Previous SectionIndexHome Page

23 Oct 2001 : Column 52WH

Putney Post Office

12.58 pm

Mr. Tony Colman (Putney): I am grateful for the opportunity to introduce this Adjournment debate, which has important lessons for all Members of Parliament with Crown post offices in their constituencies, and will require Ministers to change—or rather, I hope, halt—the sale of such post offices, including Putney post office, and subsequent franchise arrangements. I thank the Minister for his presence, and I hope that I manage to touch on all three aspects of his ministerial responsibilities.

Before I start, I take this opportunity to pay tribute to all postal workers who are dealing with the threat of bio-terrorism at this time, especially those working here in the House of Commons. They deserve our support and gratitude. Although the actual threat has been in the United States, we need to continue vigilance here.

That is one reason why I oppose the privatisation of the Post Office. What is happening at Putney post office is the thin end of the wedge of privatisation. On 2 August, I was telephoned out of the blue by the local Post Office Counters official to be told of the sale of the Putney post office site and franchise to a third party. All existing post office staff would go. There would be a consultation period until 12 October, and the decision could be rescinded.

Putney post office is on a prime retail site, has a training school above it and a large yard at the rear. It is held on a very long lease, is profitable and has 10 retail windows and a minimal stationery offering. During the two-hour telephone conversation, I discovered that the franchisee was to be London Post Ltd., which had contacted Post Office Counters to say that it was interested in any Crown post offices going in London. It thus became the preferred franchisee, to pay a franchise fee set by the Post Office to enable it to make a profit, and with a tender list consisting of itself alone, to agree the price of a substantial freehold or long leasehold for the whole site.

In an area where modest flats sell for up to £500,000 each, considering that a substantial block of flats could be built above the post office, the value of the whole site should be very high. I wished to meet the franchisee, but was told that he would not agree to a meeting because the last time he took up a post office franchise, the local MP had caused him "considerable hassle". A deal has been done behind closed doors involving only one bidder, who refuses to meet the MP or any other democratically elected representative.

What is proposed? I have seen no plans. Incidentally, in the franchising of Morden and Wimbledon post offices, carried out in the 1990s when I was the leader of Merton council, Safeway and Elys, the respective franchisees, had negotiated in great detail about their proposals with me, as a local democratically elected representative. In each case, the original post office buildings did not come with the deal.

There have been public meetings in Putney. Post Office Counters did not help itself by changing its management structures half way through so that we ended up with people who had little idea of the background except that someone else higher up had

23 Oct 2001 : Column 53WH

agreed the deals. I had no choice other than to ask the National Audit Office to investigate, and I also asked to meet board members of Consignia plc, who have not yet agreed to the meeting.

On 13 October, however, the letter came stating that the consultation was at an end, that there were to be no changes to the deal and that the franchisee was taking over both site and franchise in November. A new code of practice has apparently come in, negotiated with Postwatch, the post office consumers council, but that does not affect this consultation, or bring about the fundamental changes to procedures that I believe are necessary.

I do not believe that Crown town centre post offices should be franchised. They provide a key service to the public and, given their prime sites, could make considerable profits for the Post Office. As a former retailer, I am astonished that there has been no attempt to recruit to Post Office Counters retailers of quality who know how to make prime retail space work as Crown post offices. If the Post Office is going to walk away from retailing and the Government are, to their shame, going to allow it to do so, there must be safeguards: first, for the public purse—because we all own the Post Office—to stop a scandalous rip-off of assets; secondly, for us all as users of the Post Office; and thirdly, for the postal workers who will lose their jobs.

First, any proposals to franchise a Crown post office should be made public six months before the tenders open. That would give time for the public to understand why the franchising was proposed, and alert local business men and women to the opportunity that might become available. It would also allow for a proper consultation period before the making of any decisions. That is a specific measure being sought by Postwatch, which has outlined to me that although the Post Office will say that no decision has been made until the consultation is over, decisions are almost always a fait accompli. If no deal is ever altered or rescinded, it not only makes a mockery of the consultation period, but means that sensible suggestions that arise from consultation, from the public or Postwatch, cannot be taken on board. That, surely, is not good business practice, especially since Postwatch and its predecessor have many years of experience of examining the good management of post offices.

Secondly, a tender should be based on profit and loss statements given to the tenderers on a commercially confidential basis. That would allow the highest tender on the basis of the maximum performance standards to be identified. In Putney, the proposal to franchise was not made public until after the deal was done with one bidder. No local businesses could therefore compete, and there was no tender for an extremely profitable franchise; the Post Office set the fee.

