Select Committee on Business and Enterprise Sixth Report


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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