More unintended consequences: killing off the Royal Mail

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One of those little regulatory changes (from last year’s Budget as it happens) that rather sneaks up on us arrives on 2^nd April this year. The Government has extended to application of VAT to cover “bulk mail” and related services:

Changes to VAT law and the way in which our services are regulated have affected the VAT status of a number of our products.  A limited range of our services became subject to VAT through 2011, and this will extend to all bulk mail services from April 2012.

Now the government suggests that, because businesses are VAT registered they’ll be able to reclaim this and it won’t be noticed. But think for a second of the big users of bulk mail:

• Local government – all those Council Tax bills and other official bulk communications such as electoral registration forms
• Utilities – water, gas, electricity are all subject to a lower VAT rate or exempt
• Financial services – no VAT is charged on banking, insurance or related services (now there’s a blessing)
• Charities – direct mail is a central tool for charities to raise funds and keep their supporters informed
• Publishing – magazines, journals and so forth again carry no VAT

Now I don’t know about you but it seems to me that the big loser in all this will be the Royal Mail. The 20% increase in mailing costs will accelerate the move to paperless billing and statements for utilities, banking and other businesses. It may even prompt local government to look at the mail they send – perhaps consolidating or moving to electronic means.

One hidden effect of this change will be that some businesses – and especially those unable to claim back the VAT – will stop using targeted direct mail preferring to use cheaper mass leafleting. Meaning that rather than a personalised, specific appeal, we will receive general literature targeted using geodemographic profiling rather than real information.

That and it will cost local government a load of money that might have been spent on front-line services.

And, without a doubt, hammer another nail or two into the coffin of the Royal Mail.

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