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Brussels, 23 March 2011

State aid: Commission endorses public service compensation for UK Post Office Ltd

The European Commission has authorised, under EU state aid rules, £180 million (€212 million) of public assistance to the UK Post Office Ltd for the funding of its network of post offices during one year starting 1 April 2011. The Commission also authorised the continuation, over the same period, of existing loan facilities funding the provision of cash services at post office counters. The Commission concluded that the aid is compatible with EU rules because it does not overcompensate the net costs of the important public service tasks entrusted to Post Office Ltd. and so does not give the Post Office Ltd any unfair competitive advantage.

Commission Vice President in charge of competition policy Joaquín Almunia said: “The aid will enable the UK post office network to continue performing its fundamental social and economic role and important public service tasks, without unduly distorting competition".

Post Office Limited (POL), a limited company incorporated under UK private commercial law in 2001 and a subsidiary company of Royal Mail Group plc, operates a nationwide network of around 11,500 post office counter outlets. These outlets provide over-the-counter access to social benefit payments, basic banking services and other services in the UK, and therefore act as focal points for the communities they serve. The proposed measures would prolong by one year a "Network Subsidy Payment" of £180m (€211m) to keep open unprofitable offices e.g. in rural areas and a "Working Capital Facility" up to a ceiling of £1,150 million (€1,348 million) which enables POL to hold enough cash to carry out its public service obligations. The current authorisation of these measures expires on 31 March 2011. The one-year extension is necessary for POL to continue carrying out services of general economic interest entrusted to it by the UK Government.

The UK authorities also notified the terms of the Post Office Card Account (POCA) contract signed between POL and the Department of Work and Pensions (DWP) on 5 March 2009. The POCA is a basic current account run by POL on behalf of DWP which is used for paying social benefits to people who do not have any other bank account.

The Commission assessed all the measures under its framework on public service compensation (SGEI Framework, see IP/05/937 and MEMO/05/258) and under Annex I of the Postal Directive (IP/08/323) as amended in 2008.

The Commission concluded that the continuation of the Network Subsidy Payment and the Working Capital Facility, as well as any aid contained in the terms of the POCA contract is, until 31 March 2012, compatible with the EU's Internal Market (Article 106(2) of the Treaty on the Functioning of the European Union (TFEU)). The aid did not exceed the cost for fulfilling the services liable to be compensated under the framework and the net cost for providing access to universal postal services for Royal Mail constitutes an 'unfair financial burden' for POL in the meaning of Annex I of the Postal Directive.

The non-confidential version of the decision will be made available under the case number SA.31156 (N508/2010) in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

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