Appendix 1: Government Response
Government reply to Business, Enterprise and Regulatory
Reform Committee's report 'Post Office Closure Programme' Third
Report of Session 2007-08 published on 8 February 2008.
Introduction
The Government welcomes the Committee's report on
the implementation of Post Office Ltd's Network Change Programme,
and its constructive suggestions. It is useful to have the Committee's
views on progress to date with the programme and its views on
what improvements could be made.
Responses to Conclusions and Recommendations
Below we have set out our responses to the Committee's
conclusions and recom-mendations to which it is appropriate for
Government to respond. We have listed the conclusions and recommendations
in the order in which they appear in the report. Our response
is set out below on each of them.
Conclusions and recommendations
Role of Government and the future of the network
1. In answer to a Parliamentary Question,
the Government said a network of around 7,500 offices would suffice
to meet the national criteria. We do not think it is satisfactory
simply to accept that the network may continue to shrink in an
unplanned way between now and 2011; Post Office Ltd should be
obliged to use its best endeavours to keep the network at a minimum
of 11,500 fixed outlets. (Paragraph 7)
Post Office Ltd estimates that a network of around
7,500 outlets would meet the national access criteria but it is
neither Government nor Post Office Ltd policy for the network
to shrink to the minimum size which would be compliant with the
access criteria. The Government's funding package and Post Office
Ltd's business case are both based on the network being sustained
at around 11,500 outlets to 2011. The Government continues
to view such a network as necessary to provide an appropriate
level of national coverage. 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.
The Consultation Process
2. We urge the new National Consumer Council
to place continued monitoring of the post office network among
its highest priorities. (Paragraph 8)
3. Post
Office Ltd should be far clearer about the basis on which the
public is being consulted. All its literature should make it clear
that there will be reductions in Post Office provision, and that
the question being asked is simply whether the right branches
have been identified for closure. (Paragraph 12)
It is important to recognise, as the Select Committee
said, that the consultation is not a referendum on whether an
individual post office should close. In
its initial communications with MPs and local authorities last
July, Post Office Ltd made clear that local consultation was about
how not whether the closures and other changes should be implemented.
Those letters explained that "the Consultation in respect
of the Local Area Plan will not concern the principle of the need
for change of the Network, nor its broad extent and distribution—that
has already been established by the Government in its Response
Document. Rather Consultation will be seeking representations
on the most effective way in which Government policy—as
set out in the Response Document—can be best implemented
in the particular Area in question." The Government accepts
that this message has become diluted as the consultation has continued
and welcomes the steps being taken by Post Office Ltd to ensure
greater clarity.
Confidentiality
4. If people are to respond sensibly to proposals
to close a particular sub-post office, they need to know why that
branch has been put forward for closure. There may be some details
which need to be kept confidential, but this should be strictly
limited, given the substantial public investment in the network
and the keen public interest in the outcome. We welcome the fact
that Post Office Ltd has been prepared to share more information
as the process has evolved; it should give such information at
the outset of the consultation process. (Paragraph 14)
The Government encourages transparency in the
provision of information within the constraints of commercial
and subpostmaster confidentiality and welcomes the progress Post
Office Ltd has made in this area.
5. Area
Plan Proposals and their associated publicity should make it clear
that closure, although likely, is not inevitable, and that the
status of post offices scheduled to remain open may change. The
notification that an office, is to remain open should be far more
clearly worded. (Paragraph 16)
The Government welcomes Post Office Ltd's commitment
in the light of the Committee's suggestions to introduce clearer
wording.
6. The
Chief Executive of Post Office Ltd told us that the proposals
in Local Area Plans were refined through the pre-consultation
process and that this preparation is some compensation for the
limited time allowed for public consultation. If this is so, commercial
confidentiality should not prevent Post Office Ltd from holding
the discussions necessary to make sensible proposals. (Paragraph
17)
The Government is satisfied that Post Office Ltd's
approach strikes the right balance between preserving necessary
confidentiality and achieving robust and informed pre-consultation
input from key stakeholders. Sub-postmasters
are asked to maintain confidentiality about the proposed closure
of their own or neighbouring offices to avoid speculation which
could be commercially damaging to the offices concerned until
the relevant area plan closure proposals have
been finalised for public consultation.
There is no inhibition or link to compensation preventing
a sub-postmaster making their views known about the Network Change
Programme.
Local Authority and MP involvement
7. We also note that although Postwatch appears
to be doing a good job in influencing proposals in the pre-consultation
period, several of the MPs who responded to our request felt that
Postwatch could have been more closely involved in discussions
with them. Postwatch is the only organisation able to take proposals
to review; it would be helpful if it always discussed its position
with interested MPs. (Paragraph 20)
The Government recognises the important role played
by Postwatch in key stages of the Network Change Programme and
supports any further initiatives to raise awareness of Postwatch's
role with MPs.
Profitability
8. Local authorities and local MPs should
be more closely involved in the pre-consultation process. Postwatch
appears to be doing a good job, but it simply does not have the
wider responsibilities of local government, or the representative
role of MPs. The Chief Executive of Post Office Ltd told us that
local authorities were involved in drawing up local area plans
before they went out to public consultation; clearly, some local
authorities do not feel they have been properly involved. Local
Area Plans would be improved if local authorities and Post Office
Ltd worked together. (Paragraph 21)
The Government considers that Post Office Ltd's
processes do allow for early input from local authorities and
for a continuing dialogue with them as area plans develop and
are put out to local consultation.