Thirdly, any staff working for the Post Office on site should be given the option of transferring to the franchisee. They have the expertise and should not have to move to other potentially distant remaining Crown post offices. In Putney, the franchisee has not been required to retain existing staff, who have been told that they can have jobs elsewhere in the Post Office if they want them. Apparently, the franchisee has to guarantee that new staff are of the quality of the old staff. Why will

23 Oct 2001 : Column 54WH

he not accept the Transfer of Undertakings (Protection of Employment) Regulations 1981—TUPE—and the continuity of staffing?

Fourthly, before a contract is signed for the franchise, the final tenderer should be required to show Postwatch and locally elected representatives, such as MPs, their proposal for the retail operation, and demonstrate that there will be no diminution of standards; the tenderer should reveal details of layout and other retail offerings. Safeways and Elys did that in Morden and Wimbledon. Why was London Post Ltd. able to get away with not telling people in Putney? What is it afraid of telling the public before it is too late?

Fifthly, the franchise contract should be for a maximum of seven years, and the Post Office should be able to retender at that point, or withdraw the franchise at any time if performance standards fall. In Putney, the franchisee is required to keep the Post Office where it is for seven years. It may be moved elsewhere for seven years, and the contract may then be terminated if the franchisee wishes. In the case of Putney, the franchise deal is actually a property deal.

Sixthly, I propose that where franchising takes place in an existing Post Office-owned site, the franchisee should pay, in addition to the franchise fee and all other property outgoings, the market rent to the Post Office. If the Post Office has a long lease or a freehold, as it does in Putney, before franchising, it should sell and lease back the property, pocket the proceeds of the sale and leaseback, and pass the market rent to the franchisee. That is normal franchising practice.

Seventhly, any property rights relating to upper floors, air rights for development and any developable area, such as yards or outbuildings, not needed for the operation of the franchise should be separately developed by the Post Office, either on its own or with a private sector partner to maximise the profit from the Post Office estate for reinvestment. The Post Office should be doing that for every building it owns where no operational use is being made of such spare space.

In the case of Putney, such common sense has gone out of the window. The franchisee, who was chosen by the Post Office, has been charged a franchise fee and offered a very long lease on the entire Putney post office estate, the price of which has been set, I am told, by internal post office valuers on the basis of needing to make the franchise attractive. To date, the Post Office has refused to tell me the price that London Post Ltd. paid for that valuable site. Although commercial confidentiality is understandable when a deal is being negotiated, once the deal is done, the rules of confidentiality should no longer apply, particularly in the case of the disposal of publicly owned assets. The Post Office management have been challenged again and again on why they have not approached the transaction on normal sane commercial lines. I do not believe that they are corrupt, but I do believe that there is whiff of a fire sale of assets within Consignia; it is not privatisation, but close to it. I believe in public-private partnerships when they are to the public's advantage, but I do not believe that Crown post offices have to be franchised, or that the estates should be sold off for all time.

The Government should intervene to point out that the commercial independence of Consignia plc should not mean financial illiteracy, and failing to value staff

23 Oct 2001 : Column 55WH

and listen to customers and elected representatives. No private sector retailer would do that. The shareholders would object, and ultimately throw the management out. We are all shareholders in the Post Office. It speaks volumes that the management of the Post Office spent £2 million on changing the name to Consignia. Our representative on the board is the Minister. Will he stop the shenanigans at Putney? Will he halt the sale of the site and the franchise, and order a rethink and a proper consultation? Will he use the ideas in this speech to ensure that the licence to operate does not have to be taken away from the Post Office for future generations in Britain because of the failure of this generation's management?

The Government, via the performance and innovation unit, have laid out plans to keep the Post Office as a vital centre for our towns and villages. The universal bank will not only provide access to banking services for many who were previously left out, it will give the Post Office a profitable key role in providing services at the heart of communities. Plans for internet access, for one-stop shops for Government information and transactions, and for e-commerce opportunities in post offices are on the agenda. If people could order goods or services and collect goods ordered on the internet at a post office it would increase thousands of people's access to a wide range of products and would certainly be welcomed by my constituents. Might we even see coffee being served for those on the internet or those waiting their turn? What better hub of the community could we ask for?

