Memorandum submitted by the Royal Mail
Thank you for your letter to Paul Budd of 12
March 2008 requesting further information. Paul is currently on
leave so I have been passed the letter to reply.
I am glad that our note on TUPE was useful to
you.[1]
We would of course be happy to help you wherever we are able as
you keep a watching brief around the Network Change Programme.
I have sought to answer your questions in order.
For ease of reference I have put your questions to us in italics
and answered your questions below each one.
MEETING NATIONAL
ACCESS CRITERIA
Within the Network Change Programme how are you
ensuring that your local area plan decisions will cumulatively
meet the Government's national access criteria?
We are ensuring that we remain compliant with
the national access criteria by measuring the impact of each area
plan proposal against the criteria both before consultation (against
the proposed closures) and post consultation once final decisions
have been taken (against implemented closures).
We will continue to measure access on an ongoing
basis.
OUTREACH
What is the cost of the mobile outreach facilities
per two-hour session, including overhead?
Costs for outreach are split between the central
infrastructure costs (including maintenance of the mobile if this
is the outreach solution), core sub-postmaster remuneration and
daily running costs. Central infrastructure and core sub-postmaster
remuneration costs are met by Post Office Ltd and the daily running
costs for the time that the outreach vehicle is being used are
met by the core sub-postmaster.
We do not break Post Office costs down into
the session level that has been requested, but we can say that,
running an outreach as opposed to a bricks and mortar post office
saves Post Office Ltd on the agents fixed pay and some support
costs. Our estimate is that typically the outreach would cost
30% of the branch it replaces. However that will depend on the
size of the branch and the specific outreach model.
On what basis are sub-postmasters invited to provide
outreach to satellite offices?
The need for outreach facilities are identified
in one of two routes—either through the Network Change Programme
or through business as usual.
Outreach locations identified through the Network
Change Programme are identified on the basis of the Government
requirement to use outreach as mitigation for one of the 2,500
compensated closures.
Outreach locations identified on a business
as usual basis are identified on the need to maintain service
for an area in a way which is as cost effective as possible. In
both cases, the level of customer demand in these locations is
less than that which would warrant a full time Post Office branch.
Once Post Office Ltd has identified the locations
where an outreach service will be provided, either as a result
of changes through the network change programme or business as
usual change, core sub-postmasters are invited to provide outreach
services.
Core sub-postmasters are identified to run outreach
services following a three stage assessment process where their
suitability to operate core and outreach services is assessed.
Does Post Office Ltd (POL) provide sub post masters
with a fixed sum, and then leave them the responsibility for finding
premises, etc at whatever cost they negotiate, or does POL pay
these costs directly?
When a core sub-postmaster has been identified
they receive a fixed sum as part of their remuneration to cover
items such as rent. The core sub-postmaster is expected to identify
and negotiate locations which are suitable for outreach services.
They are fully supported in this endeavour by Post Office Ltd
staff. Ultimately the amount paid is a matter for the core sub-postmaster
and the representative of the location.
On what basis are the costs of such outreach facilities
calculated?
The costs for the hire of halls and rental of
properties are calculated based on our experience of the pilots
we have run. This amount is built into the fixed remuneration
package of the core sub-postmaster.
If a sub postmaster is unable to negotiate satisfactory
conditions for outreach services, will Post Office Ltd provide
these directly?
If a core sub-postmaster is unable to negotiate
satisfactory conditions for outreach services, this may be a determining
factor in the type of outreach service that Post Office deploys.
As with the Post Office models that outreach replaces, Post Office
Ltd will not be in a position to provide facilities directly.
Of the planned 500 proposals for outreaches
in the UK, to date 158 outreach proposals have concluded their
consultation phase. Post Office Ltd is in the process of implementing
these decisions. Whilst detailed decisions about the precise proposals
are confidential please find attached pilot proposals which I
have appended to illustrate how the various models of outreach
are likely to work.( not printed here)
PROFITABILITY AND
PROVISION OF
SERVICES
On what basis are individual sub-post offices
allowed to provide particular services (eg DVLA licence renewals)?
Typically a client organisation which seeks
a provision of a service through our network would specify the
size of the network they require as an outlet. Post Office Ltd
then works with the organisation to select the branches that will
give the best geographic coverage to meet client requirements.
As a rule of thumb we can say that the larger
the network required and the more complex the product, the more
expensive the provision of the service, and the lower the return
to the sub-postmaster.
A client (such as the DVLA) has the right to
agree the details of our suggested network including the individual
branches. Currently 4500 branches carry out car tax renewals.
Sub-postmasters are of course free to build
up their individual retail businesses by providing outlets for
additional local services such as dry cleaning, shoe repairs as
well as provide services such as internet facilities, convenience
stores etc.
