The
Committee consisted of the following
Members:
Chairman:
Mr.
Greg
Pope
Burt,
Lorely
(Solihull)
(LD)
Chaytor,
Mr. David
(Bury, North)
(Lab)
Coffey,
Ann
(Stockport)
(Lab)
Ellwood,
Mr. Tobias
(Bournemouth, East)
(Con)
Fitzpatrick,
Jim
(Parliamentary Under-Secretary of State for Trade and
Industry)
Hendry,
Charles
(Wealden)
(Con)
Key,
Robert
(Salisbury)
(Con)
Khabra,
Mr. Piara S.
(Ealing, Southall)
(Lab)
Knight,
Mr. Greg
(East Yorkshire)
(Con)
Kramer,
Susan
(Richmond Park)
(LD)
Laxton,
Mr. Bob
(Derby, North)
(Lab)
McCabe,
Steve
(Birmingham, Hall Green)
(Lab)
McCarthy-Fry,
Sarah
(Portsmouth, North)
(Lab/Co-op)
Newmark,
Mr. Brooks
(Braintree)
(Con)
Osborne,
Sandra
(Ayr, Carrick and Cumnock)
(Lab)
Smith,
Mr. Andrew
(Oxford, East)
(Lab)
Turner,
Dr. Desmond
(Brighton, Kemptown)
(Lab)
Rhiannon
Hollis, Committee
Clerk
attended the
Committee
The
following also attended, pursuant to Standing Order No.
118(2):
Smith,
Sir Robert (West Aberdeenshire and Kincardine)
(LD)
Third
Standing Committee on Delegated
Legislation
Tuesday 27
February
2007
[Mr.
Greg Pope
in the
Chair]
Draft Post Office Network Subsidy Scheme Order 2007
10.30am
The
Parliamentary Under-Secretary of State for Trade and Industry (Jim
Fitzpatrick):
I beg to
move,
That the
Committee has considered the draft Post Office Network Subsidy Scheme
Order 2007.
It is a
pleasure to welcome you to the Chair, Mr. Pope. I have not
served under your chairmanship before, and I am looking forward to the
experience.
The
Government announced their proposals for the future of the post office
network to the House on 14 December. They are the subject of
national public consultation until 8 March and we expect to announce
our final decisions in March.
There are about 14,300 post
offices in the UK; about 480 are Crown post offices owned and operated
by the Post Office. The remaining branches are operated by
sub-postmasters and sub-postmistresses as private businesses.
Historically, branches have been located where the sub-postmaster chose
to set up business, rather than as the result of a strategic decision
by the Post Office. The consequence is that in some places many
branches are competing for the same customers and it is becoming
increasingly difficult and expensive for Post Office Ltd to provide the
service.
The big
problem is that people simply do not use post offices as they once did.
Some 4 million fewer people are using post offices each week compared
with just two years ago, but the Government recognise that the post
office has a vital social and economic role in communities across the
country. That is why we will continue to support a national network of
post offices, as outlined in our proposals for the network and why we
are looking to continue to subsidise Post Office Ltd to continue to
maintain uncommercial offices that it would otherwise close.
The Government have invested
more than £2 billion since 1999 to support the network, which
includes the annual social network payment of up to £150 million
that we introduced in 2003 and are now looking to extend until at least
2011.
Mr.
Brooks Newmark (Braintree) (Con): The Minister makes a
very good point about encouraging people to use post offices more. The
problem for post offices is that the services that they used to provide
are being taken away. What will the Minister do to ensure that post
offices can provide more services to the local community, not
fewer?
Jim
Fitzpatrick:
The hon. Gentleman makes a very good point,
which has been raised a number of times in Adjournment debates on the
Floor of the House and during questions on the statement made by my
right
hon. Friend the Secretary of State on 14 December. It is well recognised
that the landscape is changing because people now go about their
business by using internet banking, ATMs, e-mail and so on. A very good
example of how things have changed is that people can now tax their
vehicles online, when previously they had to take their MOT and
insurance documents to the post office in order to purchase their tax
disc. In 2005, some 800,000 people chose to renew their vehicle tax
online and last year more than 5.5 million people did so.
