Second class joke or first class sense?

The headlines triggered a predictable response of shock. “A first-class stamp will rise in price from 46p to 60p from 30 April…” reported the BBC. The story attracted 300 comments within a matter of minutes, and has since passed over 1000!

Royal Mail have announced that the price of first and second class stamps is to rise by 14p from April 2012. What does this mean for consumers in Wales? And why are prices going up anyway?

Ofcom, the regulator for postal services, published its new regulatory framework on Tuesday.  At heart, it sought to preserve the Universal Service. While no-one will welcome the rise in prices, we shouldn’t overlook how important this is.

The Universal Service Obligation ensures that wherever you live in Wales, you can send a letter to anywhere else in the UK at a uniform price. It means that whether you live in Abersychan, Aberystwyth or Aberconwy, you pay the same price to send a letter to Bangor, Bradford or Berwick-on-tweed. This is crucial for consumers in rural areas of Wales.

Without the universal service obligation(USO), rural areas would be at risk of losing out. The end of USO could create a real postcode lottery, where your location could change the frequency of service or the prices you pay. Attempts to preserve the universal service should be cheered by anyone who lives in a rural area, and anyone who ever needs to send mail to someone who lives outside the UK’s major cities.

The second key impact of the Ofcom announcement, was to change the rules around how much Royal mail can charge for almost all its postal products. This means – effectively that Royal Mail can charge what they like for first class post, packets and parcels, recorded, Special Delivery and international mail. In reality, it means they can charge what they think they can get away with, as if prices get too high, research shows that the number of items people send by post will plummet.

Consumer Focus research [1]shows that first class is the popular choice for UK consumers, with around half of those involved in our surveys saying they use first class all, or most of the time. The comparable figures for second class are just over 1/3. The remaining 15% use both equally.

There is a difference in the way people who do not use the internet respond to questions about the price of sending something by mail. For those who use the internet regularly, their tolerance of price rises is small, as they have access to alternative methods – for example, they can send an email. Our research shows clearly that vulnerable consumers, with low internet use are more likely to be captive to high prices. As a consequence they are more likely to be effected by significant price rises as they have no alternative to Royal Mail.

An overlooked, but crucial aspect of the Ofcom announcement is the cap on second class charges for standard, large letter and packets up to 2kg. This is important. The seven year cap on stamp prices for small letters, means that whatever happens to first class prices there will be an alternative offer pegged at a more affordable rate, albeit at a slower delivery target. The extension of the cap to include second class large letters and packets – which Ofcom will introduce in April 2013 – is something Consumer Focus has been working hard to achieve.

For consumers who can plan ahead, there have always been big savings to be made from switching to second class stamps. Those savings will be bigger than ever in the future.

In summary, the rising cost of stamps will cause difficulties. It will discourage some from sending post, it will have a big impact on small businesses that rely on a postal service, and the most vulnerable and digitally excluded will suffer the most. But if the proposals achieve their intention – of safeguarding a sustainable universal service across the UK – we may come to feel that these large price rises are a bitter pill that we need to swallow.

Top tips from Consumer Focus Wales

• Stock up on first and second class stamps in March and April – before the prices go up on 30^th April
• Plan ahead and save by sending items second class
• Think about the size of birthday cards or presents – you pay less postage on smaller packages