Examination of Witnesses (Questions 140-159)
MR ALAN
COOK CBE, MS
PAULA VENNELLS
AND MR
HOWARD WEBBER
10 JUNE 2008
Q140 Chairman: Which they did.
Mr Cook: Yes.
Q141 Roger Berry: Which they have
done on the grounds of general economic interest. To what extent
has the resistance to post office closures that we have seen been
based on access to mail services or access to other services of
general economic interest?
Mr Cook: This would be a matter
of opinion.
Q142 Roger Berry: You are in a good
position to have a view on this, Mr Cook!
Mr Cook: My instinct would be
that access to cash would be the primary driver of the emotion.
It is jolly inconvenient not to have access to mails either, but
if you really get down to it, I think it is about pension payments.
Q143 Roger Berry: Do you think there
is any contradiction between the grounds on which state aid approval
was sought and the actions of individual government departments?
Mr Cook: Not yet! The grounds
of their approval are on the back of having the Post Office Card
Account. The services of general economic interest are mostly
evidenced by us paying benefits. There have been other government
contracts lost, but the dramatic decline in the Post Office Card
Account so far is a problem for us in the context of getting European
state aid approval because if it became too small then Government
would find it difficult to get approval to renew the social network
payment in 2011. It might want to do so, but it might find it
did not have the ability to get approval. We have a particular
challenge, which is that obviously now the Post Office Card Account
is up for re-tender, although the point I have just made applies
anyway because the number of people using a card account is steadily
dropping anyway. It is crucial for Post Office Ltd and sub-postmasters
that we win the card account tender, not just because of the revenue
it generates for Post Office Ltd, not just because of the revenue
that is generated in the shops of sub-postmasters while the customer
is in collecting their benefit, but also because it very much
underpins our services of general economic interest. If in 2011
there was a further renewal of the social network payment that
would need to be substantiated on the grounds of that particular
fact.
Q144 Chairman: What do you make of
the letter that is currently being sent by the Department for
Work and Pensions to State pensioners which says, "The last
option for receiving your payment would be to open a Post Office
Card Account to collect money from your chosen post office, although
this service will no longer be available from 2010"? That
letter is dated 3 April this year.
Mr Cook: I started getting copies
of that letter a few days ago. I do not think a lot of it. We
are taking that up with the DWP. I would welcome you taking it
up.
Q145 Chairman: I have another letter—and
these have both come from George Thomson of the National Federation
of Sub-postmasters—dated 23 May, sent to me and recipients
of the green giro. This lists payment methods and does not mention
the Post Office Card Account at all again. What do you make of
that?
Mr Cook: The same. That particular
service, the giro cheques, is coming up for tender now, so we
have to tender for that separately. I am sure it is better for
all concerned. The most expensive way for Government to pay benefits
is giro cheques. It would be better and cheaper to be on a card
account. Our tender for the card account is a very competitive
one. We are making it much more cost-effective for Government
to renew and continue the card account.
Q146 Chairman: The second paragraph
of this letter of 23 May says, "We would like you to take
advantage of the benefits of banking." They are telling people
to open a bank account and not a Post Office Card Account.
Mr Cook: All I can say is that
it is clearly much more in Post Office Ltd's interests for those
benefits to be collected in cash. I think there is a consumer
need to want to be able to collect their benefits in different
ways. The extent to which Government chooses to force individuals
down a particular path is for them to decide, but it has a very
adverse affect on the Post Office if they dissuade customers.
Q147 Chairman: Or they do not even
tell customers the option exists or tell them the option is being
terminated when it is not.
Mr Cook: That is why I have made
the point that it is not just about winning the tender for the
card account, it is also about making it generally available so
that new customers can take out card accounts rather than just
waiting for the existing customer base to run off.
Q148 Roger Berry: One of your main
competitors, PayPoint, was set up in 1996. I forget how long ago
this all happened. This was set up by utilities who presumably
were not satisfied with the then service provided by Post Office
Ltd. Do you think the Regulator should take more of an interest
in the range of payment services that utilities offer? Do you
have any views about attitudes to your competitors in this field
as well as attitudes to your staff?