In direct
response to the hon. Gentlemans question, the subsidy today
strongly demonstrates the Governments commitment to ensuring
that there is a viable national post office network. We have been
helping the Post Office to develop new financial products, some of
which have been announced in the past 12 months. It is now the biggest
supplier of personal insurance and foreign currency, which shows how it
is expanding its operation, and we are doing what we can to assist it
in that
process.
Mr.
Newmark:
I thank the Minister for his response. The
£150 million is welcome to many post offices, but what is needed
is a longer-term solution. The hon. Gentleman said that many people use
the internet, computers and so on, but the elderly, the poor and people
in rural areas do not have the same opportunities to do so as
middle-class people living in towns. The nub of the issue is how we
support the community as a whole, not just those who have access to the
internet.
Jim
Fitzpatrick:
The hon. Gentleman makes a valid point. By
supporting the Post Office, the Government have been trying to show
that we recognise the social value of post offices. However, we
acknowledge that the £2 million-a-week losses that the company
sustained two years ago, which this year are estimated to be in the
region of £4 million a week, have been identified as
unsustainable by the Select Committee on Trade and Industry and by the
National Federation of Sub-Postmasters. We have to do something, which
is why the Secretary of States statement of 14 December
proposed the medium-term future of the Post Office, with financial
subsidy and the ability through new access criteria to maintain a
national network and ensure that nobody has to travel an unreasonable
distance to get to a post office. There are people, as the hon.
Gentleman describes, who do not have access to PCs or the internet and
who rely on the physical being of their post office. That is very much
what we are about today, and why we are moving the order, to ensure
that the Post Office can provide the services that the hon. Gentleman
and the Government want to see.
Sir
Robert Smith (West Aberdeenshire and Kincardine) (LD): The
Minister touched on quite an important point about the vehicle tax disc
and how people can renew it online or over the phone. The complaint
from post offices again is the lack of joined-up government. No one has
yet developed an IT system to allow the post office to check insurance
documents so that people do not have to take so many documents to the
post office and can collect their tax disc there if that is what they
want to do. More joined-up government would reduce the need for the
subsidy if services were more integrated.
Jim
Fitzpatrick:
The hon. Gentleman makes a good point, and I
know that he has been a very solid and regular contributor to the
debatecertainly since I have been in post since last May. He
has secured his own and contributed to other Adjournment debates. We
are looking to develop the IT infrastructure with the Post Office, and
we paid £500 million for the Horizon project. Clearly, if we can
improve what is available to the public and allow the Post Office to
develop and produce services that are attractive to customers, that is
in the best interests of Post Office Ltd.
One of the statistics that was
curious was that 40 per cent. of those who renewed their tax disc
online did so at times when the post office was closed, such as in the
evenings or on Sundays. There are always going to be people who want to
use the most convenient method, however much we improve the services
provided by some post offices. That is not to say that we should not
provide the best possible services. Obviously, I entirely agree with
the hon. Gentleman that we
should.
As I was
saying, many branches will never make a commercial return for the Post
Office, but we are committed to maintaining a national network and
understand the need to continue to help Post Office Ltd maintain
branches in places that it would not consider to be commercial. When
the social network payment was introduced, the Government were able to
utilise the reserves that had accumulated in Royal Mail for the good of
the network. We directed Royal Mail, through provisions of the Postal
Services Act 2000, to put money into a special reserve specifically to
meet the costs of maintaining the rural post office network. We
announced an extension of the social network payment until 2008 in
September 2004.
The
first year of that extension is nearing an end and payments to date
have been made by continuing to utilise the Royal Mail reserves.
However, hon. Members will be aware that my right hon. Friend the
Secretary of State announced the funding package for Royal Mail in May
2006, which included the release of the remaining reserves to fund an
escrow account, securing Royal Mails pension fund obligations.
Funding of the social network payment must now therefore come directly
from the Government and the order that we are discussing today provides
the legislative means by which those payments can continue to be
made.
