Brussels, 28/05/2003 (Agence Europe) - On Tuesday, the European Commission decided not to raise any objections against a further series of financing measures in favour of UK Post Office Limited (POL), the retail subsidiary of the Royal Mail Group plc (100% State owned). These measures come in addition to previous measures, approved by the Commission in 2002. On 12 March 2002, the Commission approved the funding of a basic postal account to credit social benefits and from which cash may be withdrawn at post office counters, account targeted at benefit holders who do not want to open a bank account. On 18 September 2002, the Commission approved the minimum financing needed for the POL to be able to close 3,000 urban counters, which had become unnecessary in the framework of the British law of 2000 on postal services.
POL suffers losses due to its legal obligation to cover the entire United Kingdom, which forces it to retain loss-making counters. In order to ensure the continuation of POL's activities, the Royal Mail Group provided it with a loan. Today the British government wants to provide POL with compensation equal to the net cost of the public service provided by the counters in rural areas. The government, forcing POL to maintain 8,600 post offices in rural areas, will grant it annual compensation for the net costs linked to this public service, with a ceiling of GBP 150 million. Moreover, the government will provide POL with the means to guarantee its debt towards Royal Mail Group plc, which financed its account deficit until 31 March 2002, for a total amount of GBP 726 million. As of the 2006/2006 financial year, the government will grant funds totalling GBP 574 million so that POL is capable of reimbursing the entirety of its debt. Finally, it will provide it with a rolling working capital loan for over the counter payments. This loan, which will be capped at GBP 1,150 million in 2004/2005, is aimed at financing the basic postal account
These three measures constitute a transfer of state resources, conferring an advantage on POL and potentially distorting competition and intercommunity trade. However, feels the Commission, so long as the loan and the government payments only compensate the net additional cost of public service that POL must ensure, it would not enjoy any real advantage. It underlines that rural network compensation must not exceed the net additional public service cost of maintaining the structurally loss making counters. With regards to the measure financing the debt, the Commission feels that the payments agreed by the government constitutes the minimum required to enable POL to continue its activities and to continue ensuring a public services. The minimum financing is limited by receipts from competing activities. The self-regulation mechanism is foreseen in order to guarantee that the rolling working capital loan is maintained at the minimum needed to ensure the provision of a basic postal account. The Commission verified that there are sufficient a priori and a posteriori mechanisms to prevent any possible overcompensation that would be indicated by separated accounts. For the Commission, mechanisms having been foreseen to prevent any a priori overcompensation and, in case there remains overcompensation, in order to recover a priori, no real advantage has been conferred on POL. As a final analysis, the Commission feels that this means that, in accordance with the most recent jurisprudence of the Court, the measures in question do not constitute state aid and that, 'even if they were deemed to be State aids, they would be compatible with the common market as no overcompensation is involved.'