Examination of Witnesses (Questions 120-139)
POST OFFICE
LIMITED
30 NOVEMBER 2005
Q120 Sir Robert Smith: From what you
said is it five years' time where you plan to be in a sustainable
position?
Mr Leighton: About five years.
Sir Michael Hodgkinson: It is
a challenge.
Mr Leighton: It is a challenge
but that is the challenge we have got. It should be do-able.
Q121 Sir Robert Smith: So is there going
to be a timetable for consultations on the strategy once you have
got it?
Mr Leighton: Let me take this.
The answer to your question is we ought to talk to Postwatch about
it but, frankly and I go back to my point we are talking about
five offices and six offices. It is not as if we are talking about
thousands of offices and therefore if we cannot deal with some
of these things offside and say, "Look, this is where it
is," have a conversation, does it fit—
Q122 Sir Robert Smith: But you are developing
a strategy that involves a) a reduction, be it physically or of
availability and b) quite a considerable amount of franchises.
You are negotiating first of all with your workforce to understand
where you are coming from and then presumably you are going to
develop towards a general strategy for implementation of achieving
what you say in five years will be a sustainable network? Is there
not a point at which consultation—
Sir Michael Hodgkinson: I think
it is quite important to understand that there are going to be
approximately three phases to this programme. The first one is
getting a broad outline agreement, which is what we are in consultation
on at the moment. The second phase will identify as many properties
where there can be clarity as is possible. We have to accept and
do not quote the number because it is illustrative that there
are going to be possibly at least 100 or 150 of these leasehold
premises or where redevelopments are taking place where the precise
decision will depend on what properties are available at the time
in the high street, where you can go, what the options are. I
think it is quite important to understand that there are going
to be these three broad phases to the strategy. For example, for
a leasehold coming up in five years we might say we know we have
got a problem, but the chances of knowing precisely the way of
best solving that leasehold problem is probably four and a half
years away. I think it is quite important that everybody understands
the nature of this exercise which is heavily property dependent,
and some of those property-dependent decisions come up at the
time the leaseholds are naturally rolling forward, and so that
is what we are trying to manage here. It is quite a complex exercise
and we have to do it, as David has said, with as much honesty
as we conceivably can with the staff and the public as the decisions
become clear.
Mr Leighton: And there is a piece
of negotiation clearly on each one of these but also you cannot
declare your hand too far in advance.
Q123 Richard Burden: I am afraid I would
like to take you back to the relationship between this review
and the Urban Network Reinvention Programme because to some extent
we are here today because in the middle of our discussions about
the Urban Network Reinvention you dropped it on us that there
was going to be a review of Crown post offices. At that point
we did not know about that. Accepting that you are only looking
at five over the next year, if you have got 425 of the 555 Crown
post offices that are receiving branches, and even one of those
is scheduled for closure, that undermines the network reinvention
process in that area, does it not?
Mr Mills: It may do but I cannot
give an affirmative answer to your question because we would need
to look at the individual branch that we are discussing and in
any event that branch would go into consultation with us about
the need to close.
Q124 Richard Burden: This is what I am
getting at because urban network reinvention was based, we were
told, on area plans. Area plans were first talked about not when
we were having you in front of us about the urban network reinvention;
they were first talked about when you were in front of us looking
at the impact of direct payment. The point we put to you then
and it was the summer of 2003 if I remember is we said to you,
look, the real problem is that as you are responding to the pressures
on you and suggesting the closure of an individual post office
here, you are pepper-potting, so could we not look at it and have
individual communities got the right to look with you at what
the needs of the area are, what the pressures of the area are,
what the pressures on you as a commercial operation are, and you
draw up a plan on that. You said, yes, good idea and later that
year you published that and you said that is what you were going
to do.
Mr Mills: Yes.
Q125 Richard Burden: That was not what
you did.
Mr Mills: Yes it was.
Q126 Richard Burden: If it was what you
did, how come at the end of that process you say, "Actually,
there is something that we were not telling you about at that
stage which is the fact that we are going to be reviewing the
Crown post offices as well," which was not part of the previous
discussion? Why did you not synchronise the two?
Mr Mills: That was not what we
were telling you about at all. What we said was that the Crown
post offices in terms of their receiving value and in terms of
the volumes that they are likely to receive and/or were conducting
themselves were all included in every single area plan, without
exception.
Q127 Richard Burden: So in that case
why did you not consult on that?
Mr Mills: Consult on what, I am
sorry?
Q128 Richard Burden: If they were included
in the area plans and you were meant to consult on the area plans,
why did you not consult on that aspect of the Crown post offices
in those area plans?
Mr Mills: I do not understand
what there was no consultation on.
Q129 Richard Burden: I thought the idea
of the area plan and what you were assuring us was to involve
local people and local authorities and so on in the service for
their area, so the existence or non-existence or possible pressures
on the existence of a Crown post office is relevant to that, particularly
if it is the main receiving branch of a sub-post office.
Mr Mills: I am sorry, I still
do not understand what there was that we did not consult on with
you.
