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23 Apr 2008 : Column 493WH—continued

Originally, there was talk of 500 outreach services across the network, but the word on the street is that that might be a slightly more widely used model to ensure that postal services across a broader range of areas are provided at a lower cost than that of providing a full-blown sub-post office. Will the Minister clarify both the Government’s and the Post Office’s philosophical
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approach to outreach services? For example, is it something that the Government want to encourage? Can I expect the Post Office to actively say, “Well actually, outreach is good for us because we cover a whole population, but it is fairly cheap”, in which case, am I knocking at an open door? Or will the Post Office say, “No, we are only allowed 500 outreach projects across Britain, so Bristol and Somerset will get 21 and you can’t have one of them”? Is that a rigid number or is there flexibility, so that if such a service model seems right for a particular community, that is what we can have?

I could have read out the heartbreaking letters, e-mails, petitions and all the rest of it that we have received from local residents. The Minister has heard the like before many times. However, I can only stress to him that, with a community and constituency such as mine, there is the whole gamut of areas. There are relatively hard-pressed urban areas that will suffer. There are also village communities. For them, it is a cliché but it is true: the post office and village shop is the heart of the community. In a sense, the most that I hope for from the Minister today, but also the least that I hope for from him today, is some constructive encouragement: that, where we are trying to be creative and innovative locally, as the people of Tytherington have already been once before 10 years ago, he will be on their side, at least to that extent.

5 pm

The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): I would, of course, like to begin by congratulating the hon. Member for Northavon (Steve Webb) on securing this debate. He is absolutely right; this is the type of debate that I have taken part in many times in recent months. He is also right in his understanding that, as a Minister, I do not decide which post office closes and which stays open.

In the time available to me, I will do my best to answer the hon. Gentleman’s questions about funding, outreach, support and so on. I understand that he is in dialogue with Post Office Ltd about some of these issues and I also understand that he has at the moment 28 post offices in his constituency, of which three are scheduled for closure.

So where does all this process of closures come from? It comes from an announcement in May 2007 by the Chancellor of the Exchequer, who at the time was the Secretary of State in what was then the Department of Trade and Industry, that there would be up to 2,500 post office closures out of more than 14,000 branches across the country, with 500 new outreach services, which the hon. Gentleman referred to. I want to begin by saying that I obviously understand the concerns, and indeed the very strong protests, that have existed in some communities over that decision. It is one thing to announce it in the generality; it is another thing to see it implemented locally in individual post offices in individual communities.

The hon. Gentleman talked about the Government’s role in post office closures and I want to pause on that point. He knows about the Government’s role because, as he said, he was the Liberal Democrat spokesperson on work and pensions for a number of years. It is true that the Government wrote to people about change and
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so on, but we also gave people a choice. People have the Post Office card account; it is still used by several million people.

Having said that, we must also think about how people are used to being paid these days. I do not know whether the hon. Gentleman will be going to the post office for his pension every week when he retires; I wish him a long, healthy and successful retirement whenever it comes. However, nine out of 10 pensioners who come up for retirement today choose not to do that; they choose to have their pension paid into their bank account, even though they can still use the Post Office card account if they so choose.

That situation illustrates some of the challenges facing the post office network. It loses £500,000 every day that it is open, and those losses have more or less doubled in the past few years. It has lost an average of 4 million customers a week. In addition to the nine out of 10 new retirees who choose direct payment for their pensions, even eight out of 10 existing pensioners choose direct payment too.

As I said, the hon. Gentleman talked about the Government’s role; that role is interesting and important. For example, if we take online services, the Government worked to put together an online service for car tax renewal a couple of years ago. The use of that service has risen almost exponentially. Nobody is forced to use it; there is still the ability to renew car tax at post offices. However, last year, the online service was used by 500,000 people a month; this year, that figure is about 1 million people a month. Furthermore, half the people using it are doing so outside the normal office hours of nine to five.

What is the hon. Gentleman’s position on such developments? Is it that, when people are accustomed to using the internet in other spheres of their life to book flights, pay bills or access other services, somehow the Government should say, “No, you cannot do that”? I ask the question because, if that is his and his party’s position, I must say that I disagree with it. I think that the Government have to respond to changes in other spheres of people’s lives and make these types of services available online.

Now, such change has an impact on the Post Office, as do other changes, including greater competition. It is because there are other networks such as Paypoint, which can bid for contracts, that a service such as the television licence is no longer with the Post Office. That has resulted in significant difficulty for the post office network, in terms of losses of custom and other financial losses.

These changes reflect the way that we live. As a country, most of us have taken part in those changes and, as I said, most people have either ordered goods or paid bills over the internet. Some 70 per cent. of the country is now online in one way or another, so what is the Government’s response to all this change? It is not to walk away and to say that the post office network must be a purely commercial network; we have not done that. Of the 14,000 post offices that are currently in the network, it is estimated that only about 4,000 would operate as a purely commercial venture. However, that
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is not the stance that we have taken at all. Instead, we have become the first Government to put substantial subsidy into the network.

