Select Committee on Welsh Affairs Minutes of Evidence

Examination of Witnesses (Questions 40 - 59)



Mrs Williams

  40. Is that a new idea?
  (Mr Sweetman) There have been one or two examples of it on local initiative. We have picked up those local ideas which have worked in a number of communities and now put it on to our list of solutions which can work right across the country. We are now asking all our retail network managers, as they look at their own areas, if this would work in their community. Are there sub-postmasters who would provide this roving service? We have developed a mobile computer version of Horizon which will allow people to move out into that community and operate the service, rather than having a fixed-base Horizon solution. We are putting all the infrastructure in to allow this to happen. I think you will see many more solutions like this. It is like a hub and spoke service.

  41. I asked if this was a new idea. Can you tell us how new it is? The last time you came in July 2000 we discussed this. Is it a fairly new idea? Can you be more specific?
  (Mr Sweetman) There have probably been examples over the last couple of years where it has happened locally. There might well have been examples earlier but I am not familiar with those.

  42. Could I go on to the reasons for post office closures? Between 43 and 46 per cent of post office closures are due to the retirement of the sub-postmaster or sub-postmistress, either because of age or ill health. Do you have separate figures for the proportion of sub-postmasters or sub-postmistresses who retire due to ill health?
  (Mr Sweetman) No, we do not. The statistics that we shared with you are the categories into which retirements are placed. We do not have a separate category for age or ill health.

  43. Do you think it would be a good idea to have separate figures for that?
  (Mr Sweetman) Yes, that might make us more informed. As they are not employees, they do not have a retirement age. It is difficult to predict when people will decide age is the factor. Often the age and the ill health factors do come together. There is often a combined reason why people decide to retire. Up to now we thought this was a reasonable categorisation.

  44. When a person retires due to age, is that not an event which is predictable months or even years in advance? They do give you notice. We know of particular instances we have discussed previously. What advance preparation do you make to replace those people?
  (Mr Sweetman) They are not employees and therefore they do not have a retirement age.

  45. But they give you an indication?
  (Mr Sweetman) They do and some people might say, "I am going to retire in a year's time", but under their contract they can do that with three months' notice. Clearly those people who have indicated that they will be retiring a year in advance give us a greater opportunity to look for alternatives. If they give us just the three months' contractual notice, then that is a much more limited time. In both cases we think it is sufficient time to find a replacement.

  46. Would you agree that in some instances, although a long notice is given, you have done nothing about it?
  (Mr Sweetman) I cannot accept that that is our policy. If you have examples, then I will certainly follow up on those.

  47. They are not new examples.
  (Mr Sweetman) If people give notice, then that is the key for the recruitment process to kick in. We do have and we have recently revised our recruitment process so that it does kick off immediately we are told.

  Mrs Williams: I find that astounding but I will come back to it later.


  48. It is probably appropriate at this point for me to mention the Bwlchgwyn case in my constituency. You were given a whole year's advance notice that the postmaster wanted to retire. He put the small general shop up for sale. Every person interested in purchasing the shop with the sub-post office attached apparently, although my constituent did not know about it at the time, inquired of the Post Office how much that would bring in and was told precisely half of what my constituent had been telling the prospective purchasers. This is because of the policy which you say has now been changed, and I hope that is true. The worrying aspect of this was that they did not tell the existing sub-postmaster that that had changed. My constituent was trying to sell his property as a going concern, which would have been good for the village, and at no stage had anyone told him that the hours had been cut by 50 per cent, which meant that he could not sell the property for a whole year. He has now given up on that. He has decided to convert the house back into a dwelling and the village looks as though it is going to lose a permanent sub-post office because of this policy of cutting back the hours and, worse still, not telling the existing sub-postmaster? I think that is a deplorable situation and he does as well. I am sure everybody will object in view of what happened.
  (Mr Sweetman) We did not handle that well. I would not like to defend what we did there. I think more openness was needed in that case. I would not want to defend what happened.

  49. It is good of you to say that but it does not help that Bwlchgwyn postmaster, unfortunately.
  (Mr Sweetman) It does not.

  Chairman: I would be interested to know what is going to happen to villages like that in the future.

