FUND TO DEVELOP POST OFFICES IN DEPRIVED URBAN AREAS
OPERATED UNDER SECTION 126 OF THE HOUSING GRANTS,
CONSTRUCTION AND REGENERATION ACT 1996
MAIN GUIDANCE
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Background
1. The Performance and Innovation Unit's report "Counter Revolution - Modernising the Post Office Network" published by the Cabinet Office in June 2000 made a number of recommendations on the future of the Post Office network, all of which the UK Government accepted. One of these recommendations was that a fund should be established to help sustain and improve Post Office™ branches and associated retail facilities in deprived urban areas. The subject matter of the Postal Services Act 2000 is a reserved matter and responsibility within Government rests with the Department of Trade and Industry. However, as the purpose of this Fund is to support urban regeneration in deprived areas it was agreed that responsibility for the provision of any funding in this connection in Scotland, lay with the Scottish Executive. Scottish Ministers subsequently decided to establish a Fund for Post Office™ branches in deprived urban areas. The Fund is being set up by the Scottish Executive under Section 126 of the Housing Grants, Construction and Regeneration Act 1996 and will be administered by the Scottish Executive.
Introduction
2. Renewing and reviving deprived communities is at the heart of the Executive's Community Regeneration Statement "Better Communities in Scotland: closing the gap". The Fund to develop Post Office™ branches in deprived urban areas is an important part of the regeneration process as its key objective is ensuring that this vital community facility remains accessible to all, particularly those living in deprived urban areas. It is acknowledged that Post Office™ branches play a pivotal role in these communities and provide socially important services and facilities as well as acting as an "anchor" for other retail activity.
UK Support for Post Office™ branches
3. This Fund should be seen in the wider context of the various programmes aimed at supporting the Post Office network as follows:
i. Urban Network Re-invention Programme. A UK-wide programme of planned, compensated closures of branches in urban areas where there is over-supply, and the migration of customer traffic to nearby branches, the aim being to maintain a sustainable network of urban branches. This is being administered by Post Office Ltd.
ii. 2m Capital Rural Start-Up Initiative. The rural start-up capital subsidy scheme is also administered by Post Office Ltd and makes funding available to maintain or re-establish a Post Office facility in rural areas in the UK. The scheme underpins the formal requirement placed on Post Office Ltd by the UK Government to prevent avoidable closures in the rural network up to 2006.
iii. Rural Post Office Fund. 150m a year is being provided to maintain the rural Post Office network up to 2006 (450m in total). This assistance will provide direct support to rural Post Office™ branches to maintain front-line services in local communities and also give Post Office Ltd the financial flexibility to pilot modern, innovative ways of delivering services in rural areas.
iv. Rural Rate Relief. Rate relief (50% of the bill) is available to the sole Post Office or general store within a qualifying rural settlement. Local authorities in Scotland also have discretion to top-up the mandatory rate relief up to 100%.
Objectives
4. The objective of this Fund is to contribute to the regeneration of deprived urban areas by sustaining and improving Post Office™ branches, on the margins of viability, that provide socially important services and facilities and that act as an "anchor" for other retail activity.
Funding
5. Scottish Ministers have decided to provide 2m, over a two-year period, to support the Fund. The funding criteria are:
i. applicants are only permitted to make one application for each Post Office™ branch they operate;
ii. there is no minimum grant, but the maximum grant that can be awarded to a subpostmaster from this Fund is 50,000;
iii. funding is in the form of a one-off payment (which will normally be paid in one or two instalments) for the activities defined at paragraph 10; and
iv. funding is only available for capital expenditure on one or more of the works described at paragraph 12.
State Aid Compliance
6. Grants paid from the Fund will constitute de minimus State aid. In accordance with the European Commission's State aid rules, enterprises cannot receive in excess of ¤100,000 (approximately 60,000) of de minimus State aid cumulatively over any three-year period. Applicants for this Fund must disclose to the Scottish Executive any other State funding they have received in the previous three years.
