European Commission approval of Royal Mail aid welcomed

The Government today welcomed European Commission approval of a state aid package for Royal Mail which cuts the company's pensions bills and bolsters restructuring costs with a debt reduction of more than one billion pounds.

Postal Affairs Minister Norman Lamb said: "We warmly welcome the Commission's approval of state aid in favour of Royal Mail.

"It safeguards the universal postal service by allowing the Government to relieve, in full, the historic pension deficit of the Royal Mail Pension Plan and restructure the debt on the company's balance sheet as required at the time of sale."

Mr Lamb went on: "We will now put into action - through secondary legislation - our pension solution, taking on the historic liabilities and the bulk of the assets of the Royal Mail Pension Plan and establishing the new Royal Mail Statutory Pension Scheme".

He said the approval from Brussels did not mean that a sale of Royal Mail would happen overnight.

"We have always been clear that further modernisation by the company and a period of stability under a new regulatory framework, along with state aid approval, are needed before we can move forward with a sale," said Mr Lamb.

"However, this decision is a fundamental step towards achieving that goal."

The Commission said it was endorsing the Government's plans to relieve the Royal Mail Group from what it called "excessive pensions costs relating to its past monopoly position".

A Commission inquiry established that Royal Mail was liable for higher pension costs than its private competitors thanks to "legacy costs" dating back before the sector was liberalised to open up competition.

Brussels decided it was fair that Royal Mail should have help to reduce its pension liability to that of comparable UK companies.

The cash aid was also approved as being in line with EU guidelines on "rescue and restructuring".

EU competition Commissioner Joaquin Almunia said: "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".

PA