By Daniel Hunter

Ofcom today (Friday) proposed a cap on prices that Royal Mail can charge for Second Class large letters and small parcels.

As part of last month’s statement on securing the universal postal service, Ofcom decided that the safeguard cap on Second Class letters should be extended to large letters and small parcels up to 2kg to further protect vulnerable consumers and small businesses.

Under today’s proposals, customers will have the same level of protection from price rises on Second Class small parcels and large letters as they have on Second Class letters.

This means that, over a seven-year period, average price increases on Royal Mail’s large letters and small parcels products would be capped in line with the percentage price increases allowed under the cap on Second Class letters.

The cap would be indexed with CPI inflation and based on 2011/12 prices.
Research shows that the average household spends around 50p per week on postal services. Of this, approximately half — 25p per week — is on large letters and small parcels.

The safeguard cap is designed to ensure that consumer expenditure on these items remains affordable.

“Ofcom’s decision to extend the safeguard cap will further protect vulnerable consumers and businesses," Stuart McIntosh, Ofcom’s Group Director of Competition, said.

“Our proposals ensure that prices of large letters and small parcels up to 2Kg will remain affordable.”

Today’s proposal follows last month’s decision to give Royal Mail greater freedom in the way it sets its prices, subject to safeguards to ensure that consumers and competition are protected.

Ofcom’s new regulatory framework for post is designed to secure the continued sustainability of the universal postal service.

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