Memorandum submitted by the National Federation
of SubPostmasters
1. EXECUTIVE
SUMMARY
1.1 NFSP believes that the post office network
provides an ideal channel for the Government's efforts to promote
financial inclusion, due to its extensive branch network and the
trust in which it is held by financially excluded groups.
1.2 We are deeply disappointed that the
Government has failed to implement the recommendation of its Performance
and Innovation Unit and develop a Universal Bank based at the
Post Office, which would have better enabled the realisation of
the Government's financial inclusion objectives.
1.3 NFSP regrets the ongoing refusal of
several major high street banks to allow their customers access
to their accounts at the Post Office, and calls upon the Government
to take a leading role in rectifying this.
1.4 We believe that the Post Office Card
Account offers a crucial means of addressing concerns about financial
exclusion. The Government must make the application process for
the card account simpler, increase its functionality and clarify
its future beyond 2008.
1.5 NFSP holds that a strong post office
network can help to promote wider social and economic inclusion
for vulnerable groups in society.
1.6 NFSP's submission will only respond
to those aspects of this wide-ranging inquiry which are within
its competence. This will largely consist of the "access
to banking services" section, as set out in the Committee's
press notice on 15 November 2005.
2. THE NATIONAL
FEDERATION OF
SUBPOSTMASTERS
2.1 The National Federation of SubPostmasters
(NFSP) is the only body representing the interests of 14,500 subpostmasters
throughout the United Kingdom. Sub post offices make up 97% of
the national network of post offices and are run by private business
people, subpostmasters.
3. POST OFFICE
NETWORK
3.1 With 14,500 branches, the Post Office
is the largest retail and financial services chain in the UK.
This means it is larger than all of UK's banks and building societies
combined, with branches in locations where banks and building
society branches long since ceased to exist. 94% of population
lives within a mile of a Post Office branch and 28 million customers
visit every week.
3.2 As well as its unparalleled infrastructure,
the Post Office is a trusted brand. This is particularly the case
among marginalised or vulnerable members of society, which form
a disproportionately high percentage of the customer base1. According
to research among financially excluded consumers by the National
Consumer Council, "the Post Office is well regarded as offering
a good, accessible service", and is viewed as both better
trusted and more accessible than banks2.
3.3 NFSP believes that this combination
of an extensive branch network and the high regard in which it
is held by its large number of financially and socially excluded
clients means that the Post Office is uniquely placed to be at
forefront of efforts to tackle financial exclusion.
4. DIRECT PAYMENT
4.1 Direct Payment is the Government programme
which has seen the traditional payment of state pensions and benefits
by order book or girocheque over the post office counter replaced
by electronic payments made directly into an account. The programme
began in 2003 and was completed in 2005.
4.2 Under Direct Payment there have been
three main options for the receipt of state pensions and benefits:
(i) A current or savings account at any bank
or building society. This option generally includes cash machine
access.
(ii) A basic bank account, available through
the high street banks, which enables account holders to make deposits,
pay bills by direct debit and access cash via cash machines. There
are no overdraft facilities and basic bank accounts have been
specifically targeted at people on low incomes.
(iii) The Post Office Card Account, which
can only receive benefits and state pensions. Withdrawals can
only be made in cash at a post office counter.
4.3 The Government claims that Direct Payment
will help address financial exclusion, as well as being a cheaper
method of paying pensions and benefits.
4.4 The loss of payment of pensions and
benefits has cost post offices around 40% of their traditional
income.
5. UNIVERSAL
BANK
5.1 In its "Counter Revolution:
Modernising the Post Office Network" report from 2000,
the Government's Performance and Innovation Unit (PIU) recommended
the establishment of a Universal Bank based at the Post Office,
as a means to both tackle financial exclusion and safeguard post
office business following the introduction of Direct Payment.
It was envisaged by the PIU that Universal Bank customers would
be able to withdraw and deposit cash and cheques at post offices,
use cash machines, use cashback, set up direct debits and pay
for goods over the phone and Internet, but they would not be able
to go into debt.3
5.2 While the Government supported the recommendations
at the time, this proposal was never taken forward. NFSP is deeply
disappointed that this plan, which would have enabled the Post
Office to build a new business platform, was not implemented.
We continue to support and call for the establishment of the Universal
Bank as proposed by the PIU.
6. ACCESS TO
BANKING SERVICES
6.1 In addition to supporting the establishment
of the Universal Bank, the Government also agreed that post offices
should work with more high street banks to offer their customers
a broad range of transactions at post offices. This would maintain
free services for bank customers, particularly in rural and urban
deprived areas which have seen the closure of many bank branches,
and represent a new source of revenue for post offices.
6.2 However, only a limited number of banks
have signed up to allow their customers access to banking services
at the Post Office.
6.3 Post Office branches currently offer
banking services, including free cash withdrawal, for current
account customers of the following—Lloyds TSB, Barclays,
Alliance & Leicester, Co-operative Bank, Bank of Ireland,
Clydesdale Bank, First Direct (in Scotland only), smile and Cahoot.
