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Tim Farron (Westmorland and Lonsdale) (LD): I had a meeting last Friday night in my constituency with nearly 20 sub-postmasters and mistresses and they expressed many of the concerns that the right hon. Lady is eloquently bringing to the House's attention. She spoke of the many roles that sub-post offices could take on but are not currently permitted to accept. Is she, like me, concerned about the failure of the Post Office and the Driver and Vehicle Licensing Agency to share out as widely and fairly as they could the option for people to get their tax discs renewed locally?

Miss Widdecombe: The hon. Gentleman makes an important point, which adds to the list that I gave. I am sure that other hon. Members could chip in with points of their own. Anybody who has a rural constituency knows that we are considering a big, big issue, which causes genuinely serious concerns to sub-postmasters, who worry about whether they can stay in business.

Because of the restrictive practices, the Association of Convenience Stores, supported by the postmaster network that I mentioned earlier, presented a complaint to the Office of Fair Trading. They requested that some   of the restrictions in the Post Office contract should be   withdrawn because they were deemed to be unfair. I   agree with that. Consequently, a preliminary judgment has been made by the Office of Fair Trading. I understand the limitations that the Minister faces in responding, but I need to refer to the judgment to put it in context.

The OFT, which was tasked with examining the restrictions in the sub-postmaster contract, has ruled in its preliminary judgment that Post Office Ltd should continue to benefit from exclusions under certain prohibitions of the Competition Act 1988. The main ground for that is that Post Office Ltd provides services of general economic interest. The outcome of the definition combined with the judgment is that sub-post offices will be prevented in future from offering facilities to mail service providers other than the Royal Mail and from offering products and services across the network to replace the loss of previous Government business.

The position can only get worse if the Government do not show a genuine will to handle it. The Post Office currently circulates a contract, which it demands that sub-postmasters sign. The Minister will say that one is free to decide whether to sign a contract, but what are people to do if they do not sign it? They cannot operate if they do not sign it, so they lose their homes and their businesses. In many rural areas, postmasters of small post offices have mortgaged their private homes to keep the business going.

It is wrong that the Post Office, with all its power and   its monopoly position, can squeeze out small operations, which may be modest but are the world to an awful lot of constituents.
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7.38 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Barry Gardiner): I have far too much respect for the right hon. Member for Maidstone and The Weald (Miss Widdecombe) to congratulate her, as is customary, on securing this evening's debate. She would not want praise for mere good fortune in the draw. However, perhaps she will allow me to congratulate her on choosing a topic that is at once so broad that every hon. Member will have an interest in it and so narrow, being the subject of an on-going complaint to the Office of Fair Trading that, as Minister, I am precluded from saying almost anything interesting about the specific matter she has raised.

As it is perhaps the only time this evening that I may be able to, let me expand on that by explaining that the   restrictions in sub-postmasters' contracts with Post   Office Ltd, which limit the extent to which certain   services and products can be offered through a sub-postmaster's associated retail business, are the subject of the complaint that the Association of Convenience Stores made to the Office of Fair Trading, as the right hon. Lady outlined, in a letter dated 30 November last year. The Office of Fair Trading reached a provisional decision on 27 September this year to close its file on the matter, but invited the Association of Convenience Stores to make observations on its findings and provide any further relevant information before a final decision is reached. I understand that the Association of Convenience Stores has confirmed its intention to submit such further information, and that a deadline of 25 November has been set for that.

The unfortunate—or perhaps fortunate—effect of this is that, as the matter is effectively sub judice, it would be wholly inappropriate for me to comment in any way on this issue or that case. I can, however, comment on what I take to be the underlying concerns expressed by the right hon. Lady, which I share, in respect of two things. The first is that sub-postmasters should be properly remunerated for the work that they do, and assisted to run a commercial operation. The second is that the Post Office should seek to provide an improved service to people qua customers without imposing unsustainable losses on them qua taxpayers.

The future of the Post Office is an issue of relevance and concern to every Member of the House. We all share concerns for the future provision of services in our constituencies, and recognise that, until 1999, when the   Government launched the £500 million investment fund   for information technology, there had been underinvestment in the business for decades.

Advances in technology, greater mobility, and changes in shopping and financial habits have resulted in a growing proportion of people simply not using the post office as they did in the past, for many reasons. The   right hon. Lady referred to the direct payment of benefits, and I wholly accept that that has had a major impact on the decline in volume. However, this is not just about the changes in benefit payment arrangements, which were completed in April. The decline started well   before the move to direct payment, and applies not   only to those payments but to a much wider range of services, including Girobank, National Savings transactions, telephone bill payments and postal orders.
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For many reasons, custom has declined sharply across the network, and the right hon. Lady was right to point that out. If the Post Office is to thrive, it needs to change significantly. The Government want to see a post office network that can prosper on the basis of today's and future needs, not on the needs of 20 or 30 years ago. However, we also have to face up to present reality. The rural network is currently subsidised by £150 million a year—a total commitment of £750 million to 2008. The directly managed Crown offices lose £70 million a year, and the deprived urban network sustains a £40 million a year loss.

