Paula Vennells
Post Office Limited 148 Old Street
London
ECIV 9HQ
25 November 2013
Dear Paula,
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 2015 (the "Effective Date").
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 Government to Post Office
Limited entitled "Entrustment of Post Office Limited with the delivery of certain
public services" and dated 21 March 2012 (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 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.
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
26 November 2013 (the "2013 Funding Agreement")) to maintain, from the
Effective Date until the end of its financial year ending on or around 31 March 2018,
a network of post offices beyond its optimal commercial size (the "Network SGEI").
That network must number a minimum of 11,500 post offices and also meet the
following minimum access requirements:
e 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.
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« 95% of the total urban population across the UK to be within I mile of their
nearest post office outlet
e 95% of the total rural population across the UK to be within 3 miles of their
nearest post office 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 2013 Funding Agreement. This
Network SGEI obligation therefore extends the provision of the Product SGEI over a
network which may be beyond that required under individual Product SGEI contracts
entered into on a commercial basis between Post Office Limited and relevant
Government departments or bodies (whether public or private). The delivery of the
Product SGEI by Post Office Limited across its network will be governed in
accordance with contracts or other agreements under which the terms of the provision
of the individual product SGEI are specified.
The entrustment of the delivery of the Network SGEI set out in this letter to Post
Office Limited does not replace or change in any way any contracts or other
agreements under which the terms of the provision of the individual Product SGEI are
specified. Post Office Limited is expected to use reasonable endeavours to enter into
contracts with Government departments or bodies (whether public or private)
contracting with Post Office Limited in respect of the provision of one or more
Product SGEIs. A list of the current individual contracts and agreements held by Post
Office Limited to deliver the Product SGEI is provided in Annex B.
Method of Calculating Compensation
As soon as reasonably practicable following publication of its audited accounts for the
Financial Year ending on or around 31 March 2018, Post Office Limited will be
required to provide, in accordance with the 2013 Funding Agreement, a statement (the
"Cumulative SGEI Statement"). The Cumulative SGEI Statement must be
accompanied by a supporting statement from an independent financial adviser, to
confirm that the aggregate amount of the SGEI compensation payments made by the
Government to Post Office Limited under the funding agreement dated 25 October
2010 (the "2010 Funding Agreement") and the 2013 Funding Agreement (the
"Cumulative SGEI Payment") did not exceed the difference between the actual net
costs incurred by Post Office Limited and the reasonable net profits that would have
been incurred in connection with the provision of a network that Post Office Limited
would maintain on a purely commercial basis (as specified by the relevant European
Commission decision(s)), during the financial years covered by the 2010 Funding
Agreement and the 2013 Funding Agreement (the "Cumulative SGEI Cost"). The
calculation of those net costs shall include:
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1. All variable costs including those incurred in providing the Network SGEI and
the Product SGEIs; plus
2. All fixed costs including those incurred in providing the Network SGEI and
the Product SGEIs; less
3. All revenues received by Post Office Limited from providing the Product
SGEIs as well as non-SGEI services.
For the purposes of the calculation above, the costs shall include, without limitation,
contributions to pension funds, interest costs, central costs, capital expenditure, costs
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 clause 5.2 of the 2013 Funding Agreement, in the event that the
Cumulative SGEI Payment exceeds the Cumulative SGEI Cost, Post Office Limited
will be required to repay to the Government, within 10 Business Days of a request
from the Government, an amount equal to such excess.
The 2010 Funding Agreement does not foresee an outcome in which the objectives
associated with the entrusted obligations under the 2010 Funding Agreement will
need to be re-phased. In the unlikely event that this occurs and a repayment from Post
Office Limited arises under the 2010 Funding Agreement, the Government waives its
right to receive any such repayment on the strict understanding that (a) the cumulative
reconciliation described in the paragraph above will be carried out and (b) any
objectives that are not achieved during the 2010 Funding Agreement will remain as
objectives under the 2013 Funding Agreement. This is in recognition of the scale and
complexity of the activities being carried out by Post Office Limited and the parties’
desire to promote the efficient use of all funds committed by the Government to Post
Office Limited under the 2010 Funding Agreement and the 2013 Funding Agreement.
It is possible that Post Office Limited may during the period of this entrustment cease
to provide an individual Product SGEI, the provision of which over the post office
network beyond its optimal commercial size is compensated by the Government. In
those circumstances, the Government shall, provided that the provision of the
Network SGEI will be maintained, withhold such proportion of that compensation (if
any) which corresponds to the net direct costs of providing that Product SGEI.