In November 2005, these were joined by Nationwide, a move welcomed
by NFSP. A further 11 banks and building societies give their
basic bank account customers access to their account at the Post
Office.
6.4 Significant numbers of bank accounts
remain unavailable at post offices. Three major banking groups—HSBC,
Halifax Bank of Scotland and Royal Bank of Scotland Group, which
between them represent around 40% of the market—do not offer
any access to their current accounts at post offices. Furthermore,
seven in ten basic bank accounts are not accessible at post offices.
6.5 In its 2004 report "Cash Machine
Charges", the House of Commons Treasury Committee stated
that: "We note that some major banks have not yet signed
up to allow their current account customers to withdraw cash free
over post office counters, a state of affairs which does not help
promote access by the financially excluded to their accounts….
We hope… that HSBC, RBS, and HBOS will soon allow their current
account customers to withdraw cash over the post office counter.
This would convince us of their commitment to tackling financial
exclusion".4
6.6 The postal services regulator Postcomm
states in its 2005 annual report to the Government on the post
office network that "Postcomm would like to see more banks
providing customers with a wider choice of free options to access
their cash…", "…more government intervention
to prevent financial exclusion, and the promotion of further free
banking access at the Post Office" and "…more joined
up thinking with regard to access to cash and how the Post Office
can be used to help prevent financial exclusion5
6.7 In its 2004 report on post office closures
in London, the London Assembly's Public Services Committee recommended
that "the Department for Trade and Industry together with
Post Office Ltd review the current banking arrangements with the
major high street banks with a view to extending access to current
accounts to raise social inclusion".6
6.8 NFSP strongly supports the views of
all of these stakeholders, believing that post offices are uniquely
placed to provide the public with convenient free local access
to cash and banking services. All the major high street banks
should offer a comprehensive service for their current and basic
account holders (as well as business account holders) at post
offices.
6.9 The Government must take a leading role
in urgently ensuring that the banks enable their customers to
access their bank accounts and carry out a wide range of transactions
free of charge at post offices.
6.10 Cash Machine Charges
NFSP supports the principle of providing cash
machines at post offices to supplement the free over the counter
service. Cash machines offer customers an important alternative
method of accessing their bank accounts. Advantages can include
speed and availability. In addition, some customers may prefer
to carry out their banking transactions via a machine. Cash machines
at post offices can also provide the customers of banks who have
not signed up to Post Office banking with local access to their
accounts.
6.11 However, NFSP has had concerns about
charges levied on customers using cash machines situated in post
offices. As a result, NFSP welcomed the announcement from Post
Office Ltd in July 2005 that there would be 1000 fee-free ATMs
installed in Post Office branches across the UK, in partnership
with Bank of Ireland; and that Post Office Ltd is to withdraw
from the contracts with fee-charging ATM suppliers.
6.12 However, in recognising that 1000 fee-free
ATMs in a network of 14,500 post offices will not be sufficient
to meet demand, some subpostmasters will continue to supplement
free access to cash at the post office counter with fee-charging
machines where there is demand for this.
7. POST OFFICE
CARD ACCOUNT
7.1 The Post Office Card Account (POCA)
is a simple account which allows the receipt only of benefit,
state pension and tax credit payments. Account holders can access
their cash and make balance enquiries at any post office. The
card account is the only option for benefit receipt through which
claimants cannot get into debt. It is also the only option with
no restrictions on who may be able to open an account as long
as they are in receipt of a state pension or benefit.
7.2 Pensioners and benefit claimants who
cannot manage to use electronic payment to receive their entitlements
can be paid by cheque. Cheques can be cashed at any post office
or paid into bank accounts.
7.3 5.1 million applications for POCAs have
so far been made—more than 2 million above the Government's
anticipated take-up. Around 4.3 million benefit and pensions customers
regularly use their accounts to access their benefit payments,
and a further 750,000 customers using the cheque-based exemptions
service. NFSP views the POCA as a key product for both enabling
financial inclusion and sustaining the post office network.
7.4 NFSP believes official Government letters
and leaflets for claimants have discouraged Post Office Card Account
use and encourage bank account use. Throughout the programme of
Direct Payment, the Government consistently presented the POCA
as the third option, after bank accounts and basic bank accounts.
Although summer 2004 saw minor changes in the application process
for the POCA, it is still far too complex to open. Similarly,
the cheque payment service has not been well advertised.
7.5 Despite this, National Consumer Council
research among financially excluded groups found that "the
majority of those who encash their benefits at post offices already
have access to a bank account, but choose not to opt for direct
credit". Just over half of all consumers (51%) and two-thirds
from socioeconomic groups DE (67%) in the NCC survey said they
would like to continue to be able to obtain cash from the Post
Office. When asked about their preferred account options, the
most favoured option was the POCA (33%).7
7.6 NFSP believes the Government must provide
balanced information about the payment options for benefit claimants
and pensioners, including the availability of the cheque payment
service. The Government should simplify the POCA application process
and card accounts must be able to be opened at post offices.
7.7 Funding for the POCA runs until 2008,
and there are currently no plans in place for future funding.
NFSP believes that the Government must urgently clarify this situation.
