Royal Mail UK rival objects to 'unfair state aid'
TNT Mail has intensified its campaign against the state-owned postal operator’s request for Pounds 2bn of government money, writing to MPs to argue the funding would constitute “unfair state aid”.
The lobbying comes as parallel negotiations by Royal Mail with the government, its sole shareholder, and Postcomm, its regulator, near their climax.
Royal Mail’s board will meet today to discuss its response to Postcomm’s latest version of proposed four-year price controls, which will allow the cost of a first-class stamp to rise from 30p to at least 36p by 2010.
Royal Mail is understood to have gained some concessions from the regulator over price adjustments for its pension deficit after warning Postcomm that the deficit could increase from Pounds 4.25bn to more than Pounds 6bn following actuarial adjustments at the end of this month.
Postcomm is hoping for a decision from Royal Mail within 10 days on the revised controls, which are due to take effect on April 3.
TNT Mail yesterday accused Royal Mail of using “11th hour brinkmanship” in its attempts to leverage the maximum amount from both ministers and Postcomm.
In a letter sent to the main opposition parties, as well as MPs on the trade and industry and public accounts committees, TNT Mail said Royal Mail was profitable and a Pounds 2bn investment would be an “inappropriate and inefficient use of taxpayers’ money”.
It argued that the Pounds 2bn would also “greatly distort” the postal services market, which was opened up to full competition at the start of the year. “Fractions of one penny influence the buying decisions of business mailers who are responsible for 85 per cent of the UK’s mail,” the letter said.
“The proposed Pounds 2bn subsidy is equivalent to 1p for every letter Royal Mail will carry over the next 10 years, such funding is unfair and may well be contrary to the European Union regulations on state aid.”
Nick Wells, chief executive of TNT Mail, said the company had already raised its concerns with the Commission and “would consider” a formal complaint if the Pounds 2bn funding was granted.
The government cited the state aid rules when it warned last year it could not be a “bailer-out” or “funder of last resort” to Royal Mail.
Barry Gardiner, the competitiveness minister, told MPs: “If the government were to put in funds (to plug the pension deficit) specifically on a non-commercial basis, there would be a question of legality over that.”
Royal Mail rejected its rival’s argument, saying: “The question of state aid does not arise because we’ve made a strong investment case to government based on a proper commercial return for the shareholder.”