Eligibility Criteria
7. The eligibility criteria are intended to focus assistance on Post Office™ branches most in need and with the highest social value. These are:
General
i. the subpostmaster must be able to demonstrate that without assistance under this Fund, the branch would be likely to close, either because it is moving towards unprofitability, or because of security concerns (applications that fail to demonstrate reduced risk of closure within two years will not be awarded funding);
ii. eligibility will be restricted to branches located in Scotland and classifed by Post Office Ltd as urban Post Office™ branches (i.e. located in settlements with a population of 10,000 or more) and in the 20% most deprived postcode sectors, based on the 1998 Scottish Index of Deprivation, available at http://www.scotland.gov.uk/library3/education/Area-Deprivation-Index.xls and attached at Annex A. The Executive expects to issue a new Index of Deprivation in 2004 and post offices in the 20% most deprived areas in this Index will also be eligible for funding;
iii. closure will have a negative social impact on the area served;
iv. Post Office™ branches will not receive a grant from this programme unless Post Office Ltd has confirmed that the branch is not eligible for closure and compensation under its Urban Network Reinvention Programme.
Applicant
8. Applicants must:
i. hold a valid and ongoing contract for services with Post Office Ltd. The contract must be either a Subpostmaster's Contract, a Modified Subpostmaster's Contract, or an Independent Retailer Agreement;
ii. be a heritable proprietor/leaseholder of premises in sole occupation (provided the landlord or head landlord in the case of a sub-lease is not an "undertaking" for the purposes of Article 87 (1) of the Treaty of Rome as amended);
iii. provide evidence of any other sources of funding secured and/or outcomes of other applications made; and
iv. be the legal owner or hold a minimum of a three-year lease of any building refurbished under the provisions of the Fund. Where the property is leasehold the unexpired term of the lease will be taken into account.
9. The following are not eligible to apply to the Fund: temporary subpostmasters; companies that have entered into company franchise agreements with Post Office Ltd; nominee subpostmasters; subpostmasters who have entered into a profit-sharing arrangement with another business
and subpostmasters who operate more than three Post Office™ branches (temporary and permanent).
Eligible Activity
10. The Scotland Act 1998 reserves the subject matter of the Postal Services Act 2000 to the UK Government with the exception of financial assistance for the provision of services (other than postal services and services relating to money or postal orders) to be provided from public offices. Scottish Ministers can therefore only assist with capital expenditure on improvements to non-core post office services. Funding for this purpose is provided under our powers to provide financial assistance for regeneration and development under the Housing Grants, Construction and Regeneration Act 1996. In general there are two types of activity that would be eligible for funding:
i. improving the viability of the business by improving the layout of the premises or helping to provide new or extended retail activities; or
ii. improving security so as to deter violent and other crime.
11. However, within these parameters the Scottish Executive is keen to operate the Fund as flexibly as possible. Different Post Office™ branches face different problems and therefore require different solutions.
12. Eligible works could include:
i. improving access;
ii. improving or expanding the sales area;
iii. improving the external appearance of the premises;
iv. costs associated with starting, improving or modernising the associated retail business, such as fixtures, fittings and equipment;
v. provision of ICT facilities;
vi. improving security, e.g. better lighting, burglar bars, alarms, CCTV;
vii. the costs of obtaining statutory consents and approvals and legal costs and other professional fees; or
viii. marketing of new services (must not exceed 10% of overall project cost).
13. The following activities are not eligible:
i. applications seeking funding for revenue expenditure (such as assistance with running costs);
ii. requests for funding to assist with a merger;
iii. any costs, which are related to the conduct of Post Office business or services and are costs that would normally be borne by Post Office Ltd in the ordinary course of business; or
iv. applications seeking funding to purchase or acquire any form of franchise, including a Post Office franchise.
14. Applicants must explain what the funding is to be used for, and how it will improve or maintain local services and contribute towards community regeneration, as we need to ensure spending is appropriate and provides value for money.
Application Process
15. The Scottish Executive wishes to make applying to the Fund simple and unbureaucratic. However, this must be balanced with ensuring applications represent value for money and comply with the European Commission's State aid rules, the terms of the Scotland Act and will be effective in sustaining and improving Post Office™ branches.