7.8 In addition, we believe that the POCA
should offer a more flexible, fully functional service, including
the ability for customers to make deposits as well as withdrawals.
Recent experience of subpostmasters suggests, for example, that
many recipients of the Government's Winter Fuel Payment are left
confused or inconvenienced at withdrawing the entire payment using
their POCA but then, due to the limits on the cards functionality,
finding themselves unable to pay any back into their accounts.
8 ROLE OF
POST OFFICE
NETWORK IN
COMBATING WIDER
SOCIAL EXCLUSION
8.1 There is substantial evidence that post
offices play a key role in supporting and providing vital services
to socially excluded groups.
8.2 Without a nearby post office, large
proportions of the population are inconvenienced. Studies have
demonstrated that those most affected included some of the most
socially marginalised groups, including those with no transport,
people with mobility problems, older people and people from social
classes C2, D and E.8
8.3 Moreover, post offices play important
roles in providing direct support and advice for vulnerable local
residents, including elderly and disabled people. For example,
subpostmasters frequently interpret official letters, field lost
property, take messages and offer emotional support. Research
for the postal services regulator, Postcomm, found that subpostmasters
both in deprived urban areas and rural areas keep an eye on significant
numbers of residents—helping them deal with forms and officialdom,
and enquiring to make sure they are not unwell if they do not
make their normal visit to the post office.9
8.4 It is widely recognised that post offices
act as a focal point for communities. In research by the postal
services watchdog Postwatch, a high proportion of those interviewed
stated that community spirit was badly affected by the closure
of the post office, citing an increased feeling of isolation and
the fact that people do not converse and meet as much as before.
10
8.5 Post offices also provide many services
for the local economy. As well as providing direct services to
other businesses such as postal products, post offices act as
major sources of cash. Research strongly shows that people frequently
spend cash locally to the place they access it. In this regard
post offices often act as the glue which binds local economies
together, providing access to cash to safeguard or boost other
local business. Countryside Agency research demonstrates that
in local shops and businesses with a nearby post office, 15% of
customers' expenditure is directly due to the presence of the
post office, amounting to £194,000 on average per year. 11
8.6 This is further supported by the New
Economics Foundation, which states that when the number of local
retail outlets falls below a critical mass, the quantity of money
circulating within the local economy will suddenly plummet sharply
as people find there is no point trying to do a full shop with
a drastically reduced range of local outlets. As local shops close,
other local businesses lose valuable outlets for their products
and services and may have to cease trading. In turn this leads
to an impoverishment of choice for consumers about where to shop.
12
8.7 NFSP believes that post offices play
a critical role in the economic and social wellbeing of Britain's
communities. The loss of a post office can result in increased
isolation for vulnerable members of society, and a reduction in
access to cash and in the availability of other local services,
resulting in increased social and financial exclusion, particularly
for already vulnerable groups. Conversely, a robust and viable
post office network can play a key part in sustaining the social
and economic fabric of communities and combating social and financial
exclusion.
9. CONCLUSIONS
9.1 Post offices have a hugely significant
contribution to make in efforts to promote financial inclusion.
9.2 Typically, people who are financially
excluded—eg older people, unemployed people, single parents
and disabled people—have less access to transport, and therefore
need to access their money locally. Post offices are ideally placed
to provide free local access to cash and banking services. Furthermore,
post offices are known, trusted and held in high regard by a large
proportion of financially excluded individuals.
9.3 Through providing local access to cash,
post offices play an additional role in supporting the sustainability
of local economies, thereby helping combat wider social and economic
exclusion.
9.4 It is therefore highly disappointing
that the Government has failed to make full use of the opportunities
afforded by the post office network to tackle financial exclusion,
in particular its failure to develop a truly financially inclusive
Post Office account in the Universal Bank.
9.5 By addressing the concerns set out above
regarding the Post Office Card Account and access to banking services
at post office counters, the Government can begin to ensure that
it makes better use of the unique opportunities to promote financial
inclusion which the post office offers.
REFERENCES
1 Performance and Innovation Unit, June
2000, "Counter Revolution"; and Post Office Limited
estimates
2 National Consumer Council, March 2003,
"Everyday Essentials: Meeting Basic Financial Needs"
3 Performance and Innovation Unit, June
2000, "Counter Revolution"
4 House of Commons Treasury Select Committee,
March 2005, "Cash Machine Charges"
5 Postcomm, 2005, "Fifth Annual
Report on the network of Post Offices"
6 London Assembly Public Services Committee,
April 2004, "Post Office Closures In London"
7 See 2
8 Postwatch, November 2002, "The
Impact of Post Office Closures in the Rural Community"
9 Postcomm, December 2001, "Serving
the Community I—evidence of the community value of post
offices in rural areas"/Postcomm, December 2001, "Serving
the Community II—evidence of the community value of post
offices in urban deprived areas"
10 See 8
11 Countryside Agency, July 2000, "The
Economic Significance of Rural Post Offices"
12 New Economics Foundation, December 2002,
"Ghost Town Britain I"/New Economics Foundation,
December 2003, "Ghost Town Britain II"
January 2006
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