The Government has reduced the immediate threat to rural post offices by extending without competition An Post's contract to deliver social welfare payments.
It also said it would try to extend the services provided by post offices in an effort to boost their revenue. An Post believes its post offices will lose £3 million this year.
The decisions defuse the controversy which had threatened to cause significant political damage to the Government parties in some constituencies in the forthcoming local government elections. The original proposal that the social welfare contract, worth £35 million annually to An Post, should be put out to tender in order to comply with an EU directive had raised fears that hundreds of post offices would be threatened with closure.
The two Ministers involved in the recent political controversy, Ms O'Rourke and Mr Ahern, announced the decision after a special Cabinet meeting yesterday. An inter-departmental committee is to examine ways of developing the State's network of 1,911 post offices into "one-stop shops", providing a wide range of services.
Discussions on allowing post offices receive payments of ESB bills and sell Aer Lingus tickets are at an advanced stage. However, a proposal that motor taxation should be payable at post offices is more difficult and is likely to meet strong trade union resistance.
The new inter-departmental committee will also examine the feasibility of installing in post offices public access points to the Internet and other technology-related facilities.
The decision to give the contract to An Post again without competition follows advice this week from the Attorney General that it is not necessary to put the contract out to tender, as it does not relate to a financial service.
However, some Government sources conceded last night that the Government was aware that this legal advice may be disputed. There was a potential danger of legal action from institutions which might have wanted to tender for the contract or from the European Commission itself, the sources conceded.
The Minister for Social, Community and Family Affairs, Mr Ahern, told reporters yesterday that "if anyone wants to challenge it, including the Commission, they can".
But he insisted that "the Attorney General would not give advice lightly. He has advised that the payment delivery service and the provision of information and leaflets is not caught within the directive. The Government has accepted his advice." The Government Contracts Committee, which oversees State contracts, said in July 1998 that there would have to be a competition for the contract when it expired at the end of 1999. "After that time the contract is to be awarded following a competitive process having due regard to the relevant EU Public Procurement Directives," it said in a letter to the Department of Social, Community and Family Affairs. The committee operates from within the Department of Finance.
Mr Ahern, whose Department had until recently proceeded as if it were going to put the contract out to tender, said yesterday the issue had been very difficult and complex. Until very recently "there was a general view that this had to go out to public tender".
But now "the Attorney General has come up with the view that it doesn't come under the directive", he said.
The Government is to have discussions with An Post about how to modernise the method of delivery of social welfare payments. It is also likely to offer An Post considerably less than the 70p per transaction it receives now. The contract to provide these payments, due to run out at the end of this year, has been extended until the end of 2002.
The Progressive Democrats have welcomed the decision to extend the social welfare payments contracts with An Post without competition. "The Progressive Democrats are committed to a strong rural development and regeneration policy," said the chairman of the PD parliamentary party, Senator Jim Gibbons. "It is our aim to redress the serious economic imbalance that currently exists between urban and rural areas throughout Ireland.
"The development of the post office network to provide a `one-stop shop' service will help to redress the unsatisfactory imbalance that exists between urban and rural areas. It will also provide a great boost to many small communities who depend on the availability of a wide range of service."