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Session 2006 - 07
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Public Bill Committee Debates

Financial Assistance to Industry

The Committee consisted of the following Members:

Chairman: Mr. Greg Pope
Armstrong, Hilary (North-West Durham) (Lab)
Baron, Mr. John (Billericay) (Con)
Burt, Lorely (Solihull) (LD)
Fisher, Mark (Stoke-on-Trent, Central) (Lab)
Greenway, Mr. John (Ryedale) (Con)
Hendry, Charles (Wealden) (Con)
McFadden, Mr. Pat (Minister for Employment Relations and Postal Affairs)
Mackinlay, Andrew (Thurrock) (Lab)
McGovern, Mr. Jim (Dundee, West) (Lab)
Main, Anne (St. Albans) (Con)
Öpik, Lembit (Montgomeryshire) (LD)
Prentice, Mr. Gordon (Pendle) (Lab)
Seabeck, Alison (Plymouth, Devonport) (Lab)
Simon, Mr. Siôn (Birmingham, Erdington) (Lab)
Spring, Mr. Richard (West Suffolk) (Con)
Vaz, Keith (Leicester, East) (Lab)
Wright, Mr. Anthony (Great Yarmouth) (Lab)
Glenn McKee, Committee Clerk
† attended the Committee

First Delegated Legislation Committee

Tuesday 24 July 2007

[Mr. Greg Pope in the Chair]

Financial Assistance to Industry

4.30 pm
The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): I beg to move,
That this House authorises the Secretary of State to pay, by way of financial assistance under section 8 of the Industrial Development Act 1982, in respect of post office network change to 2011, a sum exceeding £10 million and up to £465 million to Post Office Ltd.
I welcome you to the Chair, Mr. Pope. I have to say that I start with a little nervousness because my old boss, my right hon. Friend the Member for North-West Durham, is behind me and I am more used to having her beside me giving good advice. I do not know whether I will need to rely on her as we proceed.
The motion relates to last week’s debate in Committee about raising the threshold for the money that can be paid out under the Industrial Development Act 1982—the legal vehicle under which the Government can make such investments. Today, we are discussing the specific sums to be spent to support the Post Office.
The Post Office is undergoing a period of significant, and in some ways difficult, change. The network is rightly regarded as important by every Member of the House and by our constituents, but we as a society no longer use it as we once did. Four million fewer people are using post offices every week, compared with just two years ago. More of us pay our bills by direct debit, we mostly have our benefits and pensions paid directly into our bank accounts and we communicate with one another by mobile phone, text message and e-mail. We do those things far more than we did even just a few years ago, let alone a decade ago.
It is sometimes said that the Post Office’s difficulties have been added to by the Government’s decisions, such as allowing benefits to be paid into bank accounts or allowing people to renew their car tax online. The truth is that the Government have not led the changes in society’s behaviour, but responded to them. People can still choose to have their pensions paid into a Post Office account or to receive them in cash at the post office, and they can still renew their car tax in the traditional manner at the post office. However, it would be wrong for the Government not to respond to the way in which people live their lives and to force people to use the post office, although we recognise the difficulties that that creates for the network. However, people are used to such changes taking place in other transactions in their lives, and we have to respond.
We published proposals in December 2006 and embarked on a national 12-week public consultation, which drew 2,500 responses. Following consideration of those responses, the Government announced our final decisions on the future of the post office network on 17 May. Those included: the introduction of minimum access criteria, ensuring a truly national post office network across the UK; the continuation of the annual network subsidy until 2001, with an expectation that the subsidy will continue beyond then; and a commitment to a successor to the Post Office card account. All that will be underpinned by investment of up to £1.7 billion until 2011.
A key part of making the necessary cost savings will be addressing both the under-use in some rural areas and the over-provision in some urban areas. To illustrate this, it is worth drawing to the Committee’s attention the fact that the least used 800 branches serve an average of just 16 people each week, whereas in more populated urban areas, some 1,000 sub-postmasters have at least six other competing branches within a mile of their business.
Andrew Mackinlay (Thurrock) (Lab): In giving these statistics, can the Minister indicate which countries of the United Kingdom have the least take-up? I think that he referred to some post offices not having any customers at all. Where are they located?
Mr. McFadden: I do not have a national breakdown on that, but I am happy to write to my hon. Friend. Obviously, those post offices are likely to be concentrated in the most sparsely populated parts of the UK.
These issues had to be addressed and we concluded that to get the Post Office on to a more stable footing for the future, a maximum of 2,500 branches would need to close under a managed compulsory programme. That will be partly offset by the introduction of at least 500 outreach sites that might involve, for example, part-time access in particular locations to ensure that at least some post office services remain available.
I am sure that we all agree that sub-postmasters and sub-postmistresses do a magnificent job the length and breadth of the country, and it is only right that those leaving the network as part of this change programme are compensated for the loss of value of their businesses. Following discussions between Post Office Ltd and the National Federation of SubPostmasters, the Government have agreed to fund compensation at the level of 28 months’ remuneration. That matches the compensation package made available to sub-postmasters under the urban reinvention programme carried out in 2003.
Turning to the specific investments that we are discussing today, there are three elements to the money.
Mr. John Baron (Billericay) (Con): Can the Minister confirm that the guidance that the Government have given on the distance between post offices is based on the as-the-crow-flies principle? The danger with that approach is that it does not take into account the state of public transport, particularly rural bus services, which in many parts of the country—for a variety of reasons, including poor funding—are suffering. What are the Government going to do about that in order to help local residents, particularly the vulnerable and elderly in our communities?
