Taxpayers could be forced to foot a multi-million pound bill to help Royal Mail deliver mail.
The 500-year-old postal service, which became a takeover target this month, has urged the Government to contribute to the cost of delivering letters.
He has long advocated a change to the rules that say you must deliver letters across the UK for the same price six days a week.
Insiders say the Universal Service Obligation (USO), which costs Royal Mail up to £675 million a year, has made its parent company International Distributions Services vulnerable to a takeover, and ten days ago the board rejected a Daniel’s £3.2 billion bid. Kretinsky.
Last week, IDS urged regulator Ofcom to accelerate the reform amid reports that the Czech billionaire (co-owner of West Ham Utd and a stake in Sainsbury’s) was working on a new bid.
Fight: Insiders say the Universal Service Obligation has made its parent company, International Distributions Services, vulnerable to a takeover.
Royal Mail maintains the system is obsolete as letter volume has fallen from 20 billion two decades ago to 7 billion. They are likely to fall to 4 billion in five years.
Royal Mail, which was privatized in 2013, hopes to reduce second class deliveries to cut costs. In the meantime, he has asked ministers to contribute financially until the rules are reformed, although he did not reveal how much taxpayer funding he was seeking.
Ofcom puts the cost of the obligation at between £325m and £675m a year. Royal Mail reported a loss of £319 million in the first half of its financial year, following losses of £419 million in 2022/23.
“We call on the government to consider a temporary contribution,” Royal Mail said. “The case is even more imperative if Ofcom delays urgently needed regulatory reform until after the general election, which, as Ofcom recognises, could lead to that “consumers pay higher prices than necessary.
Even then, he warned that OSU could become unsustainable again as the number of letters continues to decline. At that point, the Government may need to pay subsidies permanently, he said.
Royal Mail also wants Ofcom to assess USO costs every two years, “which will allow for a fair debate about how these costs are properly covered”. That could make it easier for Royal Mail to reduce its services. In plans submitted to Ofcom this month, Royal Mail proposed delivering second class letters every two working days.
First-class mail would still be delivered Monday through Saturday, but would cost more, and packages would still be delivered seven days a week.
Royal Mail would also delay the delivery of standard bulk commercial mail, such as invoices and statements, so that it arrives in three working days instead of two, saving up to £300 million but costing up to 1,000 jobs.
The postal service said the changes must be approved in April of next year so that customers do not face “additional and significant price increases.”
The Department for Business said: “We have no plans to change the USO and any changes to the operation of Royal Mail must take into account the impact on vulnerable businesses and consumers.”