Mr Cook: There is a Directive
on Payment Services which is pretty close to going into production
and that is run by the Financial Services Authority. It is going
to become a much more regulated marketplace than it has been.
Q149 Roger Berry: What do you think
the effect is going to be?
Mr Cook: It will level the playing
field to a degree. We are now competing very aggressively indeed.
Typically most of the recent utility bill contracts—because
basically the utility company which issues the bill will go out
to tender for payment services capability—have been won
by PayPoint and the Post Office jointly. I have made it my business
to make sure that we compete very effectively for this business
because cash bill payments sit very comfortably with the card
account customer who is drawing the cash. If we go back to your
earlier question about what is the biggest driver of the resentment
of a post office closing, it is all about cash. It is about being
able to collect one's benefit in cash and then pay one's bills
in cash at the same place.
Q150 Roger Berry: The Government
and the European Commission have identified the general economic
interest arguments for Post Office Ltd supporting the network.
If the post office network did not exist how would that general
economic interest duty be satisfied?
Mr Cook: They would have to find
another payment mechanism, banks or some other chain like PayPoint.
The problem that PayPoint would have is providing sufficient cash.
When this cash truck that we were talking about earlier turns
up in some it collects money but in most it delivers it. We are
paying out £24 billion a year in cash across the counter.
The logistical exercise of getting the right amount of cash in
the right town on the right day of the week and knowing you need
more on winter fuel payment weeks and Bank Holiday weeks is a
complex logistical business and that is one of our core activities,
it is moving that cash around the country.
Q151 Roger Berry: Does Mr Webber
have any comments to make on the issues I have just raised?
Mr Webber: Only a general comment.
The Government does need to be joined up in this respect. It is
very important that Government plays its part in ensuring that
the Post Office retains its business. Alan and Paula and their
colleagues are doing their best to ensure that the Post Office
combines both the commercial and social roles, but it depends
on customers, it depends on local government. It is a pity that
in many places one cannot pay council tax through the Post Office.
It would be good to be able to pay the Congestion Charge in London
through the Post Office. The Government needs to ensure that as
many services as possible are available through the Post Office.
Mr Cook: I have spent a lot of
time over the last 12 months working my way round Whitehall talking
to as many government departments as I can and I do believe I
can see new opportunities for the Post Office in providing what
you might call front of office face-to-face contact on behalf
of government departments. These opportunities take a while to
come into fruition, they do not just happen overnight, but I do
sense that there is a greater preparedness to use the Post Office
for these types of services. We are also putting together a package
of services for local authorities, which again is why we are talking
to the Local Government Association, because with some councils
you can pay your council tax at the post office and some you cannot,
which is daft, but you sort of have to do a deal with each council
to get to that point. I am confident we have put in a very competitive,
aggressive tender for the card account. We have to win it. I am
determined to win it. I think we will win it. That is why I need
to make sure that everybody understands that there will be 12,000
branches including the outreach because that is central to that
proposition.
Q152 Chairman: I would like to commend
you on the more entrepreneurial approach you have taken to winning
business generally, which is one of the problems that have beset
the Post Office in the past. You are not doing your normal sales
pitch for insurance and foreign exchange.
Mr Cook: I know that is not for
today. There are some application forms outside for anybody that
needs to avail themselves!
Q153 Mr Clapham: Mr Cook, I would
like to turn to outreach. You did kindly clear up for us in your
statement at the beginning how many post offices there are likely
to be. We are talking about 11,500 fixed offices and 500 outreach
offices. Given that outreaches can be based on a number of different
formats, one could have, for example, hosted partnerships, mobile
delivery, et cetera, do you have any particular preference
for the kind of business model that should be used for outreach?
Mr Cook: No, not particularly.
I think it really does depend on the circumstances. The default
if it is difficult to put in any other form would be the mobile
post office. That is our trump card if you cannot get the premises.
I guess one could imagine mobile post offices could break down
one morning. It may be a slightly greater reliability issue. The
more permanent we can make them feel the better, but it really
will depend on the dynamics of the area.
Q154 Mr Clapham: I understand that.
I am aware that there are certain outreach models that one could
say are less secure than others. One might look at the partnership
model and see that that could easily be one that is less secure
than the others and that would mean that we are moving about looking
for how we would maintain and sustain outreach in any particular
area. It does seem to me that there is a need to consider what
might be the more durable of the outreach models.