Mr. McFadden: I can confirm that the distance is as the crow flies, but the hon. Gentleman will know that the access criteria have been very carefully drawn up to take into account natural barriers, as well, such as mountains and rivers, and motorways. This principle is applied in a sensitive way, so we are not saying that if a particular location is a mile away and on the other side of a mountain, that major factor would not be taken into account.
I turn to the specifics of the money before us today, to which there are three elements: compensation to sub-postmasters who are leaving the network on a compulsory basis; redundancy costs of Post Office Ltd staff; and funding of the ongoing losses to which I referred earlier.
The exact split of the funding between those different headings will depend on how the company delivers the change programme, but the overall cost required will be roughly the same over the period. That is an important point, so let me pause on it for a moment. If there were fewer branch closures or Crown conversions—the plans for which I shall come to in a moment—the company would not be able to make the required savings, so the losses that would need to be funded would subsequently increase. As I said, in addition to those three elements, we will continue the network subsidy of roughly £150 million a year until 2011.
Let me say a little more about those three headings. As I said, Post Office Ltd and the National Federation of SubPostmasters have agreed a compensation package based on 28 months’ remuneration. It will be paid to all sub-postmasters leaving as part of the network change programme. It is not possible to give an exact amount for that part of the investment package, as it depends on which branches close. No decisions have been made regarding the local process, as it is just beginning. However, we expect—
Mr. Anthony Wright (Great Yarmouth) (Lab): My hon. Friend mentioned due process. Will there be time for representations to be made by local Members of Parliament, and will the situation differ from when representations were made during the urban regeneration programme? In my opinion, those representations were not heard. Although we made them, it was a fait accompli—the decisions had been taken.
Mr. McFadden: Yes, there will be time for Members of Parliament to make representations. From my reading of the issue over the past month or so, nobody would say that the consultation process under the urban reinvention programme was a model of how such things should be done. Post Office Ltd has learned a number of lessons from that. My understanding is that the consultation got a bit better as the process went on, but what my hon. Friend says is certainly fair comment regarding the early stages. As I said, Members of Parliament and the public will have a chance to respond.
Mr. Wright: What really worries me is the mention of compulsory closures, which take away the possibility of representations being made. Will there be room for manoeuvre on the number of closures or the areas in which they will happen?
Mr. McFadden: That is an important point. Let me be clear about what is being consulted on and what is not. To get the network on to a stable footing, we have said that there should be up to 2,500 compulsory compensated closures. The consultation is on how, not whether, that is to be done. However, in a particular local area there should be the opportunity to make representations and to say, “You have to close a certain number of post offices in this area, and we believe that the closures should be here, rather than there.” People should be able to make such representations.
However, I must be honest with my hon. Friend and with everyone in this Committee. Neither I nor the Post Office promise that people will simply be able to say through this consultation, “We don’t want any of this. We want the taxpayer to keep paying more and more subsidies, and we wish that the closures would go away.” The consultation is on how, not whether, the closures are to be implemented.
Mark Fisher (Stoke-on-Trent, Central) (Lab): Does the Minister not see that that is not what any other Member of this House considers consultation? Consultation is an exchange of views; the “consultation” that he describes is simply one-way. It tells people what they are going to get, which is not consultation. Such an approach is exactly like the so-called consultation on the Crown post offices. The Minister’s predecessor told me that that consultation had nothing to do with whether the Crown post offices were going to be closed—that decision had already been made. It was simply about the how and why, and only for a pitiful six weeks.
In the case of my constituency, the closure of Crown post offices went completely in the face of all the evidence, yet there was no ability to make representations to the then Minister or to the Post Office on whether the decision had been correct. Indeed, we were not even allowed to have the information on which the decision was based. We were told that there were losses of £70 million, but when we asked the Post Office and Royal Mail what the losses were for a particular post office in my constituency, we were told that that was commercially confidential and that we had no right to ask about it. How, then, could one judge whether a fair decision had been made and whether the consultation was proper?
Mr. Baron: I appreciate the Minister’s honesty. However, without going over all the old ground, which has been mentioned, I should say that in most people’s minds such a consultation is about whether a post office should be closed. It is not about a certain number—2,500 or whatever—being closed and deciding which ones they should be.
What particularly worries me is the nature of the consultation. Obviously, everybody can make a submission, but the decisions themselves will be taken behind closed doors. Again, most people would ask how that can be; very few people will come forward to say that a post office should not stay open. Surely the decisions should be made in a much more transparent way and explained to local residents. At the moment, it seems that the Government have made up their mind that they will go hell for leather for the closures, and that the consultation exercise is nothing more than sheer window dressing.
Mr. McFadden rose—
Mr. Siôn Simon (Birmingham, Erdington) (Lab): On a point of order, Mr. Pope. Far be it from me to stifle my colleagues’ special pleading, but I do not understand how all the discussion of the process—indeed, the Minister’s discussion of it—falls within the terms of a provision that authorises the Secretary of State to make the decision.
The Chairman: To be honest, that is a self-answering question. If the Minister were out of order, I would have ruled so. It is in order to raise those issues, which are pertinent to the motion before us.
Mr. McFadden: I am afraid that I disagree with the view that the consultation is window dressing. I have met representatives of Postwatch, the consumer voice on the issue, and it will be intimately involved at every stage. We are not going hell for leather in any particular area; the whole process—from discussions with sub-postmasters and sub-postmistresses, local authorities and Postwatch, to the involvement of MPs and the general public—will last several months.
We could spend all day on the question of whether the consultation meets with the agreement of Members. I do not want Members or the public to have a false impression: what I am trying to do today is to make it clear that the decision on the compensated closures has been made. We now have to talk about how to implement it.