Mrs Williams

  50. Can I pin you down again, going back to the question about when people tell you that they intend to retire and give you notice, in some instances many months? Have you ever thought as an organisation of being proactive in this area rather than waiting for complaints from people like ourselves?
  (Mr Sweetman) We do maintain a national list of people who are interested in becoming sub-postmasters. We maintain a mailing list so that when opportunities do come up, we send that list out. We have close relationships with property agencies that specialise in this area and we make sure that they are informed about the opportunities which are coming up. We keep close links with parish councils, especially when we know of a retirement coming up where contact is made. I think we have some very close relationships with parish councils. We work in co-operation with the Welsh Development Agency in helping new sub-postmasters come in and invest in new premises. I think there are good examples but, from what you are saying, we are nowhere near consistent enough.

  51. Can you tell us who actually sits down and compiles this list that you have mentioned?
  (Mr Sweetman) I will ask Mike Granville to take you through the detail of that.
  (Mr Granville) We have recently reiterated the process to our field managers who look after the offices in the field on a local basis. If a sub-postmaster either resigns his appointment or, taking your point, we understand that he is thinking of doing so, the process that should take place is that firstly there may well be the opportunity for that office to transfer commercially. In the majority of cases when a sub-postmaster resigns he is able effectively to sell his business on to an incoming sub-postmaster. There is an infrastructure that does that and transfer agencies that specialise in this area. In the majority of cases that happens. The difficulties occur where that does not happen, either because the sub-postmaster has not got anything to sell on or, for example, wants to convert the premises back to a house—and the Llansilin case was an example of that—or he is unable to sell his business. In those cases there is a problem and that is where the potential arises that the post office might not be able to continue. In those cases we talk to the local authorities and the parish council and tell them there is an issue. We canvass other areas of the local community to see if there are any other people in that community who could operate the service, another shop, for example. We would advertise and see if there are any interested parties. We would look at the hours of the post office, taking account of the point made earlier about the reduction in hours having an economic impact. There are cases where changes in hours can make the opportunity more flexible and therefore attract applicants who would otherwise not wish to run the post office full-time but may wish to run it part-time. We would look at those opportunities and at the potential, as Stuart Sweetman mentioned, and take the advice of the postmaster, for example, to provide a service, if we could find nothing fixed locally. As a final position, we would seek to go back to the local community and say, "Are there any other options?" There are examples around the country of voluntary groups coming together and operating the post office. We would look at those opportunities. Our aim is to go through this process and make sure we maintain the post office service. It is only if we come out at the bottom of that process with no clear solution that we are into this position of force majeure and closure. You have quoted cases where that process clearly has not gone through to the depth that I have talked about. Clearly there are issues we need to look at, but that is the process we seek to follow to try and do everything we can to ensure that rural post office do not close and that we are able to take the service forward.

  52. It is clear to me and I am sure to my colleagues that that is not the practice on the ground. Can you give us genuine reassurance this morning that those steps will be taken in future because that certainly has not been done in the past.
  (Mr Sweetman) I can certainly give you that assurance. It is a procedure that we have discussed with Postwatch, the consumer body which looks at the whole of the Post Office. It is a procedure we have shared with the regulator, PostCom, and it is a procedure that we will follow.

Mr Llwyd

  53. I am interested in what Mr Granville said earlier on about most cases when the sale goes on and it is all well and good and everybody is happy and the purchaser buys, but I am afraid things are not all that happy there either. I have an example of a sub-post office in (Dynefor) in my own constituency. It was such a bad example that I took it directly to the Minister, Mr Alan Johnson, who was aghast at the story. All the red tape and delay involved in the vetting of the proposed purchasers meant that in the end they said, "I am sorry, six months have gone by and we are not going to bother". When a second purchaser came in, the same rigmarole, and this time I think it lasted for seven or eight months in all, even asking them what blood group they were, and this kind of nonsense. Eventually they said, "Right, we are off as well". The Minister said he hoped that would never happen again. I do not think, with the advent of the PIU report, that things are going to change all that much. I have to say that I think there is a culture in your department that is about rationalisation and nothing else. Why is it, for example, that two separate purchaser there in Dynefor were scared off because of the delay?
  (Mr Granville) I cannot talk about that particular case. I admit that I do not know the details. I can say that across the UK historically about 10 to 12 per cent of post offices have changed hands over the year. That turnover rate is down at the moment and it is a function of the marketplace for buying and selling sub-offices. That means that in a typical year about 1500 offices across the UK would be changing hands through the kinds of commercial processes that I have talked about. There are transfer agencies specialised in this area. We do have procedures that in the vast majority of cases allow that transfer process to go ahead smoothly. Clearly there have been issues in the case that you talked about. Obviously there has been an analysis of those particular cases. It is very much in our interests to ensure that the process for applicants who are suitable coming forward—clearly there is an issue about suitability—and who can take over and run the businesses effectively goes as smoothly as possible. That is our aim, which is in the interests of ourselves, those sub-postmasters who are selling and the community that those post offices serve. That is our approach to the issue.

