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In its branch access report, Post Office Ltd identifies two alternative branches as the receiving branches in the event of Abbeville Roads closure: Clapham Park
branch and Balham Hill branch. As I have said, there is a question mark over the future of both of those branches. Clapham Park branch will without the slightest element of doubt be demolished in due course as part of the huge and welcome regeneration of the Clapham Park estate. I have met its postmaster, Mr. Siva Balan, who tells me that that development is expected in four years time and that he will be offered premises in a new shopping mallincidentally, at a greater distance from Abbeville Roadbut that he cannot be certain of his decision, which will clearly depend on several factors, not least the future proposed rent. I do not wish in the least to detract from the contribution that Mr. Balan and his post office and store make to the Clapham Park community; on the contrary, I welcome it. However, the simple truth is that it is a receiving post office whose future cannot be relied on 100 per cent.
If that is a problem, the future of the other receiving branchBalham Hillappears to be far more precarious. In fact, it is currently on the market; it is up for sale. A short time ago it was closed. It had a makeover as a Costcutter, which I suspect has not succeeded in what is an extremely competitive retail environment. There is a large question mark over its future. I also very much doubt that Balham Hill has the capacity to take on more than double its current work load in the event of an Abbeville Road closure. I have visited the store. It is very small and quite cramped, there is very little space in which queues could form, it is unsuitable for wheelchairs and childrens buggies, and it has only one operational counter. Moreover, there are no public transport links between Abbeville road and Balham hill, and there is no parking either. I would be worried about the journey on foot for the elderly, the infirm and people with children, which takes them across the very busy junction of the A24 with the south circular where there are no pedestrian crossing facilities. I honestly think this is an unrealistic and unreasonable offer to my constituents in the Abbeville road locality.
I must draw my remarks to a close. I must say to my hon. Friend the Minister that I do not have a head-in-the-sand attitude towards the post office network change programme. I accept that the Post Office has lost millions of customers and is losing very large sums of money as customer habits change and traditional post office services become available elsewhere. Changes clearly need to be made if the post office network is to have a sustainable future and if there is to be a proper return for the taxpayer. That must include a reduction in the number of branches. Let me also say that I applaud our Labour Governments willingness to commit large levels of subsidy in support of the Post Offices community and social role£2 billion since 1999 and a further £1.7 billion up to 2011. That is all in huge contrast with the total absence of subsidy under the Conservative Administration, and with the Lib Dems plans to privatise the Royal Mail.
However, in opposing the closure of Abbeville Road post office, I say this to my hon. Friend. For the long-term future of the Post Office, it makes no sense to close a profit-making branch or to disrupt the lives of 2,000 to 3,000 customers of Abbeville Road post office and send them off to other branches that either cannot cope, or which might not exist sooner or later
down the line. I gather that experience so far suggests that up to 15 per cent. of the initial proposals can be changed as a result of the consultation process. In London, I hope that that will include Abbeville Road post office. It is a successful and much-cherished local institution and it deserves a future.
The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): I congratulate my right hon. Friend the Member for Streatham (Keith Hill) on securing this debate on the Abbeville road post office in his constituency. I have known him for many years. He is, as we have just heard, an effective and passionate advocate for the people of Streatham, and today he has put his case with characteristic skill and eloquence. As he said at the beginning of his speech, he has concentrated today not so much on post office closures in general, but on the particular circumstances of the Abbeville road post office. I join him in paying tribute to the efforts of Mr. and Mrs. Patel and the work that they have done for the local community over the years.
My right hon. Friend will understand that, as a Minister, I do not have a role to play in decisions to close or not to close individual post offices. That is rightly a matter for Post Office Ltd, after the local process involving Postwatchthe consumer voicelocal people, Members of Parliament and other local representatives. I am sure that Post Office Ltd will have heard what he has said today and will give it proper consideration. He said that Post Office Ltd had got certain aspects of what is happening in that branch wrong. I encourage him to take that up with Post Office Ltd and with Postwatch.
There is the possibility of a review process. It does not involve me, as the Minister; it does involve Postwatch recommending to Post Office Ltd that it look again at a particular decision. When that has happened previously, Post Office Ltd has so far normally been willing to do so. The process is capable of escalation from the local level right up to an ultimate decision being taken by Allan Leighton, the chairman of the Royal Mail Group, so my right hon. Friend might wish to make representations to both Post Office Ltd and Postwatch about the possibility of review, if he believes that the facts set out in these circumstances were incorrect.
I want to say something about the background to the closure process affecting Abbeville road post office and, indeed, post offices in other parts of the country. I of course accept that this is a difficult and unpopular process. People have an attachment to their local post offices, even if as a society we use them a lot less than we once did. As my right hon. Friend said, the Governments starting point has been to support the post office network. We are in the midst of a programme of support worth up to £1.7 billion between 2006 and 2011, which includes an annual subsidy of £150 million. So we do not view the network as purely commercial. The commercially viable branches number about 4,000 of the 14,000 existing branches. The subsidy given by the taxpayer enables thousands more post offices to stay open than would otherwise do so. The subsidy that this Government give did not exist in the past.
Although the proposals are easy to attack and to criticise, I have yet to see a viable alternative from the Opposition parties. They variously refuse to match the subsidy that this Government have provided or to come up with viable ideas. In a recent debate, the Liberal Democrats proposed that the Post Office collect parcels ordered through the internetthat initiative is already taking place. It is easy to criticise, but it is less easy to come up with a viable alternative when even with this large level of subsidy, the network is not sustainable in its current size.