Ms Vennells: I think it is a point
very well made. As we go into working with Postwatch and the NCC
on the new code of practice one of the things we are very aware
of, which had not existed under the previous ways of working,
is exactly how we address those sorts of issues when we end up
with temporary closures in outreaches. It is a good question.
It is one that we have begun to think through because the same
sort of criteria and factors that we take into account currently
probably ought to be replicated in that code of practice. Outreaches
are very often in communities that are more isolated and therefore
we need to give due regard to how we cope with that going forwards.
Q155 Mr Clapham: In terms of the
guarantee, we are talking in terms of outreaches all being guaranteed
to 2011. Given that the individual outreaches are only guaranteed
for 12 months, is there any likelihood here that this could in
fact undermine the outreach and the determined objective of having
outreach to 2011?
Ms Vennells: No. Where we look
for outreaches and where we work with our sub-postmasters we are
very cognisant of the 2011 and preferably much longer term requirement.
The 12 months is a protection in a sense, which is that when an
outreach opens we want to guarantee absolutely that it gets a
full 12 months of operation because that is what will help establish
it. You need a certain period of time for the customer traffic
to build. That is what the 12 months is about.
Mr Cook: Normally a sub-postmaster
will have three months' notice. What we are saying is that if
you sign up for an outreach we are going to make that 12 months
for the first year and then it slips back to the normal three
months. If they then said they did not want to do it we would
have to find an alternative partner. What we wanted to make sure
was that they had had a long enough crack at it. We do not want
a sub-postmaster saying, "I'll have a little try. If it doesn't
work I'll drop it." So saying you have got to do it for at
least 12 months is a way of ensuring a commitment. If the outreach
is going to work and it is viable, they will not want to give
it up.
Q156 Mr Clapham: Mr Webber, have
you got any particular view on this?
Mr Webber: Not on that particular
question, no. The programme should have as much commitment to
the number of outreaches as it does to the number of closures
and, to be fair, it does seem to have that. I am sure that Post
Office Ltd is committed to having a successful model and having
that successful model continue well beyond 2011.
Q157 Mr Clapham: What is the real
purpose of outreach? Is it to be a bare minimum public service
or to provide a gateway to the universal services? If it is the
latter, why can partnership outreaches only handle parcels of
2kg?
Ms Vennells: The requirement of
partner outreaches is to deliver the range of services that a
local community requires. The Universal Service is a red herring
because the US only applies to letters, it does not apply to parcels.
The licence applies to parcels and through the licence Royal Mail
Group is more than covered in its delivery. However, we were,
as ever, grateful to Postwatch for raising the question on this
and challenging whether we had actually got our policy right on
it. The specific instance was in Northern Ireland. We had looked
at the amount of customer usage through the post office there
and it averaged about two customers a week who needed to send
parcels higher than 2kg. That said, we are not in the business
with outreaches or any other post office of restricting services.
So what we have done is we have gone back and made a number of
improvements to that already. For instance, all home shopping
returns, whatever size and number, can now be done through partner
outreaches, which was not previously the case. They will take
standard first and second class parcels up to 6kg. We will give
each of those partner outreaches very specific customer information
about how larger parcels can be handled and our sister company
Parcelforce Worldwide does a home collection service which is
completely free of charge. So if you have something that is a
huge weight we can get that handled separately through one of
the other group companies. I think we have addressed the issue
there.
Q158 Mr Clapham: So we are saying
that the community is a focus but at the same time we are looking
at providing the universal service through outreach?
Ms Vennells: Yes, we are. Some
of the outreach services provide more services than the community
might have had previously. For example, all of the mobile vans
will do motor vehicle licensing and in a number of cases they
would not have had that previously.
Q159 Mr Clapham: Mr Webber, have
you any comments you would like to make on that?
Mr Webber: We are still discussing
with Post Office Ltd the detail of the weight issue. Post Office
Ltd has gone a long way towards satisfying us and going beyond
their initial position. Our starting point is always going to
be that services should be provided unless there is some very
clear reason not to. The fact that very few customers may need
the service does not reduce the need for the service, because
those few customers' need is a real one.
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