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Department for Business
Innovation & Skills
CONFORMED COPY B S
Post Office Limited
148 Old Street
London
EC1V 9HQ
For the attention of: Mike Moores
24 March 2010
Dear Sirs,
ENTRUSTMENT OF POST OFFICE LIMITED WITH THE DELIVERY OF CERTAIN
PUBLIC SERVICES
Commencement
This letter has effect from the date on which the European Commission confirms that the
schedule of services of general economic interest as set out in Annex A to this letter are
compatible with the requirements on State aid of the Treaty on the functioning of the
European Union (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 Secretary of State to Post Office Limited entitled
“Entrustment of Post Office Limited with the delivery of certain public services” and dated 8
November 2007 (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.
Post Office Limited is required to provide a network of post office branches to make
available the services of general economic interest detailed in Annex A (“SGEI’). Post
Office Limited is entrusted with the delivery of these SGEI using its network in accordance
with the contractual terms which apply to each service.
1 Victoria Street, London SW1H OET
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Innovation & Skills
CONFORMED COPY B i S
Specifically, the SGEI are provided under commercial contracts entered into by Post Office
Limited and the Government department or body purchasing the service. In the case of
universal postal services, the services made available at post office branches are ones
which the universal service provider (Royal Mail Group Limited) is required to provide
under the terms of its postal service licence.
The entrustment of the delivery of the SGEI set out in this letter to Post Office Limited does
not replace or change in any way contracts and other agreements under which the terms
of the provision of the individual SGEI are made. Post Office Limited is expected to use
reasonable endeavours to enter into contracts with the Government department or body
purchasing the service to provide the SGEI.
We confirm that Post Office Limited’s public service obligation extends to maintaining a
network of post offices beyond its optimum commercial size and providing services of
general economic interest over that network from the start of its financial year on or around
1st April 2011 until its financial year ending on or around 31st March 2012. Additionally,
as set out in the Post Office Limited Funding Agreement dated on or around the date of
this letter (the “2010 Funding Agreement”), Post Office Limited will, as a minimum, be
required to meet the following access requirements:
is 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.
i 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.
Method of Calculating Compensation
As soon as reasonably practicable following publication of its audited accounts for each of
the Financial Years 2010/11 and 2011/12, Post Office Limited will be required to provide,
in accordance with the 2010 Funding Agreement, a statement (the “NSP Statement’),
accompanied by a supporting statement from independent auditors, to confirm that the
amount of the Social Network Payment made by the Government to Post Office Limited in
respect of that Financial Year under the 2010 Funding Agreement did not exceed the
direct and indirect costs incurred by Post Office Limited in connection with the provision of
SGEI during that Financial Year, including:
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Innovation & Skills
1. all variable costs incurred in providing the SGEI; plus
2. all fixed costs incurred in providing the SGEI; plus
3. such proportion of fixed costs common to both the SGEI and other activities of Post
Office Limited as is appropriate to be allocated to the SGEI (based on generally accepted
cost accounting principles); plus
4. a reasonable profit in providing the SGEI; less
5. the revenues received by Post Office Limited from the SGEI activities,
in each case in respect of the relevant Financial Year.
For the purposes of paragraph 3 above, the fixed costs common to both the SGEI and
other activities of Post Office Limited shall include, without limitation, contributions to the
Royal Mail Group pension fund, interest costs, group central cost allocations, capital
expenditure, contributions to the cost of any employee incentivisation arrangements and
the costs of rationalising the network to maintain a network with optimal coverage for
delivery of SGEI at minimum cost within the funding envelope.
Recovery of Overpayment
Notwithstanding clause 7.2 of the 2010 Funding Agreement, in the event that the NSP
Statement discloses that the amount paid to Post Office Limited on account of the Social
Network Payment for any Financial Year exceeds the costs incurred by Post Office Limited
in providing the SGEI during that Financial Year, 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 NSP Statement, an amount equal to
such excess.
/s/ Pat McFadden
Pat McFadden
Post Office Limited acknowledges that the instructions set out in this letter are legally
binding.
Signed by Mike Moores )
for and on behalf of Post Office Limited )
Dated 24 March 2010
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BIS
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Department for Business
Innovation & Skills
Annex A
SCHEDULE OF SERVICES OF GENERAL ECONOMIC INTEREST PROVIDED
BY POST OFFICE LTD AT POST OFFICE BRANCHES
Category of service
Service provided
Service provided on behalf of
Processing social
1. I benefit and tax credit
payments to the
public.
Cash payment of state
benefits including state
pension, child benefits and
tax credits and encashment
of benefit cheques.
Cash payment of benefits
and the issuing of vouchers
to eligible asylum seekers.
Cash payment of health
benefits and the provision of
form EHIC benefits
Department for Work and
Pensions, Social Security
Agency - Northern Ireland, Her
Majesty's Revenue & Customs
and financial institutions
Home Office
Department of Health.
2. I Processing of
national identity and
licensing scheme
applications
Providing passport
application forms for
customers to complete and
return to IPS
Checking and
authentication of passport
applications and supporting
documentation
Providing vehicle licence
application forms for
customers to complete and
return to 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.
The Identity and Passport
Service (“IPS”)
IPS
The Driver and Vehicle
Licensing Agency (“DVLA”)
DVLA.
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CONFORMED COPY Department for Business
BIS
Innovation & Skills
Category of service
Service provided
Service provided on behalf of
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. savings
stamps).
Provision of facilities for
payment of tax bills and
social housing rents.
Financial Institutions individual
utility service providers, and
billing service providers
Her Majesty's Revenue and
Customs, local authorities and
housing associations.
Universal postal
service.
Provision of postal services
which the universal service
provider (Royal Mail Group
Limited) is required to
provide under its postal
services licence
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
(cashing of cheques, cash
deposit, Post Office card
account and automated
cash withdrawals and
deposits) and cash
transmission facilities
(postal orders), in particular
to socially excluded
customers. This includes
deposits and withdrawals of
cash by businesses local to
Post Office branches.
Access to Saving Gateway
accounts and Government
savings instruments
including Premium Bonds,
Investment Accounts,
Children’s Bonds and
National Savings
certificates.
Financial Institutions including
Her Majesty’s Treasury, the
Government-owned National
Savings & Investments, the
Department for Work and
Pensions, the Social Security
Agency - Northern Ireland, and
Her Majesty’s Revenue &
Customs.
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