Examination of Witnesses (Questions 680-699)
SIR MIKE
HODGKINSON, MR
DAVE MILLER
AND MR
GRAHAM HALLIDAY
CBE
10 FEBRUARY 2005
Q680 Mr Beard: Some would be free and
some would be paying.
Mr Halliday: Again, without knowing
the exact pricing and costing models of the individual ATM deployers,
it is fair to say that the level of transactions, the size of
the foot-fall in certain locations, just would not support a free
ATM, and therefore if those sub-postmasters want an ATM, they
should have the opportunity of knowing that a particular type
of ATM is available to them.
Sir Mike Hodgkinson: To clarify
that, were the previous speaker to offer a significant range of
free ATMs, we would be taking that up with great alacrity.
Mr Halliday: Indeed, we would
like to speak—
Q681 Mr Beard: That is your policy? That
is the Post Office policy?
Mr Halliday: Yes.
Q682 Chairman: But you must have an agreement
with A&L. What is your agreement with A&L? You just
cannot drop that agreement with A&L tomorrow and install free
cash machines, surely?
Mr Halliday: We have an agreement
with A&L for the provision of machines.
Q683 Chairman: What is that?
Mr Halliday: But we also have
an agreement with other suppliers for the provision of machines.
Q684 Chairman: What is the agreement
with A&L because they are increasing their numbers? What is
your contract with them—for how long?
Mr Halliday: If I am to provide
you with details of the contract with A&L, then I think I
need to do that privately, and I will drop you a line about that.[3]
Q685 Chairman: The reason I am asking
the question is that we are trying to get through this fog, to
find what that agreement is, because you cannot, I do not think,
draw out from A&L tomorrow; so the concept of charging cash
machines is here to stay for quite a time, and indeed it could
increase. Is that correct?
Mr Halliday: It could.
Q686 Mr Beard: The existing contract
between the Post Office and sub-postmasters restricts the ability
of sub-postmasters from carrying out independently many types
of business, and requires them to use suppliers chosen by you,
the Post Office. What is the rationale behind that arrangement?
Mr Miller: I touched on this earlier.
Currently, we are reviewing, against the change of law within
Europe, what our restrictions policy will be going forward. Whatever
the law is, we will comply with that. What we are concerned about
is that we run 15,000 outlets in the UK and invest heavily in
those outlets. We spend a lot of money supporting them, in terms
of computer systems. We spend money in terms of cash and stock
distribution. We spend money in terms of the way we promote products
for those outlets. What we do not want, frankly, is competitors
cherry-picking the bits of that network in order that they can
ride on the back of that investment, because that is what people
will do.
Q687 Mr Beard: Can you confirm that cash
machines are one of these restricted products?
Mr Miller: They are at present,
yes.
Q688 Mr Beard: Why?
Mr Miller: For similar reasons
to other products—because we feel people will ride on the
back of that network.
Q689 Mr Beard: The correspondence received
from the sub-postmaster indicates that for each withdrawal
made from the charging machine in their post office they received
just under 5% under the present arrangement. However, as a shop-owner
allowed to approach the Alliance & Leicester directly to install
an Alliance & Leicester machine, they would receive 97.5%
per withdrawal; and that means that if there are 1,000 withdrawals
a month they would receive around £50 from the Post Office,
but if they went direct with Alliance & Leicester they would
receive £975. Why are the figures so different?
Mr Halliday: I have already said
that we will provide you with further details of how those contracts
work, but it is important to stress that we do not know the nature
of the offer that has been received direct from Alliance &
Leicester, and we do not know whether we are comparing like with
like here. A lot can depend on, for instance, whether the ATM
deployer is maintaining the machine and providing the cash; or
whether the retailer is feeding his own cash into the machine.
It can make a huge difference, and there is a variety of different
contracts between those ranges. I think it is best if I provided
that detail privately.
Q690 Mr Beard: It does look to be a very
big gap, between 50 and 975. It raises the question of what is
happening to the £925 difference.
Mr Halliday: I have already provided
you with some information about how the money that we receive
from these machines is split, and a significant amount of that
goes in national insurance and VAT.
Chairman: We look forward to getting
that.
Q691 Mr Plaskitt: Can I go back to a
couple of earlier answers and get some clarification? In your
introduction, Sir Mike, you talked about the 550 offices that
you run and own directly. That is the Crown network, is it not?
Am I not right in thinking that you are in the process of franchising
quite a lot of that out to private operators?
Sir Mike Hodgkinson: A small element.