It is also worth noting that sub-postmasters
also have the opportunity to introduce customers to a variety
of Post Office Ltd financial services products and their success
in this regard is recognised in their remuneration packages.
What would be the increase in costs to Post Office
Ltd if all sub-post offices were encouraged to provide a full
range of services relating to Government departments?
As stated above the network chosen for access
to a particular service (eg DVLA) is a matter for the client to
determine and the cost of maintaining the network would certainly
be a major consideration for clients.
Were we to extend the use of a service to the
whole of our network the cost of offering access to full network
would largely fall on DVLA (or whomever the contract was with).
The implications of such a move would be likely to cause the client
to seek a reduction in the fee they pay to us.
Government departments like any other clients
would have opportunity to determine the size of the network they
require for the distribution of any product, however there are
costs associated with maintaining the network of distribution
for the client. Additionally it is worth noting that the levels
of return per individual sub-postmaster decrease in direct proportion
to the numbers of sub-postmasters offering the service.
COMMUNITY PROVISION
OF POSTAL
SERVICES—THE
ARRANGEMENTS WITH
ESSEX COUNTY
COUNCIL
Will these post offices count against the 2,500
total for closure under the NCP?
Post Office Ltd is currently dealing with any
initiative for locally funded Post Office provision outside the
current Network Change Programme. Locally funded provision is
treated separately from the requirements we have by the Government
to provide a minimum service without the agreed funding envelope.
Essex County Council is looking to fund a number
of local businesses which are likely to have Post Office Outreach
services as part of their overall retail provision.
Any compulsorily closure via the current network
change programme that is subsequently replaced by an Outreach
whatever its funding method will be counted as part of the up
to 2,500 closures we have agreed to deliver for the Government.
Will these Post Offices offer a full range of
services?
The services offered will, as with the rest
of our network, depend on the type of outlet that is appropriate.
We will aim to match the service to the needs of the local community.
Some service availability depends on the demands of the body for
which we are providing the service. For example the Check and
Send service is only available through 4,500 outlets because that
is what the Passport Agency want, although we are in discussion
with them on this.
Will the Council now be expected to pay all of
Post Office Ltd's overheads?
The Council will not be funding Post Office
outlets. It will be providing funds to local businesses. Those
businesses may choose to provide Post Office services as part
of the retail offering they provide to support the local community.
Where branches are opened in places where a
closure has taken place through the Network Change Programme,
those services are not part of the branch network. They are therefore
not considered part of the provision that Government has identified
as being necessary for general economic interest for which state
aid approval has been given.
If Post Office Ltd is to open outlets which
are not included in the branch network which government has decided
should be funded by state aid, it cannot use that state aid to
subsidise them. It needs to run them on a commercial basis and
that means making sure that it does cover its costs.
Leaving aside the 15 post offices to be supported
by the Council, how many post offices will now close in Essex?
Essex CC will not be supporting the Post Offices
but is looking at providing funding to local businesses which
may, as part of their overall retail offering, provide Post Office
services. They recognise these retail outlets in the round aid
the sustainability of local communities and help support elderly
and disabled people to remain in their own homes rather than having
to move into institutional care.
34 branches have closed or will close very shortly
as part of the network change plan for Essex.
What effect does this arrangement have on the
profitability of nearby post offices?
The over riding objective of the Network Change
Programme was to put the post change network on a more sustainable
footing than that of the network that preceded it.
As a consequence Post Office Ltd will only consider
local funding proposals where it believes that in doing so the
remaining network is not negatively impacted.
How many other local authorities are pursuing,
or likely to pursue, similar arrangements?
We have had expressions of interest by a number
of local authorities and community representatives but to date
only six have proceeded to the next stage of signing non disclosure
agreements. The details of these bodies remain confidential.
LONG TERM
FUTURE OF
THE NETWORK
Once the network change programme has concluded,
do we expect the additional criteria about matters such as physical
(as opposed to geographical) accessibility, local economic impact
and public transport options to be applied to future post office
closures? If so, how could this be managed?
As the Governments access criteria has replaced
the Government's previous policy of "avoid avoidable closures"
Post Office Ltd will continue to apply these when making network
decisions.
The precise process for this requires a new
code of practice which is due to be developed with Government
and Postwatch or its successor body imminently.
What will Post Office Ltd do if data from the
2011 census shows that sizeable communities are without access
to a post office?
As indicated in our proposal documents for each
area in the Network Change Programme Post Office Ltd will keep
the network under review.
Post Office Ltd does not necessarily believe
that the current network will remain static indefinitely. We will
continue to review the provision of services, both commercial
and social, on the basis of demand. Additionally Post Office Ltd
will assess other factors prescribed by the Government including
the minimum access criteria which are of course sensitive to population
information.
2 April 2008
1 Printed at Ev 100, HC 292-II, Session 2007-08. Back
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