Yours sincerely,
JO SWINSON
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Post Office Limited acknowledges that the instructions set out in this letter are legally
binding.
Signed by
for and on behalf of Post Office Limited
Dated November 2013
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Annex A
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SCHEDULE OF SERVICES OF GENERAL ECONOMIC INTEREST
PROVIDED BY POST OFFICE LTD AT POST OFFICE BRANCHES
Processing social
benefit and tax
credit payments to
the public.
Cash payment of state benefits
including state pension, child
benefits and tax credits
Issuing of vouchers to eligible
asylum seekers
The Department for Work
and Pensions
The Social Security
Agency - Northern Ireland
Her Majesty’s Revenue &
Customs
Financial Institutions
The Home Office
Processing of
national identity
and licensing
scheme applications
Providing passport application
forms for customers to
complete and return
Checking and authentication of
passport applications and
supporting documentation
Capturing biometric data for
Biometric Residence Permits
Providing vehicle licence
application forms for customers
to complete and return
Receiving payment for vehicle
licences and photocard licences
Services for the sale of Rod
Fishing Licences
Her Majesty’s Passport
Office
UK Visas and Immigration
Driver and Vehicle
Licensing Agency
The Environment Agency
Universal payment
facilities for public
utility services.
Provision of facilities for
payment of electricity, gas,
telecommunications and water
bills. Payment options include
pre-payment and other
budgeting schemes (e.g.
including savings stamps)
Provision of facilities for
payment of tax bills and social
housing rents
Financial Institutions
Individual Utility Service
Providers
Billing Service Providers
Her Majesty’s Revenue
and Customs
Local Authorities
Housing Associations
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‘Access to postal
services
Provision of access to postal
services 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 36 of the Postal Services
Act 2011 and the Designated
Universal Service Provider
Conditions issued by Ofcom on
27 March 2012
Royal Mail Group Limited
Universal access to
basic cash and
banking facilities
and Government
savings instruments,
especially for rural
customers and those
on social benefits.
Provision of basic community
banking facilities (e.g. including
cashing of cheques, cash
deposit, Post Office card
account and cash withdrawals
and deposits) and cash
transmission facilities (e.g.
including postal orders), in
particular to socially excluded
customers and businesses local
to post office branches
Access to certain Government
savings instruments
Financial Institutions
Her Majesty’s Treasury,
National Savings &
Investments
The Department for Work
and Pensions
The Social Security
Agency - Northern Ireland,
Her Majesty’s Revenue &
Customs
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Annex B
POST OFFICE CONTRACTS TO DELIVER SGEI
AS AT THE DATE OF THIS LETTER
Category 1: Processing Social Benefit and Tax Credit Payments to the Public
Description of Services
Contracting Entity Opposite Post
Office Limited
POCA Card Account
The Department for Work and Pensions
Asylum Seekers Benefits Payments
Sodexho Pass
Meals on Wheels Vouchers
Fife Council
Meals on Wheels Vouchers
London Borough of Waltham Forest
Meals on Wheels Vouchers
London Borough of Tower Hamlets.
