The Royal Mail Ratchet of Doom

From the FT:

Royal Mail has increased the price of first and second-class stamps by 14p to record highs, after it was given freedom to set its own prices as it heads towards privatisation.

A first-class stamp will now cost 60p, with the slower second class service priced at 50p from April 30, the UK’s state-owned postal service announced on Tuesday.

Apparently without the price rise the service is "at risk"

Moya Greene, Royal Mail chief executive, said that without the price rise the service was “at risk”.

Nothing to do with a coming privatisation play* I suppose .

(As in, if this saves the service, then it could have been done earlier and thus wouldn't need to be privatised. )

I wonder if it was put to the Public as to whether they would prepared to subsidise rather than privatise (given the biggest risk, the pension funding, stays as a public taxpayers risk anyway) they would get a different steer.

But I also think they are putting the service at risk with such a huge (25% for first class) stamp price increase as well, as the "Ratchet of Doom" system dynamic model diagram above shows. The Inconvenient Truth of this ratchet is at some point there are just not enough customers who wish to use the service. One almost wonders if ths is in fact designed to break the service as a universal one.

The irony is that they are doing this just as Internet shopping is really taking off, so the opportunities for Royal Mail are huge. Perish the thought that the public profit from it.....

* The CEO, Moya Greene,was on BBC TV tonight arguing that the best sort of public ownership is the public buying shares in the Royal Mail IPO. There is something about being asked to pay again for something you already own, while still being stuck with the huge pension liabilities, that makes you look at this "deal" offered and suspect that Joe Public is about to be shafted. But then private benefit/public risk bailouts are so de rigeur these days.....