Our new Mailmark Economy Service launches on 4 January 2021, introducing a lower priced Access letters delivery service which defers the delivery of non-time critical letters by up to three days. I am pleased to announce our quality of service standard for the new service.
To align with the contract period over which we measure the quality of service for Access services (1 April to 31 March) each year, effective from 1 April 2021, we will be required to deliver 97.5% of Mailmark Economy mail within four working days after handover to us. This service standard is 2.5% higher than the target we are required to meet for our other Access services, as we have a greater window within which to deliver the item compared to our standard Wholesale services. Following an update of our fall to earth modelling, to take account of Covid-19 impact on mail volume, we estimate that up to 65% of your Mailmark Economy posting is likely to be delivered by the second day after handover to us.
We have also set a higher compensation target of 92.5%, so if less than 92.5% of Mailmark Economy mail is delivered in accordance with this service standard over the 12-month period, Royal Mail may award compensation, in accordance with the methodology set out in the Access Letters Contract.
To introduce the service standard we are amending Schedule 30: Mailmark Economy, of the Access Letters Contract to take effect from 1 April 2021. Contract change notice 069 details the changes to the schedule.
As I am sure you are aware, Ofcom are currently consulting, until 23 December 2020, on the appropriate regulatory treatment of the service, and if they determine that it is to be regulated and price controlled, under HMRC rules the service will become VAT-exempt. We will be responding to Ofcom’s consultation in due course. We believe that 29 March 2021 (the start of our new financial year) is the most appropriate date for implementation of any change that Ofcom may view as appropriate following their consultation. This will give Royal Mail and customers sufficient time to develop systems and update pricing, avoiding the additional complication of VAT credit notes, which would be required if, for example, Ofcom was to change the regulations earlier in 2021. We will be providing Ofcom with further details on the practical challenges if the regulations were to change part way through a financial quarter.
If you have any queries regarding the Mailmark Economy Service please contact your Account Director.