The Government has postponed a decision on opening out to competition the delivery of social welfare payments, now administered from post offices.
A Cabinet decision yesterday runs counter to the advice of Mr David Byrne, the Attorney General, who warned Ministers that delay could leave the State open to legal action from the EU. An Post has monopoly control over welfare payments in a contract worth £35 million a year.
The Cabinet is seriously divided on the issue, and no decision is expected before the local government elections on June 11th. Reliable sources say Ministers could make a quick decision after the elections in an attempt to avert possible legal action.
Ministers differed sharply yesterday on compliance with an EU directive which insists that the State must put out to tender the provision of social welfare payments to the public. At the moment An Post makes all such payments, but an EU Services directive 50/92/EC states that large public sector contracts must be offered for competition, for which An Post may also tender. The Minister for Social, Community and Family Affairs, Mr Ahern, is understood to have supported the rapid full implementation of the directive. However, the Minister for Public Enterprise is understood to be opposed. The tendering process is required to be completed by the end of this year.
The competition must be advertised well before then.
Compliance with the directive will further undermine the viability of hundreds of the State's 1,911 post offices. It was learned yesterday that An Post suggested late last year that the Government directly subsidise loss-making post offices it wanted to keep open for political or social reasons.
The deferment of the decision is intended to prevent the threatened closure of post offices becoming a major issue with just over three weeks to go to local elections. It is understood that the stated reason for the postponement was to allow "consideration of the legal issues".
However, the legal issues were explained to Ministers in a memorandum to Cabinet from the Attorney General, considered yesterday. Mr Byrne's advice is that any delay will leave the State open to legal challenge.
His memorandum to Cabinet presented Ministers with three options. The first was to put the en tire social welfare business out to tender, the second was to put just part of the business out to tender and the third - the option chosen - was to defer a decision.
Rejecting the latter two options, Mr Byrne said deferring the tendering process could expose the State to significant financial penalties. Referring to the option of putting only part of the business to tender, he said this approach would still be in breach of the EU directive and he advised against it. He said there would be less likelihood of legal action from commercial interests which wished to tender for the business, but more likelihood of such an action from the European Commission.
Only the option of putting it all out to tender "would be in accordance with EU procurements directives and the advice of the Attorney General's office and would avoid the risk of court action".
It has emerged that late last year the chief executive of An Post, Mr John Hynes, wrote to the secretary-general of the Department of Public Enterprise, Mr John Loughrey, warning that many rural post offices were unviable. "It will not be possible to cross-subsidise the rural post-office network from profits earned in the letter monopoly," Mr Hynes wrote.
"This means the financing of the rural post-office network must be resolved by the post office division itself without recourse to the rest of An Post."