Memorandum submitted by the National Federation
of Sub-Postmasters (NFSP)
I am writing to inform the House of Commons
Business and Enterprise Committee of the National Federation of
Sub-Postmasters (NFSP) views regarding the Hooper Review on the
future of UK postal services.
While we welcome many aspects of the proposals,
and the subsequent legislation tabled by the Government, the NFSP
has serious concerns about the impact on sub-postmasters, the
post office network and in particular mailwork post offices, of
the separation of Post Office Ltd (POL) from Royal Mail Group.
In view of the post office network's role in
carrying out £1.5 billion of mail transactions each year
and in providing vital access points for mail services, the NFSP
was disappointed not to be called to supply either written or
oral evidence to the Committee's inquiry on the Hooper Review.
We have therefore supplied a short briefing document to inform
the committee of our position, which we hope is of interest to
you.
HOOPER REVIEW
AND THE
POSTAL SERVICES
BILL
The National Federation of Sub-Postmasters (NFSP)
represents the interests of sub-postmasters, private business
people who run 97% of the national post office network.
BACKGROUND
The Government has tabled a Bill which proposes
significant changes to Royal Mail Group, of which Post Office
Ltd and Royal Mail are both currently part. This follows recommendations
made within Richard Hooper's report on the future of the UK postal
service (the Hooper Review), which the Government has accepted
in full.
Government Proposals
The Government proposes a number of changes
within the recently published Postal Services Bill including:
— Royal Mail should form a strategic
partnership with a private sector company able to deliver the
capital and expertise required to transform the business, allowing
the sale of a minority stake in the company. Ministers have suggested
this should take the form of the sale of up to a third of Royal
Mail to a foreign postal operator.
— Experience of other European postal
operators suggests that measures to increase efficiency and modernise
operations may result in the closure of a significant number of
delivery offices.
— Post Office Ltd (POL) should be removed
from Royal Mail Group (RMG), and established as a separate, fully
state owned company. Both POL and RMG will sit under an umbrella
company, Royal Mail Holdings.
— The government will assume Royal
Mail's historic pension deficit.
— The regulation of postal services
will transfer from Postcomm to Ofcom.
— Ofcom will have scope to extend the
financial burden of operating the Universal Service Obligation
from Royal Mail to include other mail operators.
Post Office Network
The post office network has reached a critical
point in its history. The 18-month Network Change programme, which
resulted in 2,500 post office closures, has now been completed.
Sub post office income remains worryingly low.
New work needs to be brought into the post office network, increasing
income for the remaining 11,500 post offices.
Changes to Royal Mail that adversely impact
on the post office network risk further widespread post office
closures. Many sub post offices would not survive more reductions
in income.
Post Offices and Royal Mail
Income from transactions carried out in post
offices on behalf of Royal Mail accounts for one third of POL
income (£348 million in 2007-08) and one third of sub-postmasters"
pay (£165 million in 2007-08) under the inter business agreement
between the companies.
Of this, around 60% is variable income based
on the level of transactions undertaken; while 40% is fixed income,
based on post offices providing bricks and mortar access points
for the public to access postal services.
Currently sub-postmasters only provide postal
services on behalf of Royal Mail and Parcel Force. They cannot
accept mail from other carriers for post or for collection by
customers.
Mailwork Sub Post Offices
900 mail work post offices, run by sub-postmasters,
provide premises, facilities and supervision for Royal Mail delivery
staff.
Mailwork post offices are overwhelmingly based
in rural areas—1 in 7 rural post offices are mailwork offices.
Mailwork sub-postmasters are paid according
to the number of postmen and women they supervise. This pay is
frequently around 25% of a mailwork sub office's total Post Office
income.
A sub-postmaster supervising 5 postmen/women
will be paid over £10,000/year. For sub-postmasters with
25 postmen/women, payments are £40,000/year.
Mailwork sub-postmasters also receive income
from increased footfall, as customers coming in to pick up undelivered
parcels often make other purchases in the post office.
The post office and mailwork aspects of the
business are inter-dependent, to such an extent that many mailwork
sub post offices would be forced to close through loss of income
without their mailwork contracts.
NFSP VIEW
Postal Services Bill
The NFSP welcomes several aspects of the government's
proposals. These include:
— The Government taking on the historic
pension deficit.