Although regrettable we believe that closures are necessary to ensure the remaining Post Offices are able to thrive in the future.
As my right hon. Friend mentioned, the reasons for this situation are that the Post Office lost £174 million last year, which is close to £3.5 million a week. Every day the network opens it loses £500,000, and 4 million fewer customers go through the doors of our post offices than did so a few years ago. In some of the least used post officesI accept that the Abbeville road branch is not one of themin the country the subsidy per transaction can be up to £17. There is also a problem in the urban areas, because even though a number of urban sub-post offices have closed in recent years, some 1,000 sub-post offices still compete for business with at least other six other branches within a mile of them, and that at a time when the number of customers is falling.
The number of customers is falling because of significant lifestyle change, much of which is technology driven. Eight out of 10 pensioners have their pension paid into a bank account, and among new retirees the figure is nine out of 10. That is unlikely to reduce. The Government have rightly made available the capacity to pay bills and carry out services online. The online car tax service is relatively new, having been available for only a few years. When it began, 500,000 people a month renewed their car tax online, but now about 1 million people a month do so, half of whom do so outside the office hours of 9 to 5 when my right hon. Friend told us his local post office was open. There is a significant demand for services to be provided outwith those opening hours.
Other changes such as direct debit and competition in the bill payment market from other providers have also had an impact. There is a cost to Government in the way that services are provided. For example, it costs 1p to pay a benefit or pension into a bank account, 80p to make such a payment through a Post Office card account and £1.80 to do so through the traditional girocheque method. I am not sure that it would be right for the Government to reverse the changes, nor I am sure whether any future Government will reverse the trend towards putting services online and making direct payment, or go back to the system of girocheques.
All those factors served as the background to the announcement last May by my right hon. Friend the Chancellor, when he was Secretary of State for Trade and Industry, that the Government would continue the subsidy until 2011 but that there would be up to 2,500 compensated closures, with 500 new outreach services
replacing permanent post offices in some parts of the country. That is the process that has been carried out through area plans such as the one covering my right hon. Friends constituency.
My right hon. Friend mentioned the access criteria. I will not go into them in detail, but broadly speaking they are that people in an urban area should live within 1 mile of a post office and people in rural areas should live within 3 miles of a post office. The access criteria are designed to ensure reasonable access to post offices throughout the country. We have tried to ensure that even though the network has to reduce in size it will do so in a planned way, rather than having holes appear that could diminish peoples access in urban and rural areas. The process is difficult, but we should remember that even after the current closures have taken place, the network will be larger than that of all the banks put together and some three times larger than the top five supermarket chains put together.
I wish to make one more point about the consultation process, and it is a point that was stressed by the Business, Enterprise and Regulatory Reform Committee in its most recent report on the issue. The consultation is not simply a matter of asking people whether they believe their post office should close. After all, people are unlikely to queue up to say yes to such a proposition. The decision to reduce the size of the network was announced by the Secretary of State last May. The consultation is about how that is to be done in particular areas. The Post Office made that clear in the letter that it wrote to MPs in July about the process. That letter stated that the local consultations
would not concern the principle of the need for change of the network, nor its broad extent and distributionthat has already been established by the Government in its Response Document issued on 17 May. Rather consultation will be seeking representations on the most effective way in which Government policyas set out in the Response Documentcan be best implemented in the particular Area in question.
As my right hon. Friend pointed out, that does not mean there can be no change in the plans. Before consultation plans are even published, the Post Office discusses them with local authorities and sub-postmasters. The figure to which he referred includes changes made within the period before the plans were put out to consultation. After the public consultation phase, some further changes will be made, but the point about the actual question in the consultation bears repeating.
My right hon. Friend said that the Abbeville road post office was profitable. I would urge caution on him and indeed other hon. Members who say that a particular post office is profitable. There are two factors to take into account when assessing the profitability of a particular post office. First, we must consider the business done in a post office and the level of payment from the Post Office directly into that branch. Normally, that will be transparent to the sub-postmaster and may even be shared with hon. Members. Secondly, however, we must consider the central support costs from the Post Office that are attributable to a branch. Those include IT costs, cash handling and other services that are not paid by the sub-postmaster and do not appear in his or her accounts, but are nevertheless very real costs to the Post Office. If all those factors are taken into account, it is shown that three out of four post offices cost the Post Office money to keep open, including some relatively busy offices. My right hon. Friend may wish to explore with the Post Office that point in relation to his local post office. The Post Office has confirmed that the average saving to it of a branch closing is around £18,000 per annum, when all factors are taken into account.
My right hon. Friend mentioned some of the services available at the Abbeville road post office. For the future, the Post Office must keep developing new products and new reasons for customers to go through the door. I am pleased to tell him that there has been significant progress in that direction. The Post Office is now the largest foreign currency dealer in the country. It has developed car and household insurance products. It provides broadband in association with BT and it continues to innovate. That will be necessary if customers are to have new reasons to come through the door in the network that remains after this difficult closure process.
I appreciate the concerns that my right hon. Friend raised tonight. I encourage him to raise them with Post Office Ltd and Postwatch. Post office closures have been happening for some years. They are also happening in some other countries for some of the same technological and lifestyle change reasons. Throughout this process, the Government have tried to manage the reduction in the size of the network in order to ensure reasonable access criteria for the population, to compensate properly people such as Mr. and Mrs. Patel for the hard work and service that they have shown to the community, and to give Post Office Ltd some financial certainty for the future.