TNT Post is hopeful that a UK government review next year will bring about changes in theapplication of VAT within the postal sector, leading to full end-to-end competition.
Nick Wells, CEO of TNT Post UK, said “unfair” rules requiring private operators to pay full VATon postal services had deterred them from offering final-mile postal delivery in the UK – as wellas limiting competition within the bulk mail ‘access’ market.
However, Wells said recent indications from the government during the consultation around theUK’s new Postal Services Bill suggest the current VAT rules could be set to change.
He told this week’s ‘The Future of UK Postal Services” conference: “We have some view of thefuture from government, that they have noted some comments made in response to the consultation.The following is from the executive secretary to the treasury: ‘We will therefore review thatlegislation in mid-2011, and take action as appropriate, to ensure that it supports the developmentof a fully competitive postal service’.”
Wells said a VAT change would remove a barrier to competition that was the key to thedevelopment of the postal services industry.
“At the moment, Royal Mail has a de facto monopoly. And VAT has stopped us going for the finalmile. That is why we have not seen enough innovation in this market – we have only been able toinnovate within the access regime.
“The likely outcome of VAT change is that it will stimulate full end-to-end competition. And ofcourse final mile delivery will enable us to compete for the final mile. We are doing tests inLiverpool, and they are going well, but that is the extent of our current opportunity.”
Wells said the experience of the last six years, since the opening of the bulk-mail sector toprivate operators, had demonstrated the improvements that could be achieved, even in a partiallyliberalised market, and removing the VAT barrier to competition would deliver further benefits ofcompetition.
“Access is here to stay, and we do not mind paying a cost-reflective price for the service weget, although at the moment we don’t have competition,” he said. “But it has still delivered choicefor customers, more flexibility, improved customer service, and, of course, cheaper rates. Butthere still remains one big barrier, and that is VAT. At the moment it is 17.5%; it will soon go to20%.”
