Ofcom’s ideas on how to reform the postal service were so well advertised in advance that the government had rejected two of them by the time the report landed. If the prime minister “will not countenance” scrapping postal deliveries on Saturdays, then a five-day service is a non-starter and a three-day version is completely off limits for now.
That, in theory – at least under this government – leaves only the surprise idea within Ofcom’s bundle: the one to slow down Royal Mail’s delivery speeds. It doesn’t have a simple name, but we could call it the “snail mail” proposal since it involves pushing the bulk of deliveries through a standard service taking “up to three days or longer”, as the regulator puts it. Urgent mail could still be delivered overnight, including for Saturdays, via a premium service that would operate outside the morning postal round – but you’d have to pay more than the current £1.25 cost of a first-class stamp.
Any good? Well, one can follow Ofcom’s thinking. The regulator starts from the position that “post users are willing to consider a slower letter service provided delivery is reliable”. One can also see the appeal for the government: it could say Saturday deliveries have been protected under a reliably slow standard model – it’s just that you’ll have to cough up if you really want an item to arrive the next day. An additional benefit for ministers, one might speculate, is that a vote in the Commons could be avoided. Unlike the five-day and three-day options, a “snail mail” reform to the current six-day-a-week Universal Service Obligation (USO) could happen just by Ofcom changing the regulations.
The rest of us, though, should be deeply suspicious – and not only because of the potential lack of parliamentary scrutiny. For starters, three days “or longer” is as vague as it gets. Organisations that use the existing slow bulk service – think banks and utilities – may not notice a difference, but many small businesses would surely prefer a standard service that aims to be quicker. The Communication Workers Union is not alone in fearing we would end up with three-day-a-week deliveries by stealth.
And how would a premium overnight service be priced? Weekly magazine publishers would be semi-obliged to go premium, but what would be the cost to them and their readers in terms of cover prices? The same applies to time-critical hospital appointment correspondence that can’t take a punt on three days or longer. The giveaway in Ofcom’s document was the enormously wide estimate of the net cost savings to Royal Mail under the slow-plus-premium model: £150m-£650m says details are sketchy and pricing is anybody’s guess.
None of which is to deny that reform of some sort is needed. The volume of letters has fallen from 20bn to 7bn over the past 20 years and is predicted to shrink further. We are at a point where Royal Mail, even if it were managed superbly and banked every efficiency gain, would struggle to sustain the current universal service over the long-term. Many other European countries have already watered down their USO equivalents. The question is which route the UK should take.
This column’s vote still goes to the five-day-a-week option as the least bad compromise. It yields the smallest savings under Ofcom’s modelling, but £100m-£200m is not small change and Royal Mail, despite it all, is still targeting a return to adjusted operating profit in the financial year that ends in March 2025.
The challenge for the company is to find new sources of revenues beyond letters and parcels. Royal Mail has an unmatched hyper-local network that ought to be capable of delivering other services to the door. Five days a week looks the minimum to encourage innovation while simultaneously maintaining the “social fabric” role of Royal Mail, which also matters, not least in rural areas. Three days, or three days by stealth via “snail mail”, would be giving up.
