The fine is the largest issued to date by Postcomm, although Royal Mail is allowed to appeal it. The figure has already been reduced from £12.6m in acknowledgement of the improvements Royal Mail has since made.
Postcomm identified management failings over a prolonged period. It first became concerned in the summer of 2003 after customer complaints and an instance of apparent failure in staff vetting.
It carried out a broad investigation between August 2004 and May 2005, in the light of allegations made by a Channel 4 'Dispatches' documentary in April 2004.
It found that Royal Mail did not properly vet the majority of its temporary staff before taking them on, and generally failed to monitor the application of procedures designed to prevent loss, theft and damage to mail.
Nigel Stapleton, chairman of Postcomm, said: "The level of this proposed financial penalty reflects the commission's view of the extent and seriousness of the licence breaches."
Postcomm is also proposing a separate £270,000 fine for Royal Mail's underperformance in delivery in some areas of London.
In other bad news for Royal Mail, the Evening Standard has reported that it is close to losing major delivery contracts with the BBC, O2, Orange, HSBC and HBOS.
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