Select Committee on Welsh Affairs Minutes of Evidence

Supplementary memorandum submitted by Consignia PLC



  This paper has been prepared in response to a request from the Welsh Affairs Committee for a further update on the memorandum of 31 January 2002 submitted by Consignia and addresses the following specific areas:

    —  the request for a list of Post Office branches with an indication of those that are at risk of closure;

    —  proposals and strategies for the future of Post Office branches;

    —  Changes to the Code of Practice on Post Office branch relocation in light of the PIU report.


    —  As previously confirmed, the number of Post Office branches overall continually fluctuates due to re-openings however, obtainable overall figures show 1383 Post Office branches open in Wales at the end of December 2001. A full list of these is attached [Appendix 1]. This list is provided solely for the use of the Committee and the details are regarded by Post Office Limited and Consignia plc as confidential. Around 418 of the 1383 branches in Wales would be regarded as urban.

    —  The Committee requested information on those outlets which are at risk of closure. It is true to say that the strategy for restructuring the urban network will result in closure of some Post Office branches in areas in which there is a more than adequate provision of Post Office branches and where some rationalisation will result in sustainable businesses for the remaining branches. However, until discussions with sub postmasters are further advanced Post Office Ltd is unable to identify which branches will be involved in restructuring.

    —  It is Post Office Ltd policy in line with PIU recommendations to prevent all avoidable closures in the rural network

    —  Specific strategies for the urban and rural networks are discussed in detail below.


  Post Office Ltd has previously provided the Committee with an overview of its five year Strategic Plan to secure the future of the national network of Post Office branches in the light of the Government's acceptance of the recommendations of the PIU report. The following information details the latest position in relation to the initiatives which made up that Strategic Plan.

3.1  Commercial Opportunities

3.1.1  Banking and Financial Services

Universal Banking:

    —  In May 2001, 10 financial institutions[8], the Government and Consignia signed a Memorandum of Understanding that committed all parties to the universal banking proposition. There are two components to this proposition which together will ensure that benefit recipients will continue to have access to their benefits in cash at Post Office branches.

    —   A card account available only at the Post Officetm for those who do not have a bank account or for any reason do not wish to use an existing account.

    —  Access to the banks' basic accounts for cash withdrawals in Post Office branches.

The Card Account:

    —  In December 2001, the Government announced that it was making an operational assumption that around three million people will open the universal banking services card account. At the same time the Government confirmed that there will be no cap on the number of, or funding for, card accounts and that it is committed to funding these Post Office-based accounts. This clarity has enabled Post Office Ltd to move forward with planning and in March 2002 Agreements were signed between Post Office Ltd and the relevant Government agencies for provision of card account services.

    —  Post Office Ltd is now on schedule to deliver card account by April 2003, to meet Government's target for the payment of benefits directly into bank accounts via Automatic Credit Transfer (ACT).

Basic Bank Accounts (BBAs)

    —  The Memorandum of Understanding included the commitment from the banks to improve access to financial services by making their Basic Bank Accounts (BBA) available through Post Office branches.

    —  Discussions are continuing with those banks to provide BBA access at Post Office branches in time for ACT migration in 2003.

    —  A significant milestone was reached in November 2001 when Post Office Ltd announced that it had signed a contract with Link Interchange Network Ltd (LINK), the transaction management company behind the UK's cash machine network, that will allow us to offer BBA access for the 10 financial institutions

Network Banking:

    —  It is our ambition as part of our commercial banking strategy to offer network banking services, in an automated environment, for as many banks as possible. This would help to establish the Post Office branch as the community banking hub.

    * We already offer manual network banking services for Alliance & Leicester, Barclays, Co-Operative Bank, Lloyds/TSB, cahoot, smile and First Direct in Scotland. We are continuing discussions with other financial institutions to offer manual and automated services.

Automated Teller Machines [ATMs]

    —  We currently have a plan to install an estate of 3,000 machines. To date we have an estate in excess of 1400 ATMs [50 of which are in Wales] through partnerships with five ATM operators, Alliance & Leicester, Euronet Worldwide, Halifax, Nationwide and Hanco ATM Systems. These will afford Post Office Ltd customers additional convenience and allow customers of banks which do not have a relationship with Post Office Ltd to use Post Office branches to get cash using the ATM.

    —  Post Office Ltd would prefer not to see charges applied to withdrawals from these machines but in some areas it would not be economically viable for our ATM providers to install machines without levying some sort of convenience charge (such as in remote locations or machines with a low volume of transactions). Some machines installed in Post Office outlets do therefore charge a 1.25p convenience fee. The convenience fee is levied by the provider, not Post Office Ltd. An on-screen message alerts customers when a convenience fee will be charged, so they have the option of continuing the transaction accordingly or using the counter in the Post Office branch where, if they are a customer with one of the Post Office Ltd's personal banking partners (Alliance & Leicester, Barclays, Lloyds TSB, the Co-operative Bank, smile, cahoot and first direct( in Scotland only), they can withdraw cash from their accounts free of charge.

