Why Royal Mail has been fined £10.5 million and has public trust 'eroded'?

Regulator Ofcom has fined Royal Mail £10.5 million for missing its post delivery targets in the 2023-2024 financial year.

The fine is the second in two years, after the watchdog also gave Royal Mail a £5.6 million penalty in November 2023.

Royal Mail said just under three-quarters of first class post was delivered on time during the period, well short of its 93% target.

And 92.7% of second class post was delivered on time, below its 98.5% target, it said.

Regulator Ofcom has fined Royal Mail £10.5 million for missing its post delivery targets in the 2023-2024 financial year. | Canva

Chancellor Rachel Reeves said on Friday: “I recognise it’s incredibly frustrating for people when they receive mail late and it’s right that Royal Mail have been fined for failing to deliver.

“The Business Secretary Jonathan Reynolds has met with Royal Mail to be really clear with them about the importance of delivering the service that people rightly expect.”

Ian Strawhorne, Ofcom director of enforcement, said: “With millions of letters arriving late, far too many people aren’t getting what they pay for when they buy a stamp.

“Royal Mail’s poor service is now eroding public trust in one of the UK’s oldest institutions.

“This is the second time we’ve fined the company since the pandemic.

“Royal Mail has provided an improvement plan, and we’re seeing some signs of progress, but it must go further and faster to deliver the service that people expect.”

A Royal Mail spokesperson said high quality service is “extremely important to us” and that it is making changes to deliver it.

But they added that its one-price-goes-anywhere so-called universal service obligation needs “urgent reform”, as it does not meet modern customers’ needs.

The universal service currently requires Royal Mail to deliver letters six days a week and parcels five days a week, but is under review.

The fine comes as Czech billionaire Daniel Kretinsky closes in on a deal to buy Royal Mail from current owner International Distribution Services.

Daniel Kretinsky’s EP Group agreed to buy IDS earlier this year, but is believed to have agreed to several concessions to gain approval.

He had already guaranteed to maintain the universal service.

Mr Kretinsky has also pledged not to raid the group’s pension surplus, and keep the brand name and Royal Mail’s UK tax residency and headquarters.

There was also an agreement to respect union demand for no compulsory redundancies until 2025.

It is thought some of these safeguards, such as the commitment to avoid compulsory redundancies, could be extended as part of a new agreement.

The deal would still need security approval after its deal is agreed with the Government.

Responding to the fine on Friday, Tom MacInnes, director of policy at Citizens Advice said: “Failing to hit a single delivery target for nearly five years is simply unacceptable by Royal Mail, and it’s consumers left facing the consequences.

“Letter delays leave millions of people missing urgent medical appointment letters, legal documents and benefit decisions.

“This comes despite Royal Mail routinely hiking their prices, meaning consumers are getting less despite paying far more.

“Today’s fine from Ofcom goes some way to show it recognises Royal Mail’s persistent failings.

“But in a virtual monopoly, fines at this level clearly aren’t pushing Royal Mail to improve standards for all of us relying on our country’s postal service.”

Consumer Scotland Head of Post Grace Remmington said: “It is unacceptable for Royal Mail to be once again missing its delivery targets at a time when the price of post has risen sharply.

“Consumers across Scotland depend on the postal service for vital communications, including sending letters to government departments, local authorities, banks, the health service and solicitors.

“Failing to meet the required service standards risks harm to these consumers - and all consumers are entitled to the service they pay for when sending mail.

“We welcome the latest action by Ofcom, but the regulator must ensure Royal Mail addresses these failings to ensure the postal service is reliable and affordable for all users in future.

“This is particularly vital for those who are most dependent on postal services including consumers with a disability or long-term health condition and consumers who live in rural and remote communities.”