Having talked about the compensated closures, I shall move on. As well as the large losses incurred in sub-post offices, Post Office Ltd also needs to address the significant losses being made in Crown post offices. In the past year alone, that group of about 460 branches, representing just 3 per cent. of the total number of post offices, incurred losses of some £70 million. Again, action is required if the company is to meet its commitment to the Government to get the network on to a more stable footing.
Part of that is the deal, announced on 19 April, to site a total of 76 Crown post offices near branches of WH Smith. That will have a major impact. It is certainly not the first franchising arrangement into which the Post Office has entered, and I appreciate that it is controversial among some Members. However, the move will secure the future of Post Office services in the relevant areas. A main branch will be secured in all 76 areas and every site will be fully compliant with the requirements of the Disability Discrimination Act 1995. Post Office Ltd has given an assurance that any customers with mobility problems will be served on the ground floor if they are unable to get to the main counters. In many cases, customers will also benefit from increased opening hours, including during the prime Saturday afternoon shopping period, and from the retail offer in the same location.
Those changes to the Crown post office cost base will have a short-term financial cost, as some staff may opt for voluntary redundancy rather than being redeployed within the company. The Government will meet the cost of redundancies of those staff. In addition, the Post Office will seek significant savings in central administrative support for the whole network. That part of the package will cost up to £170 million. The Government’s investment package—
Mr. Wright: To be perfectly honest, having post offices open on Saturdays is great for customers. However, I am concerned about the staff who do not want to work on Saturdays. Will they be allowed to refuse, or will the new employers decide?
Mr. McFadden: If the staff choose to transfer over, they will do so under their new employer’s terms and conditions. If they choose not to transfer, there may be the option of voluntary redundancy or redeployment elsewhere in the network.
The Government’s investment package is based on the Post Office’s five-year business plan, which extends to 2011. We have already made some payments to Post Office Ltd in respect of accrued losses to 2006-07. Further losses during the funding period to 2011, and the compensation and redundancy costs that I have outlined, require up to £465 million of assistance to be made available through section 8 of the Industrial Development Act 1982.
There are three elements to what we are discussing: the compensated closure programme, redundancy payments, and ongoing losses in the network. Government investment in the Post Office is vital to maintain the network. If we were unable to make the required payments, the consequences would be disastrous, as the company would need to start closing branches on minimum contractual terms of a few months’ notice. That would take no account of accessibility requirements, and the resulting diminished network would be located predominantly in urban areas.
4.52 pm
Charles Hendry (Wealden) (Con): It is a pleasure to serve under your rigorous chairmanship, Mr. Pope. I welcome the Minister to his new brief and wish him success in it. It is appropriate that, after Postman Jim, Postman Pat should be in charge of the issues that we are discussing. However, I have to say that Mrs. Gogginses all around the country will be disturbed by what he has in mind for their beloved post office network.
Some of the Minister’s comments have added to the grounds for such concern. He said that the Post Office was undergoing a period of significant and in some ways difficult change. The changes that he has outlined are extremely difficult and painful, not “in some ways” difficult. He should not minimise the consequences of 2,500 post office closures and the impact that that will have on our constituents, particularly on the most vulnerable: those who do not have transport, those with disabilities and those who are vulnerable in other ways. Such people simply will not be able to travel to the post office, which will be that much further away.
The Minister also said that it is sometimes said that Government decisions have added to the difficulties. Yes, that should be said. We understand why the decisions have been made and that they have to reflect how our society is changing and moving on. However, let us be in no doubt about it: last year, the Government’s decisions took £165 million out of the network, while putting £150 million of subsidy into it. The problems facing post offices—the reasons why footfall has dropped and why some post offices have become so marginal—owe a significant amount to those Government changes.
The Government’s biggest failing has been not to recognise that they should be using the funding to bring new business to the Post Office network, rather than finding ways of managing its decline. We cannot vote against the motion because to do so would, as the Minister said, mean that the closure programme would go ahead without compensation. That would be catastrophic. However, we think that how the Government have reached this position and how they intend to proceed is fundamentally flawed and very mistaken indeed.
We need greater clarification from the Minister, particularly on how the money will be used. Will he tell us a bit more about how post offices will be chosen for closure? Will that be done purely by location? We assume that such considerations must be the driving force. However, if closures are done by location, that means that somebody will put a cross on the map and say, “You’re in the wrong place. You may be profitable and highly popular, but because you are too close to the next post office, you will have to be the one to go.”
My hon. Friend the Member for Billericay rightly mentioned the access criteria. Most of our constituents do not travel in straight lines. Even people in urban areas do not always travel in straight lines, and in more rural areas, a journey of what might be 3 to 5 miles on paper involves going a lot further when one actually follows the road network—not because of a whopping great mountain or a stream, or whatever happens to be in the middle of such an area, but simply because the roads are wiggly. That is particularly true if one is dependent on public transport.
To what extent will the closure decisions be made on the basis of profitability? If profitability is the only test, rather than location, it will be very hard to meet the Government’s access criteria. If sub-postmasters move from one branch that is due for closure to another in order to stay in business—if they are staying in the business—will they be entitled to compensation under the scheme? If not, I can give an absolute assurance that they will walk away. They might come back six months or a year later and say that they want to do it again. However, if they would be walking away from £25,000 or £30,000 in compensation simply by moving to another post office, where they have neither the good will nor an established business, it is difficult to see why they should make that decision.
The hon. Member for Stoke-on-Trent, Central spoke about the consultation process. He is right to do so, because the process is not what we understand by consultation—a process in which we can argue a case. The consultation process sets one post office against another. It requires one community to argue why they should keep their post office and why a neighbouring community should lose theirs.
