House of Commons - Business, Enterprise and Regulatory Reform

Select Committee on Business, Enterprise and Regulatory Reform Third Report

3 The Access Criteria

29. As a result of its consultation, the Government changed its initial purely distance-based access criteria. The revised access criteria for the network are:

99% of the population within 3 miles;

90% of the population within 1 mile;

95% in urban areas within 1 mile;

99% in the 15% most deprived urban areas within 1 mile;

95% within 3 miles in rural areas; and

95% within 6 miles within every postcode district

in applying the access criteria, Post Office Ltd will be required to take into account obstacles such as rivers, mountains and valleys, motorways and sea crossings to islands to avoid undue hardship.

30. Most significantly, the Government now requires Post Office Ltd "to consider the availability of public transport and alternative access to key services, local demographics and the impact on local economies when drawing up area plans".

31. Many of those who wrote to us felt that these criteria were not being properly observed, and that Post Office Ltd was not gathering the information necessary to make sure its proposals conformed to the criteria. We have had numerous complaints that proposals failed to take account of poor public transport links, or of high concentrations of elderly or disabled people living close to offices scheduled for closure.[49] The evidence we have received from local authorities suggests the detailed information required to implement the access criteria properly has not always been taken fully into account. We are particularly concerned that in some cases the local area plan has failed to reflect arrangements to transfer Crown Offices to franchised premises in a different location.[50] If Post Office Ltd cannot take into account information about matters that it controls, confidence in the wider information underlying these plans is undermined. Post Office Ltd must do more to demonstrate that local area plans are accurate and based on current information.

32. We underline the fact that the geographic access criteria are national, and can be met even if coverage in certain local areas falls well below the national standard. We do not know the extent to which the national criteria are met in each local area plan. We expect Post Office Ltd, as far as possible, to take the geographic access criteria into account at local area plan level, not just meet them nationally.

Accessibility

33. Many of those who submitted written evidence were concerned about the need to make services accessible. There are two types of accessibility involved. One is the ease with which people can reach a post office, including matters such as transport links, and the availability of parking close by, discussed above; the second is the facilities provided in the individual premises themselves.

34. Individual post offices should be accessible to elderly and disabled. This includes making various types of physical provision but is not limited to that. An office where frail people face lengthy queues is as inaccessible as one with no wheelchair access. There were concerns that some of the proposals for closure of sub-post offices failed to take into account the degree to which the office was Disability Discrimination Compliant, or otherwise accessible.[51] Similarly, many of the concerns expressed about the transfer of franchises to W.H. Smith were based on the accessibility of services on the first floor or basement. Although in oral evidence Postwatch assured us that these branches were as accessible as those they replaced,[52] their survey data was more mixed. The data we were sent had been gathered before many franchises to W.H. Smith were in operation, and covered only six W.H. Smith operations, which were all accessible. However, the survey's findings did not reassure us. Queuing times at Crown Offices were longer than in most franchised operations (a consideration for frailer customers) but disabled facilities were more commonly available in crown post offices, and seven of the eight offices where wheel chair access was impossible were in franchised offices.[53] The NFSP told us that although grants were available to enable facilities to be upgraded, it is believed "that the maximum grant amounts are too low and total funds available is inadequate." They considered the sum was likely only to allow relatively small grants to a few hundred post offices. We welcome the fact that Postwatch surveys proposed franchises for accessibility. We trust it also considers accessibility when it considers proposals for sub-post office closure made as part of the Network Change Programme. However, we are far from convinced that Post Office Ltd itself is fully engaged with the need to ensure that services are accessible to all. This needs to be given much higher priority.

Local economies

35. There were also concerns that the impact of closures on local economies, particularly rural economies, was not properly considered. The Commission for Rural Communities suggest that there should be "a presumption against the closure of a post office with an attached shop where this is the last remaining outlet in a community"[54]; this recognises the importance of that outlet."[55] Mr Webber of Postwatch hoped that "it is possible to meet, or pretty well meet, the Government target for closures with no or very few such cases happening".[56] However, our evidence suggests that, despite Postwatch's hopes, several such closures have been put forward.[57] We believe that there should be a presumption against closing a post office where this is the last shop in the village, or in a deprived urban area.

36. Post offices perform a vital role in getting cash into rural or deprived areas. The NFSP explained that the amount of compensation a postmaster receives depends on the nature of his or her business, If a sub-postmaster with a retail business wishes to continue to offer services which might compete with the post office, then compensation is reduced accordingly. Compensation is set at 28 months of earnings, so the loss is 28 months worth of the earnings from the service in question.[58] However, Paypoint considered that "If the goal is to minimise disruption caused by closures to local communities, then this is certainly a disturbing development.[59] Greg Clark MP also criticised the restriction on providing services such as Paypoint.

