Closing the Loophole: Ending the digital exclusion penalty in Royal Mail pricing

The principle of ‘one price goes everywhere’ is the bedrock of the postal Universal Service Obligation (USO). It’s there to ensure no one — especially those in vulnerable groups or remote communities — is denied access to this essential form of communication. But, while Royal Mail has reaffirmed its commitment to the principle in recent years, it’s being quietly undermined in practice.

Postage products purchased online are now routinely cheaper than those bought in person, creating a ‘digital exclusion penalty’. As Ofcom starts its consultation on the future of pricing and affordability within a revised USO, it must close this loophole and reinforce the core principle of pricing equity in our postal service.

Affordability challenges in the postal market are growing, amidst an ongoing cost of living crisis

Letters remain a vital part of the UK’s national communications infrastructure. Almost 9 in 10 (86%) people received an important letter or document in the post and half of us sent one in the 6 months leading up to February 2025.

Yet price pressures are intensifying. Since 2020, the price of a 1st class stamp has increased by 124%. The price of a 2nd class stamp has increased by 34% over the same period — despite 2nd class prices being capped by Ofcom. Inflation over that period was 28.2%. Against a backdrop of ongoing cost of living pressures, inflation-busting price rises have raised serious questions about affordability, value for money and fairness in the postal service.

The digital transition makes certain groups more heavily reliant on post as their backstop to social and economic participation

In the UK, 7.9 million adults lack the most basic digital skills. Digital exclusion is higher amongst older people, those on lower incomes and those living in rural areas. For these groups, the drastic postage price hikes seen in recent years are coming at a time they are likely to be least able to absorb them.

Affordable access to postal services is also particularly important for these groups, for whom letters are a necessity for access to many key services. Our new research shows nearly a third (31%) of digitally excluded people report relying on postal services for at least one essential task, such as corresponding with financial institutions, health or government services. People who are digitally excluded are almost twice as likely to rely on post for correspondence around bills and finances.

But a ‘digital exclusion penalty’ is now undermining the principles of affordability and universality within the postal USO

The postal USO is there to recognise this role of post as a vital, universal point of access to communication necessary for full social and financial inclusion. Royal Mail’s ‘one price goes everywhere’ slogan once summed this up. But, in recent years, the company has been quietly undermining this principle through growing discrepancies between online and in person prices, initially in the parcels market and now extending into letter postage too.

Postage prices for 2nd class large letters (250g) are now 11% more expensive when purchased in person than online. And 2nd class medium parcels (2kg) are now 24% more expensive when purchased in person. We refer to this loophole as the ‘digital exclusion penalty’.

This issue is affecting more of us than you may think. Clearly, people who are digitally excluded or otherwise more reliant on post are disproportionately impacted by higher prices, particularly when they’re also more likely to live on lower incomes. But our research shows that in-person purchasing of postage remains the norm for the vast majority of the population. We estimate that 45.7 million of us (83% of UK adults) are being exposed to higher prices, simply because we buy our stamps in places like a Post Office or cornershop. This rises to 93% among people who are digitally excluded.

The regulator’s review of affordability and price protection in postal services is the opportunity to close this loophole

Unsurprisingly, there is public opposition to this growing digital exclusion penalty in our postal service. 61% of people think postage prices should be the same whether products are bought online or in person, compared with just 13% who think prices should remain cheaper online. Clearly, current pricing practices cut against consumer expectations of fairness in a universal service.

This is all set against a backdrop in which Ofcom has recently granted Royal Mail significant concessions, relaxing legislative requirements to allow the company reduced delivery days and targets. The changes are estimated to generate up to £425 million in savings at Royal Mail.

The next stage of Ofcom’s review will look at affordability and pricing, creating a clear opportunity to introduce reciprocal protections for consumers. We’re calling on the regulator to tackle the issue of digital exclusion penalties head on, by mandating price parity between in-person and online postage purchases. This will not only close the loopholes undermining the principle of universal pricing, but also protect those for whom post provides a backstop to social and financial participation from price penalties they are often least able to afford. Royal Mail has been offered savings, the public now needs fair safeguards.