I am not sure whether he meant to say it, but in his opening remarks the Minister said that in a given area a certain number of post offices would have to close. We have not seen those numbers. If he has information on how many will close in each area, he therefore ought to tell us the figures before the House rises for the summer, and say whether those figures are for counties or metropolitan areas, for example. That way, we will know how the 2,500 closures will be spread around the country. He has said that that is the number, and he must give that additional information to the House before we rise for the recess.
Hilary Armstrong (North-West Durham) (Lab): I am interested in the hon. Gentleman’s alternative proposals for consultation. Is he saying that he would be prepared to have a consultation that resulted in no closures? If so, how much extra money would he and his party commit to keeping post offices open?
Charles Hendry: The tragedy of this debate is that the Government turned away from options that would have brought more business into post offices. No sub-postmaster to whom any of us has spoken in our own constituencies says, “I want a bit more compensation”; they say, “I want more business. I want to be freed up so I can work with carriers other than Royal Mail.” At the moment, if UPS or FedEx drive past a post office and cannot deliver a package, they have to drive back 15 or 20 miles to the depot, rather than dropping it off there, where it can be collected at the convenience of the customer.
Post offices want to offer other, financial services, but they are being prevented from doing so. Many want to work with PayPoint, but they are being prevented from doing so. All that the Opposition are saying is that we should give the post office network the chance to survive on business rather than subsidy, which is what the post offices have told us they want to achieve.
We need greater understanding of where the funding will go. Some of the money will clearly be channelled into Royal Mail and the Post Office centrally, so can it be used to cross-subsidise other activities carried out by Royal Mail? Postwatch told us yesterday that it thinks that the redundancy payments necessary for Royal Mail to become profitable and successful will total approximately £1 billion. Could any of that be used for the more general restructuring of Royal Mail? We know that its volumes of post have declined by 2 per cent. during recent years, so it is difficult for it to find the funding from its own resources that such a redundancy package would require.
How does the package relate to the £1.2 billion that the Department of Trade and Industry authorised Royal Mail to borrow to modernise its systems? Is it an additional sum, or is it somehow included in that figure? Will the Minister also tell us what period the figures will cover? In his statement to the House, the Secretary of State told us that he was going to give £1.7 billion over the next few years up to 2011. When does the Minister expect to have to draw down the remaining part of that money? For how long does he expect this particular element to last? When does he expect to have to come back before this Committee to ask for more?
This money should be being used to generate new income for the post office network. It is crying out for new business, it knows that the business exists and that is what it wants to be able to get on with. We should not be managing the decline, because through that process we will simply be hitting the most vulnerable the hardest.
Post offices are incredibly important institutions in our communities. If someone is ill and does not call to collect their pension, the sub-postmaster—the person most in tune with what is happening—is often the first to know and to raise the alarm because something might be wrong. We know that what often follows the decline of a post office is the closure of the shop in which it is situated. In many of our constituencies, the last shop in the village happens to be the one containing the post office. If we lose the post office, the whole viability of that village shop could go, too.
As the new Minister with responsibility for such matters, the hon. Gentleman should go back to the drawing board and say, “I think we have made significant mistakes in our approach. We need to see how we can bring more business into the post office network, rather than simply letting it decline.” We will support this measure because the consequences of our voting against it would be too serious—it would lead to uncompensated closures. However, the whole ethos of the Government’s approach to this issue has been massively flawed.
5.1 pm
Lorely Burt (Solihull) (LD): I find myself in agreement, unusually, with the hon. Member for Wealden, particularly on the diversification of business in post offices. The Government still have a big opportunity to enable post offices to earn their living in the way that, as he rightly says, they are in business for: by generating more revenue for themselves and by becoming viable in themselves.
I do not want to rehearse all the arguments about the closure of the 2,500 post offices—we have heard them on several occasions—about the Government’s role in the demise of the post office, or about the fact that the consultation did not appear to be real because the decision has already been taken. Instead, I want to ask about the incredibly broad range of financial assistance to which the Government are referring—of between £10 million and £465 million. I am amazed that they are not in a better position to narrow down to a smaller range the money that will be needed for such financial assistance. Can the Minister throw any more light on that issue? In respect of the three areas to which he referred, how will he be able to demonstrate to Parliament the value for money of this expenditure and the different ways in which it has been spent?
Have we applied for any European money to assist in this compensation programme? Will the Minister reassure the Committee that this sum is not part of the £1.7 billion investment pot announced by the Government in May?
5.4 pm
Andrew Mackinlay: I shall be brief, although I do want to make one or two comments. The first relates to the documentation. Yesterday, I went to the Vote Office to clarify just what I was being put on to by the Whips. I have no criticism of the Vote Office, but there was bewilderment there. I then went to the Journal Office, where the situation was also not clear to our distinguished Clerks. I do not blame them, either, because the fact is that the supporting explanatory memorandum is inadequate. No doubt I am an exception, and everybody else in the Committee is a walking encyclopaedia on what we are discussing, but I confess that it was not easy to find out about.
It is incumbent on the Minister and the Department to state in the motion or in the explanatory memorandum what the issues are when bringing a provision forward for parliamentary approval, and to make such a statement available in the Vote Office. Some things in the Minister’s speech could have been legitimately flagged up in an explanatory memorandum. I commend that approach to him, but I do not criticise him personally. I criticise the Department for the usual contempt for Parliament: “We’ll get the Whips to get some MPs to come along, and we’ll rubber stamp this.” That is what happens, and with it I am not prepared to put up. I hope that that will be borne in mind.