37. Although the NFSP was content with the terms of the compensation package, the Co-operative Retail Trading Group, which runs a number of franchises, told us that "Co-operative societies are not members of the FSB and, therefore, had no input into these negotiations.[60] In their view:

services such as bill payment and lottery are an important part of our commercial offer and we have always sought to offer them in our stores regardless of whether a store hosts a Post Office. The proposed compensation package penalises us for providing these services and for honouring our existing contracts with existing commercial partners such as Paypoint. In doing so we believe the Post Office is trying to reduce competition and acting against the consumer interest.[61]

38. Alan Cook defended this practice:

it is a critical part of the success of this programme that the income that is being generated in a post office migrates as far as possible to the neighbouring post office and we are trying to encourage that to happen, we are trying to encourage the customers to go to their neighbouring post office, so we are not saying to a postmaster whose business is closing, "You can't do this", but what we are saying is, "We're putting a 12-month wait in if you want the full compensation", and that does not seem an unreasonable thing to me.[62]

We understand the commercial logic of Post Office Ltd's position, but pure commercial logic cannot be the overriding factor here; the Post Office performs a social function, recognised in the Network Subsidy Scheme. Preventing a former urban office from competing with a post office half a mile away may be acceptable; we are not convinced this is reasonable in rural areas where the nearest post office may be several miles away and only easily accessible by car. Where a post office is attached to a shop it is unreasonable—and potentially very damaging for the shop—to penalise it for taking a service such as Paypoint when the village pub or garage would have no such restriction. However, we accept that Post Office Ltd will wish to do all it can to retain business for the network as a whole. Post Office Ltd must take great care to ensure that any reduction in compensation to a sub-post office that closes, but where the remaining business intends to offer new and competing services, is not excessive. The purpose of reducing compensation is to limit competition with, and encourage business to migrate to, remaining post offices nearby. The argument for this reduction is weaker in areas where there is no ready access to such offices. Because of the importance of such facilities to the local communities, Post Office Ltd should always be realistic in its assessment of the degree to which alternative services would really displace business for the Post Office Network. When reaching its decisions it should give the benefit of the doubt to the business and so to the people it serves.

39. The timetable for the Network Change Programme is extremely compressed. We would be concerned if postmasters had to decide whether to accept the cut in compensation before they had the time to establish whether they could attract bill payment or other services, or explore the terms of such contracts. Postmasters should be given adequate time to explore these factors before deciding what compensation to accept.

Outreach

40. Outreach services are an integral part of the Network Change Programme. 500 such services are to be provided. They have, so far, only been proposed for rural areas, but there is no reason why they should not operate in urban areas. There are "four models for 'Outreach' service provision—a mobile post office service visiting small communities at set times; a hosted service operated within third party premises for specific hours each week; a partner service within the premises of a local partner such as a shop; or a home service whereby customers can contact a sub-postmaster by phone for services."[63] These services will be provided by sub-postmasters.

41. In early consultations, Post Office Ltd asked local communities to propose the type of outreach they might require. Lincolnshire County Council commented:

communities have been asked for their opinions about a service that has not been properly investigated or thought out by Post Office Ltd. It is not reasonable for Post Office Ltd to ask communities their opinions on the suitable outreach options for their community without any indication of a location, the service that will be provided, and the sustainability of the service.[64]

Postwatch told us:

that from January 2008 all Outreach proposals entering public consultation will include proposed operational details. Postwatch will continue to monitor this. Additionally, we welcome Post Office Ltd's commitment that for those outreach proposals that have already moved through public consultation and where Post Office Ltd continues to be unable to provide Postwatch with operational service details at our post-consultation review discussion, Post Office Ltd will undertake a further six-week local consultation on the proposed Outreach service, once details have been worked up.[65]

42. We agree that open-ended questions about the type of Outreach which may be appropriate are not helpful but welcome the fact that in recent consultations Post Office Ltd suggests what Outreach arrangements could be provided. We also welcome the assurance that Outreach services will continue until at least 2011.[66] In addition we welcome the statement from Post Office Ltd that they are prepared to consider Outreach services in areas which had previously lost their postal services but are within the new national criteria.

