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Wednesday, 18 October, 2000, 15:35 GMT 16:35 UK
EU 'puts post service at risk'
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The end of the simple letter system?
A senior Post Office official has told a House of Lords committee that services could suffer under a European Commission draft proposal.

Chief executive John Roberts told the Lords EU committee that the plan went completely against government policy on ensuring uniform and affordable prices.

Mr Roberts said the plan - to increase competition in postal services - would lead to higher prices, with people in rural areas the biggest losers.

The only benefit would be to "cream skimmers", companies which were not interested in maintaining high servicer standards, only in profits, he said.

'Cream skimming'

Peers are investigating the EC's directive on postal services, which proposes that from January 1 2003, all mail in the EU weighing more than 50g - rather than the current 350g - should be open to full competition.

In the UK, first and second class letters have a limit of 60g, which is more than the commission's proposal.

The Post Office has instead proposed that the current 350g limit be lowered to 150g from 2003.

Mr Roberts told the committee that the directive "threatened to destroy the Post Office's ability to continue to provide the valued delivery service to every address, six days a week at a uniform, affordable price.

"The great danger in the Commission's proposals is that it would lead to classic cream skimming in countries, such as the UK, committed to deliveries to all addresses at a uniform price," he said.

Mr Roberts told peers that profits currently used to subsidise rural consumers would instead be taken by competitors who have no incentive to offer a universal service or be efficient.

He said there was also evidence that full competition in postal services would lead to big price rises.

Price rises

Mr Roberts cited the case of Sweden, which introduced full competition into its postal sector in 1993 and had seen the basic price of a stamp rise 59% in real terms.

And while Swedish businesses sending large amounts of mail to towns enjoyed lower prices, they had to contend with a complex tariff structure where the price varied, dependent on the delivery area. Individual customers paid the highest price for their mail, he said.

Mr Roberts argued that the Post Office's proposal would introduce significantly more competition, but the 50g threshold could push it into a loss.

This would undermine the Post Office's ability to meet the social obligation laid down in the Postal Services Act 2000 to deliver mail to all of the UK's 27 million addresses, no matter how remote, at a uniform and affordable price, he said.

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