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Last Updated: Thursday, 18 May 2006, 21:34 GMT 22:34 UK
Royal Mail pensions deal 'murky'
Royal Mail
Royal Mail says it is acting within competition rules
The government package to plug Royal Mail's pension hole and help it modernise has been criticised by a competitor as being unfair.

TNT Post UK said it would refer the "murky" deal to EU and UK competition regulators, saying it amounted to "state aid".

However, Post Office minister Jim Fitzpatrick said the deal followed EU and UK rules.

Most of the money will be a loan, with the rest from Royal Mail reserves.

The loan - about 900m - with commercial rates of interest must be repaid by 2013.

The other 850m comes from existing Royal Mail reserves, which it will be allowed to use to shore up a pensions deficit now totalling 5.6bn.

If we are not happy, we will take this to the competition regulator for the whole of Europe
Nick Wells
TNT Post UK chief executive

The 850m from reserves is essentially money that the Royal Mail owns, but cannot use freely due to existing arrangements with the government.

TNT Post UK chief executive Nick Wells told BBC Radio 4: "I'm really alarmed at the decision to waste 1.75bn of taxpayers' money and potentially damage competition by giving such an enormous handout.

"If we are not happy we will take this to the competition regulator for the whole of Europe. It sounds like state aid to me."

He added: "The game's not being played on a fair playing field and I'd like to know where the referee is.

Within the rules

"If necessary we will refer this to the Competition Commission."

Mr Fitzpatrick told the programme: "We believe we are within EU rules and regulations and we don't think we even have to report this to the Commission."

BBC business editor Robert Peston said the fact that the 900m was being given as a loan "makes it difficult for competitors to call it a subsidy and claim that it breaches European Union rules".

Speaking on BBC Breakfast, Royal Mail chairman Allan Leighton insisted the government was not bailing out the company.

"To keep going on about all this news about rescues and bail-outs and stuff like that is wide of the mark."

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