Meals on Wheels Vouchers
Salford City Council
Meals on Wheels Vouchers
London Borough of Islington
Meals on Wheels Vouchers
Eastleigh Borough Council
Homecare Vouchers
Salford City Council
Payout (Emergency Payments) Contracts
Bedford Council
Payout (Emergency Payments) Contracts
Blackpool Council
Payout (Emergency Payments) Contracts
Cornwall Council
Payout (Emergency Payments) Contracts
Derbyshire Council
Payout (Emergency Payments) Contracts
Glasgow Council
Payout (Emergency Payments) Contracts
Greenwich Council
Payout (Emergency Payments) Contracts
Lewisham Council
Payout (Emergency Payments) Contracts
Merton Council
Payout (Emergency Payments) Contracts I Reading Council
Payout (Emergency Payments) Contracts _I Rotherham Council
Payout (Emergency Payments) Contracts I Staffordshire Council
Payout (Emergency Payments) Contracts _I Torbay Council
Payout (Emergency Payments) Contracts
Tower Hamlets Council
Payout (Emergency Payments) Contracts
Westminster (City of)
Payout (Emergency Payments) Contracts
West Lothian Council
Payout Contracts
Autism Initiatives
Payout Contracts
Durham and Darlington NHS
Payout Contracts
First Initiatives
Payout Contracts
Blackburn and Darwin Council
Payout Contracts
Buckinghamshire Council
Payout Contracts
Cumbria Council
Payout Contracts
Hampshire Council
Payout Contracts
Hull Council
Payout Contracts
Lambeth Council
Payout Contracts
Lancaster Council
Payout Contracts
Leeds Council
Payout Contracts
Lewisham Council
Payout Contracts
Manchester City Council
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Payout Contracts
Newham Council
Payout Contracts
Redbridge Council
Payout Contracts
St Helen’s Council
Payout Contracts
Staffordshire Council
Payout Contracts
City Of Westminster Council
Payout Contracts
Wirral Council
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Category 2: Processing of National Identity and Licensing Scheme Applications
Description of Services
Contracting Entity Opposite Post
Office Limited
Her Majesty’s Passport Office
Passport Applications ‘Check & Send’
Driving Licence Applications
Driver and Vehicle Licensing Agency
Services for the sale of Rod Fishing
Licences
The Environment Agency
Capture of photograph in support of
applications
Security Industry Authority (The Home
Office)
Biometric data capture for Biometric
Residence Permit applications
UK Visas and Immigration
Identity Assurance Services (for access to
online public services)
Government Digital Services (The
Cabinet Office)
Document checking in support of a
Vetting and Barring Scheme application
(formerly CRB)
Care Quality Commission
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Category 3: Universal Payment Facilities for Public Utility Services
Description of Services
Contracting Entity Opposite Post
Office Limited
Bill Payments
Santander (A&L Commercial Bank ple
as was)
Bill Payments
The Co-Operative Bank ple
Bill Payments
Allpay.net Ltd
Bill Payments
Airtricity Holdings Limited (Republic of
Ireland company)
Bill Payments
Freedom Council - London Councils
Transport and Environment Committee
Bill Payments EON Energy Limited
Bill Payments EDF Energy
Bill Payments RWE Npower ple
Bill Payments
Scottish Power Energy Retail Limited
Bill Payments
Scottish & S Southern (SSE)
Bill Payments
British Gas Trading Limited
Bill Payments
Phoenix Gas
Bill Payments
BT ple, novated to BT Payment
Services Limited
Bill Payments
South West Water Limited
Bill Payments
Northern Ireland Electricity plc, novated
to NIE Energy Ltd
Bill Payments
United Utilities
Bill Payments Yorkshire Water
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
Travel Tickets
Coventry Council
Travel Tickets
Neath Port Talbot Council
Travel Tickets
Scotland Improvement Service
Travel Tickets
Strathclyde Council
Travel Tickets
Transport for London
Council Tax and Other Related Council
Services
The Lord Mayor & Citizens of the City
of Westminster
Council Tax and Other Related Council
Services
London Borough of Hammersmith and
Fulham
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Category 4: Access to Postal Services
Description of Services Contracting Entity opposite Post
Office Limited
Master Distribution Agreement - Mail Royal Mail Group Limited
support services from Post Office
Limited to Royal Mail Group Limited to
assist Royal Mail Group Limited in meeting
its designated Universal Service Provider
conditions
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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
Contracting Entity opposite Post
Office Limited
ATM Services
Bank of Ireland
Provision of Basic Banking Facilities
Bank of Ireland
Provision of Basic Banking Facilities
Barclays Bank
Provision of Basic Banking Facilities
Charities Aid Foundation (CAF) bank
Provision of Basic Banking Facilities
Cahoot
Provision of Basic Banking Facilities
Clydesdale Bank
Provision of Basic Banking Facilities
Co-operative Bank
Provision of Basic Banking Facilities Danske Bank
Provision of Basic Banking Facilities First Direct
Provision of Basic Banking Facilities First Trust Bank
Provision of Basic Banking Facilities HBOS
Provision of Basic Banking Facilities HSBC Bank
Provision of Basic Banking Facilities Lloyds Bank
Provision of Basic Banking Facilities
National Australia Group
Provision of Basic Banking Facilities
National Savings & Investments
Provision of Basic Banking Facilities
Nationwide Building Society
Provision of Basic Banking Facilities Northern Bank
Provision of Basic Banking Facilities RBS Group
Provision of Basic Banking Facilities Santander
Provision of Basic Banking Facilities Smile
Provision of Basic Banking Facilities TSB
Provision of Basic Banking Facilities
Virgin Money
POCA Card Account
The Department for Work and Pensions
Premium Bonds applications
National Savings & Investments
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