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Department for Business
Innovation & Skills
Norman Lamb MP
Minister for Employment Relations,
Consumer and Postal Affairs
Paula Vennells
Post Office Limited 148 Old Street
London o
ECiV sha 18 March 2012
Dew. rode,
@ } ENTRUSTMENT OF POST OFFICE LIMITED WITH THE DELIVERY OF
CERTAIN PUBLIC SERVICES
Commencement
This letter has effect from the later of: (i) the date on which the European
Commission confirms that the requirements of this letter are compatible with
the requirements on State aid of the Treaty on the functioning of the European
Union; and (ii) 1 April 2012 (the “Effective Date”). a.
Existing entrustment letter
Notwithstanding the signing of this letter, in respect of the period prior to
the Effective Date, the provisions of the letter from the Secretary of State
to Post Office Limited entitled “Entrustment of Post Office Limited with the
delivery of certain public services” and dated 24 March 2010 (the
“Existing Entrustment Letter’) shall continue in full force and effect and
@ the provisions of this letter shall be without prejudice to any rights,
remedies, obligations or liabilities of any party accrued under the Existing
Entrustment Letter.
The Existing Entrustment Letter shall be terminated on the Effective Date.
Entrustment
This letter contains an overarching ministerial instruction entrusting Post
Office Limited with the provision and delivery of certain public services of
general economic interest. This instruction is legally binding on Post Office ~
Limited and Post Office Limited has signed this letter in agreement and
acknowledgement of this.
1 Victoria Street, London SW1H OET
www.bis.gov.uk
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We confirm that Post Office Limited is under a public service obligation (as
set out here and also contractually in the Post Office Limited Funding
Agreement dated 25 October 2010 (the “2010 Funding Agreement’)) to
maintain, from the Effective Date until the end of its financial year ending
on or around 31st March 2015, a network of post offices beyond its
optimal commercial size (the “Network SGEI’). That network must”
number a minimum of 71,500 post offices and also meet the.following
minimum access requirements:
. Nationally, 99% of the UK population to be within 3 miles and 90% of
the population to be within 1 mile of their nearest post office outlet.
. 99% of the total population in deprived urban areas across the UK to
be within 1 mile of their nearest post office outlet.
«95% of the total urban population across the UK to be within 1 mile of
their nearest post office outlet.
. 95% of the total rural population across the UK to be within 3 miles of
their nearest post outlet.
In addition the following criterion will apply at the level of each and every
individual postcode district, establishing a minimum level of coverage at a
very local level.
. 95% of the population of the postcode district to be within 6 miles of
their nearest post office outlet.
Post Office Limited is required to provide this network of post office
branches to-make available the services of general economic interest
detailed in Annex A(“Product SGEI’) on the basis set out in the 2010
Funding Agreement. This Network SGEI obligation therefore extends the
Product SGEI over a network which may be beyond that
! Jer individual Product SGEI contracts entered into ona
commercial basis between Post Office Limited and the relevant
Government department or body (whether public or private) purchasing
the Product SGEI. The delivery of the Product SGEI by Post Office Limited
across its network will be governed in accordance with the contractual
terms which apply to each Sérvice> ~~. -- -
—
Department for Business
+ I
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Innovation & Skills
Specifically, the Product SGEI are provided under commercial contracts
entered into by Post Office Limited and the Government department or
body (whether public or private) purchasing the service. In the case of
access to postal services, the services to be made available at post office
branches are ones which the universal service provider (Royal Mail Group
Limited) is required to provide under regulatory conditions and directions
issued by OFCOM in accordance with section 66 and paragraphs 4 to 6 of
Schedule 9 of the Postal Services Act 2011.
The entrustment of the delivery of the Network SGEI set out in this letter to
Post Office Limited therefore does not replace oiChange in any_way
contracts and other agreements under which the terms of the provision of
‘the individual Product SGEtare specified. Post Office Limited is expected
to use reasonable endeavours to enter into contracts with the Government
department or body (whether public or private) purchasing the service to
provide the Product SGEI. A list of the current individual contracts and
agreements held by POL to déliver the Product SGETis provided in Annex
Bo
Method of Calculating Compensation
As soon as reasonably practicable following publication of its audited
accounts for the Financial Year 2014/15, Post Office Limited will be
required to provide, in accordance with the 2010 Funding Agreement, a
statement (the “SGEI Compensation Statement’). The SGEt———
Compensation Statement must be accompanied by a supporting
statement from an independent financial adviser, to confirm that the
aggregate actual amount of the SGEI compensation payments made by
the Government to Post Office Limited in respect of Financial Years
2012/13, 2013/14 and 2014/15 under the 2010 Funding Agreement did
not exceed the difference between the actual net costs incurred by Post
Office Limited and the net profits that would have been incurred in
connection with the provision of a network of post offices of the optimal
commercial size (as specified by the Commission Decision under which
such SGEI compensation is paid) during those Financial Years. The
calculation of those net costs shall include:
1. All variable costs incurred in providing the Network SGEI and the
Product SGEls; plus
2.. All fixed costs incurred in providing the Network SGEI and the
Product SGEls; plus
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3. Areasonable profit in providing the Network SGEI and the Product
SGEls; less
4. Allrevenues received by POL from providing the Product SGEls as well
as non-SGEI services.
