EU law may scupper Consignia congestion charge hopes

Consignia’s hopes of avoiding having to pay congestion charges to drive Royal Mail vans in to central London could be scuppered by European legislation.

It is a further blow to the cash-strapped mail operator, which warned this week that it would lose millions more each year if it had to pay the charge, which is to be introduced in the capital in February under plans devised by Ken Livingstone, London’s mayor.

Consignia said yesterday it was considering calling on the Department of Trade and Industry to ask the European Commission to review the exemption.

Consignia is in discussions with Mr Livingstone’s office to obtain a “100 per cent discount” on its Royal Mail services in London. When the mayor announced plans to introduce a congestion charge he said some form of exemption for certain Consignia vehicles, and possibly for those of their competitors, “merits further consideration”.

But Transport for London said yesterday it had been advised by its lawyers that such an exemption may be illegal under European Community regulations on state aid.

Under article 87 of the EC treaty, any state aid that distorts or threatens to distort competition is deemed “incompatible with the common market”. Granting exemption to a private sector company such as Consignia – even though it provides a public service – may contravene this law and would require the government to petition the Commission.

Royal Mail handles 6 1/2m letters, a day in central London, carried by an average of 1,200 vans. If all vans were to pay the congestion charge, Consignia estimates it would cost Pounds 1m-Pounds 2m a year. “Given central London has all the government departments, we think we should get a discount,” it said.

The embattled mail operator said last week it was already facing a loss of Pounds 460m if Postcomm’s proposals to freeze prices from March 2003 were approved.

Transport for London argued that Consignia was not the only company delivering parcels in London, so it should not receive more favourable treatment than the competition. Granting an exemption to Royal Mail vans would pave the way for other services – such as British Gas and London Electricity – to ask for discounts.

Consignia, however, said it had asked the mayor for an exemption on the basis that it provided a universal service. “This places a unique burden on us, no other company provides that. We are still in discussions with the mayor because we think we have a strong case for an exemption.”