Select Committee on Business and Enterprise Ninth Special Report

1  Postwatch Response

Postwatch response to the Business, Enterprise and Regulatory Reform Committee report 'After the Network Change Programme: the future of the post office network'


The relative slowness of the Government and Post Office Ltd replies would have been easier to understand if they had been final statements of the position. In fact, there have been further developments since then. We regret the Government and Post Office Ltd response were either speedy or definitive. (Paragraph 4)

Postwatch response

1.  The Committee's interest and scrutiny have made for a better programme. Postwatch will continue to do all it can to keep the Committee promptly informed of relevant developments affecting the network of post offices.

Local Authority and MP involvement

Since the Government and Post Office Ltd responded to our report on 3 April, Post Office Ltd has announced that in future it will engage with MPs "10 days before the start of public consultation in their constituencies in relation to the current Network Change Programme, rather than a few days before the consultation begins as at present". While this is welcome, we do not understand why it did not form part of the response to our report, and consider it disappointing that the Post Office took no steps to revise its response. (Paragraph 7)

Postwatch response

2.  Postwatch agrees with the Committee that the earlier engagement with MPs by Post Office Ltd is a welcome step forward. We hope that Post Office Ltd will now see early and full communication with MPs as an aid to the effective operation of the closure programme, and that, more generally, they take full advantage of opportunities to communicate with their customers and stakeholders.

We note that successful dialogue requires both parties to engage properly, and urge local authorities and Post Office Ltd to work together as the programme continues. (Paragraph 8)

Postwatch response

3.  We agree that the constructive involvement of local authorities is essential in helping to ensure that the right decisions are taken by Post Office Ltd. Postwatch works closely with local government—both with the LGA and local authorities through its Counters Advisory Group and through local contacts between regional offices and local authorities.

Sustaining the Network

We accept that the Government has no desire to see the network shrink below 11,500 outlets between now and 2011. Indeed, it is investing £1.7 billion to safeguard the network. However, there is no guarantee that there will not be further closures after the Network Change Programme as a result of individual postmasters and postmistresses' decisions. We note that Post Office Ltd itself does not believe "it is possible or desirable to set a minimum number of fixed outlets." We expect Post Office Ltd to share the Government's commitment to maintenance of the network. (Paragraph 10)

Postwatch response

4.  A statement by the Government, clearly backed up by Post Office Ltd, clarifying the commitment of both to maintain a network of 11,500 outlets would be welcome to customers and would provide much needed certainty to postmasters and postmistresses.

Access criteria

The Government has asked Post Office Ltd to work with Postwatch to "develop a new code of practice covering 'business as usual' network changes to reflect the current policy and lessons learned from the Network Change Programme, "and Post Office Ltd told us that it looks forward to working with Postwatch and its successor body, the National Consumer Council, to draw up such a code. In successive Reports we have expressed our concern about the transfer of responsibility from Postwatch to the NCC at such a critical time in the Network Change Programme. We recognise that Postwatch is currently heavily burdened by the need to monitor the Network Change Programme itself. However, we think it is important that the Code of Practice is drawn up speedily, and that the transfer of responsibility does not cause delay. We urge Postwatch and Post Office Ltd to start work immediately. (Paragraph 12)

The future shape of the network is a matter of direct political concern and will be determined by the Code of Practice. We wish to see a draft of the code before the summer recess. Ultimately, Government, as sole owner of Royal Mail Group, cannot duck responsibility for the shape of the network. While we do not expect it to replicate other parties' monitoring, we expect it to use those monitoring returns to ensure its considerable subsidies are being used to secure a network which meets public needs. (Paragraph 13)

Postwatch response

5.  We welcome the Committee's continued interest in the development of the new code of practice on post office relocations, closures and conversions. We agree that maximum use should be made of our experience of network change issues. We are currently engaged in dialogue with Post Office Ltd and have established the main principles. The revised code will:

  • take account of the Government's distance criteria for access to post office services;
  • explain how POL will take account of local information when managing and developing the network;
  • describe how customers and local representatives can participate in consultations on changes to the network; and
  • provide information on action that can be taken if the code of practice is not properly followed.

6.  We have also given our successor organisation, Consumer Focus, information to allow it to decide on its role in ensuring that the code of practice is complied with.

7.  We believe it is realistic to expect that a revised draft will be in place before our abolition at the end of this September.