In each case in respect of the relevant Financial Years.
For the purposes of the calculation above, the fixed costs common to both
the SGEls and other activities of Post Office Limited shall include, without
limitation, contributions to pension funds, interest costs, group central cost
allocations, capital expenditure, contributions to the cost of any employee
incentivisation arrangements and'the costs of transforming the network, in
each case whether such costs are recurring or exceptional.
Recovery of Overpayment
Notwithstanding clauses 5.2 of the 2010 Funding Agreement, in the event
that the aggregate actual amount of the SGEI compensation payments
made by the: Government to Post Office Limited in respect of Financial
Years 2012/13, 2013/14 and 2014/15 exceeds the costs incurred by Post
Office Limited in providing the network of post offices of beyond its optimal
commercial size providing access to the SGEIs during those Financial
Years, as calculated in accordance with the above formula, Post Office
Limited will be required to repay to the Government, within 10 Business
Days of the receipt by Government of the SGE] Compensation Statement,
an amount equal to such excess.
It is possible that Post Office Limited may during the period of this
entrustment cease to provide a Product SGEI(s), the provision of which
over the Post Office network beyond its optimal commercial size is
compensated by the UK Government. In those circumstances, the UK
Government shall, provided that the provision of the Network SGEI will still
be maintained, withhold such proportion of that compensation (if any)
which corresponds to the net direct costs of providing that product SGEI.
“NORMAN CAMB
ee
Department for Business
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Innovation & Skills
BIS
Post Office Limited acknowledges that the instructions set out in this letter are legally binding.
Signed by!
for and on behalf of Post Office Limite
Dated wv March 2012
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Annex A.
Department for Business
Innovation & Skills
SCHEDULE OF SERVICES OF GENERAL ECONOMIC INTEREST
PROVIDED BY POST OFFICE LTD AT POST OFFICE BRANCHES
Category of service I Service provided Service provided on
behalf of
1 Processing ‘social Cash payment of state benefits I Department for Work and
Provision of facilities for
payment of tax bills and social
housing rents,
benefit and tax credit I including state pension, child Pensions, Social Security
payments to the benefits and tax credits and Agency - Northern Ireland,
public. encashment of benefit cheques. I Her Majesty’s Revenue &
Cash payment of benefits and Customs and financial
the issuing of vouchers to institutions Home Office
eligible asylum seekers. Cash
payment of health benefits and I Department of Health.
the provision of form EHIC
benefits
2. Processing of Providing passport application I The Identity and Passport
national identity and I forms for customers to Service (“IPS”)
licensing scheme complete and return to IPS
applications Checking and authentication of I IPS
passport applications and
supporting documentation The Driver and Vehicle
Licensing Agency
Providing vehicle licence (“DVLA”)
application forms for customers
to complete and return to DVLA.
DVLA, and budget cash savings
schemes for licence fees.
Receiving payment for vehicle
licences and Photocard
Licences, and checking
Photocard application forms and
supporting documentation.
3. Universal payment Provision of facilities for Financial Institutions
facilities for public _I payment of electricity, gas, individual utility service
utility services. telecommunications and water I providers, and billing
bills. Payment options include service providers
pre-payment and other
budgeting schemes (e.g, savings I Her Majesty’s Revenue and
stamps). Customs, local authorities
and housing associations.
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\ I S Department for Business
I Innovation & Skills
I Category of service I Service provided Service provided on
I behalf of
I 4, Access to postal Provision of access to postal Royal Mail Group Limited.
I services services which the universal
service provider (Royal Mail
I Group Limited) is required to
i provide under regulatory
I conditions and directions issued
by OFCOM in accordance with
I section 66 and paragraphs 4 to 6
' of Schedule 9 of the Postal
I Services Act 2011.
5. Universal access to I Provision of basic community Financial Institutions
I basic cash and banking facilities (cashing of including Her Majesty’s
! banking facilities and I cheques, cash deposit, Post Treasury, the Government-
Government savings I Office card account and owned National Savings &
i instruments, automated cash withdrawals and I Investments, the
especially for rural deposits) and cash transmission I Department for Work and
i customers and those I facilities (postal orders), in Pensions, the Social
on social benefits. particular to socially excluded Security Agency - Northern
customers. This includes
deposits and withdrawals of
cash by businesses local to Post
Office branches. Access to
Government savings instruments
including Premium Bonds,
Tnyestment Accounts,
Children’s Bonds and National
Savings certificates.
