House of Commons - Post Offices - Securing their Future

Post Offices - Securing their Future - Business and Enterprise Committee Contents

3 Sustaining the network

68. The network has long been valued for more than just the provision of mail collection and delivery:

According to NFSP research:

Virtually all of the submissions to the Committee reflected the huge demand for still more services to be provided through post offices. However, we recognise that people may like having access to post office services, but may not actually use them. The challenge for Post Office Ltd will be not just to offer the services discussed in this chapter, but to do so in an environment that is attractive and efficient enough to attract customers.

69. Each of the new services identified over the course of this inquiry is explored below in more detail under each category of 'core service': postal services, central government services, local government services, financial services, and community services. Some are examples of services currently offered in a few post offices that represent good practices that could be emulated throughout the network; some are entirely new ideas; and some are inventive but may be impractical. But they demonstrate clearly that the network's potential is far greater than has so far been realised.

Postal services

70. Post Office Ltd received £358 million from Royal Mail Group in 2007-08 for providing mail services. In an earlier report the Committee expressed concern about the lack of clarity over the extent to which this sum was related to the cost of providing those services.[72] For example, it is not clear whether the payment includes any consideration of the exclusive access to the network that Royal Mail Group has enjoyed up until now. We are encouraged that the Postal Services Bill, in recognition of the need for appropriate oversight of Post Office Ltd's funding arrangements, proposes to improve transparency with a statutory requirement for Post Office Ltd to lay its accounts before Parliament each year.[73]

71. The most commonly requested new postal service is for the post office network to act as a mail or parcel delivery and collection service for all mail operators and couriers, not just for Royal Mail.[74] The growth of e-commerce, coupled with changing working patterns, has meant that private individuals and businesses need a place to send and receive parcels. Postcomm notes that in 2007, £46.6 billion was spent online, an increase of 54% over the previous year.[75] Increases in online commerce represent a huge opportunity for Post Office Ltd to increase parcel receipt.

72. Postcomm submitted that "Post Office Ltd should have complete commercial freedom to handle packets from other postal operators than Royal Mail".[76] Postcomm claimed that there was an exclusivity agreement between Royal Mail Group and Post Office Ltd.[77] However, CWU and Unite the Union told us that "the facility already exists for competitors to request and agree access to the network".[78] Post Office Ltd confirmed that Royal Mail Group must make the post office network available to any mails competitor.[79] But although the mechanisms are in place for Royal Mail's competitors to use the post office network, until recently, they have not been acted on.

73. When questioned about the lack of deals with Royal Mail's competitors, Post Office Ltd told the Committee that it had just signed a contract with DX Group to provide a local collection service for DX Group parcels.[80] While the Committee welcomes this development, it raises the question: why is this the first such deal?

74. The largest single source of Post Office Ltd income is Royal Mail Group. As we have noted, there is little clarity about how this is calculated, and we welcome the Government's proposals to introduce more transparency into this. Given the wider social role of post offices, we believe that it is appropriate to allow any mail operator who wishes to negotiate with Post Office Ltd to use the network. Post Office Ltd should do everything it can to secure contracts with Royal Mail's competitors. However, such contracts should be properly priced; any such arrangements should "pay their way" for Post Office Ltd and its partners.

Central government services

75. The post office network has become increasingly disassociated from government over time. According to Six Steps to a Sustainable Post Office Network, government-related services represented 26% of Post Office Ltd's revenue in 2007-08, a sharp decrease from 43% in 2003-04. This is a worrying development, because the network represents an invaluable opportunity for central and local governments to reach citizens.

76. The NFSP stated that one of the reasons behind the decline in the provision of government services through post offices:

77. As we explored in the introduction to this report, post offices have a vital role in sustaining the social fabric in local communities, rural or urban, and the public considers that the Government has a responsibility to ensure they continue to do so. The more that useful services can be offered through post offices, the greater their role will be in sustaining communities. Pursuing individual departmental objectives through the network will contribute to wider policy.

78. Unfortunately, government departments do not appear to appreciate this at present. The post office network is all too often seen as the problem of its sponsoring department, rather than an opportunity for government services to reach every community. At the beginning of this inquiry, the Committee asked each government department several questions:

What services do you currently provide through post offices?
Are you exploring the provision of any additional services through post offices?
What gets in the way of providing more services though post offices?