Can the Minister explain how the Post Office is driving forward that modernisation agenda, which provides the opportunity to retain profitable Crown post offices in the major high streets of this country? The Post Office seems too keen on getting rid of assets, rather than modernising them into workable, socially inclusive, profitable businesses. I know that my hon. Friend the Minister, with his portfolio for e-commerce, has ensured that post offices such as Putney do not miss out on the potential for services that can be provided on the internet. As in Putney, post offices are often in prime locations. Location is everything in retail, so they are in an excellent position to compete with other retailers and increase competitiveness. Why can they not sell computers, stationery or other services? One further suggestion would be to give my hon. Friend an extra power, akin to the power of his ministerial colleague with responsibility for planning. He could then call in proposed sales or franchises and demand to be shown the facts and figures, with the power to stop the proposal if it seemed that it was not the best available course of action.

I have digressed slightly, but only to try to draw some attention to the options available to the Post Office, other than the disposal of publicly owned assets as fast and as secretly as possible, as in the case of Putney post office.

At the beginning of this speech I mentioned the current threats to postal workers, particularly US postal workers. I was in Massachusetts and New York this recess before the terrible events of 11 September. One of the things that my family noticed was that whether in the smallest villages of northern Massachusetts or in

23 Oct 2001 : Column 56WH

downtown New York, the US postal service premises were at the centre of the community. They are substantial civic buildings, often new and always well maintained. They are a matter of pride. As we pride ourselves on sharing a common heritage with America, may I try to persuade my hon. Friend that Crown post offices should remain owned and run successfully by the Post Office on behalf of the Government? That includes Putney post office.

1.13 pm

The Minister for E-Commerce and Competitiveness (Mr. Douglas Alexander ): First, may I congratulate my hon. Friend the Member for Putney (Mr. Colman) on securing the debate on the future of Putney post office, and start by echoing his praise of post office workers not just here in the House of Commons, but right across the UK. They deserve our support and gratitude during these difficult days.

I listened carefully to his speech, and welcome the opportunity to respond to the issues and the points that he has raised. I know of his strong commitment to the Post Office as an institution and to the community that he represents with such diligence. His concerns centre on whether the change of status from Crown post office to franchise outlet will have an adverse impact on post office customers in the locality. I can reassure hon. Members that the Post Office Ltd. proposals that I have seen are intended to secure the long-term viability of post office facilities and services for the local Putney community, bringing a number of improvements including the extension of opening hours and improved facilities.

My hon. Friend will be aware that under the Government's reforms we have given the Post Office greater commercial freedom, and established an arm's-length relationship so that the board can structure the business as it decides how best to meet the challenges of market developments and changing needs.

From 26 March this year, under the Postal Services Act 2000, the Government's role became not director but shareholder in a public limited company. Decisions relating to the day-to-day running of the business are the responsibility of the Consignia board and management.

With regard to operational matters, I should emphasise that this is not a new development. It has been the policy of successive Governments since 1969, when the Post Office was established as a public corporation, that decisions relating to day-to-day operational matters, such as the status and location of individual post offices, were the responsibility of the Post Office board and management.

Given the size of the post office network, it was, and remains, inappropriate and impractical for Ministers to become involved in decisions relating to individual offices. With almost 600 Crown offices operating, the suggestion that franchising and conversion plans be called in for ministerial consideration and assessment is, I fear, not practical. The method of sale that the management of Post Office Ltd. choose to employ when offering franchises to the market and deciding how best value for money is achieved is a matter for their own commercial judment.

The conversion of Crown post offices to agency or franchise status is by no means a new issue. The process began in the late 1980s as a means of strengthening the

23 Oct 2001 : Column 57WH

economic viability of the post office network. Because of concerns that resulted from some earlier conversions, on taking office in May 1997 the new Government imposed a moratorium on further conversions pending a review. That moratorium was lifted in December 1998, following agreement on proposals put by the Post Office to the trade unions on a future strategy for the Crown office network. The arrangements were included in the White Paper, "Post Office Reform: A World Class Service for the 21st Century", published in July 1999.

This strategy provided for more Crown offices to be converted to privately run operations, while ensuring that the total proportion of business transactions carried out at Crown offices was maintained at no less than 15 per cent. of the total business transacted by the post office network as a whole. This percentage figure, which established that Post Office Ltd. should maintain a substantial core of Crown offices within the network, forms the basis on which the May 1997 moratorium was lifted.

