‘Tail of the mail’ reliability targets would require Royal Mail to deliver 99.5pc of first-class letters within three days - Hannah McKay/Reuters

Plans to force Royal Mail to deliver virtually all first-class letters within three days would be too expensive, the postal service has warned.

Regulator Ofcom has outlined proposals to overhaul postal deliveries amid concerns a sharp decline in letter sending has left the service financially unsustainable.

These include so-called “tail of the mail” reliability targets that would require Royal Mail to deliver 99.5pc of letters within three days for first class and within five days for second class.

However, the company has warned that these guarantees would add “significant” costs and drive up prices even further for consumers.

Royal Mail this month increased the price of a first-class stamp by 5p to £1.70 – the sixth price rise in three years. Second-class stamp prices, which are capped by Ofcom, went up by 2p to 87p.

It has instead proposed a requirement to deliver 96pc of first-class letters within two days and 99pc of second-class post within five days.

Insiders said even a small percentage change has a significant impact on costs. They added that a 99.5pc target would leave the company exposed in the event of any adverse weather conditions such as a storm or flood.

Royal Mail has repeatedly fallen foul of delivery targets in recent years, with letters taking weeks to arrive in some instances. In December, the company was fined a record £10.5m after delivering more than one in four first-class letters late.

Bosses have blamed the poor quality of service on Royal Mail’s ailing financial performance after it posted losses of £348m last year.

They have argued that an overhaul of the outdated universal service obligation (USO), which includes a requirement to deliver letters six days a week, is needed to get the postal service back on track.

The postal service was delivering 20bn letters annually two decades ago. That figure now stands at 6.6bn and is expected to fall to 4bn over the next few years.

Ofcom has proposed a watering down of Royal Mail’s main quality of service targets, which currently require it to deliver 93pc of first-class post the next day and 98.5pc of second-class post within three days.

Under the new plans, these targets will be lowered to 90pc and 95pc respectively.

The reforms will also end second-class post deliveries on alternate days and Saturdays, while first-class mail will remain a six-day service.

While Royal Mail is broadly supportive of the changes, it called on Ofcom to scrap rules blocking it from offering parcel tracking on its first and second-class service, while it urged the regulator not to introduce a new two-day service for bulk mail.

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The postal service, which has previously expressed frustration at delays to USO reform, urged Ofcom to publish its decisions on the new rules by July 1.

It comes as Royal Mail prepares for its long-awaited takeover by Czech billionaire Daniel Kretinsky to complete within weeks, almost a year after the £3.6bn deal was first agreed.

The deal, which marks the first time Royal Mail will fall into foreign hands in its 500-year history, received UK government approval in December, but was delayed by regulatory issues in Romania.

Martin Seidenberg, the chief executive of Royal Mail parent company International Distribution Services, said: “It is vital that universal service reform delivers a postal service which is reliable, affordable and better meets what customers need for both letters and parcels.

“These changes we seek are important measures to ensure we can protect the one-price-goes-anywhere universal service for many years to come.”

An Ofcom spokesman said: “The universal postal service needs urgent reform to be sustainable for the future. We’ve set out plans to make that happen, including rules to ensure letters don’t get lost in the system for long periods. 

“We’ll examine feedback from postal users, experts and the industry before setting out our final decisions in the summer.”

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