Royal Mail admits stamp prices could rise again as it's revealed half of all post is junk mail

By This Is Money Reporter and Becky Barrow

PUBLISHED: 03:57 EST, 14 November 2012 | UPDATED: 04:05 EST, 14 November 2012

Stamps price: Royal Mail's chief executive Moya Greene yesterday refused to promise customers that prices will not rise again

Royal Mail could hike the price of stamps again despite having imposed price rises just seven months ago and despite growing operating profits.

A first-class stamp rose from 46p to 60p on April 30 and second class jumped from 36p to 50p, in one of the biggest rises since the issue of the first stamp, the Penny Black, in 1840.

Royal Mail’s chief executive Moya Greene yesterday refused to promise customers that prices will not rise again.

Meanwhile, the group yesterday admitted taht almost half of all postal deliveries are junk mail and warned that the volume of 'direct marketing mail' will only grow in its drive to make bigger profits.

The rise is fuelled by the removal a year ago of a cap that stopped postmen delivering more than three unaddressed letters to a house in a week.

This – along with much higher stamp prices – saw Royal Mail report vastly improved operating profits yesterday.

The stamps price increase was controversial because Royal Mail was being allowed for the first time to set prices, rather than be restricted by rules laid down by the regulator Ofcom.

The sole remaining rule is that Royal Mail cannot charge more than 55p for a second class stamp, a cap which will be increased in line with inflation until 2020. There is no limit to the cost of first-class mail.

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Robert Hammond, of the campaign group Consumer Focus, said: ‘Some consumers may find it frustrating that almost half of mail received now is direct marketing and that this will be contributing to higher profits.

‘However the hard fact is that without this revenue stream for Royal Mail and the associated profits, customers could in fact face paying more for their stamps.’

Royal Mail made £144million in the first half of the year compared with only £12million in the same period of 2011. Around £1billion of its annual revenues come from junk mail.

On the rise again: Royal Mail hiked prices for first-class stamps from 46p to 60p on April 30 and second class from 36p to 50p

Ms Greene said such ‘direct marketing’ was approaching 50 per cent of all deliveries. She described herself as a huge fan of the ‘powerful medium’, adding: ‘We are poised to increase our share of it.’

The growing profitability of Royal Mail opens up the possibility of it being floated on the stock market or sold off to a rival.

Michael Fallon, Tory business minister, said yesterday: ‘Parliament decided, via the Postal Services Act 2011, to inject private capital into the company in order to secure the future of the universal postal service.

‘The structure and timing remain open, but Government is committed to doing that to ensure the ongoing viability of the company.’

A potential sell-off has been helped by shifting responsibility for Royal Mail’s pension fund to the taxpayer. Assets of £28.5billion were transferred to the Government along with £37.6billion of liabilities, which are the cost of pension promises to postal workers and its retired staff.

Yesterday’s financial results revealed how the stamp price hike has hit Royal Mail’s letters business, with the number of letter deliveries dropping by 9 per cent.

Miss Greene said however that 50p for a second-class stamp was a bargain. Insisting she did not mean to be ‘glib or flip’, she added: ‘Realistically, what can you buy for 50p today?’

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I live in the US. Recently had a letter from the Inland Revenue postmarked Malta! What does that tell you?!

- Me , The world, 14/11/2012 23:53

Click to rate Rating 2

Just put all the junk mail back in the post box. - Return to Sender. Hopefully they will soon get the message. Use emails. Just another rip off.

- Me , The world, 14/11/2012 23:52

Click to rate Rating 1

Every time the prices rise, the LESS I use Royal Mail. Eventually I will NOT use them again & move to a competitive company!

- vpharm , Hampshire, 14/11/2012 20:57

Click to rate Rating 5

Just dont send letter, birthday, Xmas cards or anything you can do on-line. These price rises are beyond a joke and if they want to price themselves out of the market that is their problem. I am just sorry for those who live in rural areas who must suffer from the current policy.

- Username , City, United Kingdom, 14/11/2012 19:49

Click to rate Rating 7

Send every Junk Mail letter/leaflet back to them in an envelope with no stamp on it. They will be sent a surcharge card by Royall Mail. It will cost them time and money to get their crummy junk mail back. They'll soon delete you from their Mailing Database:)

- maggio , london, 14/11/2012 19:42

Click to rate Rating 6

Royal Mail are being fattened up prior to to being sold off to a third party.

- Ray , Oxford, 14/11/2012 19:12

Click to rate Rating 14

For those people who are dragging the Post Office into their argument, I just have this to say. Royal Mail set the price of postage, it has nothing to do with the Post Office. They have been separate companies for a long time now. Post Office are basically just agents for RM, acting as a go between from the customer to RM. Please make sure you are complaining about the correct company!

- goingcrazy????!!! , Hastings uk, 14/11/2012 18:54

Click to rate Rating 7

All the junk mail I get goes into the local postbox, I don't want it so Royal Mail can have it back.

- Alifink , Chorley, 14/11/2012 16:10

Click to rate Rating 36

I decided a long time ago to find a way round these postage increases and I now send text message or e-mails when getting in touch or I have a quick phone call As far as I am concerned they can increase charges as much as they like because if they do I will find a way to avoid using the postal services altogether

- bernard , Sheffield, United Kingdom, 14/11/2012 15:48

Click to rate Rating 13

The Government of1994 missed a golden opportunity to protect Post Offices. The sale of Lotto tickets should have been restricted to Post Office outlets. would that have resulted in openings and not wholesale closures and so improved profits to keep down the cost of stamps?

- lampoiler , wakefield, 14/11/2012 15:45

Click to rate Rating 8

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