February 23, 2011

PPA head: Postal charge hike is a publisher penalty tax

The chief executive of the Professional Publishers Association has warned that allowing the Royal Mail to impose a price increase on bulk mail would be like a penalty tax on magazine publishers.

Barry McIlheney said magazine companies would end up paying for the Royal Mail’s inefficiencies once Postcomm, the postal regulator, approved its request to raise additional revenues through a price hike.

Postcomm said earlier this month it was minded to accept Royal Mail’s request to ‘maintain the pace of the modernisation programme required to safeguard the provision of the universal postal service”. A final decision is expected this week.

Amongst a range of measures requested by the Royal Mail, Postcomm said it intended to remove the retail price controls from all parcels weighing more than one kilogram and from second class pre-sorted bulk mail services.

‘The PPA has serious misgivings over Postcomm’s decision to allow Royal Mail the flexibility to double the permitted price increases on bulk mail,’Barry McIlheney said.

‘At a time when the Government is looking to the creative industries as a driver of economic growth, this is a short-sighted move.

‘Price increases of this level are tantamount to imposing a penalty tax on magazine publishers who are being forced to pay for Royal Mail’s inefficiencies.”

McIlheney said distribution can account for half of total production costs and an increase would have serious implications for the ‘delicately balanced economics’of the publishing industry.

‘Postcomm itself acknowledges the decline in mail volumes that are likely as a result of such price rises but we believe the effects will be even more serious in the long term,’he added.

‘Publishers could be forced to cut circulations and direct mail volumes and to reduce future investment in subscriptions.”

McIlheney said the PPA supported the principle of protecting Universal Service but feared that raising funds at the expense of businesses was counter-productive.

‘We believe the proposed short-term fix of significant price rises could potentially cause long-term damage to the publishing sector, the wider mail industry and, ultimately, Royal Mail itself,’he said.