Although the Government response to our inquiry on the Postal Services Bill noted that "a range of prospective opportunities for the Post Office to act as the 'Front Office for Government' have been identified",[82] this front office role does not seem to have penetrated deeply. The Committee received responses from most government departments; the responses were of varying quality. Some departments (notably Transport and Home Office) provided thoughtful responses; several others (Culture, Media and Sport; Health; Innovation, Universities and Skills; Justice; and Northern Ireland Office) responded but utterly failed to address our questions. The Department for Work and Pensions reply was very poor, particularly considering their key role in improving social inclusion. A number of departments (Communities and Local Government; Children, Schools and Families; Energy and Climate Change; International Development; Revenue & Customs; Scotland and Wales) failed to respond at all.

79. Most of the departments which responded to our letter adequately addressed the question about services currently provided. The Committee's question about what additional services could be offered was less well answered and in many cases, ignored. The then Department for Business, Enterprise and Regulatory Reform (BERR) stated that it was considering the use of post offices to provide information on consumer credit and as a channel of communication with small businesses about the Business Link services.[83] The Ministry of Defence is currently working with the Department for Work and Pensions to deliver more services to war pensioners.[84] The Home Office is exploring using post offices to biometrically enrol foreign nationals applying for identity cards.[85] None of the other departments appeared to consider additional service provision through the post office network.

80. Very few departments responded to our question about what constrained them from using post offices to provide additional services. Among those that did, cost was a common theme. The Ministry of Defence pointed out that value for money could be a constraint, and that the facility to deliver armed forces benefits using post offices had been withdrawn because of costs.[86] The Department for Transport stated that the cost of processing the renewal of vehicle excise duty through a post office is 50% higher than processing the same transaction online.[87]

81. The Department for Transport identified two more constraints on the expansion of services through the network: customers' preference for doing transactions from the comfort of their homes; and the "growing need for specific expertise in checking identity".[88] The Home Office submitted that there are no constraints on the expansion of the use of post offices as long as the services are effective and competitive compared to other businesses.[89] None of the other departments answered this question.

82. Value for money is important, and we have some sympathy with departments' emphasis on the comparative costs of using the post office network. We will explore this later in this report. However, as we note above, government departments should always consider what is the most effective way to reach those who prefer to deal with matters face-to-face. It is legitimate to encourage people to use cheaper communications channels, but not to deny them choice.

83. We accept that not all government services can be provided across the network, but as a minimum, wherever a service can be provided by post then the associated material should be available at post offices. For example, passport application forms should be universally available. The Government must think of post offices not just as a collection of private businesses, but as a public service. Apart from the opportunity for better communication and service that the network represents, where post offices are no longer available, additional burdens may be placed on social services.[90] Failure to recognise this reveals a lack of a coordinated approach within Government. As one submission put it, post offices are a wasted asset:

84. The responses from government departments to the Committee's inquiry were, as a whole, inadequate. Most departments failed to suggest any way in which they might use the post office network. It is easy to think of government facilities which might usefully be available through the network, simply because of its near universal reach: payment of fines, and proof of such payment; provision of simplified consultation documents; leaflets about departmental services and initiatives; application forms for energy saving schemes; and provision of popular government forms.

85. The Committee is profoundly disappointed by the narrow focus on departmental concerns and the lack of attention to citizens' needs displayed in many of the answers to our questions about departments' use of the post office network. Government is in the business of providing services, and the post office network represents an unparalleled facility to deliver those services to local communities. It is bizarre that government policy recognises the value of the network, but that individual departments do not see that they have a role in making sure that everybody, not just the web enabled, has access to their services, and that taking this seriously by using the post office network more could contribute to wider policy aims.

A DIGITAL SWITCHOVER OF PUBLIC SERVICES?

86. The recently published Digital Britain final report says:

87. We profoundly disagree. We support efficient use of technology. We acknowledge that online schemes can save taxpayers' money (Digital Britain notes the electronic vehicle licensing scheme saves the DVLA around £8 million per year). However, while it is reasonable for private companies to decide to restrict their market segment to those who can use web-based services, it is not appropriate for the Government to do so.

88. According to Digital Britain itself, only 55% of those who already have the internet at home had used government services online. That means many people have chosen not to. We also note that Digital Britain's consultation process was intrinsically likely to capture the views of the digitally confident, rather than those who cannot or do not wish to engage in this way. As we have noted, our web forum, which was intended as an additional communication channel, provoked strong reactions. As one respondent said:

89. Public reaction to being expected to use the internet as the main way to access government services would be still stronger. Government's proper role is to encourage the take-up of new technology, not to enforce it. Those who do not wish to use the internet deserve more than a "safety net".