Let me now
provide some detail about the terms of the scheme. It enables the
Secretary of State to make payments to Post Office Ltd of up to
£160 million per annum. That subsidy will assist the company to
continue to provide services through a national post office network. In
the absence of the subsidy, it is likely that Post Office Ltd would
take a commercial decision to close a significant number of post
offices in order to achieve profitability. In determining the need for
subsidy payments, the Secretary of State shall have regard to continued
provision of services through a national network of post
offices.
The new
access criteria proposals outlined in the post office network
consultation document have been designed to ensure that we maintain
national access to post office services. The proposed access criteria
include provisions to protect customers in deprived urban areas and
remoter rural areas. The Post Office will also provide services in
different and more imaginative ways better to serve its
customers needs. The way in which postal services are provided
will also change. Government support will enable the Post Office to
open at least 500 new outreach locations to provide access to services
for smaller and more remote communities using mobile post offices and
post offices within other locations, such as shops, village halls,
community centres, or in travelling mobile vans. In some cases it will
be able to deliver services directly to peoples homes. The
current subsidy relates solely to the provision of a rural network. The
Government believe that the needs of post office users in other parts
of the network merit similar protection, which is reflected in the
broadened scope of the proposed access criteria. Payments of subsidy
from April 2008 will take into account the access criteria resulting
from the consultation.
10.40
am
Charles
Hendry (Wealden) (Con): I echo the Ministers
comments about it being a pleasure to serve under your chairmanship,
Mr. Pope. I also thank the Minister for so clearly setting
out the provisions of this order, which we will certainly not be
opposing, and for the courteous way in which he has dealt with
interventions so far. However, that does not minimise our
dissatisfaction with the Government strategy being adopted at this
time.
This order
simply highlights the Governments failure to have any long-term
strategy for dealing with the future of the post office network. They
have no clear direction for that network, and thousands of
sub-postmasters and millions of people are disappointed that all that
they seem to be doing, at this stage, is managing its decline. People
are looking for a Government vision that will give the post office
network a vibrant future. Whenever any of us come across a
sub-postmaster or sub-postmistress, they say, We want to run a
profitable business; we want to invest in those businesses, to provide
more services and to do something more for our communities. Yet
this Government are, sadly, not giving them permission to do exactly
what they want.
As my hon.
Friend the Member for Braintree pointed out, this Government have taken
away £168 million in Government contracts from the post office
network. Some of those aspects are beyond their control, like the BBC
licence fee, and we understand why the BBC has to collect the licence
fee in the most cost-efficient way possible. Yet other issues, like
passports, are the direct responsibility of the Government, as is the
phasing out of the Post Office card account in 2010, which will itself
lead to the direct closure of many post offices around the country. Car
tax has already been mentioned.
So, the Government hold
significant responsibility for the lack of business currently going
into the post office network. Indeed, it is rather a coincidence that
they took out £168 million last year from the Post Office in
Government contracts, and are proposing to put £160 million back
in this year. What a strange coincidence that those numbers are so
similar.
This order
will be of little consolation to those sub-postmasters who want to run
their businesses but are going to have them taken away. We still do not
know how the Post Office will decide which post offices will stay and
which will not. There will be tremendous inconsistencies. It may be
arbitrarily decided to close a popular business that has been there for
years, with the
postmaster being told, Sorry, you are being made redundant. You
have no choice about it. Perhaps he will then be told,
You can go and run a new post office, which we have
strategically decided should be positioned a few miles away,
and he may say, Hang on a moment. My whole business depends on
my local community. You will be taking me away from the community that
I have worked in and servedone to which I really feel I
belongand requiring me to go to a different community, further
away, which I do not know so well. There will be an enormous
amount of pain as we go through this process, and we believe that the
Government have truly missed an opportunity to bring new business to
the post office network.
I have a number of questions
that I hope the Minister will be able to answer. The Government have
talked of a £1.7 billion package over the next five years. The
£160 million a year for this element will, therefore, be
£800 million of that £1.7 billion. Can the Minister give
us a breakdown of the remainder of that package, and exactly what it
will be used for? In particular, will the redundancy packages being
proposed for sub-postmasters come from that £160 million a year,
or from some separate element of the fund?
