The Business, Innovation & Skills Committee has backed Ofcom’s decision to let Royal Mail set its own prices, although has expressed concern that rates could reach a “tipping point”, triggering a mailing mass exodus.
The final recommendation was made despite last week’s admission by Royal Mail boss Moya Greene that prices for advertising mail could rise by another 20% on top of the 20% VAT some firms will be hit with.
Committee chairman Adrian Bailey MP said: “No compelling case was made for the continued use of price controls. However, I was surprised at the lack of detail Royal Mail provided with regards to the cost of specific services.
“A clear grasp of underlying costs should underpin any future price changes. Without that, the scale of increases being discussed becomes far harder to justify.”
The committee agreed some increase to rates would be necessary, given Royal Mail’s financial woes, but pointed out “the uncertainties in the mail market mean that in setting prices Royal Mail will need to have very careful regard to the possibility of a tipping point affecting volumes”.
Robert Hammond, the director of postal policy and regulation at Consumer Focus, said: “It is essential that Ofcom keeps the pressure on Royal Mail to look for efficiencies before it raises prices.
“Transparency is even more vital if regulation is to be relaxed and Ofcom must stand ready to step in if satisfactory progress is not made.”
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