— Greater protection for the Universal
Service.
— A fairer regulatory regime under
Ofcom.
However, there remain other aspects on which
we have significant concerns:
POL/Royal Mail Relationship
The separation of POL and RMG into two separate
companies, bound only by a loose holding company, means that the
current business arrangements between the two companies may well
change. Royal Mail may reconsider whether POL should remain as
its preferred retail outlet.
There are strong synergies between POL and RMG
and no known international precedent in separating a national
mail operator from its retail arm. We believe that guaranteed
major new income streams would be required for there to be any
possibility that POL could be financially viable without at least
maintaining current levels of Royal Mail work.
Income
Sub-postmasters are increasingly dependent on
Royal Mail transactions, with over a third of sub-postmaster income
coming from mail services. To lose any of that work would be catastrophic.
The NFSP is therefore calling for a minimum 10-year exclusive
deal for POL to handle Royal Mail and ParcelForce transactions.
Any reduction in the number of delivery offices,
leading to losses of mailwork contracts, threatens one in seven
rural sub post offices.
The separation of POL and RMG, and with a private
company in part ownership of Royal Mail, may well lead to the
renegotiation of the fixed payment aspect of the inter business
agreement, which Royal Mail pays to POL for the post office network's
role as an access point. This in turn would significantly threaten
POL's and therefore sub-postmasters' income.
FUTURE OF
MAIL SERVICES
AT POST
OFFICES
The NFSP believes the post office network should
build on its traditional products and position as the retail arm
of Royal Mail, and that the Post Office should be the place to
go for all mail needs:
— The NFSP supports new mail services
being introduced at the Post Office, such as Local Collect which
allows people to collect undelivered parcels from a nearby post
office.
— Postcomm, the regulator, has suggested
that new mails operators may want to use the size and geographic
coverage of the post office network to sell their products and
services to domestic customers and small businesses. The NFSP
agrees that if this is how postal competition develops, post offices
must act as dropping off and collection hubs for all mails companies.
To maintain the network's integrity, this should be agreed on
a network-wide basis, rather than by arrangements with individual
post offices.
FUTURE OF
THE POST
OFFICE NETWORK
The provision of mails-related services and
the income they bring is essential to the future of the post office
network. In addition, it is vital that other services offered
by our post offices are extended and enhanced to improve the viability
of the network:
— Current government services available
at post offices should be extended so that the network can provide
a comprehensive range of government-related payment transactions,
information provision, and form access, checking and verification.
A one-stop shop for government information at post offices, offering
a face-to-face service complementing the DirectGov website, would
provide convenient access to government services at the heart
of local communities.
— All local authorities should also
offer payment collection facilities at post offices. These should
range from rent payments and council tax to meals on wheels, blue
badges and leisure centre passes. Local authorities should also
formalise arrangements and remunerate post offices for their informal
role as communications channel providing information and signposting.
— Banking should be a major service
provided by the post office network. A national bank at the Post
Office, or Postbank, should be created building on the Post Office
card account to provide a full range of basic, current and business
accounts. This would enable increased access to banking services
for individuals and businesses alike in a trusted, accessible
environment.
— Post offices should also offer full
access to all major high street bank accounts, providing free
access to cash in local communities.
— The post office network should continue
to offer a range of other financial services, bill payment facilities
and travel-related services.
— The government must urgently commit
to the renewal after 2011 of the Network Subsidy Scheme, the £150
million a year payment to POL which acknowledges post offices'
unremunerated social and economic contribution to the communities
they serve.
— Local and devolved government should
offer full, automatic small business rates relief to support post
offices; and provide grant funding to enable improvements in post
offices and their retail businesses.
— Most post offices also operate retail
outlets, usually a newsagent or grocery store. In addition, post
offices are acknowledged as critical to the economic wellbeing
of local high streets. Action to support small shops and champion
local retail, particularly during the current economic downturn,
is vital and will help support post offices too.
The post office network is a critical piece
of the nation's infrastructure, and makes a major contribution
to the social and economic glue that holds communities together.
Decisions about the future of Royal Mail have consequences far
beyond that of the company itself; its future is inextricably
tied to the fate of our local post offices—it is imperative
that the right decisions are made.
9 March 2009
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