§ The Minister for E-Commerce and Competitiveness (Mr. Stephen Timms)I would like to update the House on the implementation of the Royal Mail financing package.
In her statement of 13 June 2002, Official Report, column 1016 my right hon. Friend the Secretary of State for Trade and Industry announced that the Government had agreed a package of measures to put the company on a stable financial footing. This draws on the £1.8 billion of gilts (the accumulated cash generated by the business) on the balance sheet of the Royal Mail to enable the mails business to implement its renewal plan, and to support the nationwide network of post offices. The individual elements of this package have now been agreed.
MAILS
The package for the mails business has been put together on commercial terms and provides an appropriate level of debt financing to allow Royal Mail management to finance their restructuring programmes, which aim to return the mails business to profitability in 2004–05. The Government is providing £1,044 million of debt, which comprises:
£544 million of loans from the National Loans Fund (NLF), secured on cash deposits from Royal Mail; andTwo DTI bonds, one of £200 million and one of £300 million, both secured against Royal Mail's assets.Both the loan and bonds will be provided on commercial terms, and will be repayable between 2007 and 2009. Before the Departmental bonds are issued, the Department will seek Parliamentary authority, in the form of a main or supplementary estimate, for the necessary funds to acquire the bonds from Royal Mail.
POST OFFICE LIMITED
I announced to the House on 2 December 2002, Official Report, column 518W, that £450 million from the gilts will be made available from 2003 to 2006 to help maintain the rural post office network over the next few years. In addition to this, and subject to state aid clearance, which we are currently seeking from the 31WS European Commission, we intend to support the network business through its current period of transition by allowing the use of the gilts:
to repay short term loans from the Royal Mail Group to Post Office Limited totalling £420 million; andto meet the net cash outflows of POL (up to £570million) over the next 5 years, based on the decreasing levels projected in its strategic plan.