9. Postwatch
should scrutinise proposals to close post offices which are commercially
viable for Post Office Ltd particularly closely and, if necessary,
have powers to block them. (Paragraph 22)
The Government believes that Postwatch has an
important role to play in scrutinising all proposals under the
programme but that it is not appropriate for them to have a right
of final veto. There is a review process triggered by Postwatch
built into the Network Change Programme but final decisions rest
with the company as operational decisions based on full consideration
of all the relevant local issues.
Alternative support for Post Offices
10. We welcome Post Office Ltd's apparent
willingness to contemplate introducing locally supported post
offices. (Paragraph 24)
The introduction of locally supported post offices
requires a different funding model which is additional to Government
support for the non-commercial network. It is reasonable for Post
Office Ltd to ensure full coverage of its costs for such offices
and that any support be guaranteed at least until 2011 as well
as considering the impact of such initiatives on the broader programme
and on the sustainability of those parts of the network which
migration of custom would help to underpin. However, where such
a proposal appears sustainable in its broader context, we would
encourage Post Office Ltd to engage constructively.
Management style
11. The Post Office's future is a matter of
public debate. As we have said, Post Office Ltd is not solely
a commercial enterprise. Its network provides access to essential
services, and has a greater reach than any other. The Government
is the sole shareholder, and the public has a right to expect
Government-controlled enterprises to behave in an exemplary way.
After the experience of this inexcusable lapse, we expect Post
Office Ltd to do so in future. (Paragraph 28)
The Government accepts the need for Post Office
Ltd to strive to meet the highest possible standards in its dealing
with all interested parties at all stages of the programme. The
letter referred to in the report arose from an error which should
not have happened. It was immediately retracted with a full apology.
The company has since put in place measures to prevent a recurrence.
The Government Access Criteria
12. 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.
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. (Paragraph 31)
Post Office Ltd has confirmed that the key concern
expressed here relates to one isolated instance in Liverpool.
13. 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. (Paragraph 32)
The access criteria are designed to maintain a
national network of post office outlets and are national in their
application but with an underpinning of minimum coverage at a
very local level in each of the 2,800 postcode districts into
which the country is divided. Post Office Ltd helpfully indicates
in its area plan proposal document the percentage of customers
for whom the proposals would mean no change to the post office
they currently use and the percentage of customers for whom there
would be no change or will be within one mile by road of an alternative
branch. On average, for area plans published to date, these percentages
are respectively 90% and 99%.
Accessibility
14. 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. (Paragraph 34)
Post Office Ltd has confirmed the importance it
sets on accessibility of alternative service provision and the
steps it follows in all cases to identify and consider key factors
such as transport, physical access to premises and capacity.
Local economies
15. 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. (Paragraph 35)
The Government recognises the sensitivities around
the closure of a post office which is the last shop in the village
or in a deprived urban area and asked Post Office Ltd to consider
this in the context of assessing the impact of closure proposals
on local economies. We believe that each such case should therefore
be considered on its merits in the light of the particular local
circumstances.
16. 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. (Paragraph
38)
The Government believes that the arrangements
agreed between Post Office Ltd and the National Federation of
Sub-postmasters strike the right balance. Compensation is paid
to sub-postmasters for 'loss of office' recognising that they
will no longer receive income from post office products and services
after the closure of their post office. If income from post office
products and services is replaced e.g. from lottery products or
is generated from equivalent products and services offered through
some other service provider, some adjustment in compensation is
reasonable. The level of reduction to compensation in such circumstances
is based only on income generated from that product or service.
The rest of the compensation is unaffected.
17. 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. (Paragraph 39)
The Government considers that the revised procedures
by Post Office Ltd put in place since December 2007 will ensure
that sub-postmasters have adequate time to consider the options
open to them with regard to their compensation terms.
Outreach
18. 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. 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. (Paragraph 42)
Whilst a non-specific outreach proposal potentially
allows for wider local input, it can also create greater uncertainty
about future service provision and delay in finding a viable proposal.
The Government therefore welcomes the steps taken by Post Office
Ltd to address the concerns of Postwatch and others by now including
proposed operational details for all outreach proposals at the
start of public consultation.
19. We believe a single outreach
session of two hours a week is generally unacceptable; there should
normally be at least two sessions per week. (Paragraph 43)
The Government considers that decisions about
individual branch opening hours are a matter for Post Office Ltd
and individual sub-postmasters, reflecting the needs and level
of demand in local communities. We do not believe it is appropriate
for Government to seek to decide matters which
are best considered at local level.
20. 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.
(Paragraph 44)
Post Office Ltd is committed to ensuring compliance
with the access criteria, introducing new services where necessary
to achieve this and providing services directly if no core sub-postmaster
can be found.
Proportionality
21. 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. (Paragraph 45)
The Government remains committed to the principle
that closures should not fall disproportionately in particular
areas.
22. 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. (Paragraph 46)
The Government will continue to monitor this as
the programme proceeds through to its final stages in the late
summer.
Conclusion
23. 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. (Paragraph 47)
The Government agrees that the programme is challenging
both in its scale and timetable but is confident that it remains
deliverable. Adjustments to the timing have been made to allow
for the 'purdah' period ahead of local elections in England and
Wales in accordance with standard Cabinet Office guidelines. The
Government believes that Post Office Ltd and Postwatch have been
responsive to concerns and issues which have arisen and have made
adjustments to their processes and handling arrangements as a
result. Other modifications are being put in place in response
to the committee's comments and recommendations.
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