  Mr Llwyd: But people feel let down. That person in Dynefor has lost two potential purchasers. To the best of my knowledge, and I have looked at it in detail, neither set of applicants was unacceptable in any way. A delay of five to seven months is totally unreasonable in a commercial conveyance transaction.

  Chairman: Obviously that is a statement with which we would all concur. We accept what you have just said, Mr Sweetman, that this is not going to happen again and there is going to be a huge culture change in Post Office Counters to enable that to happen. I hope that will be the case.

Ms Morgan

  54. Going back to Houghton near Milford Haven, the sub-postmistress resigned after 25 years' service because the income she received was only £4.5p per hour, which is in fact five pence less than the national minimum wage will be in October. I wondered if you could tell us what are the typical hourly earnings of a sub-postmistress or postmaster in rural Wales.
  (Mr Sweetman) Legally sub-postmasters are not employees. Their remuneration is not by the hour. It is basically a two-part remuneration system. One part is a fixed fee for the office, which is not variable by the amount of business passing through that office. The second part is based on the number of transactions of each particular type which on a monthly annual basis pass through that office. Typically, the smaller the office, the higher the proportion of fixed fee. This we have designed into the remuneration system and agreed with the National Federation of Sub-postmasters to give a high degree of protection to the smaller end of the sub-postmaster market so that they do not see the large fluctuations in their pay. To scale it, if the remuneration level is, say, £8,000 a year, typically probably just over £6,000 of that will be fixed, irrespective of the amount of business that they do. That is the sort of proportion. The larger the office, the higher proportion is based on throughput. In the very small offices, again we have agreed with the National Federation of Sub-postmasters that there will be top-up payments to allow an equivalent remuneration to the minimum wage. The minimum wage requirements do not apply to sub-postmasters but we have agreed that we would take note of that and, because the nature of the contract is not for personal service, a sub-postmaster can, and some do, employ somebody to look after an office one hundred per cent of the time. We now give them a level of remuneration where they can pay somebody at least the minimum wage to run that office one hundred per cent of the time. That is a long answer to your question but we do not pay people by the hour.

  55. So the fixed fee varies according to the size and business of each post office?
  (Mr Sweetman) Yes.

  56. But in the smaller ones it makes up a bigger proportion; is that what you are saying?
  (Mr Sweetman) That is absolutely right. That gives them protection from the vagaries of the business. In three years' time when the payment of benefits starts to cease, they will be protected through that mechanism by reductions by quite a considerable degree. That is one of the big challenges. In national terms, to give you an overall feel, we pay sub-postmasters about £550 million a year, of which just over £200 million is this fixed fee element. That is a form of support subsidy across the network, which is an important mechanism for maintaining what are economically unsustainable outlets.

  57. Do you have those figures for Wales?
  (Mr Sweetman) No, I do not but broadly it would be about 8 per cent of those numbers.

  58. That is at the same sort of level and you do not have any separate figures for Wales, do you?
  (Mr Sweetman) No, we do not.

  59. It would have been helpful for the Committee if we did have some of these figures for Wales.
  (Mr Sweetman) I clearly recognise your interest but Wales is not an organisational unit within the Post Office; it is part of an area. We do not have the management information to support absolute Welsh numbers. We have a different configuration, unfortunately.

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