House of Commons portcullis
House of Commons
Session 2006 - 07
Publications on the internet
Public Bill Committee Debates

Draft Post Office Network Subsidy Scheme Order 2007

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

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?
In direct response to the hon. Gentleman’s question, the subsidy today strongly demonstrates the Government’s 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 State’s 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 debate—certainly 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 Mail’s 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.
10.40 am
Charles Hendry (Wealden) (Con): I echo the Minister’s 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 Government’s 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.
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. Lady’s 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 year—although 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 Government’s 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 services—a 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 people’s 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 them—I heard the Minister say that loud and clear—they 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 year’s 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 size—11,500 sub-post offices—or 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 topography—rivers, mountains and so on—and 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 party’s 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 exercise—nobody said that it would be entirely pain free—but 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 Office—an 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 restructuring—closing, moving or whatever—will 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.
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 ally—I take his word for that—but 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 Government’s 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. Gentleman’s question about May and March.
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 people’s 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.
That the Committee has considered the Draft Post Office Network Subsidy Scheme Order 2007.
Committee rose at sixteen minutes past Eleven o’clock.

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2007
Prepared 28 February 2007