Postal Services: the Postal Services Act 2011 and recent developments - Commons Library Standard Note

In 2008, the Hooper Review recommended a package of measures to modernise the Royal Mail Group and sustain the universal service. It proposed included the creation of a strategic partnership between Royal Mail Group and one or more private sector companies; the transfer of historic pension liabilities from Royal Mail Group to government; and a new regulatory regime to place postal regulation within the broader context of the communications market (through the transfer of responsibility for regulating the postal service market from Postcomm to Ofcom).The Labour Government introduced the Postal Services Act 2008-09 to legislate for the Hooper Review recommendations, but the legislation did not proceed to Second Reading due to difficulties in identifying a private sector partner.

The Coalition Government held a ‘Hooper Update’. This found that, as private sector experience had been brought in to Royal Mail Group through other means, a private partner was no longer required, although the potential to privatise Royal Mail remained. The Government therefore legislated for the rest of the Hooper recommendations in the Postal Service Act 2011. As a result of the legislation:

• Ofcom has taken over regulatory responsibility for postal services. Changes to the regulatory approach mean Royal Mail has more freedom to decide stamp prices. Royal Mail has announced that the price of a first class stamp for a standard letter will rise to 60p and a second class stamp will be 50p.

• Royal Mail Group and the Post Office have become separate companies although both remain wholly owned by the Government. The Government aims to move the Post Office into a mutual structure with “clear progress” towards mutualisation to be made by 2015.

• Royal Mail’s historic pensions liability has been transferred to the Government. European Commission State Aid approval for the Government’s plans was announced on 21 March 2012.

This note summarises the Labour Government’s policies on postal services before outlining the Postal Services Act 2011 and subsequent developments.

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