The Commission has authorised, under the EC Treaty's rules on state aid, £634 million (€884 million) of public funding for the UK's network of post offices- Post Office Limited - over the three years starting 1 April 2008. In addition it has authorised the continuation, over the same period, of existing loan facilities which allow the network to fund the provision of cash services at post office counters. The post office network is entrusted with important public service tasks and the Commission is satisfied that the requirements of the Community framework for state aid in the form of public service compensation are met.

Post Office Limited is a subsidiary of Royal Mail, the UK's main postal services provider which is entirely state-owned. Post Office Limited operates the network of around 14,000 post offices throughout the UK. The large majority of these are separate businesses operated under agency contracts by sub-postmasters. The network provides a range of public services on behalf of government departments and private undertakings, such as basic cash facilities, bill payment, licensing etc, as well as access to the universal postal service provided by Royal Mail. In addition, the network provides a small but growing range of commercial services including lottery tickets, foreign exchange, telephony and insurance products.

In July 2007 the UK notified a series of measures in favour of Post Office Limited to take effect between 1 April 2008 and 31 March 2011. They include £150 million (€209 million) per year to cover the specific costs of operating the parts of the network which are inherently loss-making. A similar measure was approved in 2006 for two years. Certain additional funding included in the financial year 2008/2009 reflects certain specific costs to arise that year, including costs for the closure of some post offices as part of a transformation programme announced by the UK Government in December 2006. The loan facility between the UK Government and Post Office Limited provides funding up to a limit of £1.15billion (€1.6billion), allowing Post Office Limited to finance the provision of basic cash services by post offices, in particular to more vulnerable groups in society. This measure was originally authorised in 2003.

Under the Community framework for state aid in the form of public service compensation, it is for the Member States to define the public service - in this case, the size of the post office network and the services it should provide - which they wish to entrust to an undertaking. The role of the Commission is to check that the compensation provided for carrying out the public service task does not exceed the additional costs of providing these services.

On 21 February 2007 the Commission opened a formal investigation procedure concerning funding arrangements for Royal Mail, totalling more than £2.5 billion. That investigation is still continuing. The measures authorised today are separate and concern only the compensation of costs specifically incurred by Post Office Limited. [29 November 2007]