Paul Kelly: Price rises were needed

ROYAL Mail is a key part of Scotland’s economic and social infrastructure.Our 11,100 postmen and women perform a vital and trusted role in every community from Stornoway to Stranraer. We deliver letters for one price, anywhere in the UK, six days a week. It’s called our Universal Service Obligation (USO). The USO is of particular significance in Scotland, because of its geography and demography.

We serve all island communities in Scotland. Shetland (16 islands), Orkney (20 islands). Western Isles/Outer Hebrides (15 islands). Very few service providers of mail reach the Islands apart from Royal Mail.

Yet, over the past four financial years, the Royal Mail has made a loss of almost £1bn on its core mail business, including packets. To secure the Universal Service into the future, we need financial stability. The increases we have announced in the price of postage – which include raising the cost of First Class stamps from 46p to 60p, and Second Class stamps from 36p to 50p – will help deliver this.

No-one likes to raise prices in the current economic climate. We know how hard it is for households and businesses at the moment and we have thought very carefully about the impact on our customers and on our own business before making this decision.

Our regulator, Ofcom, agrees that price rises are needed to restore the Universal Service to viability in the near term. Royal Mail’s next-day target of 93% is the highest for any major EU country. We deliver six days a week while many EU countries only provide a five-day delivery service. Yet, mail volumes have fallen overall by around 25 per cent in five years in the UK and in Scotland this figure is around 30 per cent.

Research has shown that postage typically accounts for a modest proportion of household expenditure – around 50p or 0.1 per cent per week. To put the price of a First Class stamp in perspective – a single bus fare in Edinburgh is £1.40.

We’re not relying on price rises alone to restore Royal Mail’s financial viability. We have embarked on our own self help programme. We’re modernising our operations as fast as we can, taking out costs and improving our financial performance. In Scotland, we are investing around £59 million in our modernisation programme including new automation and new delivery equipment for our postmen and women. Improved technology will also enable us to develop new services involving the growing parcel market – a growth area which will help us fund the Universal Service.

We are also seeking to put in place a new and more collaborative approach to employee relations. Scotland is leading the way on a new way of working called World Class Mail.

This programme uses the talents and abilities of our frontline people to change the way we do things for the better. There are three world-class mail centres in Scotland in Glasgow, Edinburgh and Aberdeen. Glasgow is also the first centre in Scotland to be awarded bronze status as part of the World Class Mail Programme.

We have also announced a scheme for this Christmas to enable people on low incomes to buy a total of 36 First or Second Class Stamps in one purchase at 2011 prices. The scheme will launch on 6 November and will be in place until the last Christmas posting days for First and Second Class stamps. We will write to every household in Scotland later in the year to further explain the scheme.

The fact is that Royal Mail provides a high quality service, six days a week to 2.5 million addresses in Scotland. It needs to be paid for.

• Paul Kelly is regional operations director for Royal Mail in Scotland.