EU legislators have granted the UK permission to subsidise its post office (PO) network through a package that could be worth hundreds of millions of pounds.
The European Commission (EC), acting in its capacity as a pan-European ‘Office of Fair Trading’, ruled that the subsidies would not hinder competition and were in the public interest.
By number of outlets, the PO is Europe’s largest retail network; it is run by Royal Mail Group, which in turn is wholly owned by the UK government.
It provides over-the-counter access to government and payment services, which are particularly convenient for the elderly and people receiving benefits. Around 90% of the group’s turnover derives from services provided in the public interest.
Ministers argue that the UK must maintain rural outlets, which are structurally loss making, but vital to rural communities’ access to essential services.
In exchange, the government will deliver public service costs up to a maximum £150m per year. The agreement runs from April 2006 to March 2008, potentially valuing it at £300m.
“I am satisfied that the funding is proportionate to PO’s public service obligations,” said competition commissioner Neelie Kroes. “I am happy to endorse a measure which will benefit customers in rural areas without distorting competition.”
The news was greeted with applause from the small business community, which relies on the post office for deliveries, sending invoices and other basic services.
Clive Davenport, FSB trade and industry chairman, said: “With the declining number of rural bank branches in many areas, the post office is the only option for many firms for their day-to-day banking needs.
“Post offices also generate footfall for surrounding businesses. Keeping them in place is vital and we welcome this announcement,” he added.
