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The rising cost of a stamp is the price of choosing market failure

Universal postal delivery is a natural monopoly. Encouraging competition, even without requiring a universal service, has eventually led all competitors to invest in parallel delivery mechanisms, covering households as well as businesses as internet shopping continually grows. There are precious few benefits for consumers — just more and more missed deliveries while they’re out at work and ever higher prices. Preparing Royal Mail for privatisation, whilst preserving the universal delivery obligation no-one else has, forces the massive hike in prices we are now seeing.

In the early days of competition, there were arguably some benefits, but they accrued overwhelmingly to businesses, in the development of business-to-business services and cutting the cost of mass marketing by mail. The effect was to cream off the profits of Royal Mail, the monopoly rent that, historically, had been returned to the taxpayer. From 1998, Royal Mail became loss-making and, apart from a 5-year period under Labour, has remained so since. It cannot be privatised without a massive price rise or a contiuing subsidy from the Treasury to pay for its universal delivery obligation.

The customer is paying through the nose for the unnecessary duplication of infrastructure. Why? Because of an ideological preference in Britain and Europe for markets. It isn’t enough to stop (or reverse) privatisation of the Royal Mail – we need a Labour government to roll back the presumption in favour of markets and competition in postal services and in other utilities where the prime cost is in maintaining and operating the infrastucture for delivering the service to the customer.

The price of a stamp is rising outrageously because we are paying the cost of market failure.



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