Commission Endorses Public Service Compensation For POL

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Commission Endorses Public Service Compensation For UK Post Office Ltd

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The European Commission has authorised UK plans to grant a £1155 million (around €1383 million) network subsidy to the UK Post Office Ltd aiming to keep open and modernise non-commercially viable offices. The Commission found the measure to be in line with EU state aid rules, in particular because the aid does not exceed the net cost for providing the public service mission entrusted to the Post Office Ltd. The Commission also endorsed the continuation, under stricter conditions, of a working capital facility of up to £1150 million (around €1377 million) which will provide the Post Office Ltd with sufficient liquidity to carry out its public service obligations. The Commission concluded that this liquidity facility is provided on market terms and therefore does not constitute state aid within the meaning of EU rules.

Commission Vice President in charge of competition policy Joaquín Almunia said: “The network subsidy will enable the UK post office network to continue performing its fundamental social and economic role by delivering essential public services to UK citizens in remote and rural areas without unduly distorting competition".

The Commission assessed the network subsidy under its new framework on public service compensation (see IP/11/1571 and MEMO/11/929). The Commission found that the aid does not exceed the net cost of the public service mission entrusted to the Post Office Ltd and that its entrustment complies with public procurement rules. Moreover, the entrustment letter and funding agreement governing the payment of the compensation contain appropriate provisions to incentivise an efficient provision of the public service, in line with the Post Office Ltd's strategic plan for the period 2012-2015 which aims at modernising and improving the provision of services over its network according to yearly efficiency milestones. The Commission therefore concluded that the measure is compatible with Article 106(2) of the TFEU, which governs the assessment of services of general economic interest under the state aid rules.

The Commission also considered that the revised terms of the working capital facility and in particular the increased interest rate paid by the Post Office Ltd to benefit from this liquidity facility will ensure that it is provided on market conditions. The Commission therefore concluded that the measure does not involve state aid.

Those measures were notified in January 2012. In previous decisions, the Commission had authorized comparable financing measures for the Post Office Ltd (see IP/07/288 and IP/11/346).

Background

The Post Office Ltd operates a nationwide network of around 11,500 post office counter outlets that provide over-the-counter access to social benefit payments, basic banking and other services in the UK. Part of these offices, especially rural ones, would not be commercially viable, but are maintained as a public service, because they fulfill important functions for the communities they serve. The network subsidy is intended to cover the extra cost deriving from the Post Office's public service obligation between 01 April 2012 and 31 March 2015.

The non-confidential version of the decision will be made available under the case number SA.33054 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.