I turn to my second point. I deliberately asked the Minister about this issue in the context of the countries of the UK. My feeling from going round Northern Ireland and other parts of the UK is that there is a disparity in broad-brush terms between the countries of the UK, which I fear might continue or get greater. If this downsizing is a UK-funded operation, I want to see a consistent approach throughout the UK.
I must say in passing that I have thought for some time that if ever there was a case for devolving something to the Scottish Parliament, the Northern Ireland Assembly and the Welsh Assembly, it is the location, distribution, funding and subsidy of the post office network. Bearing in mind all the other things that we have devolved, it makes sense that these issues should be a matter for local decision making and funding. The post office network could and should fall into line with the idea behind the Barnett formula—that different communities want different things, and that some believe that certain things are more important for a variety of social reasons. Independently of the motion before us, over the coming period I want to canvass the idea that the post office network should be devolved. There is also a case for other post office services being devolved to the various Governments.
You are witness, Mr. Pope, to the Minister saying that he will write to me. I hope that he will write to me about the distribution of the existing network and how it will operate after the closures, to show that there is a universal approach throughout the UK. If there is a disparity, he should disclose it and explain why. That would be useful to us in future discussions. I also hope that he will address the question of the pot of money provided, and of assessing which areas will be affected. Will such areas be based on government regions, administrative counties or local authority areas, for example? [Interruption.] The Minister is indicating that I am wrong, so I wait with bated breath to hear what areas are involved.
5.10 pm
Mark Fisher: May I join other Members in welcoming the Minister to his new responsibilities? He said many welcome things in his opening remarks. The very fact that he used the word “we” when referring to the Government in respect of post offices was a welcome change. When I made representations about the Crown post office closures, his predecessor’s view was that they had nothing to do with the Government and that they were the result of an entirely commercial Royal Mail decision. He said that there was no point in my coming to see him. The different attitude shown by a new Minister who says, “We take responsibility and we have made the decision,” is very welcome and quite proper.
I was also heartened by what the Minister said, in the context of post offices generally, about a “national network”—I think that that was the expression that he used. That is in welcome and marked contrast to the last round of major closures, when there was no planning at all and sub-postmasters were simply invited to apply for closure. Those who did got the money, closed and left my constituency—and, I suspect, many others around the country—with a completely cockeyed map. There was no recognition of where there was need, or of the demography of the constituency.
We have a long way to go if we are to re-form a coherent and sensible map that serves all communities. When the Minister mentions the “national network”, I hope that he means it—I take him at his word. I hope that he will make sure that this time, there is a coherent map that recognises where people use the post offices and how travel takes place. Then, we will have come some way back towards having a national network, which is an essential ingredient. I welcome both those aspects of the Minister’s contribution and I am grateful to him for them.
I should like briefly to take issue with the Minister again over his use of the word “consultation”. I and many other Members understand “consultation” to mean a dialogue. When we consult somebody, we put a view and solicit and want to hear their response. It is clear from the consultation on the Crown post offices that that has not been the case—we are being told that they are being closed, and whatever we say or query about the basis or good sense of the decision is not relevant. That is not consultation but dictation of what is about to happen, which is regrettable.
Andrew Mackinlay: Is not part of the problem—my hon. Friend has experienced this and it will happen again—that relatively large sums of money have been dangled in front of sub-postmasters and sub-postmistresses, who seize them regardless of any consideration of their customers or the locality? Consultation is almost meaningless if there is a bung up front for people to seize and then go away.
Mark Fisher: My understanding is that the Minister said that that will not be the case this time. He will ensure that there is a planned national network, and that decisions about which sub-post offices will close will be made not on the basis of people volunteering to do so, but on the basis of use and need. Perhaps the Minister will clarify that point when he responds. I hope that I am right and that my hon. Friend has misunderstood.
Andrew Mackinlay: I hope that, too.
I asked—quite reasonably, I thought—that if such changes were being made on the ground of losses, could the Post Office explain how the losses were being made and how big they were. Had there been dramatic losses, no one would defend the continued existence of the Crown post office. However, we were denied the information. We were told that it was commercially confidential, but commercially confidential to whom? There is no commercial confidentiality. WH Smith is not yet involved and therefore not affected. The Post Office and Royal Mail is a public service. If it is making a loss, it ought to spell out that loss to the Minister and the House. It is public money and if it is being lost, we have a right to know. Commercial confidentiality has nothing to do with it. It is a completely fake argument. I was therefore very disturbed to discover that Royal Mail would not tell us what the losses were.
I suspect that rent was one of the main reasons for the losses of our Crown post office. The landlord of our very handsome 19th-century post office, which is sited in a prime position on very valuable land in the middle of Stoke, was charging an enormous rent. Sadly, the landlord is Royal Mail. So one side of Royal Mail—Royal Mail estates—was charging a huge commercial rent and making it impossible for Post Office Counters to remain viable. One does not know whether that is the right supposition or whether it is just paranoia on my part, because we are not allowed to see the figures. Democratically, that is simply wrong.
The Minister must understand that he is responsible for public money, which is why he is asking for money today to make compensation. If he is asking for public money for a reason, he ought to say what the losses are. It is completely wrong to deny us that information. My constituents are not stupid. If they think that something is not viable, they will accept it. When they are told, however, that something is not viable but are not told why, they get very angry indeed. This closure is very unwelcome.
I also have to take the Minister up on something that he said about disability. He said that people will be served on the ground floor, but that is not possible in the WH Smith in my constituency because it is on the upper floor of a large shopping centre. It can be accessed only via escalators and lifts, so there is no way that anybody can be served on the ground floor.
