Supplementary memorandum from the National
Federation of SubPostmasters
1. INTRODUCTION
1.1 The National Federation of SubPostmasters
is submitting an additional memorandum to its written evidence
to the Treasury Committee Inquiry on Financial Inclusion, following
the announcement by the Government that it does not intend to
extend the contract for the Post Office Card Account (POCA) beyond
2010. This news came subsequent to the Committee's deadline for
submissions to the inquiry.
2. POST OFFICES
AND FINANCIAL
INCLUSION
2.1 As set out in our submission, NFSP believes
that post offices are ideally placed to play central role in enabling
the Government to tackle financial inclusion exclusion.
2.2 NFSP believes that the POCA is a key
product to both enable the Government's financial inclusion objectives
and to provide income from transactions to sustain the post office
network.
2.3 Research demonstrates a strong preference
among financially excluded groups for post offices as the place
to receive payment of state pensions and benefits.1
3. WITHDRAWAL
OF POST
OFFICE CARD
ACCOUNT
3.1 The Government has now stated that the
POCA contract will not be extended after 2010. It now claims that
the POCA was only ever intended to run until 20102, as a transitional
device following the introduction of Direct Payment. NFSP would
request clarification from the Government on where and when this
information was communicated. It is not our understanding that
this was ever the case.
3.2 It was our understanding that the POCA
contract would be renewed. Many subpostmasters have invested their
own money in their businesses on the understanding that the network
would continue to have a role in, and thereby receive income from,
the provision of Government pensions and benefits.
3.3 As detailed in our submission, the Government's
Performance and Innovation Unit (PIU) report recommended the establishment
of a Universal Bank based at the post office, which "would
provide a post office-based solution, allowing a post-office card
to replace benefit books".3 It was intended that this would
both tackle financial exclusion and provide business for the post
office network following the introduction of Direct Payment. Though
the report was accepted in full at the time by the Government,
this recommendation was never implemented, a failure which NFSP
regrets.
3.4 It would now appear that far from favouring
a "post office-based solution", the Government sees
no role for post offices in the delivery of state pensions and
benefits and in efforts to tackle financial exclusion. NFSP believes
that this is hugely shortsighted and reflects a lack of coherent,
long term thinking within Government about the future of the post
office network and its role in providing access to cash and financial
services.
3.5 Consequences for Financial Inclusion and
for Post Offices
NFSP believes that the Government's withdrawal
of the POCA will have grave consequences for the many vulnerable
groups who are dependent upon their post office as the only place
where they can gain free and local access to cash.
3.6 The POCA is currently the only option
available to claimants through which they cannot get into debt,
and is 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.
3.7 Of the 4.3 million current users of
the POCA, many have access to bank accounts but have chosen the
POCA as their preferred method to receive pension and benefit
payments4, despite the well-documented efforts by the Department
of Work and Pensions to make this option difficult for them.
3.8 The withdrawal of the POCA will also
have potentially devastating consequences for the UK's network
of post offices. Post Office Limited estimates that the withdrawal
of the POCA could cost the network at least £100 million
a year in income. In addition to this, post offices will suffer
further reduced income as a consequence of reduced "footfall"—ie
fewer customer visits leading to fewer purchases of other goods
and services available in post offices.
3.9 This will inevitably lead to post office
closures, coming as it does shortly after the £400 million
a year loss incurred by the network through the introduction of
Direct Payment of pensions and benefits. Many subpostmasters were
already struggling on low incomes before the full impact of Direct
Payment was felt. According to research carried out for NSFP by
MORI in 20045, 56% of subpostmasters surveyed took personal drawings
from their post office business of less than £1,000 a month;
for two-thirds of these, this was income for both themselves and
their spouse/partner. At this point in time, only 40% of claimants
had transferred to Direct Payment. Full implementation of Direct
Payment and the withdrawal of the POCA will only serve to worsen
this situation, resulting in more subpostmasters being forced
to close their businesses.
3.10 This inevitable reduction in the post
office network will in turn have a further and disproportionate
impact on financially excluded groups who are often dependent
upon their post office, with ever more consumers left with fewer
or no options available to gain free and local access to cash.
4. WIDER SOCIAL
AND ECONOMIC
IMPACTS OF
POCA WITHDRAWAL
4.1 As detailed in our submission, research
demonstrates that post offices have a wider role in supporting
other local shops and businesses, and that the existence of other
local businesses is threatened when a post office closes. The
postal services regulator, Postcomm, estimates that in settlements
with a population of 1,000-3,000 people £417,000 per year
could be lost by nearby shops following the closure of a post
office. 6
4.2 NFSP believes that the post office closures
which will result from the withdrawal of the POCA will further
impoverish choice and access to goods and services in many communities
in the UK through the knock-on closure of other local business,
with socially and financially excluded groups hit the hardest.
5. CONCLUSIONS
5.1 NFSP opposes the Government's intention
to withdraw the POCA from 2010.
5.2 We believe that the POCA has a key role
to play in enabling the Government's financial exclusion objectives,
in view of the preference held among financially excluded groups
for the POCA and for post offices in general.
5.3 This action will leave many financially
excluded individuals with even fewer options available to them,
and will have devastating consequences for the post office network.
The resulting post office closures will in turn impact most adversely
on vulnerable members of society dependent upon their local post
office for access to cash and a range of other products and services.
5.4 NFSP finds it hard to identify any consistency
between the Government's actions and its stated commitment to
a thriving post office network with a role in tackling financial
exclusion.
REFERENCES
1. National Consumer Council, March 2003,
"Everyday Essentials: Meeting Basic Financial Needs"
2. Financial Times, 20 January 2006
3. Alan Johnson MP, 5 June 2000, Commons
Hansard
4. See 1
5. NFSP/MORI, July 2004, "Subpostmaster
Income—The Impact of Changes to the Benefits Payment System"
6. Postcomm, December 2001, "Serving
the Community I—evidence of the community value of post
offices in rural areas"
January 2006
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