3.1.2  Your Guide [formerly known as Government General Practitioner]

    —  A large scale pilot in the Leicestershire and Rutland area involving 280 Post Office Branches commenced in July 2001. "Your Guide" offered free information and services, with a choice of easy to use ways to access them: assistance from counter staff, leaflets, freephones and touch screens along with expert advice sessions at larger branches. Important information and services from over 30 organisations ranged from subjects such as advice on benefits and entitlements, jobs, training and retirement, to transport and interesting local community information including local leisure and shopping facilities.

    —  The pilot has progressed well and ended on 1 March having seen positive reaction from consumers and content providers. From our early assessment we believe that "Your Guide" will deliver value to Government and content providers.

    —  Post Office Ltd is now working with Government on a thorough evaluation and we are keen to roll this out nationally on a commercial basis, building in key lessons from the pilot.

3.1.3  Other New Services

  In addition to the key Banking [Universal and Network] and Government Partnership opportunities [Your Guide], Post Office Ltd is actively exploiting a range of other commercial opportunities:

    —  Stakeholder Pensions launched nationally in April 2001.

    Post Office outlets provide a free first time application checking service and an automated payment service for Standard Life Stakeholder Pensions

    —  Post Office Local Collect home shopping service launched in July 2001.

    Designed primarily for the expanding internet home shopping market, this service offers consumers the convenience of an alternative delivery address facility at Post Office branches for when they are unavailable to take delivery at home.

    —  Telephony services launched in October 2001.

    Post Office Ltd has launched two new telecoms products in partnership with Sweden's pan European telecoms operator, Tele2 AB which has some 13 million telephony customers in 21 countries across Europe. Customers can make cheaper national and international telephone calls, whether at home or out and about, with the pay as you go home phone service and prepay phonecards.

      —  The home phone service offers customers savings of up to 90 per cent on international and 50 per cent on domestic calls. The service is easy to connect to—customers do not have to enter into a long-term contract and there are no credit checks for customers paying in cash. Customers pay as they go, so they can keep control of their bills.

      —  Post Office phonecards are available in denominations of 5, 10 and 20 from branches nationwide, and offer a simple reliable way to make calls to anywhere in the world, from almost any UK phone, at low rates.

    —  Home Insurance Launched March 2002:

    This product is offered in partnership with Aon Risk Services and Royal & Sun Alliance and offers customers affordable, accessible insurance to protect their homes and contents.

    —  Smart Cards:

    Post Office Ltd has introduced schemes to provide concessionary travellers with Smart Cards to be used on local transport for two Consortia in Wales:

      SWIFT Consortium—The trial launched in Caerphilly on 5 March 2001 has proved successful and the service continues there with a further local authority, Rhondda Cyon Taff, adopting the scheme since 7 March 2002.

    SWITCH Consortium—(South West Wales Integrated Transport Consortium) incorporating four Local Authorities of Carmarthenshire, Pembrokeshire, Neath Port Talbot and Swansea. Post Office Ltd introduced a Smart Card scheme on behalf of all four authorities on 4 April 2002.

    Development work continues on a more extensive Smart Card production, recharging and issuing scheme to be piloted in Manchester. Implementation is now expected later this year. This scheme will provide Post Office branches with point of sale terminals to recharge cards and selected branches will be equipped with "imaging issuing stations" including digital cameras and Smart Card printers.

    Together with our service provider partners, Post Office Ltd are involved in a number of approaches to Local Authorities and public Transport Executives throughout the UK for the provision of similar services. Many of these bodies see Post Office Ltd as a natural retail partner for these services and are considering including involvement of Post Office branches as part of their specifications for planned schemes.

    —  Bureau de Change:

    Post Office Ltd has invested significant sums over the past year to increase awareness of the availability of this product at Post Office branches. A major TV advertising campaign was launched on 2 July 2001 and ran for seven weeks with two key objectives;

      —  to change perceptions of the Post Office brand

      —  to introduce 0 per cent commission on foreign exchange and enhance market share

    The campaign proved successful on both counts. A brand tracking survey compiled by Millward Brown [November 2001] presented clear evidence of improved customer perceptions. With regard to sales, Post Office Ltd market share for Foreign Exchange and Travel Insurance has doubled since the campaign placing us second in the market behind Thomas Cook for Foreign exchange. Post Office Ltd now sells in excess of one million Travel Insurance policies per annum.

    Post Office Ltd is currently developing a joint venture opportunity to enable us to extend our involvement in the Foreign Exchange market. An announcement is expected shortly.

3.2  Network Reinvention

3.2.1  Plans for rural outlets

    —  These are defined as outlets in areas of less than 10, 000 people. Within these areas Post Office Ltd, in line with Government policy, proactively does all it can to avoid closures. An approach to this has been agreed with Postwatch and included in a Code of Practice. In order to pursue this policy, Post Office Ltd has appointed 28 Rural Transfer Advisors covering all parts of the country, who are focused on this issue. Their aim is to find solutions to potential rural closures or reopening for offices closed within the last 12 months The RTAs work with the local community, local councils and other interested bodies to find alternative sources for the provision of Post Office services. Four of these RTAs are based in Wales and they have had considerable success in recent months in restoring service to communities affected by closures. Eg:

      —  Mathern: there is a proposal for a branch with a shop and internet café.