Ireland, and Her Majesty’s
Revenue & Customs.
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Annex B
Department for Business
Innovation & Skills
POST OFFICE CONTRACTS TO DELIVER SGEI AS AT 1st March 2012
Category 1: Processing social benefit and tax credit payments
Description of Services I Contracting Entity
opposite POL
POCA Card Account DWP
Reconciliation services in
relation to certain Bill
Girobank ple and Alliance &
Leicester ple
payments, cash, DSS and
personal banking services
DSS / DWP Cash Girobank pic
Cheque Service
Asylum Seekers Benefits I Sodexho Pass
Payments
Meals on wheels Fife Council
vouchers
Meals on wheels London Borough of
vouchers Waltham Forest
Meals on wheels
London borough of Tower
vouchers Hamlets
Meals on wheels Salford City Council
vouchers
Meals on wheels London Borough of Islington
vouchers
Meals on wheels Eastleigh Borough Council
vouchers
Category 2: Processing o!
f national identity scheme applications
Description of Services I Contracting Entity
opposite POL
IPS Passport Application I Home Office Identity and
Form Check & Send Passport Service
Concession Agreement
DVLA Driving Licences_I DVLA.
Services for the sale of I Environment Agency
Rod Fishing Licences
Category 3: Universal payment facilities for public utility services
Description of Services I Contracting Entity
. opposite POL
Bill Payments Santander (A&L
Commercial Bank plc as
was)
Bill Payments ‘The Co-Operative Bank ple
Bill Payments Allpay.net Ltd
Bill Payments Aittricity Holdings Limited
(Republic of Ireland
company)
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Description of Services I Contracting Entity
opposite POL
Bill Payments Freedom Council - London
Councils Transport and.
Environment Committee
Bill Payments EON Energy Limited
Bill Payments RWE Npower ple
Bill Payments Scottish Power Energy
Retail Limited
Bill Payments Scottish & S Southern - SSE
Energy Supply Ltd
Bill Payments British Gas Trading Limited
Bill Payments BT ple, novated to BT
Payment Services Limited,
Bill Payments South West Water Limited
Bill Payments Northern Ireland Electricity
ple, novated to NIE Energy
Lid
Bill Payment Bristol and Wessex Billing
Services Ltd
Bill Payment Siemens Energy Services (a
Management Division of
Siemens PLC)
Travel tickets West Yorkshire Passenger
Transport Executive
Travel tickets Merseyside Passenger
Transport Executive
Travel tickets Cardiff Council
Travel tickets Brighton and Hove Bus &
Coach Company
Council Tax and other The Lord Mayor & Citizens
related council services _I of the City of Westminster
Category 4: Universal postal services
Description of Services I Contracting Entity
opposite POL
High Value Mails Royal Mail Group PLC
MDA - Mail support Royal Mail Group PLC
services from POL to
RM to assist RM in
meeting its universal
postal service provider
licence obligations
IS
Department for Business
Innovation & Skills
Category 5: Universal access to basic cash and banking facilities and Government
savings instruments, especially for rural customers and those on social benefits
Description of Services I Contracting Entity
opposite POL.
ATM Services Bank of Ireland
Retail cash services to
Alliance & Leicester ple
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Description of Services I Contracting Entity
opposite POL
business customers
Business Banker Alliance & Leicester ple
Introducer Scheme
Agreement
Personal Banking Alliance & Leicester ple and
Services Girobank ple
Basic Banking Alliance & Leicester ple
Personal Banking Alliance & Leicester ple
Personal Banking Service I Bank of Ireland
Basic Banking Bank of Ireland
Personal Banking HBOS
Basic Banking HBOS
Personal Banking Abbey National PLC
Personal Banking Clydesdale Bank
Basic Banking ‘National Australia Group:
Personal Banking First Direct
Personal Banking Lloyds
Basic Banking Lloyds
Personal Banking Nationwide Building Society
Basic Banking Nationwide Building Society
Personal Banking Northern Bank
Basic Banking Northern Bank
Personal Banking Co-operative Bank and
, Smile
Basic Banking Co-operative Bank
Personal Banking Barclays
Basic Banking Barclays
Basic Banking First Trust
Basic Banking HSBC
Basic Banking RBS Group
Personal Banking RBS Group
Business Banking National Australia Group
Europe Limited
Business Banking The Governor and Company
of the Bank of Ireland
Business Banking Barclays Bank ple
Business Banking HSBC Bank ple
Counter Services & National Savings &
Premium Bonds Investments
Counter Services Northern Bank Limited
Department for Business
Innovation & Skills