Q692 Mr Plaskitt: You are franchising
the one in my constituency.
Sir Mike Hodgkinson: Yes.
Q693 Mr Plaskitt: So that 550 is dwindling,
in terms of the amount of control you exercise over what happens
inside those branches. For a Crown office such as the one in my
constituency that has been franchised out, presumably the operator
in future will be free to bring in ATM machines if he wanted to,
but they could be charging machines.
Mr Halliday: Yes.
Q694 Mr Plaskitt: So that 550 core is
dwindling, is it not?
Mr Halliday: Yes.
Q695 Mr Plaskitt: In another answer you
said that you were in the process of negotiating choice for sub-postmasters.
I am not quite clear what choices you are talking to them about.
Is it between having a charging machine and no machine, or is
it a choice of a charging machine and a non-charging machine?
Mr Halliday: If I can recap, the
answer arose because of a specific Alliance & Leicester situation,
which I believe was the sub-postmaster in Scotland. The issue
was that the sub-postmaster felt that he had been required to
have a surcharging machine in place of the free machine. We are
in the early stages of discussions with Alliance & Leicester
to discuss how we can handle that situation for the future to
give the sub-postmaster an option. We do not know how those discussions
will turn out yet, but it may well be that the option will be
to have a surcharging machine or no machine. I accept that.
Q696 Mr Plaskitt: But the option is not
going to be between a surcharging machine and a free machine;
the deal you are putting on the table is a charging ATM or no
ATM.
Mr Halliday: And that would be
the case in just about every location, not just sub-post offices,
because the machines have got to be viable for the operators.
I am sure they will say that, and I believe indeed they did say
that in their evidence two weeks ago[4].
Sir Mike Hodgkinson: I think it
is important to recap what we were saying earlier. As we have
introduced free cash withdrawal over the counters, then the volumes
through some of those ATMs have gone down. It is quite important
to bear that in mind.
Chairman: You should give us the figures,
if that is the case.
Q697 Mr Plaskitt: I wanted to come back
to that because you did indeed say in your submission to us: "Post
Office Ltd has the network and the ambition to become the universal
provider of free cash to personal customers." Is not the
gradual trend, possibly accelerating trend, in post offices, of
the appearance of charging ATMs running directly counter to that
objective?
Sir Mike Hodgkinson: Again, I
think it is important just to recap on where we are. We have been
in banking since April 2003, so this is very new. We had hoped
that all of the banks and financial institutions would have signed
up with us to get free cash over the counter. In the event, everybody
did not do it. We then spent not only the computer systems and
all of the background office work to be able to do that; and our
next focus was to ensure that we had adequate, or some coverage
in Scotland and Northern Ireland, because when we started we had
very little coverage in Scotland and Northern Ireland. We managed
to get the Bank of Ireland on board, and Clydesdale Bank in Scotland
on board. The next part of this exercise has been to try and become
a member of LINK, which would enable everybody to have access
to the cash. We are in the very early stages of trying to do what
we all want to do, which is to ensure that we do have free access
to cash over the counter.
Q698 Mr Plaskitt: While you are inching
your way towards that situation, you are acquiescing in the growth
of the charging ATM network in post offices; so you are actually
contributing to this landslip we are seeing take place from a
free network to a charging one. Are you comfortable about the
fact that you are contributing to that?
Sir Mike Hodgkinson: As I say,
we are in this dilemma at the moment where a lot of the transactions
through the machines—the very fact that we have offered
free cash to 15,000 outlets with quite extensive opening hours—of
course the use of the ATMs is actually dropping, which is a kind
of natural corollary. We are still in this interim period.
Q699 Mr Plaskitt: When a charging ATM
appears in a post office, do you put a notice on it that says
to your customers that they can withdraw cash for free over the
counter?
Mr Halliday: Over the past two
years we have advertised and displayed extensively noticed about
our over-the-counter service. We have spent £6.5 million
in the past two years running television adverts, radio adverts,
newspaper/magazine, ad shells and also posters in and around our
branches, saying that we have an over-the-counter service. I believe
that we have done a lot and will continue to do a lot. We also
require our staff, where they can, to advise our clients of the
existence of the over-the-counter service.
3 Ev 144. Back
4
Note from Witness: It is the ATM deployer, not Post Office
Ltd, that decides whether a machine will be free or will levy
a surcharge. It may therefore be that in areas where the ATM deployers
are unwilling to locate a free machine, the only option that they
will present subpostmasters with is having a surcharging machine,
or not having a machine. Back
| 