      —  Abergwesyn: a restricted hours service is to be offered from a volunteer's kitchen.

      —  Peterston: Super Ely a new sub postmaster has been found after about a year.

      —   Aberedw: service now provided from a local pub.

      —  Blaenplwyf: sub postmaster was persuaded by community to delay retirement pending a search for a replacement. RTA worked with the community group for six months to identify a replacement.

    —  Our most recent analysis shows that at the end of December there had been 16 net closures in Wales between March 2001 and December 2001, comprising of 2 urban and 19 rural office closures together with 1 urban and 4 rural office openings. This figure of 16 net closures over the fist nine months of this year compares favourably to 71 net closures over the full year last year (April 2000-March 2001). This follows the national trend where there was a net reduction of 192 offices between March and December 2001 compared to 435 over the same period in the previous year.

    —  The PIU report asked Postcomm to advise Government about mechanisms for financial support for the rural network in Autumn 2001. We understand Postcomm have provided that advice, and we await the opening of discussions with DTI on the financial support which is appropriate. It is important that these discussions start soon. The position of the rural network remains tenuous—the efforts of the RTAs have met with considerable success in reducing the rate of closures which occur because we can't get someone to run a particular office—but a longer term solution requires the financial support the PIU recommended.

    —  In the meantime the Government has allocated 2 millon under the Rural Post Office Start Up Capital Subsidy Scheme to help small rural Post Office Branches get established. One of the tasks of the RTAs has been to help support activities relating to this fund and have made good use of it in developing some of the solutions detailed in the examples above. Overall to date there have been eight applications from communities in Wales for support from the fund and so far 25k has been awarded with applications for a further 49k well advanced.

3.2.2  Plans for outlets in deprived urban areas

    —  Government have set aside funds to help investment in branches which serve our most deprived communities. DTLR are currently developing a scheme to utilise these funds in England. Similar funding has been provided to the devolved administrations to support Post Office branches in deprived areas of Wales, Scotland and Northern Ireland. We await proposals for utilising these funds.

3.2.3  Plans for Urban outlets

    —  Post Office Ltd has put in place a plan for urban reinvention to address the need for investment in improvements in the environment and standard of service in urban Post Office branches and the inability of the network to attract sufficient external investment for this purpose in recent years. With the support of Government and the NFSP, Post Office Ltd proposes the creation of branches where the combination of enhanced retail returns through more professional and, typically larger, retail offerings and increased Post Office income are sufficient to represent attractive investment propositions to both existing sub postmasters and other potential partners.

    —  The programme aims to create viable Post Office branches by merging outlets where appropriate, based on detailed analysis of the opportunities in each area and sub postmaster preferences and ensuring proper local consultation takes place prior to local changes being implemented.

    —  The reinvention programme also includes a strand to develop improved operational models for these remaining outlets. Typically they will offer extended opening hours, a wide range of Post Office products and services and a more attractive environment thereby providing an improved service for our customers. They are also likely to provide a strong, branded convenience offer in order to compete effectively with other retailers' offers.

    —  Implementation is subject to the outcome of Government's approach to seek EU State Aid clearance and UK Parliamentary approval for a funding package to provide compensation to sub postmasters who leave the network under this plan.


    —  Recommendation 11 of the PIU Report stated `The Code of Practice should require the Post Office to consult additional stakeholders in deprived urban areas (such as the proposed Local Strategic Partnerships in England, and corresponding bodies in Scotland, Wales and Northern Ireland) as a condition of closure and relocation of Post Office Branches in these areas'.

    —  In Autumn 2001, Post Office Ltd introduced the following key changes through a revised Code of Practice agreed with the Consumer Council for Postal Services [Postwatch]:

    —  The confirmation in the document of an extended eight week period for consultation in the case of conversion of a directly managed Post Office branch to one managed by a franchise.

    —  The inclusion of the commitment to consult more widely in cases of closure in deprived urban areas, in particular to consult any official bodies established to promote development on the particular area (eg Local Strategic Partnerships).

    —  The inclusion in the code of practice of a comprehensive set of processes which Post Office Ltd had established to ensure that everything possible is done to avoid closures in rural areas.

    Copies of this revised code of Practice which was published in bilingual Welsh/English format in November 2001 will be made available to the Committee

    —  Post Office Ltd continues to work with Postwatch to develop approaches to meet the special circumstances in relation to the reinvention of the urban network as that programme moves into the implementation phase. It is anticipated that these discussions will be concluded in the late Spring when a further revision to the code published.

Anna Malley

Head of Company Secretarial

15 April 2002



8   Barclays, RBS, HSBC, Lloyds TSB, Abbey National, Nationwide, HBOS [BOS & Halifax], NAG, CoOp, Alliance & Leicester. Back

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