Several important steps to restructure and revitalise the post office have already been taken, but the future of the network rightly remains an issue of national debate, and it is clear that there are still major challenges to be faced.

Tim Farron: Will the Minister give way?

Barry Gardiner: Not at the moment, no.

Miss Widdecombe: Oh, go on.

Barry Gardiner: Oh, all right.

Tim Farron: I am grateful to the Minister for giving way, and even more grateful to the right hon. Lady for her intervention on my behalf.

The Minister has rightly pointed out that the Government will support the rural network to the tune of £150 million a year until 2008, but postmasters and postmistresses in my constituency are worried about what will happen after 2008. Many of them are considering whether they should retire now or later, and whether their business will be a viable going concern in the future.

Barry Gardiner: Of course they are, which is why the Government are considering carefully what to do at that point.

The post office network has been contracting since the   1960s. Between 1979 and 1997, Conservative Governments presided over 3,500 closures, and in all that time produced no policy on how to ensure that the network could continue to remain relevant into the 21st   century. There have been reductions in post office usage, some of which were caused by the absence of investment. Above all, however, changes in lifestyle and habits mean that our constituents do not use the post office as much as they used to. This is fundamentally about ordinary people, our constituents, making choices about how they want to conduct their business.

Private business people run 96 per cent. of the nation's post offices. They have invested not only their own money into their businesses but also a great amount of care and effort to help the post office network to achieve its highly regarded status. But with declining profitability in the network as a whole, the viability of many individual offices has taken a severe knock. Decisive action, in the form of the urban reinvention programme, was taken to restructure a sector of the network in which there was extensive over-provision, with the aim of better matching supply to demand and of creating the viability necessary for a sustainable network for the future.
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The Government committed £210 million to facilitate that restructuring, which took 2,500 offices out of the urban network, but ensured that 99.3 per cent. of people in urban areas still live within 1 mile of their nearest post office.

We now need to address the issues facing the social network of sub-post offices in rural and urban deprived areas. It is no longer clear that the needs of those communities or the most disadvantaged are best served by the current traditional, costly and inflexible structure. We need to find innovative and more cost-effective ways to deliver post office services, and we cannot ignore the fact that large numbers of rural offices have a tiny number of customers.

Indeed, earlier this year I had the opportunity to visit one such post office in the constituency of the right hon. Lady, as she knows, where there were, on average, fewer than 12 customers a day. That is not uncommon. The truth is that there are 800 offices averaging fewer than five customers a day and generating average losses of more than £6.50 per customer visit. That means that for every customer who pops in to buy a first-class stamp, Post Office Ltd. could give them a book of six stamps, a loaf of bread, a pint of milk, a bag of sugar, a packet of bacon and a big box of tea bags and still lose less money. I have the bill here to prove it.

Even in the busiest rural offices, the revenues to Post Office Ltd from transactions are less than the cost to it of providing the service. The Department of Trade and Industry, together with other Departments and the devolved Administrations, is assessing and analysing a range of financial, economic and demographic data on the rural and urban deprived sectors of the network to establish a clear picture of usage, transaction volumes and costs. In addition, Post Office Ltd is running a series of pilot trials of alternative innovative means of delivering services to rural communities.

The focus of those pilot trials is to test a range of alternative methods of delivering those services to smaller communities, in particular to explore different approaches to achieving acceptable standards of service from the traditional post office. With so many rural post   offices now having a small customer base, it is essential to recognise that the rural network must have the flexibility to adapt to the changing needs and circumstances of the communities in which they are located.

In politics, we frequently expend our energy on the   structure of the delivery mechanism rather than the quality of the service we are delivering. In recent years, we have all perhaps tended to focus too closely on the size of the network. The debate needs to move on. We need to focus much more clearly on provision of and   reasonable access to post office services, paying particular attention to innovative methods of delivering them.

Research conducted for Postcomm shows that most customers quickly adapt to changes in service provision. The pilot trials that Post Office Ltd is conducting will give further useful insights into how best to deliver services and the fluidity and adaptability of people's behaviour where a "core and outreach" approach is offered. I will be particularly keen to see how we might be able to improve both quality and service and the number of people we can reach. In this, I shall want to compare provision of a fixed outlet in a small village
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serving only a few customers each day with an outreach or mobile service that can visit not only that village, but the five or six surrounding villages whose inhabitants travel to the nearest large town for their postal services.

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