was split by Act of Parliament into Royal Mail and The Post Office. Royal Mail was responsible for the delivery of letters and parcels. Post Office Counters Ltd was to be responsible for providing retail services.

So for five hundred years the system was a public system. And then in 2013 Royal Mail was sold off – privatised – with the government selling a majority stake to private investors. The Post Office, however, is still in public ownership.

Serving two masters

And therein lies the problem of a business serving two masters. On the one hand Royal Mail should by its charter provide a service that is accessible to all, regardless of location or ability to pay. In reality it runs its business to satisfy its shareholders. Only the terms of its licence prevent Royal Mail undermining the postal service. So the question is, will the Government enforce the charter? Royal Mail says it cannot make money, and that is also one of its obligations. The answer is to take the service out of private ownership.

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