Rise in postage costs 'will hit small charities hardest'

Small Charities Coalition warns that a higher proportionate rise in second-class stamp prices will have a bigger effect on small organisations

Postal charges will go up next month
Postal charges will go up next month

A hike of more than 30 per cent in the cost of stamps will disproportionately hit little charities, the Small Charities Coalition has warned.

Royal Mail announced yesterday that from 30 April a first-class stamp will go up from 46p to 60p and a second-class stamp from 36p to 50p.

Mail franked in-house will increase in price from 39p to 44p for first class and 28p to 31p for second-class post.

VAT will also be charged on addressed direct mailings from 2 April. The Direct Marketing Association, which represents direct mail firms, estimated in January that the VAT rise would cost charities £17.9m a year.

VAT has been charged on unaddressed bulk mail since 31 January 2011. Stamps do not attract VAT.

Cath Lee, chief executive of the Small Charities Coalition, said small charities generally used second-class post to save money, so the 39 per cent hike, compared with 30 per cent for first-class stamps, would hit them especially hard.

"It is a disproportionate hike on something that will disproportionately affect small charities," she said. Small charities, said Lee, were less likely to have access to email or franking services or have a contract with a direct mail provider to reduce their postage costs. She said the sudden announcement meant charities had not been able to budget for the change.

Charities will have to wait to see whether direct mail providers increase their charges. Alex Walsh, head of postal affairs at the DMA, said some contracts allowed providers to pass on to customers any increases in the sums they pay Royal Mail, but there might be opportunities to negotiate.

A spokesman for the Institute of Fundraising said he thought donors might see it as another squeeze on their income that would deter them from giving, especially in the case of pensioners already hit by tax rises in last week’s Budget.

A spokesman for Royal Mail said: "We know price rises are hard for charities when our economic conditions are as tough as they are now. I want to assure you, we thought very carefully about the impact on our customers and our own business. We recognise that this is difficult coming on top of the introduction of VAT on the mail contract services that some charities use. This change in VAT status is a result of the way our products are regulated."

Products such as mail redirection and direct mail now attract VAT because of changes in the way they are regulated by the Postal Services Act 2011.

Organisations that have accounts with Royal Mail will be able to buy stamps VAT-free, just as over-the-counter customers do, which will help companies and charities that cannot reclaim VAT.

Royal Mail said Ofcom, the communications regulator, had allowed it to raise prices because the financial viability of the universal post service was at "severe risk".

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