By Marcus Leach

The government's plans to overhaul the Royal Mail are under investigation by the European Commission amidst claims they contravene EU rules on state aid.

The Commission doubt that the government's plan - to take on Royal Mail's £8 billion pension deficit and £1.7 billion debts - does enough to address how much it would distort competition.

However, the government claims that their plan fell in line with EU guidelines as they look to privatise part of, if not all of Royal Mail.

"The Commission acknowledges the importance of the reform of the postal market in the UK," said Competition Commissioner Joaquin Almunia.

"However, we must ensure that the state measures do not provide undue advantages to Royal Mail as this would distort the conditions of competition among postal operators in the internal market."

The investigation is not unexpected, with Postal Affairs Minister Edward Davey admitting they expected it.

"It is only right that the Commission has opened the State Aid process to properly investigate the case," he said.

"However, we are keen to resolve the case as soon as possible, and are seeking a resolution by March 2012."

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