How will the subsidy for each
post office be calculated? Can the Minister explain to us the precise
formula that will be used? Will there, indeed, be a maximum level of
subsidy to which any individual sub-post office will be entitled? If
that is the case, then what will the level of that subsidy be, and if
post offices have to apply for it, how will they be made aware of their
entitlement or how to go about the process?
Does the Minister expect the
maximum subsidy to be paid each and every year for the next five years?
If not, does he expect it to be £160 million for this coming
year, gradually declining over the subsequent five, or to start lower
and build up to £160 million, or to peak somewhere in the
middle? As the number of sub-post offices declines, does he expect the
subsidy also to decline, or will the average subsidy per post office
rise as the number of post offices falls?
Those are
detailed issues, but it comes back to the fundamental question. The
Government are missing the opportunity to bring new business into the
post office network, which would remove the need for much of this
subsidy. The Post Office wants to have the chance to work with other
carriers. We all know that the majority of packages and parcels cannot
be delivered on the day that the Royal Mail tries to deliver them
because the people to whom they are being delivered are out. The vans
trundle back in a very environmentally unfriendly way to depots which
may be 15 or 20 miles away and then come out again the next day to try
to deliver again. How much more sensible to allow those packages to be
left at the sub-post office, where they can be picked up by their
intended recipient, with the sub-postmaster deriving a fee from
that.
What is the
Minister doing to explore the use of sub-post offices as a hub for
local council services? Some extremely imaginative approaches have been
adopted by councils up and down the country of all political colours to
try to bring new business into the post office network. People are
being encouraged to
pay their rents, their parking tickets and their car permits through
post offices. More should be done to encourage that.
What is the Minister doing to
encourage the establishment of Government information points in
sub-post offices where people can find out their entitlement to
benefits and other matters? That would bring more footfall into the
post offices and the likelihood of greater business. What is he doing
to encourage the introduction of new financial services which so many
sub-postmasters feel they could deliver? They feel that they are being
deprived of those opportunities. The Minister has genuinely missed an
opportunity with this. I urge him to go back and look at the whole
strategy for the post office and see what can be done to generate new
business to give a viable business future to those post offices so that
they can survive on business rather than on
subsidy.
10.47
am
Lorely
Burt (Solihull) (LD): May I also welcome you to the Chair,
Mr. Pope.
It is clear that no one in the
room wants our post office system to be reliant on subsidy. As things
stand, it is clearly necessary to preserve loss-making post offices
with vital functions in our communities. The Government are presiding
over a decline in post offices. The last available figures show 14,263
post offices to the end of September 2006, which is a fall of 4,988
from March 1977. I would imagine that we have passed the threshold of
5,000 post office closures now. It is hardly cause for celebration, but
I have heard no mention of it. It is a sad moment that should be
marked. Although the Conservatives are making lots of suggestions about
how post offices can be built up, it is a sad fact that 3,500 were lost
under the previous Conservative Administration. The decline certainly
started before the current Government came to power.
Mr.
Newmark:
Has the problem not been exacerbated by the fact
that the services that post offices provide are being taken away from
them, although I appreciate the hon. Ladys point that the
decline has been going on for quite a
while?
Lorely
Burt:
Yes. The Government have, to some degree,
manufactured part of the decline. The Minister blames it on lifestyle
choices, but as the hon. Member for Wealden said, things like the
potential removal of the post office card account, the loss of TV
licence renewals, which was presided over by this Government, the
refusal to allow post offices to take over some of the new passport
registrations, and the restriction of potential investment activity
through Treasury borrowing rules, are all contributing to the sad
decline that we are
witnessing.
With
Government pension and benefit business, the losses amounted to
£168 million-worth of business last year, which is greater than
the £111 million operating loss. The Minister said some
encouraging things about the Post Office. His warm words on encouraging
new markets were very welcome, but I wonder how far he is prepared to
go to create a level playing field. Will he free post offices to invest
in new business? For example, the hon. Member for Wealden talked about
parcel
depots for Royal Mail and Government information points. Lots of ideas
are being offered to the Government. I hope that they will take some of
them on board and loosen the constraints under which the post office
system is
labouring.
