Should Royal Mail still have to deliver to all the UK for the same price?

Duncan O’Leary, deputy director of Demos, says Yes.

Before Royal Mail was privatised, business secretary Vince Cable stated that the “overarching objective” of the sale was to secure the universal service obligation.

In doing so, the government entered into a contract with two groups.

First, shareholders, who knew what they were investing in – a profitable business with certain special obligations.

Second, a wider public, which was reassured that the post would be delivered to all 29m homes across the UK.

A year on, the company is seeking to move the goalposts. It argues that it faces “unfair” competition from firms who can choose where they deliver, avoiding areas that are remote and expensive to serve.

This may be true, but it was always part of the deal.

As a private sector company, its job now is to find new ways of competing, not to change the rules of the game.

The government should heed Ofcom: its own evidence “clearly shows that the service is not currently under threat”.

Dr Steve Davies, education director at the Institute of Economic Affairs, says No.

The issue here is whether Royal Mail should continue to deliver letters at a single uniform price – so that a letter that travels several hundred miles to a remote location costs the same as one that travels a short distance.

Quite simply, there is no case for this to continue.

Currently, people in densely populated urban areas are effectively subsidising those who live in rural districts.

This doesn’t happen with other kinds of products, so why with letters? Paying a higher price for many services is one of the costs of living in a rural area, and should be weighed against the benefits.

The historical reason was that it was important for everyone to have equal access to the most important means of communication. But the revolution in communications means that the letter no longer has that essential function.

It makes sense to allow price discrimination here, as we do in most areas of economic life.

Related articles