90. We recognise that providing services through the post office network may be more expensive than providing those services online. However, we consider the public's expectation that there should be a choice of ways to access government services and information is legitimate. The question should not be "is it cheaper to provide this service entirely on-line or remotely?" but "given that there needs to be a choice of delivery methods, what is the most effective way to reach those who prefer to deal with matters face to face?". As we have already noted (see paragraph 16), the public does not believe it is acceptable to offer services online only. Once it is accepted that there will always be a proportion of the public that will not use cheaper electronic communication methods, the value of the post office network becomes clearer. One submission to the Committee noted: "If post office outlets reduce further or disappear, Government might in the future find itself in the position of having to re-establish person-to-person services, at potentially greater expense".[94]

NEW CENTRAL GOVERNMENT SERVICES THAT MIGHT BE OFFERED

91. Central government services currently provided through some or all post offices include: car tax disc renewal; Statutory Off-Road Notification; DVLA checking; fishing and game licence applications; payments to benefit recipients and pensioners through the POCA; passport check and send; European Health Insurance Cards; National Savings and Investments (NS&I) products; and the Child Trust Fund.[95] In addition, 77% of customers use post offices to access government forms.[96] There is a range of other services which the network could offer, which can be broadly divided into identity services, documentation checking, and wider government services. Many build on services already on offer or being piloted. The new central government services suggested to the Committee are summarised in Table 2 below, and then described in more detail below.

Table 2: Suggestions for possible new central government services

Advice on government matters
Processing driving licenses
Processing passport applications
Vehicle licensing renewal
Application form checking service
Visas for foreign travel
Postal voting
Payment of benefits
TV licensing
Proof of identity checks
Photocopy authentication service
Implementation of future ID cards
Renewal of DVLA's photo ID cards
War Pensioners' postal service
'Signing-on' for benefits

Identity services

92. Some of the suggestions for 'new' government services to provide through the network are already available. For example, a number of submissions recommended that post offices could be used for processing driving licences.[97] We note that on 23 March 2009, Lord Mandelson announced that Post Office Ltd had signed a five-year contract to support the DVLA in issuing photographic driving licences. The DVLA licence renewal service will be available at 750 post offices.[98] This contract should allow Post Office Ltd to undertake a multi-million pound investment in verification technology, which could lead to other related contracts. Indeed, the potential to use this technology for other services was included in the contract.

93. The development of post offices' ability to provide identity related services would clearly be welcomed by those who submitted evidence to us. There is considerable demand for more post offices to process passport applications.[99] Some would simply like to be able to access passport application forms in all post offices;[100] others would like post offices to include passport photo booths,[101] while another submitted that post offices could undertake passport and identity interviews.[102] There was widespread support for the use of the post office network for implementing the identity card scheme.[103] The Home Office is exploring the possibility of using post offices for biometric enrolment of foreign nationals for the identity card scheme, potentially using the DVLA's framework agreement. The UK Border Agency aims to run a six to 12 month pilot at 20 post offices.[104] This could lead to additional work related to the new generation of passports.

94. However, before identity services could be provided across the network, staff would have to have additional training. The Department for Transport told the Committee that the "ability to identify increasingly sophisticated counterfeits and forgeries has become a specialist skill which Post Office staff, who handle a very wide range of business and general transactions, cannot be expected to have".[105]

95. Many or even most identity services may well be too sophisticated to provide across the network. However, even limited use of the post office network will allow these services to be offered across a wider geographical area than would otherwise be possible. There is potential to use the post office network to offer such services at a range of locations across the UK, which will both benefit those who need new driving licences or identity documents and provide income for Post Office Ltd.

Documentation checking or authentication

96. Many of the submissions identified the post office as a sensible place to have documents checked and processed. According to Post Office Ltd, 2,500 post offices currently offer a 'passport check and send' service and stock passport application forms.[106] In addition, photo licence application checking is already available in 743 post office branches.[107]

97. These services are currently funded by a payment from the customer. There are other suggestions where the source of payment is less obvious. It was suggested post offices could be used to check benefits applications, as considered by the Irish Government, in order to help prevent benefit fraud.[108] This idea is similar to the 'Validate' pilot project, described below in paragraph 115. The NFSP reports that subpostmasters already provide an informal service for customers by checking application forms for them. In addition,

109

The CWU and Unite the Union similarly suggested that post offices could both check and process tax self-assessment forms.[110] Once again, this might depend on staff training.

