Household Bills
Future stamp price rises to be reviewed by regulator
The communications regulator is set to review the level of ‘safeguard caps’ that apply to stamp price rises.
Earlier this month, Royal Mail announced that the price of a 1st class stamp would increase by 10p to 95p while the price of a 2nd class stamp would increase by 2p to 68p.
The price rise will take effect from 4 April 2022 and comes as Royal Mail cited the “long-term structural decline in letter usage and rising inflation”.
A year earlier, stamp prices were hiked by 9p for a 1st class letter and 1p for 2nd class delivery.
Given the latest rise in stamp prices, Labour MP Mike Amesbury, shadow minister (Housing, Communities and Local Government), asked the secretary of state for Business, Energy and Industrial Strategy (BEIS) “what assessment has been made of the impact on Royal Mail customers of the price increase in Royal Mail stamps”.
As part of MP Paul Scully’s – parliamentary under-secretary for BEIS – response, he said that as a private business, Royal Mail’s management sets the prices for its services.
While the government doesn’t have a role in Royal Mail’s day-to-day commercial or operational decisions, in setting its prices, “it must work within the regulatory framework set by the regulator Ofcom”.
Scully said: “This framework currently imposes price caps on certain 2nd class products.
“In January 2021, Royal Mail raised the price of second-class standard letter stamps to the level of the cap, and it can now only raise prices for that product in line with CPI rates for the remainder of Ofcom’s current review period, ending in March 2024.
“Ofcom plans to begin work towards the end of this year on a review of the appropriate scope and level of the safeguard caps that should apply from April 2024.”
As there are another two years until the end of the current review period, Royal Mail can only increase the price of second-class stamps by the change in CPI (Consumer Prices Index measure of inflation) over the 12 months ending 30 September. Any changes will then come into effect the following April.
Royal Mail has flexibility setting the price of 1st class stamps but a cap applies to price rises of 2nd class stamps to ensure an affordable option is always available to customers, particularly those on lower incomes.
