Direct mail fundraising is about to cost considerably more, following the Royal Mail’s announcement that it is to increase the cost of stamps. The steep increase follow’s Ofcom’s decision to give Royal Mail the freedom to set its own prices.
New stamp prices from April
From 30 April 2012, the costs to send a standard letter will increase:
• a first class stamp will jump from 46p to 60p.
• a second class stamp will rise from 36p to 50p.
Other price rises include:
• the cost of a Large Letter stamp up to 100 grams will rise from 75p to 90p for First Class and from 58p to 69p for Second Class.
Moya Greene, CEO of the Royal Mail, said: “We know how hard it is for households and businesses when our economy is as tough as it is now. No-one likes to raise prices in the current economic climate but, regretfully, we have no option”.
The inflation rate in February 2012 was 2.8%.
Reasons for the price rise
The price rises come as the Royal Mail continues to make losses on its core postal and packets business, the ‘Universal Service’ on which so many people and businesses rely. In the past four years it has lost nearly £1 billion in this area of activity. In a statement, the organisation said: “Price increases are therefore needed to put the Universal Service on a sound, sustainable and secure basis.”
In addition, the Government is lining up the Royal Mail for privatisation or for floatation, either as a whole or in part. This process could begin as early as Autumn 2012, according to the Financial Times. The Government recently took responsibility for the Royal Mail’s pension fund, taking away the company’s estimated £9.5 billion pension deficit.
Impact of rises
The unprecedented rise in postal costs resulted in the Royal Mail also announcing a scheme to help people on low incomes to afford stamps at Christmas. Around five million people will be eligible or the discount scheme which comes into effect in November. Those eligible will be able to buy up to 36 First or Second Class Stamps in one purchase at 2011 prices – 46p for First Class and 36p for Second Class.
There was no announcement of any similar dispensation to charities, which are among some of the heaviest users of direct mail.
Other postal cost increases
On 2 April bulk mail and a number of other Royal Mail services such as Mailsort, Cleanmail, Walksort, Presstream, and Advertising Mail will become subject to standard rate VAT. Although a decision by HM Treasury rather than the Royal Mail, this change will ensure that April 2012 sees a remarkable rise in the cost for charities of communicating with donors and prospective donors using mail.
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