On
15 February, the Minister announced £1.7 billion to support the
post office system. However, breaking that down, the subsidy is
£750 million, assuming that we have five years of
subsidy at £150 million a yearalthough it has been
questioned exactly what the subsidy is likely to be year on year; some
£200 million will be needed for redundancies and closures; and
there is an undisclosed amount for the ongoing losses of Post Office
Ltd. That leaves a very small amount for investment and certainly
nowhere near the £2 billion that the Liberal Democrat
part-privatisation scheme would
produce.
The
Conservative and Labour parties seem to be in a mental trap of managing
down the post offices. Only the Liberal Democrats have a policy of
investment, to build up the post offices. We look forward to the
results of Government consultation, which will be published later on in
March, but more in hope than expectation. In the meantime, we will
support the
subsidy.
10.52
am
Mr.
Newmark:
I want to reiterate the point that the
£150 million proposed by the Government is welcome, but my
concern is that that is a short-term fix and not a long-term
solution.
I will make
a couple of points arising from e-mails that I have received. One was
from Billy Hayes, the general secretary of the Communication Workers
Union, not perhaps a natural ally of the Tories, who
said:
It is
crucial the Government recognises the vital community role the Post
Office plays and fully appreciates and ensures the long-term viability
of this national
asset.
He went
on:
Government
proposals to close 2,500 Post Offices will have a detrimental impact on
both rural and urban way of life for millions of
people.
Those
points are echoed by a constituent of mine, Mr. Alan Smart,
who wrote to me with pretty much the same
concerns:
I am
writing to you to express my concern regarding current government
proposals to close over 2,500 post offices in the
UK.
He makes a good
point about the need for access, which perhaps people in urban areas
have, but people in rural areas do not. If we have a national strategy
for post offices, it is important that everybody in the country has
access to post offices. He makes another good point, which I suspect
backs the Governments view, that his local post office in
Newland street,
Witham,
is heavily
oversubscribed...indicating the value the community places on the
services it
provides.
Clearly
there is a demand, and in an urban environment that is very good,
because the services are there. However, I have spoken to the lady that
runs the rural post office in Terling, one of my 42 villages. It is
also a shop that relies on people going there to buy goods, but it is
in decline and losing money because it can no longer provide the same
post office servicesa point made by the hon. Member for
Solihull, for the
Liberal Democrats. If there is not a footfall into village shops, the
core store becomes less viable. When we are thinking about a long-term
strategy, it is important to be concerned about issues such as phasing
out the post office card account or taking away peoples ability
to get their television licences and so on from village shops. We want
more, not fewer, services. The Catch 22 for many post offices is that
while the Government encourage people to go into themI heard
the Minister say that loud and clearthey will continue to
decline unless the Government also allow them to provide more
services.
10.55
am
Sir
Robert Smith: Thank you for calling me, Mr.
Pope, even though I am not a member of the
Committee.
The order
is a tribute to the National Federation of Sub-Postmasters and the 4
million people who petitioned the Government to make a future for the
Post Office. It is a welcome recognition of the vital social role that
post offices play and that their communities see for them. As others
have pointed out, it is also, in part, a response to the loss of
business from the Post Office. Nobody can deny that lifestyles and
habits change. However, the Government must accept that the way in
which they dealt with the card account for the Department for Work and
Pensions accelerated a lifestyle change and prevented business from
progressing naturally at post offices, creating more of a crisis than
there might have been.
It is important for the
Minister to clarify whether this years subsidy is similar to
the previous one. Many of our constituents thought that an extra
£150 million was being paid to our sub-post offices. They did
not realise that the money was to be given to Post Office Ltd. for it
to decide how it should be spent to maintain the network and to cover
the losses that it faced. The order increases the figure to £160
million, to cover urban post offices. How was that calculated? What
continuing support is envisaged for the rural network, which is the one
that clearly needs a subsidy at the moment?
The order
says that the money is going to the Post Office or to a successor
company that carries on its business. Will the Minister clarify what
conditions will be attached to the £800 million that will be
given to the Post Office to discharge its duties? Will they purely be
the criteria in the consultation? It is hoped that those might change
in light of the concerns expressed in submissions to the consultation.