Although Post Office Ltd has told Postwatch that they believe relatively few customers will be affected by the inability of some outreach services to handle packets weighing more than 2kg, it will mean considerable inconvenience for those who need to send large packets, and could have an impact on local businesses. We note that the universal service obligation extends to packages of up to 20kg. We consider that all Outreach services should be able to handle packages of up to 20kg. (Paragraph 16)

Postwatch response

8.  We agree that outreach services should be able to handle packets weighing more than 2kg—and that where possible this should be up to 20kg, in keeping with the statutory definition of the universal postal service. We have referred this issue to BERR and will keep the Committee updated on progress.

Closure of profitable branches

The post office network is a social as well as a commercial asset; as Postwatch says "profitable offices are likely to be heavily used, and closures would therefore affect many customers". We continue to believe there should be a presumption against their closure. (Paragraph 18)

Post Office Ltd's own figures leave significant uncertainty as to where £57 million of savings will come from. It is not surprising there are fears that as offices are closed, overheads per office will increase, and decline will continue. (Paragraph 21)

Given the lack of transparency about Post Office Ltd's finances, and the reported deficiencies in Royal Mail Group's financial systems, it is impossible to be sure that the allocation of costs to individual post offices is rigorous. Post Office Ltd is a publicly owned monopoly, which provides many of its services on behalf of the Government and receives substantial taxpayer support; there should be far more clarity about such matters. (Paragraph 23)

Postwatch response

9.  We remain of the view that profitable post offices are likely to be heavily used and that, accordingly, their closure is likely to damage the interests of more customers than the closure of a loss-making office. We would expect proposals to close profitable offices to be made only in exceptional circumstances, with clear justification. Such proposals will be very closely scrutinised by Postwatch for their impact on the community and on the ability of customers to gain access to post office services, rather than for the financial effects on Post Office Ltd.

Closure decisions

We understand why the Government is reluctant to become directly involved in decisions on the closure of particular offices. Closure proposals rest on a great deal of detailed local and commercial knowledge, which central Government cannot replicate. Nonetheless, it is not satisfactory that Royal Mail Group is left as the sole arbiter of the network. (Paragraph 28)

Postwatch response

10.  We understand the Committee's concern. On the other hand, first, Post Office Ltd is best placed to take decisions on the network and to be responsible for defending those decisions; second, the necessary balance to this is the role of Postwatch, MPs and other interested parties in overseeing the way that Post Office Ltd carries out this task; and third, the current regime provides clarity that all decisions are taken by Post Office Ltd, and that they must take responsibility for them. Postwatch would be reluctant to see that clarity eroded.

The statutory framework

We would be concerned if regulators and consumer bodies were not using their powers to the full. We are likely to return to this in the autumn. (Paragraph 35)

Postwatch response

11.  Our participation in the closure programme has been entirely consistent with the role given to us by the Government. Certainly, if there were no other way to receive the information we need to do our job, we would use whatever statutory powers were available to us. So far that has not been necessary.

Wider responsibility

There appears to be little or no co-ordination between regulators, between regulators and Government, or between government departments about the social effects of withdrawing payment services from the post office network. Given the grounds on which state aid was granted, and the current tender for the new Post Office Card Account, the loss of which could devastate the network, we believe this needs further consideration.   (Paragraph 36)

Postwatch response

12.  We agree with the Committee that the loss of the new Post Office Card Account would have a significant negative impact on the viability of the post office network, and that the Government should have a co-ordinated approach to securing the future viability of the network.

The reviews

We do not think it is reasonable or prudent to conduct reviews of mail services without looking at the relationship between Royal Mail Group and Post Office Ltd. Given the lack of clarity about the finances of the network, and the apparent disjunction between the Government's desire for a network of 11,500 offices, and Post Office Ltd's much more nuanced response, we recommend that Postcomm and the Postal Services Review include a thorough examination of Post Office Ltd as part of their work. There should be as much clarity as possible about the operational and financial relationship between the post office network and the universal service provider, and about the potential effects of changes in postal services on the post office network. We intend to examine output from these reviews in the autumn. One thing is clear—history has given us a network which remains among the largest in Europe. The Government and the European Commission accept the network provides a valuable service: all Government departments should bear that in mind when they consider how to provide their services. (Paragraph 39)

Postwatch response

13.  This links with the Committee's previous conclusion. We welcome the Committee's challenge to Government departments to take account of the post office network—and of what would be lost if it were allowed to wither—when deciding how government services should be delivered. We hope that the Committee will extend this challenge to local authorities, though we recognise that many of them are already considering actively and creatively what they can do to support their local post offices.

21 July 2008

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