Q130 Richard Burden: Your strategy.
Mr Mills: The strategy is of no
closures.
Sir Michael Hodgkinson: Could
I help in this exercise?
Mr Mills: I have said that about
four times now.
Sir Michael Hodgkinson: Could
we just look at the position of Belfast which is quite illustrative
of the types of things that are going on. Do we think it is of
material change to network reinvention that we moved to a better,
newer, more appropriate, cheaper post office 200 yards down the
high street? If that is really serious then the answer is we may
have got a slight problem, but I would argue that that is fundamentally
replacing with more appropriate premises the Crown post office
network. This exercise is not about closing large numbers of the
Crown post office network. This is about finding more appropriate
premises from both a cost point of view, handling the leaseholds
as they come up for review, and also looking at very difficult
freehold properties like the Hastings one. What we are saying
is as part of that process and we are not closing, we are trying
to maintain the services of the main post offices in the area
that we might well be operating out of different premises in the
vicinity or some of those premises when they are changed could
also move to franchise.
Q131 Richard Burden: So are you suggesting
that really you would only think it relevant to talk to people
if you are suggesting a closure?
Sir Michael Hodgkinson: Or very
substantive change.
Q132 Richard Burden: With respect, that
is not what you said to us in 2003.
Mr Leighton: Richard, again, with
respect, 99.98% of all of the closures are being consulted on
in advance. Okay. For the 0.02%, which might be the five or six
Crown offices, it looks as if we have not but on the assumption
that Mike's point is correct and the intention is to keep them
open in a similar location in better premises, frankly, if we
got that wrong, I apologise but in the scheme of things I just
do not think—
Q133 Richard Burden: I just want to put
to you what would have been the problem if, let us take my own
area, when you came out with your network reinvention proposals
for you to say, "This is what we think needs to happen as
far as the sub-post office is concerned." These are the issues
for the Crown post office, which you had identified by then anyway
(not necessarily solutions but you had identified the issues),
what would be the appropriate mix of the two, what are the opportunities
for the new franchises, which actually by the sound of it could
have helped safeguard at least one of the sub-post offices you
have decided to close? What would have been the problem in involving
people in that way?
Sir Michael Hodgkinson: Can I
say two things, which is why I made the introduction at the beginning.
I can look at this from the outside because I came in not at the
beginning. You had the most appalling business you could ever
imagine here then facing a crisis of losing the benefits system,
the sub-postmasters desperate to get out if they possibly could,
so a new management team coming in simply had to prioritise its
tasks and the most important thing was to try and ensure that
we had sub-postmasters through the 15,000 network who could potentially
have a viable business and wanted to stay. The second thing was
to take as much cost as we sensibly could out of the business
that did not impinge on the public. The third thing was to go
for brand new products that would give the post office a future.
The next part of the exercise was very complicated because, first
of all, you could not really start it until you had done the first
two. In an ideal world, if this had been a very well-managed business
and it was not lurching from crisis to crisis, I think there would
be a point in what you are saying, but that is not where these
guys were two years ago. I think people do have to accept that.
Whether we like it or not, that was a fact. The second part is
that this is a very complex exercise and you are dealing heavily
property by property but we also have to consult with our own
staff and other people on the general shape of the exercise and
what was done, and what is still the intention, was that people
did put in their view of what the Crown post office receiving
capability was and this exercise is about attempting to maintain
that same Crown post office receiving capability, albeit in possibly
different properties and possibly some of those offices being
franchised. I think people did the very best they could, given
where they found themselves. That was an honest view from what
I saw from outside.
Q134 Mr Hoyle: Who were the consultees?
Sir Michael Hodgkinson: The first
one is our staff.
Q135 Mr Hoyle: We recognise that and
quite rightly so, but who is second, third and fourth?
Mr Mills: In terms of working
out how we handled the strategy for the managed branches?
Q136 Mr Hoyle: Who do you consult if
you are thinking of closure? We know you consult the staff. Who
else do you consult? Let us say you are closing Clitheroe. Who
would you consult?
Mr Mills: Postwatch. It is a natural
part of the consultation process.
Q137 Mr Hoyle: How many?
Sir Michael Hodgkinson: We have
to divide this between closures and franchises.
Q138 Mr Hoyle: Sir Michael quite clearly
said that you consult and you have a section of consultees that
you must consult with. Who are they?
Mr Mills: MPs, local authorities,
local representatives, local organisations that have an interest
in the Post Office, as many stakeholders as we can find who would
represent a view to us that can be focused down on Postwatch so
that Postwatch can come back to us and give a whole series of
points about what we are doing or not so that we can improve what
we are doing. Perhaps I could give you an illustration of that.
We were set upon the closure of 3,000 urban post offices. We have
halted that at roughly 2,500 because we found 500 locations where
the arguments against what we were doing were compelling when
the consumer interests were taken into account.
Q139 Mr Hoyle: I know one where you did
not. When does the consultation process start? How long before?
Mr Mills: How long before the
closure?
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