| During our inquiry into the Post Office Urban Network Reinvention programme, we were surprised to learn that Post Office Ltd was separately reviewing the future of the network of directly managed post office branches, popularly known as Crown Post Offices. We were concerned that the review called into question the credibility of the Urban Reinvention programme, given that in many instances the Area Plans drawn up by Post Office Ltd had identified sub post offices for closure on the assumption that their customers could instead use the local Crown Office.
The Government's decision to deliver benefits and pensions by direct payment to bank accounts will cost Post Office Ltd up to £400 million in lost income. Directly managed branches have historically been the main source of pension and benefits payments for claimants, so the change to direct payment will hit them particularly hard. Even before this change, the directly managed network was losing money—£71 million in 2003-04. Last year's income covered only 77 percent of the operating costs of the network.
News of the review had raised speculation that Post Office Ltd intended to close or sell off its Crown Post Offices. We welcome the assurance from Post Office management that this is not the case and its commitment to the development of a sustainable directly managed network within the next five years. This is a challenging target. If large-scale closures are to be avoided Post Office Ltd will need to rely on the successful conversion of branches to franchised operation at a much higher rate than has been achieved over the past ten years. It is vital that customer service standards do not slip as a result.
In the recent past, Post Office Ltd's rationalisation of the sub post office network has been bedevilled by the company's consultation procedures. We welcome the company's willingness to review these procedures. In future the company should be prepared to justify its proposals with a detailed rationale for each case, including the financial case for closure or conversion to franchise. It is essential that the consultation process should be transparent and inclusive.
Like the Government, we hope that Post Office Ltd will be able to finance any necessary change to the directly managed network from its own resources. However, the Government should be prepared to provide support at least in the short term, if this proves to be necessary. Even if it refuses to do so, it should at least be prepared to pay an economic price for the services that Post Office Ltd delivers on its behalf, such as benefit payments, passports and vehicle licences. The Government cannot continue to profess its commitment to a viable post office network for the future while at the same time paying the Post Office less than the going rate for the job.
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