16. Applicants must:
- discuss their plans for the physical changes to their branch with their Post Office Ltd retail line manager before submitting an application to the Fund. These discussions will also concern the future of the branch under the Urban Network Reinvention Programme. Applications will not be considered until Post Office Ltd has confirmed that it does not intend to close the applicant's branch under the Urban Network Reinvention Programme and has provided a statement concerning physical changes to the Post Office part of the business, and the future of the branch under Urban Network Reinvention. Application forms will be ineligible if not accompanied by a statement from Post Office Ltd dealing with such matters;
- provide information about how closure of the branch will have a negative social impact on the local community and how the project will complement other community regeneration or renewal activities;
- for projects that include security improvements, ask the local police force to undertake an audit of the premises and to provide advice, which is free, on what is needed to upgrade security. If the police provide a report this should be included with the application. If not, applicants should provide the Executive with details of the advice received. Applicants should also discuss these plans with their retail line manager.
17. All completed application forms should be accompanied by two separate quotes for the cost of any works or equipment proposed in the application form. Applicants are expected to provide audited accounts for the previous two years, where available, in support of their application. Where audited accounts are not available, a current bank statement must be provided. All applicants should also submit profit-and-loss projections for a two-year period, along with details of any other public funding (received or subject to approval) within the last three years.
18. Subpostmasters are encouraged to obtain business advice from the business support services available in Scotland (such as the Small Business Gateway in Scottish Enterprise Networks and in Highland and Islands Enterprise area via the Local Enterprise Company). Further details can be obtained from:
Assessment Procedures
19. From 3 March 2003 subpostmasters of Post Office™ branches located in the 10% most deprived urban areas, and located more than half a mile from another branch, will be eligible to apply for the scheme. From August 2003 Post Office™ branches in the 10% most deprived urban areas that are half a mile or less from their nearest neighbour will also become eligible. From February 2004 all Post Office™ branches in the 20% most deprived urban areas will become eligible, but priority will be given to applicants from the most deprived areas whose applications have not yet been determined. Applications from subpostmasters in less-deprived wards will only be considered if funds are available. The dates for phases two and three will be kept under review, and may be changed. Unsuccessful applicants will be provided with feedback from the appraisal process.
20. Detailed guidance on completion of the application form is available as part of the application pack. The Scottish Executive will be able to request further information, approve grant at a lower level than originally sought (to exclude for example ineligible works) or to refuse an application.
Payment Procedures
21. Payments of grants from this Fund to subpostmasters will be made on receipt of invoices for expenditure incurred. Five per cent of the amount of grant awarded will be retained until the Executive has obtained from Post Office Ltd a statement indicating that Post Office Ltd has visited the branch and made a visual inspection to check that the changes as specified in the grant offer letter have been carried out. Once the Executive has received this statement from Post Office Ltd, and once it has satisfied itself that the grant conditions have been observed, the final 5% of grant will be released to the applicant. The Executive expects all work funded under this scheme to be carried out no later than six months after the grant offer letter is issued. In the unlikely event that Post Office Ltd do not provide a statement confirming that the changes have been carried out as specified, the Executive reserves the right to clawback the entire grant, enforce implementation of changes, or to withhold the final 5% of grant.
22. The amount of grant funding approved is the maximum that the Executive can pay out. No additional payments will be made to cover VAT.
23. Branches receiving a grant under this programme will not be eligible for closure and compensation under the Urban Network Reinvention Programme.
Clawback Arrangements
24. Clawback arrangements from subpostmasters will be enforced, for example, in the event that money is not spent properly or if the State aid requirements set out in paragraph 6 are not met or if the de minimus ceiling is breached.
25. The conditions of the grant (which are listed in full in the grant offer), will allow the Executive to clawback grant, for example, where there has been a change of use or closure of the premises within two years of the grant offer. Further details of the clawback arrangements are provided in the grant offer.
26. There will be no clawback if a subpostmaster who receives a grant from this Fund ceases to operate the branch and Post Office Ltd subsequently appoints a new subpostmaster, provided that the premises continue to be used for the purposes of a Post Office™ branch at the time of the transfer or, if the branch closes for reasons outside of the subpostmaster's control. If, however, the subpostmaster makes a decision that the premises should no longer be used as a Post Office™ branch within two years of final grant payment, and the grant has materially added to the value of the premises, clawback may be applied.