Postcomm examines Royal Mail's special privileges

12 January 2004

Postcomm today published a consultation document that examines the special privileges enjoyed by Royal Mail and considers whether they distort competition in mail services.

Royal Mail’s special privileges include exemption from VAT and special parking privileges. The exemptions date from the time when Royal Mail was the sole provider of postal services.

Postcomm’s document considers whether Royal Mail’s special privileges are necessary to provide a universal service, or distort competition in postal services. Postcomm has no powers to make changes itself to any of these statutory privileges, but if it considers that a change is needed it will make recommendations to the appropriate government department or authority. Any changes may require appropriate legislation.

Of all the privileges Royal Mail enjoys, Postcomm considers Royal Mail’s VAT exemption to be the most contentious, a view supported by postal operators who argue that this privilege materially distorts competition.*

The document says:

“Postcomm’s provisional view is that VAT exemption is not necessary for the provision of a universal postal service, distorts competition in a significant part of the UK postal services market and should be reviewed as a priority, with the aim of levelling the playing field.”

Notes for editors

Royal Mail does not charge VAT on postal services, yet other postal operators are required to charge VAT at 17.5%. While this has little effect on businesses that can reclaim VAT, many major mailers – such as providers of financial services and charities – are not able to reclaim VAT and this puts competitors to Royal Mail at a disadvantage.

Royal Mail’s special privileges, reviewed by Postcomm in this document are:

  • Exemption from VAT
  • Exemption from parking restrictions
  • Power to require ships or aircraft to carry mailbags
  • Compulsory purchase of land needed in connection with the universal service provision
  • Immunity from prosecution for carrying prohibited items in the mail
  • Exemption from harbour charges
  • Not classified as a common carrier
  • Fast clearance of overseas mail by Customs and Excise.

The consultation document, A Review of Royal Mail’s Special Privileges is published today on Postcomm’s website, www.postcomm.gov.uk. Printed copies will be available shortly from Postcomm at Hercules House, 6 Hercules Road, London SE1 7DB. Responses are requested by 12 April 2004.

*A review of the UK postal market, also published today by Postcomm, says that new entrants face a number of legal and economic barriers to entry, including Royal Mail’s VAT exemption and customs and traffic privileges. The document, The UK Letters Market 2000-2003 -- a Market Report, and a press notice, can be found on Postcomm’s website.