EU allows UK to give Post Office new subsidy

BRUSSELS - Britain won European Commission blessing on Wednesday for a 313 million pounds ($604.8 million) subsidy to the Post Office in the 2007-8 fiscal year to help cover the cost of operating thousands of outlets. Post Office Limited is a unit of Royal Mail, the UK’s main postal services provider, and runs some 14,000 offices that provide a public service by allowing customers to pay bills, buy lottery tickets and withdraw cash as well as send letters.

By (Reuters)

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Published: Wed 7 Mar 2007, 5:58 PM

Last updated: Sat 4 Apr 2015, 10:46 PM

‘Public services are a vital part of the European economy, and the Commission recognises their importance,’ EU Competition Commissioner Neelie Kroes said in a statement.

‘Aid can therefore be approved where the amount is strictly limited to what is necessary to cover the costs of public service obligations.’

Government financial assistance to companies is generally banned under EU rules because it tends to distort competition by benefiting less efficient firms over efficient ones. But the EU executive can approve state aid under strict criteria.

The subsidy approved by the Commission comes on top of 150 million pounds the government was authorised last year to give to the Post Office over two years to cover the specific costs of operating loss-making outlets in the countryside.

In a separate move, the Commission launched an investigation two weeks ago into whether certain funding arrangements for the Royal Mail worth more than 2.5 billion pounds broke EU competition rules.

If Brussels finds that Britain gave any financial aid illegally, it can order the government to reclaim the cash.

The Royal Mail group employs almost 200,000 people and made a 395 million pound profit after tax in the 2005-2006 fiscal year on a turnover of 9.1 billion pounds.

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