Costs warning on post privatisation

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A new campaign group launched to protect postal services has warned that privatising the Royal Mail could lead to higher stamp prices, fewer deliveries in the countryside and "rocketing" costs to small businesses.

Save Our Royal Mail, set up by groups representing the countryside, the elderly, small firms and the blind, urged the Government not to "rush headlong" into a sell-off. A £1 first class stamp might not be far off if prices were no longer regulated and become eligible for VAT, said the group.

The campaigners also warned that free postal services for the blind would be under threat, a freepost service to British forces could be scrapped, and the Royal Mail's iconic red pillar boxes could be lost.

Campaign director Mario Dunn said: "Save Our Royal Mail is a broad based and growing campaign. We want to take our message to the politicians - do not rush headlong into a sell-off if you cannot guarantee a privatised Royal Mail will constrain its prices and provide these services at their current level."

A Royal Mail spokesman said: "Stamp prices, whether set under public or private ownership, are subject to significant competitive pressures. Customers have many alternatives to the post and there are now many postal providers. It is pure speculation to suggest that stamp prices could reach £1 in the next few years - in fact in 2013 there was no increase in the price of first class or second class stamps."

"UK stamp prices are among the best value in the EU. In five of the six weight steps for first class and second class mail, the cost of UK stamps are ranked in the bottom half of prices when compared with other European countries. In some cases, the UK is the cheapest.

"Clearly, the rules governing the implementation of VAT are a matter for HMRC not Royal Mail. VAT exemptions for core postal service delivery products such as stamps, by universal service providers (USP), are in place in the vast majority of EU countries under the European VAT Directive. Under the Postal Services Act 2011 Royal Mail is the USP in the UK.

"The VAT exemption would apply regardless of whether Royal Mail was in public or private ownership. Similar VAT exemptions are in place for universal service providers in Germany, Austria and the Netherlands. In each country the USP is privately owned."

A Department for Business spokesman said: "Royal Mail will continue to be the designated universal service provider regardless of its ownership. An ownership change would not, therefore, trigger a change in the current VAT exemption which applies to first and second class stamps as part of the one price, anywhere service."