Tommy Broughan (Dublin North East, Labour)
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Question 103: To ask the Minister for Communications, Marine and Natural Resources if he will avail of the opportunity presented by the EU Commission decision that it will not oppose State aid to An Post to enable the company to discharge its universal service obligation by securing the future of the company and preserving the national sub-post office network; and if he will make a statement on the matter. [14375/05]

Noel Dempsey (Meath, Fianna Fail)
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I am aware that services of general economic interest, such as postal services, can benefit from certain financial measures only to the extent that such measures are necessary to fulfil public service obligations. This was the basis of the 2002 commission approval of the €12.7 million equity injection to An Post to fund a modernisation programme. There are no proposals to pay further State aid to the company.

The Government and An Post are committed to the maintenance of a nationwide post office network and to the universal mail delivery service, which requires that mail be delivered at a uniform tariff to every address in the State. To ensure that these commitments continue to be honoured, the fundamental requirement is not for State aid but rather for An Post to address certain structural and strategic issues relating to the mail service and the post office network respectively. In regard to mail delivery and collection, exhaustive negotiations are ongoing between unions and management, with the assistance of the State's industrial relations machinery to conclude a recovery plan that all agree is necessary. I have urged both sides to work to bring the negotiations to a successful conclusion.

Turning to the nationwide post office network, the challenge for the company is to develop a comprehensive strategy that satisfies the needs of existing customers while attracting new customers into the post office. An Post has already had some success in winning new business and continues to benefit from a considerable amount of Government business, especially in the areas of social welfare payments and savings products. To ensure that our post offices remain attractive to customers, future strategy must address electronic technology issues in a comprehensive fashion. In the interim, a pilot project will see ten small post offices computerised.

Inquiries made to the European Commission suggest that there has been no recent specific decision that will affect the position in regard to State aid for An Post. The Deputy may have in mind the recent reply to a parliamentary question from Deputy Gay Mitchell MEP from Mrs. Kroes, the Commissioner for competition. The text of the question and reply provided at the end of this reply. The Commissioner confirms that, in respect of general economic services such as postal services, the possibility exists for paying state aid for public service obligations only. This is not new and was in fact the basis for securing the 2002 approval to the €12.7 million equity injection for An Post.

In 1999, at the request of the Prime Minister of the UK, the performance and innovation unit published a report on the modernisation of the post office network. The report covered both the urban and rural network. Following its recommendations, the UK post office network is now in receipt of substantial funding from historical Royal Mail surpluses which were not transferred to the government but were invested in government gilts. The issues facing rural post offices in the UK are similar to the issues in the Irish network. The rural network has been in decline due to changing demographics, car ownership and greater consumer choice. Consequently, the network is facing a serious viability problem with average revenues at rural post offices low. The range of services in the network is similar to the range here with a high reliance on government business.

In order to support the rural post office network, the UK Government decided to fund the network to the tune of £150 million per annum from 2003 to 2006 on condition that the post office would try to prevent avoidable closures of post offices. A continuation of this funding until 2008 has recently been announced and the condition on closures has been dropped. The rural network is now considered effectively to be a social service but nevertheless, the UK Government has not agreed to an open ended funding of the network. The current funding framework is a transitional mechanism pending a fundamental decision on the future of the network.

Copy of question in the European Parliament.

The public company that provides the Irish postal service, An Post, is currently in financial crisis. Industrial action was recently taken by workers in An Post for non-payment of their pay awards under the national wage pay agreement for the past three years. Article 3 of Directive 97/67/EC 1 directs member states to ensure that users enjoy the right to a universal service involving the permanent provision of a postal service of specified quality at all points in their territory at affordable prices. Given this, will the European Commission allow the Irish government to provide a small subvention to this company currently in crisis, for a period of three to five years, so that the company can be returned to profitability? E-0632/05EN

Answer given by Mrs. Kroes on behalf of the Commission — 1 April 2005. The postal directive laid down common rules regarding the provision of a universal postal service within the Community. A set of universal service obligations, or USOs, is set out in article 3 of the postal directive to give effect to the principles of universality, equality and continuity. National postal providers have been entrusted by their national government to perform these USOs and may benefit from exclusive rights for certain services to the extent necessary to ensure the maintenance of universal service. These universal postal providers also compete in competitive markets with private operators, including both postal markets for express mail and parcels and non-postal markets for financial services.

Provided that the measure in question is dedicated only to compensate An Post for the provision of public and universal service obligations, its compatibility will be dealt by the Commission under Article 86(2) of EC Treaty. The latter provides that services of general economic interest, such as postal services, are not subject to the application of the Treaty rules to the extent that this is necessary to fulfil their general interest mission.

The analysis of the measure in question under Article 86(2) presupposes certain conditions. Amongst others, the Commission should perform an in-depth analysis about the cost of the service of general economic interest in order to verify whether the subsidy granted to An Post will not exceed what is necessary to cover the costs incurred in discharging the public service obligations, taking into account the relevant receipts and reasonable profit. As long as State compensation are granted for competitive activities of the universal postal provider, these are subject to the application of normal competition rules, especially the rescue and restructuring aid guidelines.