One Thursday—Thursday is the big day for pensions—all the lifts and escalators were out of service for the whole day. In that instance, the changeover had not yet taken place, but what would have happened if the post office had been moved to the back of WH Smith? Apart from the fact that there would have been no service that day, the health and safety risk would have been enormous. How can elderly people get out of a first-floor building such as that if there are no escalators or lifts?
Charles Hendry: Is the hon. Gentleman aware that quite a number of the WH Smith branches in question have escalators, but that they go only one way? Normally, if the shop is downstairs in the basement, there is an escalator to take the customers down and they have to make their own way up. If the shop is upstairs, the escalator goes up and the customers have to make their own way down. It is extremely difficult for people who have disabilities to leave.
Mark Fisher: I did not realise that we are obviously very lucky in Stoke. We have a two-way system involving escalators that go both up and down, which is the lap of luxury for my pensioners who want to go to the new post office.
We have a further problem, in that our WH Smith happens to be on private property. A large company runs the shopping centre and, for reasons of its own—not necessarily perfectly sensible, but understandable and well-established commercial reasons—it has a strong exclusion policy. It does not want people in its beautiful new shopping centre who are wearing hoods, or vagrants off the street. It does not want the elderly, the scruffy or the smelly. All those people have an absolute right to go to the local post office, and they will be excluded. I put that to Mr. Crozier, and he has yet to reply. It is an extraordinary idea that the public service of a post office can be on private property and that a private landlord can exclude people from it.
Mr. McFadden: Some 97 per cent. of post offices in this country are on private property. Does my hon. Friend object to that?
Mark Fisher: I do not think that 97 per cent. are on private property where the landlord has an exclusion policy that decides who should or should not go on to that property. This company operates a strong exclusion policy—for commercial reasons, it believes. It does not want people whom it considers undesirable to go into its shopping centre, so they will be denied access to the post office. When I put that to Mr. Crozier, he would not discuss it or recognise it as a problem. We will have a ridiculous situation whereby access to a public service—the post office—will be determined for commercial reasons by a private entrepreneur. That cannot be right.
Is that really what the Government want and believe to be correct: that someone should say who can and cannot go into a post office? That cannot be right. Surely we all have the right to go into a post office. After all, post offices have been paid for by our money—for instance, by the money that we are meant to be voting today. However, my constituents, who will contribute to the money that the Government rightly want for post offices, will be denied access at the whim of a private property owner. That cannot be right.
Like other hon. Members, I am baffled by the fact that the Government cannot be more specific about how much money they need. Surely we could be told a rather more precise figure than somewhere between £10 million and £450 million, as well as why it is needed. I would bet that whatever happens and whatever the sum is, this will not be the last time that the Government come back to the House to ask for more money to subsidise closures and to keep things open.
I shall certainly vote for the Government today, because I welcome anything that will salvage the national network that I hope to have. I believe that that network is an enormously important public service socially, and is to the benefit of all our constituents. However, the Government need to think carefully about whether they are committed to the post office network as a public service. If so, are they prepared to put public money behind it? This will not be the last of the public money, and nor should it be. We need a post office network, and I fear that by incremental means, we are sliding away from that.
5.24 pm
Mr. Baron: I will not speak for long, but there are one or two issues about which I would not mind pressing the Minister. I initially raised access criteria, because they are important. The Minister rightly responded by talking about mountains, lakes and rivers and so on in rural areas. May I press him on the access criteria for urban areas? A mile might not sound a long distance, but when bus companies and public services in general are being cut, for lack of funding or whatever reason, a mile can be very long indeed, particularly for the elderly and the vulnerable.
The Minister will be well aware that post offices are used disproportionately by the elderly, young mothers and mothers to be. For those people, a mile can be a very long distance. Are the Government looking at this carefully and ensuring that they are not simply rubber-stamping access criteria policy without taking into account the provision of local public transport facilities? I should be interested to hear the Minister’s view on that.
Secondly, several Members mentioned the lack of transparency on the consultation. The Minister should be applauded for his honesty in making clear what the consultation is about. Like my hon. Friend the Member for Wealden, I urge him to think again about the issue. In most people’s minds a genuine consultation is about whether closures should be taking place, not about where they should take place given that the decision to savage the network by 2,500 cuts has already been made.
Hilary Armstrong: The hon. Gentleman has a fair point. I am sure that the Government will seek to be as transparent as possible. I remember a post office closure in my constituency, which has some very small urban areas and huge rural areas. The decision was incredibly difficult because the postmistress—they are not all masters—wanted to get out of the property. She had very good personal reasons which she did not want the local community to know about. She desperately wanted the get-out clause. Nobody was able to be wholly transparent because she had the right to keep her counsel on that and to ask us not to let the local community know. The hon. Gentleman asks for things that are sometimes impossible and go beyond people’s capacity or willingness to participate.
Mr. Baron: The right hon. Lady makes a fair point, but let us be absolutely clear. I doubt that personal reasons will be cited for closure in the vast majority of those 2,500 cases. Secondly, where there are personal reasons—[ Interruption. ] If the right hon. Lady wants to intervene she is more than welcome to do so. Where there are personal reasons, they should be respected. But at least let it be clear that there are personal reasons.
At the moment, all we are going to get from the Government is a decision from the top saying which post offices are to be closed, without any possible explanation of the criteria used to make that decision. That cannot be right. Of course, if the decision of a sub-postmaster or mistress is for personal reasons that is fine, and it should be accepted, but I refuse to believe that there will be personal reasons in all those 2,500 cases.