The Cabinet Office's performance and innovation unit report on "Modernising the Post Office Network", published in June 2000, concluded that, as a matter of priority, the Post Office should carry out work to maximise the commercial potential of the network, the efficiency of its operations and the quality of individual post offices. The PIU report contained 24 specific recommendations, all of which the Government accepted.

My hon. Friend suggested that Putney post office was profitable. However, a particular conclusion of the PIU report was that more Crown offices should be converted to privately run operations as a means of addressing the poor profitability of the Crown office part of the network, which is currently losing about £50 million annually.

Clearly such a situation needs to be addressed in the wider interests of the network as a whole, in view of the major changes and challenges that it faces. Decisive and urgent action to reduce costs, including measures such as the planned changes at Putney post office as well as other Crown offices, is increasingly necessary. It is the clear aim of Post Office Ltd. to address the losses generated by the Crown offices and contribute towards establishing a sustainable future for the urban network as a whole by establishing bigger, brighter, better post offices with robust business potential to deliver sufficient returns to sub-postmasters.

Mr. Colman : Given that Putney post office is profitable, will the Minister confirm whether there is a pattern of first franchising the most profitable post offices rather than addressing the problems of the unprofitable ones?

Mr. Alexander : I would like to make it clear that proposals regarding the Crown office part of the network are judged on the merits of both the profitability that can be achieved in the network as a totality and the individual circumstances of individual offices.

In proceeding with conversion of Crown offices, Post Office Ltd. will continue to fulfil its publicly stated commitment to maintain a network of main post offices that offer the full range of products and services, while enabling it to invest in improving the whole network.

23 Oct 2001 : Column 58WH

However, the process is subject to public consultation with interested parties. That provides customers and local representative bodies with specific details about the facilities being offered under the proposed new arrangements, and allows for objective evaluation and feedback. The overall process has been updated recently following discussions with the Consumer Council for Postal Services, which is more commonly known as Postwatch. The revisions are included in a code of practice on the network agreed between the Post Office and Postwatch to cover post office branch relocation, closure and conversion.

Although the consultation process under the code does not extend to the principle of conversion of a particular Crown office to franchise or agency status, it gives customers and other interested parties the chance to express their views about the operational and customer service implications of planned changes. If significant issues emerge from the consultation, Post Office Ltd. will review its plans and, wherever possible, incorporate appropriate modifications. In addition to customers, the code of practice requires Post Office Ltd. to notify other interested parties, which include the relevant parish council, local authority, local chamber of commerce, Member of Parliament, Postwatch at headquarters and regional level, and the local branch of the National Federation of Sub-Postmasters.

In Putney, Post Office Ltd. adhered fully to the code of practice on public consultation. The code states:

As well as standard provisions relating to post office relocations, the section on conversions provides for Post Office Ltd. to allow an eight-week period for consultation, to provide information on the proposed franchisee, to display prominently information about the proposed change in the post office concerned and to invite customers to write in with their views on the proposal. Post Office Ltd. stated that, in considering a range of options for the Putney premises, it is satisfied that the contractual arrangement reached with Mr. Patel represents the best commercial option. Against the background of commercial freedom and non-intervention by Government, that is a judgment for Post Office Ltd. to make.

My hon. Friend the Member for Putney criticised the consultation as being meaningless because a deal with the franchisee had already been struck before the views of customers and other interested parties were sought. In the past, Post Office Ltd. put out broad proposals for change before any specific agent, franchisee or location had been identified. However, it found such an approach was unsatisfactory both from its perspective and from that of customers, who criticised the absence of any specific plan or proposals on which they could comment. Clear plans for the proposed changes allow informed and constructive debate.

Postwatch, as one body consulted about the conversion of Putney post office, has closely monitored the plans of Post Office Ltd. Postwatch's Greater London committee has sought assurances, on behalf of Putney customers, on future service provision under the new franchise arrangements. Post Office Ltd. has given Postwatch Greater London the assurance it sought: that customers in Putney will continue to receive the same range and quality of service as is currently available.

23 Oct 2001 : Column 59WH

Other key assurances received by Postwatch Greater London include commitments that the services currently provided will continue to be available throughout the extended opening hours; that, after refurbishment, there will be nine counter positions, compared with the current 10, of which a maximum of eight are in service at any one time; and that the space for post office operations will conform to the requirements of Post Office Ltd.

