The European Commission has approved UK plans to grant £640 million to the UK Post Office Ltd for delivering a whole range of the public services in its entire network. The Commission found the measure to be in line with EU state aid rules in particular because the compensation paid to Post Office Ltd is limited to the additional costs it faces to fulfil its public service mission.
Commissioner Margrethe Vestager, in charge of competition policy, said: “Today’s decision will make sure that those UK citizens who live in more remote areas will also have access to a post office and the services it provides. EU state aid rules enable Member States to fund services of general public interest, and provide a framework to ensure that there is no overcompensation of the service provider.”
In January 2015, the UK notified plans to grant £640 million (around €890 million) to Post Office Ltd for providing public services from 1 April 2015 to 31 March 2018 to the Commission for state aid scrutiny. The Post Office Ltd has and will continue to have the public service mission to carry out and maintain a set of public services over a larger network of post offices than would be commercially optimal. The services provided include among others the handling of social benefit payments, passport and vehicle license applications, public utility payment facilities, access to postal services and basic bank and cash facilities.
EU state aid rules on public service compensation, adopted in 2011, allow under certain conditions the compensation of companies through state aid for the extra cost of providing a public service. The state aid rules allow Member States to grant aid for the provision of public services whilst at the same time making sure that companies entrusted with such services do not get overcompensated, which minimises distortions of competition and guarantees an efficient use of scarce public resources.
In this case, the Commission’s assessment shows that the compensation to Post Office Ltd is designed to ensure that it will not exceed the cost of the public service mission. The payment of the compensation depends on Post Office Ltd reaching certain annual milestones regarding the scope and size of its network. This will give an incentive to Post Office Ltd to be efficient in the provision of the public services. Moreover, the award of the public service mission complied with EU public procurement rules. The Commission has therefore concluded that the measure is compatible with Article 106(1) of the Treaty on the Functioning of the European Union (TFEU), which governs the assessment of services of general interest under state aid rules.