The closing date for the consultation is in March and the Minister is
going to respond in March. When we met him, I understood that he
expected to respond in May. How do the Government expect to do due
justice to all the concerns expressed in the consultation so soon after
its closure? Will it be a genuine response that reflects those
concerns?
The Minister
needs to clarify what he understands, from his modelling and his
discussions with the Post Office, to be the criteria that he is buying.
Is he buying a network of a certain size11,500 sub-post
officesor does he have a model that says how many post offices
represent the minimum that will meet the new criteria? The criteria are
still fairly vague to many people, who do not understand over what
rural area the
95 per cent. will have to apply. Will it be a large aggregation of rural
areas, in which case there could be skewing and certain communities
could lose out even though the Post Office might meet the
criteria?
There are
two worrying aspects to the rural programme that the Government have
come up with and which is, in effect, a rural closure programme. The
model for the urban programme was that one sub-post office would close
and business would be diverted to the neighbouring post office. The
geography of rural areas means that, because of the radial routes
intothe larger towns, if a rural post office is closed the
neighbouring one will not necessarily pick up the business. I hope
that, in his modelling, the Minister is not relying on the transfer of
business to maintain certain post offices.
In the requirement on the Post
Office to meet the criteria, the Minister emphasised that he does not
want the chaos of the urban reinvention or closure programme, and that
geography and topographyrivers, mountains and so onand
access to post offices and transport need to be recognised. How will it
be enforced on the Post Office that it needs to recognise those things,
because it might just tick the box and say, We have met our
target of 95 per cent. within three miles of a rural post
office.? How will the Minister police the delivery of a genuine
network that serves communities, rather than one that ticks the boxes
and complies with the
criteria?
The
Government have a vital opportunity to recognise the need to bring in
more businesses and to integrate Government services into post offices.
It is also crucial that they make it clear to us what size of network
the subsidy, and the criteria, will support. How will they ensure that
rural communities rather than statistics are dealt with and that the
rural communities continue to have the vital service that they so value
at the heart of their
community?
11.1
am
Jim
Fitzpatrick:
I will try to respond to the points raised in
the debate and, if I miss anything, I hope that hon. Members will catch
your eye, Mr. Pope. I will write to them if I do not have
the answers to
hand.
The
hon. Member for Wealden, typically, opened his contribution
very generously and I am gratefulfor his comments on what we
are trying to do. He outlined his partys position that we are
managing the decline of the Post Office and made some points to
substantiate that view. I draw his attention to the comment by Sally
Reeves, president of the National Federation of Sub-Postmasters. She
was speaking in the same vein as the hon. Member for West Aberdeenshire
and Kincardine. She
said:
Last
year we collected a petition of four million signatures expressing
concern about the future of the local post office services and access
to current accounts. The petition was presented to Downing Street and
drew huge media attention. Our intention was to alert the Government to
how strongly people felt about the issue. The Government's proposals,
announced in December, call for the closure of 2,500 loss-making
offices and the opening of 500 outreach offices. ... We broadly
agree with these numbers as a way of creating a sustainable network but
the petition was vital.
Sally Reeves is the
president of the organisation that said that the losses being
experienced by Post Office Ltd were unsustainable. If it is the
professional assessment of the person representing sub-postmasters
that, broadly, the Government are getting it about right, it gives us
some reassurance.
It
will not be a painless exercisenobody said that it would be
entirely pain freebut we will make it as painless as possible
and will try to deal with the myriad problems that arise during the
consultation. I will return to that matter
later.
The hon. Member
for Wealden referred to the BBC, and the decision of the board of
governors to remove the contract for BBC licences from the Post
Officean issue that we have covered in previous debates. The
hon. Gentleman asked how the Post Office would decide who goes and who
stays. Obviously, the business case will have to be assessed; it will
be scrutinised by Postwatch and local Members of Parliament to ensure
that the procedure is as robust as possible.
The hon.
Member for West Aberdeenshire and Kincardine asked about the timetable.
It is very much as I outlined in my statement. The consultation ends
on8 March. We are assessing the submissions as they come in so
that we do not have to wade through hundredsof submissions on
8 March. As I said, the Secretary of State hopes to make an
announcement by the end of March so that we can confirm, amend or
adjust the access criteria and the points that he made in his statement
on 14 December in advance of purdah for the elections in Scotland and
Wales and local government elections in England.