Postwatch was also told that the franchisee would make a substantial investment in refurbishing the post office, including installing new counters in full compliance with the requirements of the Disability Discrimination Act 1995, and that for measuring quality of service—including queuing times—and for staff training, the same procedures as those applied at Crown offices will continue. Postwatch was also reassured that the franchisee had experience and an excellent track record in operating franchise post offices. However, it will monitor the situation carefully to ensure that facilities and staffing standards are maintained and that customers receive improved service levels.

My hon. Friend asked about the existing staff at Putney post office. That is an important issue. They are Post Office Ltd. employees, and none expressed a wish to continue to work under the franchise arrangements. All have been easily and successfully reassigned to posts in nearby offices under their existing terms and conditions of employment, so there will be no compulsory redundancies.

Post Office Ltd. has been criticised for failing to advertise the franchise opportunity at Putney more directly in the locality. However, it is the long-standing policy of Post Office Ltd. to market franchise opportunities in the business community at franchise fairs and trade shows and in trade and retail press advertising, including local press such as the Evening Standard, without specifying particular offices, because to do so would create considerable uncertainty and concern for the future among the staff and customers of the named office. That might be prolonged if there were no early expressions of interest from prospective franchisees in that office.

Concern has also been expressed at the refusal by Post Office Ltd. to disclose the detailed terms and proceeds of the sale of the lease on the grounds of commercial confidentiality. However, it is operating in a commercial market and is subject to the prevailing customs and practices. I understand that it has confirmed to my hon. Friend that an extensive range of options relating to the sale of the premises of Putney post office were reviewed and considered before concluding that the terms agreed represented the best commercial option both in the wider interests of the network and in the specific continuing provision of main post office services in Putney.

Anxiety has been expressed that the move to franchise Putney post office provides no long-term guarantee of continued service provision. However, I understand that although the standard term of a franchise is seven years, in Putney's case there is a requirement for the post office to remain at the existing site for 14 years. There is

23 Oct 2001 : Column 60WH

also provision for an 18-month notice period, so ample time is available to find alternative premises for a post office should that be necessary.

My hon. Friend, who has considerable retail experience, expressed surprise that there had been no attempt to recruit those with retail experience to the post office network. However, I can confirm that such steps are being taken. The appointment of the highly experienced Allan Leighton to the main Consignia board with a role as "network champion" will be followed shortly by the recruitment of a new chief executive for the network to address the issues raised by my hon. Friend.

I acknowledge my hon. Friend's genuine desire to protect and maintain the provision of first-class postal services for his constituents. I hope that during this short debate I have been able to clarify some matters for him and provide reassurance on others. I hope that he and his constituents will draw reassurance from the detailed inquiries made, and the reassurances received, by Postwatch, which will monitor developments in Putney closely in the coming months. If my hon. Friend wishes to raise further issues with me, I shall be happy to respond to him in writing.

Mr. Colman : I made a series of proposals for a new code of practice to ensure that future Crown post offices are dealt with in a different way. Is the Minister considering those proposals as a way of ensuring that we do not have similar debates about every Crown post office in the UK?

Mr. Alexander : I assure my hon. Friend that I shall consider the matters that he raised in the debate and discuss them with him either in person or in correspondence. It is clear from the PIU report that there is a genuine commitment to the Crown offices as part of the network's future; there is an equal determination to tackle the matter of retailing raised by my hon. Friend. In considering the sustainability of the Post Office network in the years to come, it is essential that we advance the retailing agenda in what are often prime locations in communities in urban and rural Britain. The Government are committed to implementing the recommendations of the PIU report; as I said, we are already driving forward the agenda with a network champion specifically allocated those responsibilities on the board of Consignia. I am also confident that the chief executive who will be appointed to look after issues related to the Post Office network will regard those issues as being high in the in-tray when he or she takes up the post. It is important that the Government continue to support the Post Office network; there is a great deal of work to be done to ensure that we realise the considerable retailing potential for Crown offices and for the sub-post offices throughout the country.

I applaud my hon. Friend's concern about the post office in Putney; I have received representations from several hon. Members on the issue. I am fully cognisant of the strength of feeling in the House about the Post Office. I assure my hon. Friend that the issues that he has raised receive considerable attention in my Department. Even in the present difficult international circumstances, in which the focus tends to be on the delivery of mail, there is much work being done to ensure that we sustain the network's viability throughout the country.

23 Oct 2001 : Column 61WH

Next Section

IndexHome Page