It is important to say that, because the hon. Gentleman was critical of the Government’s role, but no previous Government have subsidised the post office network. We have done so. By 2011, we will have put up to £3.7 billion into supporting the Post Office in one way or another. That includes a subsidy of £150 million a year, without which his constituents and constituents throughout the country would be facing thousands more post office closures than is currently the case. So the Government’s position has been to support the network. The Government, however, also have a duty to the taxpayer, and subsidy cannot be unlimited in the face of some of the changes that I have talked about. The Government cannot be blind to the impact of the internet, direct debit, or the way that people do business and receive money in the world today.

Those challenges have been recognised not just by the Government but by the general secretary of the National Federation of SubPostmasters himself. He said at the start of the programme:

So he recognises the difficulties that the network faces. The hon. Member for Rutland and Melton (Alan Duncan), who is Conservative shadow Secretary of State for Business, Enterprise and Regulatory Reform, said in a debate on the post office network only last month:

I think that there is widespread recognition about the challenges facing the network.

I fully understand that nobody likes to see their post office close, even those people who may not use a post office very often but like the idea of having one in their community. However, it is also important to remember the scale of what is planned. Even after completion of this programme, in the Bristol and Somerset area, which covers the hon. Gentleman’s constituency, almost 90 per cent. of customers will see no change in the post office branch that they use. In total, 99 per cent. of the area’s population will either see no change in the branch that they use or they will remain within one mile, as measured by road, of an alternative post office branch.

This is not wholesale destruction of the post office network. It is a reduction in the size of the network, but the vast majority of post office users will still be using the same branch that they have always used, and almost all post office users will either be using the same branch or, as I said, be within a mile of another branch.

The hon. Gentleman asked me some questions about the consultation process, appeals and so on, and I want to help him with those questions. The first thing is to stress what the question in the consultation process is. That process is not, as the Business and Enterprise Committee said in its report a few months ago, a referendum on whether people want post office closures. That decision was announced by the Chancellor of the Exchequer, when he was Secretary of State for Trade and Industry in May 2007, and a letter, which set out
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that decision, was sent to the hon. Gentleman and all other MPs just before this process began. It said that the consultations

It is about how this is implemented and not about whether.

When it comes to appeals, a review mechanism is triggered by Postwatch, which is the consumer voice in this area. The hon. Gentleman said that he was in touch with Postwatch, and that is the right and sensible way if he believes that the Post Office has got the how—not the whether—wrong in terms of its own criteria. Postwatch can trigger a proposal and put it into review, and that can go up through several levels from local to national. Ultimately the matter can be decided by Allan Leighton, chairman of the Royal Mail Group. Therefore, there is a review process, but it is triggered by Postwatch.

The hon. Gentleman asked me about proposals for locally funded rescue packages and so on. The first thing to stress is that the Government fund the post office network to a very large extent. That funding includes subsidy and provision to help improve the situation in the remaining network. I understand what he is saying about queuing and the handling of custom elsewhere. Several local authorities have said that they are interested in such packages, but I have a few things to spell out about that. On 19 March, the Secretary of State wrote about this issue to the managing director of the Post Office and to the chairman of the Local Government Association. I believe that a copy of that letter is available in the Library if he wishes to see it. It sets out the Government’s position. Broadly speaking, the letter says that if a local authority—or another third party—was seriously interested in a package, the Government would encourage talks with Post Office Ltd.

The process is not easy or costless. I have set out the reasons why branches are closing. Post Office Ltd will expect to recover its costs, which include payments to staff, and also the central support costs that the hon. Gentleman talked about. Those can be expensive because they include the provision of cash to all the branches around the country, the provision and maintenance of
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IT and various other costs. Even with volunteer labour, the running of a post office in most circumstances is a cost to Post Office Ltd. When we take into account both the central costs of the network and the individual payments to the branches, three post offices out of four run at a cost to Post Office Ltd.

Post Office Ltd is keen to secure a commitment for several years. The Government have given the network some financial certainty by guaranteeing the subsidy until at least 2011, so Post Office Ltd will look for similar certainty from any third party which may wish to fund a post office. Post Office Ltd wants to avoid being in the same circumstances in six months’ or a year’s time.

It is important to stress that once the network has gone through this process, we will still have a post office network that is bigger than all the banks put together. It will be three times larger than the top five supermarket chains put together, including the one that the hon. Gentleman is not a fan of. We will still have, through the access criteria, a significant network which has an unparalleled reach in both rural and urban communities throughout the country.

Steve Webb: Will the Minister tell me whether outreach is being encouraged and how it works.

Mr. McFadden: I am grateful for the reminder. We have said that there should be up to 500 outreach projects, but that is not costless. Outreach needs a sub-postmaster in a neighbouring town to take over the project. It is innovative and it has been successful. I have visited outreach projects myself. A couple of weeks ago, it was announced that, in addition to the 500 outreach projects, there would be new provision geared towards urban areas—outreach is more geared towards rural areas—to ensure that that kind of part-time and flexible approach may be available everywhere. I encourage the hon. Gentleman to talk to the Post Office about it.

I appreciate that this is a difficult issue for the hon. Gentleman’s constituents, but the Government have stood by the Post Office with significant subsidy. It is a lifestyle change that is a challenge to the network and the future will be about developing new products and new reasons for people to use the post office rather than trying to rewind the clock.

Question put and agreed to.

Adjourned accordingly at fourteen minutes past Five o’clock.

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