During the purdah period, Post
Office Ltd will have the certainty of the Government-approved template
before it does the number crunching. It will bring forward its
proposals in May, which will be subject to public consultation in which
Members of Parliament will be centrally involved, as will Postwatch. We
want to make those procedures as robust as
possible.
Charles
Hendry:
The Minister mentions the issue of consultation.
Can he confirm that there will be consultation on each and every
proposed closure, and not just consultation on the general principles
involved?
Jim
Fitzpatrick:
I fully expect that every sub-post office
that has been proposed for restructuringclosing, moving or
whateverwill want local views to be taken into account, and
will enlist the support of their local Member of Parliament. We know
that a number of sub-postmasters and sub-postmistresses are waiting to
see the package because they want to go. One of the difficulties last
time, which we have discussed on a number of occasions, was that some
people were able to go before local Members of Parliament for local
communities had a real understanding of what was happening in local
areas. We have learned the lessons of that, and this time, we will
endeavour to ensure that the mistakes are not repeated and the lessons
learned are put to good effect. The Post Office will come forward with
proposals on a cluster basis, so in answer to the point made by the
hon. Member for West Aberdeenshire and Kincardine, decisions will be
made not in isolation but in the round with groups of constituencies,
similar to last time. There will be boundaries, so some post offices
will not be taken in co-ordination with
others.
Sir
Robert Smith:
The Minister says similar to last
time, but last time was in an urban environment. Will it be up
to Post Office Ltd to define the scope of the rural area over which it
has to meet the
criteria?
Jim
Fitzpatrick:
Well, Post Office Ltd is responsible for
managing the process, but I am sure that it will consult with officials
within the Department to ensure that we are comfortable with the
structure that it will come forward with. I am sure that it will also
take soundings from elsewhere. The company is responsible for coming
forward with the proposals.
The hon. Member for Wealden
raised other questions relating to funding, in terms of how the
breakdown will be compiled. The funding will include compensation to
sub-postmasters, losses that will be incurred by the network, and
investment in the continued social network payment. The hon. Member for
Solihull made up her own calculations as to how that broke down, but we
are not in a position to give a detailed breakdown. We have responded
in that vein to a number of parliamentary questions. Until we get to
the end of the consultation period, we will not be able to determine
exactly how much will be in each element of the package.
The hon.
Member for Wealden also asked a question about whether compensation to
existing sub-postmasters would come from the annual social network
payment. The answer to that is no; the compensation will be a separate
allocation of funding. The precise amount will be determined by
decisions taken at a local level. He raised the question of the
£160 million a year; the Post Office must be able to demonstrate
that there is a clear audited trail in respect of that £160
million. Post Office has provided forecasts of the subsidy required to
be able to allow it to maintain the level of provision required by the
Government. There will be an annual independent audit of the subsidy
provided to show that no over-payment occurs. I cannot imagine that
there will be any under-payment, given the nature so far of the
support.
The hon.
Gentleman asked about the local government dimension, and that has been
raised in a number of debates. We fully expect the Local Government
Association to contribute to the consultation exercise. My right hon.
Friend the Secretary of State has said that Post Office Ltd and the LGA
will be in dialogue to see how they might be able to assist each other
going forward.
The
hon. Gentleman raised a question about whether Government information
points could be trialled in post offices. As I understand it, that was
the subject of previous trialling, where 85 per cent. of respondents
said that it was useful, but that they could have got the information
elsewhere. It was not followed up as a viable way to spend
taxpayers
money.
I refer now to
the final issue that the hon. Gentleman raised. It has always been the
case that subsidy payment to Post Office Ltd is to assist it in making
a larger network that it would otherwise. He asked whether individual
payments would be made to individual officers. The subside is not a
payment to individual officers, but it means that branches can be
retained where there is no clear commercial rationale for the company
to do so.
The hon.
