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Department for Business
Innovation & Skills
BIS
Edward Davey MP
Minister for Employment Relations.
Consumer and Postal Affairs
Post Office Limited
148 Old Street
Paula Vennells
London EC1V 9HQ LS October 2010 I
\ uu Qara\ennells )
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 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; and (ii) 1 April 2012 (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 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.
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.
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I
Specifically, the SGEI are provided under commercial contracts entered into by Post I
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 ‘st April 2012 until its financial year ending on or around 31st March 2015.
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:
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.
e 99% of the total population in deprived urban areas across the UK to be
within 1 mile of their nearest post office outlet.
e 95% of the total urban population across the UK to be within 1 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 outlet.
e 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.
e 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 the
Financial Year 2014/15, Post Office Limited will be required to provide, in accordance
with the 2010 Funding Agreement, a statement (the "Cumulative SGEI Statement’),
accompanied by a supporting statement from an independent financial adviser, to
confirm that the aggregate actual amount of the SGEI 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 direct and indirect
costs incurred by Post Office Limited in connection with the provision of SGEI during
those Financial Years, including:
1. all variable costs incurred in providing the SGEI; plus
2. all fixed costs incurred in providing the SGEI; plus
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3. such proportion of fixed costs common to both the SGEI and other
activities of POL as is appropriate to be allocated to the SGEI (based on
generally accepted cost accounting principles); plus
4. areasonable profit in providing the SGEI; less
5. the revenues received by POL from the SGEI.
in each case in respect of the relevant Financial Years.
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
pension funds, 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, 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 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 SGEI 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 Cumulative SGEI Statement, an amount equal to such excess.
Post Office Limited acknowledges that the instructions set out in this letter are legally :
binding. porary
Signed by QAVIO SMITA ) GRO
for and on behalf of Post Office Limited )
Dated 2S October 2010
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
1. I Processing social
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.
3. I 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).
Financial Institutions
individual utility
service providers, and
billing service
providers
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Category of
service
Service provided
Service provided on
behalf of
Provision of facilities for
payment of tax bills and
social housing rents.
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.
EDWARD DAVEY
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