Hilary Armstrong: The real problem with what the hon. Gentleman has just said is that it would have left that woman incredibly exposed. She was the only person who could have had personal reasons for the closure. We would have exposed her if we had made that public. Nobody would have said what the problem was, but she would have had to take the blame from members of the local community, first for not telling them what her reasons were, and secondly for having the temerity to say that she wanted to go.
Mr. Baron: As I said, the right hon. Lady makes a fair point, but although we can protect a sub-postmaster’s or sub-postmistress’s reason and ensure that there is an element of privacy, we should not allow that one reason to blanket out the whole decision-making process in respect of why 2,500 branches are about to be closed, because people will be very angry about that.
Charles Hendry: Does my hon. Friend agree that the right hon. Lady is fundamentally confusing two different elements? One is the voluntary closure issue, which involves somebody saying, “I no longer want to run this post office.” If their post office is not one that has been identified by the Post Office for compulsory closure, they will be entitled to no compensation whatever, so in the case that the right hon. Lady mentioned, the person would probably not have been entitled to any compensation under the closure programme. As I said, there are two totally different issues. One is a decision made on high by the Post Office and sanctioned by the Government that certain post offices will have to close. The other issue involves cases in which people simply decide that they do not want to go on running the businesses and there will be no compensation.
Mr. Baron: That is a very fair point and reinforces the fact that, if anybody has a personal reason for voluntarily giving up their post office, they do not have to disclose it and that that should not be used as an excuse to impose a blanket ban when it comes to transparency and the criteria for the closure of up to 2,500 post offices. That just will not wash. I do not know about the right hon. Lady’s constituents, but the excuse that we have to keep personal details private certainly will not wash with mine, because that can be taken care of with voluntary closures. We are talking about a programme for the enforced closure of up to 2,500 post offices. Her thinking on the issue will not wash with constituents.
I want to press the Minister on a third and final point, which was very well made by my hon. Friend the Member for Wealden. Will the Government explain why they seem so intent on not allowing post offices to gain access to more business? Why, instead of managing the decline, do they not allow post offices to install PayPoint, for example? Will the Government explain why carriers cannot be allowed to work together? My hon. Friend cited an example relating to items that have not been delivered.
Simple measures such as those would help post offices—struggling post offices, perhaps—to take on more business, so instead of managing the decline, we could encourage more post offices to expand their business and so become commercially viable. At the moment, too many post offices are caught in a grey area: they are not allowed fully to operate commercially, as they should be, which is affecting their viability, and the Government’s answer to that—wrongly, in my view—is that we manage the decline. We should be trying to make post offices more commercially viable, which would be better for their long-term sustainability.
5.33 pm
Mr. McFadden: I think that we are due to finish at 6 pm. The debate shows that we all care about this issue, which is absolutely right. A number of questions were asked. Let me try to go through the main points that were made.
That said, with a network of 14,000 branches, there is still a need for the closures. The Opposition might say, “We should not have any closures at all and the subsidies should be limitless. Four million fewer people a week are using our post offices, and next year there might be even fewer, but the Government should just keep on signing those cheques.” However, ultimately, we have to balance our commitment to the national network with our responsibility to taxpayers. The issue before us does not concern network subsidies, but the management of the closure programme, redundancies and public investment in the network. Such investment cannot be unlimited.
I shall deal with the commercial freedom of post offices. As I said in response to my hon. Friend the Member for Stoke-on-Trent, Central, 97 per cent. of post offices are private businesses and share with organisations such as the Co-op and newsagents. Recently, I met the general secretary of the National Federation of SubPostmasters. He runs a post office that formerly was a Crown office and is now shared with the Spar shop in his home town. It is not uncommon to share retail space. In fact, it is much more common than having free-standing post offices. Most post offices share.
Opposition Members have underestimated the degree of innovation in the Post Office in recent years. It is now one of the largest suppliers of foreign currency in the country and a major retailer of travel insurance and broadband. It is diversifying and has the freedom to continue to do so. There will always be a discussion between Post Office Ltd and sub-postmasters and sub-postmistresses about new products. That is quite right. The Post Office has taken a view on whether it makes sense for sub-postmasters and sub-postmistresses to sell products that directly affect the revenue of Post Office Ltd. For example, there is nothing to prevent sub-postmasters from having a PayPoint, as long as it is not used for the key services provided by Post Office Ltd.
I discussed that recently with the general secretary of the National Federation of SubPostmasters and asked him about commercial freedom. Opposition Members say that their own sub-postmasters are queuing up to say that they disagree with the stance that has been taken. If the critical mass of the national network is a valuable bargaining tool and a post office is to sell new products, it is important to maintain that critical mass. A free-for-all would not necessarily benefit the network.
Charles Hendry: The Minister is wrong. If a sub-postmaster wanted to take on a PayPoint facility, he would have to get permission from the Post Office, which has declined permission in virtually every case. They have accepted that that might be necessary in a very few rural cases, but in almost every other case, it has declined permission. Sub-postmasters cannot have PayPoint installed because they are overruled when they make the request.
Mr. McFadden: My understanding is that the critical thing is the products being sold through PayPoint, and not the PayPoint itself. That is the principle that the Post Office applies to the different products available in a post office. It does not see the merit of selling products that directly affect its own revenue.
A question was raised about the compensated closure programme and factors that will be taken into account. A wide range of factors will be taken into account—not just location, the level of custom or losses, or profitability. The hon. Member for Billericay asked about public transport. That should be considered. The Post Office will take into account a whole range of factors. Postwatch will be closely involved throughout the process. There will be discussions with local authorities, sub-postmasters and sub-postmistresses, and an opportunity for the public and MPs to make representations. I have been clear with the Committee today about the terms of the consultation precisely to be straight and honest with the public about the decision that was taken in May and not to pretend that somehow it was reversed through the programme that we are advancing. We are talking about how to do that over the next 18 months, and that is what the process is about.
