Paula Vennells
Post Office Limited
20 Finsbury Street
London
EC2Y 9AQ
30" March 2017
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
2018 (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 23 January2015 (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.
(a) 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 30 March 2017, and amended on or around the date of this
letter, (the "Funding Agreement")) to maintain, from the Effective Date until
the end of its financial year ending on or around 31 March 2020, a network of
post offices beyond its optimal commercial size (the "Network SGEI"). That
network must meet the following minimum access requirements:
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« 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 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.
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© 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 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 I
product SGEI are specified. I
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 I
specified. Post Office Limited is expected to use reasonable endeavours to enter into I
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 2020, Post Office Limited will be I
required to provide, in accordance with the Funding Agreement, a statement (the . I
"Cumulative SGEI Statement"). The Cumulative SGEI Statement must be
accompanied by a supporting statement from an independent financial adviser, to
confitm that the aggregate amount of the SGEI compensation payments made by the
Government to Post Office Limited under the 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
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on a purely commercial basis (as specified by the rélevant European Commission
decision(s)), during the financial years covered by the Funding Agreement (the
"Cumulative SGEI Cost"). The calculation of those net costs shall include:
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 I
Notwithstanding clause 5.2 of the 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.
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 may in its absolute discretion, provided that the
provision of the Network SGEI will be maintained, withhold such reasonable
proportion of that compensation (if any) which corresponds to the net direct costs of
providing that Product SGEI.
TOM TAYLOR
Post Office Limited acknowledges that the instructions set out in this letter are legally
binding.
Signed by
for and on behaif of Post Office Limited ~
Dated 30" March 2017
Annex A
SCHEDULE OF SERVICES OF GENERAL ECONOMIC INTEREST
PROVIDED BY POST OFFICE,.LTD AT POST OFFICE BRANCHES
“} Service Provided
Processing social Cash payment of state benefits
benefit and tax credit I including staté pension, child
payments to the benefits and tax credits
public,
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
-I scheme applications
Processing of Providing passport application
national identity forms for customers to
and licensing 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 Provision of facilities for
facilities for public payment of electricity, gas,
utility services. “I 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
“I Local Authorities
Financial Institutions
Individual Utility Service
Providers
Billing Service Providers
Her Majesty’s Revenue and
Customs
Housing Associations
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I Servite-Provided «.::
I’ Service Provided on:
‘) Bel ts
4, Access to postal
-I 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
5. Universal access to
basic cash and
banking facilities,
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
Financial Institutions
Her Majesty’s Treasury,
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
Payout (Emergency Payments) Contracts_I Blackpool Council
Payout (Emergency Payments) Contracts_I Cornwall Council
Payout (Emergency Payments) Contracts _I Derbyshire Council
Payout (Emergency Payments) Contracts
Greenwich Council
Payout (Emergency Payments) Contracts
Merton Council
Payout (Emergency Payments) Contracts
Reading Council
Payout (Emergency Payments) Contracts _I Torbay Council
Payout Contracts Autism Initiatives
Payout Contracts Durham and Darlington NHS:
Payout Contracts Financial Services Compensation.
Scheme
Payout Contracts Buckinghamshire Council
Payout Cumbria Council
I Payout Contracts
Hampshire Council
Payout Contracts
Hull Council
Payout Contracts
Lambeth Council
Payout Contracts Lancaster Council
I Payout Contracts Manchester City Council
Payout Contracts Newham Council
Payout Contracts Redbridge Council
Payout Contracts St Helen’s Council
Payout Contracts Wirral Council
Payout Contract Capita
Payout Contract ___I Bon Energy Limited
Payout Contract RWE Npower ple
Payout Contract
Scottish Power Energy Retail Limited
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Category 2: Processing of National Identity and Licensing Scheme Applications
Description of Services
Contracting Entity Opposite Post
Office Limited
Passport Applications ‘Check & Send’
Her Majesty’s Passport Office __I
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
Agreement for the Provision of Identity
Verification Services: Public Carriage GB Group
Office Services
Agreement for the Provision of Identity
Verification Services: Generic Services
GB Group
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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
___I as was)
Bill Payments The Co-Operative Bank ple
Bill Payments Allpay.net Ltd
Bill Payments Airtricity Holdings Limited (Republic of
ee __ Ireland company)
Bill Payments ____I 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 PhoenixGas-
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 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)
Bill Payment Capita
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 I The Lord Mayor & Citizens of the City
Services of Westminster
Council Tax and Other Related Council
Services
London Borough of Hammersmith and
Fulham
Face to face payment services
The Lord Mayor & Citizens of the City
of Westminster
Agreement for Provision of Online and
E-Bulk Services
Atlantic Data Limited
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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 I
Limited to Royal Mail Group Limited to I
assist Royal Mail Group Limited in meeting
its designated Universal Service Provider
conditions
Category 5: Universal Access to Basic Cash and Banking Facilities for Business
and Retail Bank customers, and Government Savings Instruments, Especially
for Rural Customers: and Those on Social Benefits
Description of Services
Contracting Entity opposite Post
Office Limited
[ATM Services __
Provision of Basic Banking Facilities
under the Banking Service Framework
Bank of Ireland
Lloyds Bank PLC — including Bank of
Scotland and Halifax
Provision of Basic Banking Facilities
under the Banking Service Framework
HSBC Bank ple — including First Direct I
Provision of Basic Banking Facilities
under the Banking Service Framework
Santander UK PLC- including Cahoot,
Abbey National and Alliance+Leicester
Provision of Basic Banking Facilities
under the Banking Service Framework
Barclays Bank PLC
Provision of Basic Banking Facilities
under the Banking Service Framework
Royal Bank of Scotland PLC —
Including NatWest, and Ulster Bank
Provision of Basic Banking Facilities
under the Banking Service Framework
Nationwide Building Society
TSB Bank PLC
Provision of Basic Banking Facilities
under the Banking Service Framework -
Provision of Basic Banking Facilities Virgin Money PLC
under the Banking Service Framework
Provision of Basic Banking Facilities
under the Banking Service Framework
Northern Bank Limited — including
Danske Bank
Provision of Basic Banking Facilities
under the Banking Service Framework
Bank of Ireland (UK) PLC
Provision of Basic Banking Facilities
under the Banking Service Framework
AIB Group (UK) PLC — including First
Trust/
Provision of Basic Banking Facilities
under the Banking Service Framework
Metrobank PLC (currently Business
Customers only)
Provision of Basic Banking Facilities
under the Banking Service Framewe
Cooperative Bank PLC — including
Smile
Provision of Basic Banking Facili
under the Banking Service Framework
Svenska Handelsbanken AB (publ)
Provision of Basic Banking Facilities
under the Banking Service Framework
CAF Bank Limited
Provision of Basic Banking Facilities
under the Banking Service Framework
Clydesdale & Yorkshire Bank
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