43. Outreach proposals are based on current usage.[67] Some proposals for Outreach suggest a single session of two hours a week. Ms Vennells told us that in such cases, the communities involved often asked for two one-hour sessions instead.[68] However, the Minister was reluctant to set minimum criteria because:

First of all, Post Office Ltd have to make a judgment about the amount of business in that village or that location. Secondly, they need sub-postmasters to act as the core. … Outreach is a lower cost model of providing the service but it still has to work for the sub-postmaster at the core who might be covering two or three areas, so I am not sure we should set that minimum criteria.[69]

We believe a single outreach session of two hours a week is generally unacceptable; there should normally be at least two sessions per week.

44. There are also areas where Post Office services do not currently meet the access criteria, and where coverage will be improved. In these cases, Outreach services might be used to provide the necessary services.[70] We pressed the Minister on whether the availability of Outreach services in remote areas would depend on the willingness of sub-postmasters to provide the service. We were told "The Post Office are required as part of the Network Change Programme to bring up provision in those areas so it meets the access requirements. If a sub-postmaster leaves and that will mean the Post Office is going to dip below its access requirements, they would be required to ensure the provision was replaced."[71] We welcome the proposals to introduce Post Office provision to remote areas. If this cannot be done by voluntary Outreach arrangements, we expect the Post Office to provide the necessary services itself.

Proportionality

45. The Urban Reinvention Programme, a previous closure programme, was based on postmasters' willingness to leave the network, rather than on strategic consideration of the network as a whole. The Network Change Programme takes a more strategic approach, but is constrained by the Government's requirement that changes are roughly proportionate between different areas. The National Consumer Council criticised this approach:

Post Office Ltd should have taken a baseline of provision and cross-matched it with consumer need before the start of this closure programme. Historically, closures have not been based on consumer need but rather sub-postmaster preference, and this first strategic reshaping looking at need should not have ignored this. The Government's rule that one place would not be more disadvantaged than another by closures failed to take account of the mistakes of the past and has meant that the current closure programme could not address previous low provision. This was a missed opportunity.[72]

There is a difficult balance between the need to ensure that the overall Post Office Network is coherent, and the need to ensure that individual communities are not proportionately hard-hit by the closure programme. If closures were made evenly across the network, most areas would experience closures of about 18% of post offices. Ms Vennells told us that "What we have in the Memorandum of Agreement with Postwatch is that we will go either side of that 18% by 1% or 2%. … We are managing that to try and take account of the fact that the country is not evenly spread in terms of post offices".[73] Postwatch suggested the range was still wider—from 13% to 23%.[74] We welcome the fact that Post Office Ltd appears to be taking a flexible and pragmatic approach to the requirement that the closures should not fall disproportionately in particular areas, and that its programme takes some account of the varying levels of current provision.

46. Although we are pleased that the proportionality rule is not provided over-rigidly, we agree with the Government that no one area should take a disproportionate share of reductions. There had been concerns that if Post Office Ltd was too willing to "reprieve" offices in the early stage of the programme, later areas would find themselves faced with an extremely high rate of closures. We were largely reassured that the Minister told us:

we should not be in a position whereby we suddenly come to the final couple of area plans and say, "Oh, my goodness, we'll have to shut far more in these areas." That should not happen.[75]

The Network Change Programme has a difficult balancing act to perform between responding to local needs and concerns and ensuring that the necessary reduction in the network is achieved. We welcome the Minister's assurance that areas which are considered late in the process will not be disadvantaged. We intend to keep this, and other aspects of the programme, under review.

47. Post Office Ltd has been given the task of reducing the network by a fixed number of branches in a fixed period. The Network Change Programme began in July 2007 and the final consultation is scheduled to end in October 2008. That is a very challenging timetable. As we always feared, this has meant that consultation has been curtailed, and the whole process has been rushed. The failure to realise at the outset that the consultation timetable should take account of the "purdah" for local elections, and the failure to allow properly for the effects of holidays on consultation periods, are symptoms of this. The process has been improving as more experience is gained, but problems remain. There is not enough clarity about the basis of the consultation; we are concerned that accessibility is not always taken into account; commercial confidentiality has prevented sensible discussion. We hope that all those involved will use this Report as a prompt to make further improvements.

49 Eg Gwyneth Dunwoody MP, John Gummer MP, David Lepper MP, Alan Simpson MP, Paddy Tipping MP, POS 6A, POS 7, POS 8, POS 9, POS 17, POS 28 Back

50 See POS 22, for example Back

51 See POS 29 Back

52 Q123-5 Back

53 Post office Product Advice, Research Study conducted for Postwatch by Ipsos Mori, 23 August 2007 Back

54 POS 13 Back

55 CRC POS13 para 14 Back

56 Q114 Back

57 Eg POS 16 Back

58 Q 216, QQ 36-38 Back

59 Eg POS 32 Back

60 Eg POS 23 Back