The hon. Member for Wealden asked whether I had a secret list of numbers for different areas that I could give to the House before Thursday. There is no secret list of numbers because the process is just beginning. In reply to my hon. Friend the Member for Thurrock, it will be done in roughly 50 or 60 groups of parliamentary constituencies over 18 months. In each group of constituencies, the process will take 20-odd weeks from the beginning until the final conclusion.
If you will indulge me, Mr. Pope, I shall turn to PayPoint. I understand that some 1,400 post offices currently have PayPoint terminals on the associated retail side of their businesses for services that do not directly compete with the Post Office. I may be told that I am wrong, but there we are.
Andrew Mackinlay: I am genuinely intrigued by my hon. Friend’s reference to 40 or 50 constituencies, and I am grateful for the information, but it occurs to me—
Mr. McFadden: It is 50 or 60 groups of constituencies, not 40 or 50 constituencies.
Andrew Mackinlay: I see. I misunderstood, but my point is the same. That would be a mix of town and country and, although my hon. Friend may not be able to do so this afternoon, he should clarify whether there would have to be a proportion. I think that the Committee agrees that there will be different criteria for rural areas and for urban areas. The cluster or pool from which the selection will be made will be a mixture of both, and we need to know what will constitute a rural area as distinct from an urban area. My constituency is in the Thames gateway and is very much an urban area along the river frontage, but clearly it would be included with some of the leafy lanes of Essex, Norfolk, Suffolk and Great Yarmouth.
Mr. McFadden: My hon. Friend is probably right that a cluster of constituencies might include urban and rural areas, and I shall clarify the matter. There will not be 40 or 50 constituencies in a cluster but 40 or 50 groups of constituencies throughout the country. However, he is probably right that there will be a diversity of areas within a group.
Hilary Armstrong: Some constituencies are like that.
Mr. McFadden: Some constituencies have both urban and rural areas.
Charles Hendry: The Minister is being extremely generous with his time in giving way, and I am most grateful to him.
The 50 or 60 clusters must be known, and I assume that the Post Office and the Minister know. Can he release that information this week before we break for the recess? We need to know the areas in which those decisions will be made. I believe that the Royal Mail has started writing to hon. Members saying when their areas might be involved, and it would be useful to see the total picture.
Mr. McFadden: My understanding is that Post Office Ltd is writing to hon. Members about this, so the hon. Gentleman will have the information if he has not already got it.
My hon. Friend the Member for Stoke-on-Trent, Central raised a number of issues. I will slightly disappoint him when I say that, whatever I have said today, I still believe that it is for Post Office Ltd to manage the network and not for Ministers to make detailed decisions about individual branches. I do not want to give a false impression; I want to make that position clear. He asked about the erosion of the national network and expressed concern about its prospects. Even after the closure programme, the Post Office will have, for example, vastly more branches than the banks and some seven or eight times as many branches as the biggest supermarket group in the country, so we are still talking about a major national network.
One or two hon. Members asked whether the programme will be on a first come, first served basis. The answer is no. There will be some overlap between people who want to leave and branches that it is deemed necessary to close, but there will not be a queue of people to claim the compensated closure payments. There will be much more co-ordination than that, precisely because of the access criteria and our commitment to ensuring the maintenance of a national network.
I am always wary in debate of going up a street that I have not been on. My hon. Friend the Member for Stoke-on-Trent, Central knows his constituency much better than I would claim to. He went into some detail about access to the proposed franchise within WH Smith in his constituency. I hope that Post Office Ltd will discuss such issues with him. I shall certainly be happy to ask it to do so. On his point that putting a post office into a private space is somehow against the commitment that we should have to the post office as a public service, I can tell him that the vast majority of post offices are in that situation. Many share space with the newsagents Martin McColl, the Co-op and others in franchise-type arrangements. I do not believe that that has given rise to people being banned from picking up their pensions because they are not dressed properly, or the other access issues that he raised. If he is worried about that, it is important for him to discuss it with Post Office Ltd, and I would encourage him to do so.
Mark Fisher: I trust that Mr. Crozier and his colleagues will read what the Minister has said and have the courtesy to come back to me on the matter. Perhaps they do not understand that the owner of that particular shopping centre operates a very tough exclusions policy and is therefore acting as the gatekeeper to a post office. My constituents might say, “I want to use what was our Crown post office, now in WH Smith,” but those private individuals have the right to say, “I am sorry, you cannot. It might be a public service post office, but we are not going to let you use it.” That cannot be right. All our constituents contribute to all our post offices, so surely there has to be free and open access for the public. It is the responsibility of the Government to ensure that that is the case.
Mr. McFadden: My hon. Friend has raised the matter twice now, and I have to say what I said before: he should discuss it with Post Office Ltd. I certainly do not believe that franchising is an enemy of the continuation of post office services. In fact, in some cases it will be its saviour.
There have probably been comments that I have not responded to, but I hope that I have covered most of the points that have been raised and that I have the agreement of the Committee to draw the debate to a close.
Question put and agreed to.
That the Committee has considered the Motion, that this House authorises the Secretary of State to pay, by way of financial assistance under section 8 of the Industrial Development Act 1982, in respect of post office network change to 2011, a sum exceeding 10 million and up to 465 million to Post Office Ltd.
Committee rose at eleven minutes to Six o’clock.

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