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6 May 2008 : Column 238WH—continued

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1.46 pm

The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): I congratulate my hon. Friend the Member for Great Yarmouth (Mr. Wright) on securing this debate on post office closures in his constituency. He knows a lot about post office closures as he serves on the Business, Enterprise and Regulatory Reform Committee, which has conducted several inquiries into post office provision and published a report just a couple of months ago. I thus acknowledge his expertise and knowledge about this subject. As he said, the consultation proposal is that six of the existing 27 post offices in his constituency should close. The consultation is still open, but that is the initial proposal.

I thank my hon. Friend for acknowledging the extent of the Government’s support for the post office network. I will go on to say a bit more about that support, but it is not always acknowledged in such debates and it is a very important part of the picture, because whatever difficulties the network is facing—in his constituency and elsewhere—they would be far greater were it not for the huge Government support and subsidy for the network.

My hon. Friend went through in some detail the cases for the individual post offices in Beresford road, Northgate street, Lichfield road, Springfield road, Stokesby and West Somerton. Of course, I bow to his knowledge of his constituency. As he said, there is a wide variety of branches in the constituency, ranging from one with less than 50 customers a week to others with between 1,000 and 1,500 customers a week.

Although my hon. Friend knows this, I want to set out some of the rationale behind why some post office branches have to close, because this is a difficult process and, I acknowledge, one that is unpopular in those communities affected. No one likes to see their post office closing; even people who do not use their post office very much do not like to see it closing.

This programme of closures is happening because the network is losing a significant amount—some £500,000 a day—and the losses have more or less doubled in the past few years. It has lost 4 million customers a week. My hon. Friend touched on some of the reasons behind those losses. Part of the cause is lifestyle and the way in which people get their benefits and pensions paid. Nine out of 10 new retirees have their pension paid directly into their bank account. The service for paying car tax online did not exist a few years ago, but it is now used by more than 1 million people a month. Those 1 million people would have used the post office to renew their car tax. Although that choice is still available, an increasing number of people choose to pay online. There is also now direct debit and competition from companies such as PayPoint, which won the contract for TV licences. Several big challenges concerning competition, technology and lifestyle mean that the Post Office is in some financial difficulty.

My hon. Friend was absolutely right to say, as I believe he did, that a commercial network would be 4,000 branches rather than the 14,000 or so that currently exist. As a Government, we do not want the network to be reduced to that level, and that is why we have put in a subsidy of £150 million a year, which is part of a total package of up to £1.7 billion in the years up to 2011. Without that, far more post offices would be facing closure than is the case under even the current proposals.

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The need for closures is not just recognised by the Government, but accepted by the general secretary of the National Federation of SubPostmasters, who said at the start of the programme:

Indeed, the hon. Member for Rutland and Melton (Alan Duncan), the Opposition spokesman on business and enterprise, said in a debate on this issue some weeks ago that

I am not sure what the Conservative campaign literature says, although I think I have seen the literature that my hon. Friend referred to, but the truth is that, in the House of Commons, the Opposition Front-Bench spokesman accepted the need for the network to reduce in size.

Alongside the proposals for closures, there are proposals for outreach and part-time services. My hon. Friend will have heard the announcement by the Post Office about a month ago that it would pilot such services in urban as well as rural areas. It is looking at alternative ways to provide post office services, perhaps in a more flexible way and at lower cost than has traditionally been the case.

My hon. Friend referred to the consultation. In truth, I doubt whether it is possible to do something like closing post offices in a way that satisfies everyone. There will always be questions raised about consultation, but one point that I want to make, which I also tried to make to the Business, Enterprise and Regulatory Reform Committee, is that the consultation is not simply a referendum on whether there should be post office closures. I believe that we know what the answer to that would be. The decision to reduce the size of the network was announced to Parliament exactly a year ago by the Chancellor, who was then the Secretary of State for Trade and Industry. Instead, the question is how closures should be made against the backdrop of the announcement. In fact, Post Office Ltd wrote to MPs last July and stated that the consultation

In other words, the Post Office is asking about the detail. It is asking, given that the network has to reduce by about 17 or 18 per cent., “Have we got it right? Have we taken all the factors into account in making the best decision about what is, inevitably, a difficult process?”

The consultation has two parts. There is a pre-public consultation phase and then a public consultation phase. In the area plan that covers my hon. Friend’s constituency, nearly one in eight of the initial proposals were changed as a result of detailed input from key stakeholders, including Postwatch.

My hon. Friend raised the issue of some offices being busy, and some being busier than others. He did not get into profitability, although some hon. Members do in such debates. Profitability is judged on not just the books that the sub-postmaster keeps, but central support costs covering things such as information technology,
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cash delivery and distribution, and other services that are paid for centrally. They do not appear on the sub-postmaster’s books but are, nevertheless, very real costs to Post Office Ltd. Taking all those things into account, some three out of four post offices run at a cost to Post Office Ltd rather than a profit.

My hon. Friend asked about the capacity of receiving branches to deal with custom directed to them. That should be part of the process, and Post Office Ltd should be talking to sub-postmasters whose branches will not close, but who might be in the position of receiving business from other branches, and sometimes from Crown offices, too. That should be taken into account.

I appreciate the difficulty of this issue for my hon. Friend and his constituents, but we must have some sense of perspective. Even after the closure programme is over, the post office network will still be three times bigger than the top five supermarket chains put together. Even under the plan that covers his constituency, more than 90 per cent. of people will see no change to the local post office that they use, although I appreciate that that is of little comfort when one of the 8 per cent. affected is his mother—the last thing that I want to do is to inconvenience her.

I acknowledge that although most people will be unaffected, there is concern about those who will be affected, but with the access criteria that will ensure reasonable provision in rural and urban areas, we are led to the fact that in the plan covering his constituency, some 98 per cent. of people will either see no change in the post office branch that they use, or will be within a mile by road of the nearest alternative. I do not pretend that the closures will have no effect, but we must retain
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some sense of perspective and acknowledge that we will still have a very large network.

Finally, my hon. Friend spoke about the future and whether the process will need to happen again. Let me just say a couple of things about that. Through the subsidy, which we have guaranteed until 2011, we have given the post office network some financial certainty for the next few years. Obviously, we will then have to make a decision about the future. Like any Minister, I cannot say what subsidy or expenditure will apply after that. That means not that there will not be a subsidy, but that I cannot set out today what it will be.

Mr. Anthony Wright: We all understand that the Post Office card account is very important to the post office network. There is a debate about whether its future use can be guaranteed. Is there any way in which pressure could be put on the Department for Work and Pensions to ensure that the Post Office card account remains with the Post Office?

Mr. McFadden: My hon. Friend raises a good point about the card account’s importance to the future of the network. His expertise will tell him that that has to be judged as part of a proper tendering process. That is the legal basis on which to do it. The last thing that I want to do is to say anything that interferes with a proper legal tendering process. I hope that he will not mind if I do not get drawn too much into the matter, but I acknowledge that the Post Office card account is important for the future of the Post Office, as are areas of service provision such as foreign currency services, the car and home insurance that it is expanding into, and the broadband service that has been launched in conjunction with British Telecom. We cannot—

It being Two o’clock, the motion for the Adjournment of the sitting lapsed, without Question put.

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