Member for Solihull said that the Governments policy was
short-sighted. The Liberal
Democrat policy to privatise Royal Mail, sell it off, raise £2
billion and use that to subsidise the network is even more
short-sighted, because underlying the payment of £2 billion, the
losses, which have been increasing for a number of years, would
accelerate and in three or four years time we would be in
exactly the same position as we are in today. If the policy was
applied, the network would have to be restructured, but the Government
would have spent much more taxpayers money and we would be no
further
forward.
Lorely
Burt:
We are not planning to sell off all of Royal Mail,
only 49 per cent. of it. It would remain in Government ownership, with
the rest divided between the Government and Royal Mail employees. The
Minister said that the £2 billion would be frittered away and
the post office network would be in the same situation as it was
before. However, the investment, combined with the freedom of the Post
Office to conduct a world-class service, would help it to compete with
other organisations in the same market.
The
Chairman:
Order. Before the Minister responds, I remind
the Committee that interventions should be brief. I draw the Minister
back to the order rather than proposals for the privatisation of Royal
Mail.
Jim
Fitzpatrick:
I apologise for inviting the hon. Lady to go
down that cul de sac, Mr. Pope. The hon. Member for
Braintree said that Billy Hayes was not a natural allyI take
his word for thatbut Mr. Smart probably is; if he is
not, he may be after he is mentioned in
Hansard. The hon.
Gentleman makes a reasonable point, with which we agree: how best do we
protect the network to ensure that the communities that rely on post
offices continue to receive their services? The essence of the
Governments argument is that if we do not stop the haemorrhage
of losses and cannot put Post Office Ltd on as secure a financial
footing as possible through restructuring, the network will be
irreparably damaged. We are confident that the medium-term
restructuring strategy will be of
assistance.
The hon.
Member for West Aberdeenshire and Kincardine asked about urban offices
being taken into account in respect of support moneys from the
Government to the network. As the hon. Gentleman knows, several
different factors determine the level of subsidy; the continuation of
the subsidy to maintain the network is part of a large Government
investment. The closure programme will address over-provision in some
areas and under-use in others. We expect that much of the business will
migrate to remaining branches, making them more viable for Post Office
Ltd and for
sub-postmasters.
The
Post Office has cut its costs by 25 per cent. in the past four years
and is looking to make further significant savings in its cost base.
The introduction of outreach services will help to reduce costs,
too.
I think I
responded earlier to the hon. Gentlemans question about May and
March.
Sir
Robert Smith:
The Minister is asking the Committee to
approve the taxpayers handing over a cheque for £800
million to buy a service from the Post Office over and above its
commercial service, which is
to be enshrined in the criteria. We do not yet know formally what those
criteria will be because they are still subject to consultation.
However, the Government, with their access to data, must have done some
modelling with the Post Office on how many sub-post offices will be
maintained to meet the criteria. Will the Minister tell the Committee
how many sub-post offices the subsidy
guarantees?
Jim
Fitzpatrick:
I think that the figures are in the public
domain. The Post Office Ltd is on record as saying that its estimate is
of about 4,000 commercial branches. Anything above that is a subsidy.
The hon. Gentleman made a good point about how much subsidy goes to
each office. Although there are averages, the amount of subsidy that
each office accrues will depend on how much business each office does.
I hope that during the consultation exercise there will be greater
transparency and greater identification of costs. Some 8,000 branches
will benefit from the subsidy after the restructuring, if we get down
to 12,000 plus 500 outreach services that will be provided by the
taxpayer, over and above what is provided by the
commercial network. I am sure that it will be the aspiration of us all
and Post Office Ltd that the network will be able not just to maintain
itself but to expand into new areas and new products, ensuring that it
becomes more viable. We all know what competition it is up against, and
how peoples habits are changing, with the advances of
technology, communications and the internet, so it not going to be an
easy task. However, both Opposition parties have demonstrated support
for the principle of a future payment to maintain the network, so we
are arguing about tactics rather than strategy.
I hope that the responses that
I have given have been helpful to hon. Members. The Government believe
that the order will allow us to maintain a national network of post
offices that will continue to meet the needs of communities throughout
the country, and I commend the order to the
Committee.
Question
put and agreed
to.
Resolved,
That
the Committee has considered the Draft Post Office Network Subsidy
Scheme Order
2007.
Committee
rose at sixteen minutes past Eleven
oclock.