State aid granted

[POSTMAN]

http://europa.eu/rapid/pressReleasesAct ... anguage=en" onclick="window.open(this.href);return false;

State aid: Commission approves pension relief and restructuring aid in favour of the Royal Mail Group

Brussels, 21 March 2012 - The European Commission has approved UK plans to relieve the Royal Mail Group (RMG) from excessive pension costs relating to its past monopoly position and to provide RMG with restructuring aid consisting of a debt reduction of ₤1089 million (around €1311 million). RMG's revised restructuring plan will ensure a sustainable future for the group in its twofold function of providing universal postal services and of granting access to its delivery network to other providers in the UK. Moreover, the plan negotiated with the Commission includes appropriate measures to minimise distortions of competition induced by the aid.

Commission Vice President in charge of competition policy Joaquín Almunia said: “In order to achieve a level playing field in postal markets, it is crucial that incumbent operators neither enjoy undue advantages, nor suffer from structural disadvantages in comparison with competitors. The relief of excessive pension costs and the restructuring aid approved today will help ensure this balance for Royal Mail and its competitors."

The Commission's investigation found that RMG was liable for higher pension costs than its private competitors, as a consequence of legacy costs originating in the pre-liberalisation period, when RMG held a legal monopoly. The Commission therefore authorised the pension measure, under the condition that it only relieves RMG of costs which are in excess of the level of pension payments made by comparable companies in the UK. This will ensure that the pension relief does not place RMG in a better position than competitors. This decision is in line with the Commission's conclusions in previous postal cases (e.g. French Post, see IP/07/1465, BPost, see MEMO/12/38 and Deutsche Post, see MEMO/12/37).

The UK also plans to grant RMG a debt reduction amounting to £1 089 million in the context of a broad restructuring plan, aimed at ensuring the sustained viability of RMG. The revised restructuring plan, taking into account the Commission's concerns, will be implemented over 2010-1015. It foresees an improved business model for RMG which will better address its weaknesses and ensure its future viability. It builds on the significant restructuring that Royal Mail has already undertaken since 2002 to modernise its business and drive costs down. The plan includes operational modernisation, the offset of the remaining pension deficit of the RMG pension plan, which falls outside the legacy costs relief, and a structural reduction of mail centres. RMG will finance 50% of the restructuring costs through several measures, such as asset divestments.

The Commission therefore concluded that RMG's restructuring plan is in line with the 2004 EU Rescue and Restructuring Guidelines (see IP/04/856 and MEMO/04/172).

Background
RMG, 100% state-owned through the Royal Mail Holdings, provides the universal postal service in the UK and had a legal monopoly over certain basic letter services until the end of 2005 when the postal markets in the UK were fully liberalised.

RMG is the only licensee in the UK postal market with universal service obligations and is required by its license to allow customers and other postal companies access to its national network on a non-discriminatory basis.

In July 2011, the Commission opened an investigation on the proposed measures in favour of Royal Mail Group (see IP/11/936). Today's decision closes this investigation.

The non-confidential version of the decision will be made available under the case number SA.31479 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

Contacts :
Antoine Colombani (+32 2 297 45 13)
Maria Madrid Pina (+32 2 295 45 30)

[POSTMAN]

http://www.cwu.org/news/archive/54870/- ... s-cwu.html" onclick="window.open(this.href);return false;

‘Good news for Royal Mail pensions’ says CWU

The European Commission has announced today (Wednesday) that it has ruled in favour of Royal Mail Group receiving State Aid approval to allow the UK government to take on the Royal Mail pension scheme and deficit. Responding to the announcement, the CWU says it is "good news for postal workers" and claims the decision as a success for the union's campaign.


Commenting from Brussels where he sat in the Commission's press conference, Billy Hayes, CWU general secretary, said: "The lifting of the pensions deficit came from the CWU. We've been campaigning for the government to take on the pension deficit for years and the success of our campaign is a result of thousands of CWU activists and their work. People laughed in our faces when we suggested it so it's been a long journey getting here.

"Today's announcement will protect the pensions of postal workers who have faithfully paid contributions for decades. We've consistently argued that the government has a moral obligation to take on the pension deficit, partly as owner of the company and for allowing Royal Mail to take a 13 year contributions holiday.

"We remain strongly opposed to privatisation. Nationalising the debt and privatising the profit doesn't make sense. It's not in the interests of customers, workers or the taxpayer. Royal Mail is now £8.4bn better off and the case for privatisation weaker still."

The European Commission described the pension deficit as placing "excessive pension costs" on the company. Commission Vice President in charge of competition policy Joaquín Almunia said: "In order to achieve a level playing field in postal markets, it is crucial that incumbent operators neither enjoy undue advantages, nor suffer from structural disadvantages in comparison with competitors. The relief of excessive pension costs and the restructuring aid approved today will help ensure this balance for Royal Mail and its competitors."

Dave Ward, CWU deputy general secretary, commented: "Today's announcement is good news for postal workers. Without these changes the Royal Mail Pension Plan would be under major threat of closure and continue to destabilise the company's finances. The changes will help transform the finances of the company and protect jobs.

"CWU remains fundamentally opposed to privatisation, but we have always supported and campaigned for the need for a pension solution and changes to regulation.

"Without a pension solution the consequences for our members and the company would be very severe, including the strong possibility of the pension scheme being completely wound up. This would still remove a barrier to privatisation but without securing our members' pensions. Without this change it would be a lose-lose situation."

The Royal Mail Pension Plan has a deficit of £8.4 billion. The transfer of assets will give the Treasury a short-term boost of £28bn but the lifetime costs will be far higher than the value of the assets. Royal Mail will continue to run a pension scheme which will be deficit-free at the point of transfer.

[Lounge Lizard]

"The revised restructuring plan, taking into account the Commission's concerns, will be implemented over 2010-1015" - travelling back in time to before the Battle of Hastings, that's how future generations won't be plagued by the pension burden, absolutely brilliant.