The European Commission has approved British financial aid of up to £150 million (€219 million)a year for the country’s rural post offices.
The European Commission announced that it had decided not to raise objections under EC Treatystate aid rules to a refinancing measure in favour of Post Office Limited (POL), the retailsubsidiary of the Royal Mail Group plc. The measure in question refinances an earlier funding tocompensate POL for the public service costs of rural counter coverage, which the Commission hadapproved in 2003.
The UK Government requires POL to maintain rural counters which are structurally loss-making inorder to safeguard rural communities’ local access to essential services. In exchange, the UKGovernment compensates POL for the related public service costs up to maximum £150 million (€219million) annually. Competition Commissioner Neelie Kroes said: “I am satisfied that the funding isproportionate to POL’s public service obligations. I am happy to endorse a measure which willbenefit British customers in rural areas without distorting competition.”
As the measure implies a transfer of state resources, grants an economic advantage to POL andpotentially distorts competition and intra-EU trade, it constitutes state aid. However, as theGovernment only compensates POL for the net cost of the public tasks it is entrusted with pursuantto the recently approved Community framework for state aid in the form of public servicecompensation, the aid is compatible with EC Treaty rules on state aid.
Post Office Limited (POL), the arms’ length retail subsidiary of Royal Mail Group, is thelargest European retail network measured in number of outlets. The rural network supportcompensation is designed not to exceed the net public service cost of maintaining structurallyloss-making counters. The Commission said it found that sufficient ex-ante and ex-post mechanismsare in place to prevent any overcompensation of the net cost of the public service.
