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Who decides the price of a stamp?

Who decides the price of a stamp?
Image source: Getty Images

The price of stamps has risen every year since 2015.

Today, sending a standard sized letter using first-class post sets you back 85p and sending a large letter costs £1.29. For second-class post, it’s 66p and 96p respectively. But while price hikes seem to be one of life’s inevitabilities, who actually sets the price of a stamp in the UK?

Who sets the price of a first-class stamp?

Royal Mail is in charge of setting the price of first-class stamps, but that’s not always been the case.

Up until around nine years ago, communications regulator Ofcom set the price of all stamps in the UK. In 2012 the rules changed and the price of a first-class stamp was deregulated, meaning Royal Mail got the right to decide what to charge.

Why the change? Essentially, it was to help Royal Mail become more efficient and profitable as people turned away from snail mail and used tools like email instead.

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Who sets the price of a second-class stamp?

Confusingly, it’s not Royal Mail.

In order to safeguard an affordable ‘universal postal service’, Ofcom still regulates the price of second-class stamps. The price is capped and only ever rises in line with the Consumer Price Index (CPI).  

Will first-class stamp prices rise again?

Based on what’s happened in the past, probably. But price changes are an annual event, so we don’t have to worry about it just yet.

Giving Royal Mail the freedom to set first-class stamp prices along with a cap on second-class stamps was for a set period of seven years. This period officially ended in 2019.

However, Ofcom reviewed its deregulation framework in 2017 and decided that the framework was working well enough to justify an extension. As a result, Royal Mail will remain in charge of the price of first-class stamps. Second-class stamps will continue to rise annually according to the CPI.

Ofcom still keeps a watchful eye on exactly what Royal Mail is doing when it comes to the price of first-class stamps. The regulator also closely monitors Royal Mail’s performance to make sure the company is meeting its targets.

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What happens if Royal Mail doesn’t meet its targets?

If Royal Mail doesn’t meet its targets, it gets fined – a lot.

In fact, in July 2020, Ofcom announced it was fining Royal Mail for failing to meet delivery targets. Under Ofcom rules, Royal Mail must deliver at least 93% of first-class post within one day.

In 2018-2019, Royal Mail only achieved a rate of 91.5%. As a result, the company was fined £1.5 million.

But that’s not all Ofcom checks up on. Last year, Royal Mail was also fined an additional £100,000 for breaching the second-class stamp price cap in 2019.

The cap was set at 60p, but for seven days (between 25 March and 1 April), Royal Mail charged customers 61p. That extra penny saw customers overcharged by £60,000.

Do stamps have an expiry date?

Stamps don’t have an expiry date. As far as Royal Mail is concerned, that means you can use them no matter how long you’ve had them.

So, the stamps you buy now at today’s prices will still be valid in the future – saving you money in the long run.

But despite rising prices, Royal Mail is still one of the most cost-effective ways to send letters and small parcels.

Of course, whether you choose the expense of a first-class stamp or opt for second-class will come down to how late you are in posting that birthday or thank-you card.

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