98. Postcomm notes that Portuguese post offices offer a photocopy authentication service, and suggests that this is a government service that the network might provide.[111]

Wider government services

99. Despite an increasing reliance on electronic channels for the delivery of government services, some people are unable or unwilling to use these channels. Consumer Focus suggested that subpostmasters could check, authenticate and digitise applications, and then forward them to the relevant government department.[112]

100. Many submissions would like to see post offices as a 'one-stop shop' for government services.[113] The North Yorkshire County Council suggested that just as the DirectGov website acts as a virtual one-stop shop for government information, the post office network could be the complementary face-to-face service.[114] They envisage that: "Trained sub-postmasters could provide information and basic advice on government issues (tax returns, pension entitlements etc.), and help the public carry out routine transactions".[115] Cornwall County Council suggests that post offices could be used to provide information on government policy.[116]

101. The CWU and Unite the Union support the notion of a one-stop shop, because it:

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They cite a scheme recommended in the 2000 report of the PIU,[118] whereby 'Government General Practitioners' would act as a 'guide to government', providing information and low-level advice on government issues and handling transactions. CWU and Unite the Union would like to see "trained counters staff working in this way in all Post Offices across the country".[119]

102. However, the Government has already conducted a trial of the PIU proposals under the label "Your Guide"; the then Minister, Mr Stephen Timms, said:

120

103. There may be scope for using the post office network more as a source of government advice, but provision of such services would require substantial investment in training and, quite possibly, in technology. Moreover, this role would have to be managed so that it took account of the fact that the majority of branches are run by subpostmasters, not direct government employees.

104. Several submissions saw potential for the post office network to provide employment information. For example, post offices could host Job Centre Plus 'Jobpoint' terminals,[121] advertise job vacancies,[122] or host local employment or skills fairs.[123]

105. There were two more unusual suggestions for government services. Postcomm reports that postal voting services are handled by post offices in Finland and suggests that this service might be an opportunity for post offices.[124] The CWU and Unite the Union suggested that the post office network might be used to issue visas for foreign travel.[125] It is not clear how practical these two suggestions are; however, they indicate that there are potentially many innovative uses of the network.

106. It is not enough simply to identify services which could be provided through the network; they must provide value for the Government. This is not simply a matter of the lowest possible cost; the decisions need to be considered on a cross-government basis. Expanding government services could help ensure the sustainability of the network, and the additional costs of providing the services might be offset by reduced costs in other publicly-funded areas.

107. Services must also provide income for the post office network — indeed, the Co-operative group is supportive of post offices as a universal hub, but caution that:

126

108. Even so, many of the preceding suggestions for improved central government services are both feasible and advisable. The biggest barrier to the expansion of government services offered through the network is the attitude and lack of imagination of most government departments. History has given government an unparalleled and highly valued portal in the post office network. Departments must try harder to provide their services through post offices. At the very least, individuals must be able to get important government forms in all post offices. It surely cannot be beyond the Government's technological ability to provide a means to supply such material electronically so that the most up-to-date version of the form in question can simply be printed. Some of the proposals which have been made to us are impractical at first glance, but contain good ideas. Departments should not simply dismiss the provision of services through the network; they should assess whether offering services through post offices would make life easier for their customers, and if so, whether it is at all practicable.

109. In asking us to undertake the task force role, BERR showed its commitment to a coordinated effort to provide more services through post offices. The new Department for Business, Innovation and Skills should continue this work. There should be a government-wide leader to coordinate and implement as soon as possible a programme of expanded government services in post offices. There should be a new presumption that, in addition to any other delivery methods, all government departments should seek to deliver their services through the post office network in the interest of social inclusion. They should also be obliged to promote these delivery methods on an equal footing with other methods. The example of the Pensions Agency, constantly seeking to obscure the availability of its services through post offices, stands as a warning as to what will happen if this policy is not enforced properly.

Local government services

110. The post office network is also used for the delivery of some local government services, although these vary from place to place. Local services available through some post offices include: applications for concessionary bus passes; acceptance of council tax, rent and other payment types;[127] meals on wheels; travel permits and passes; blue badges and leisure centre passports.[128] Post Office Ltd reports that of the 526 local authorities they analysed, 312 use post offices for at least one service. However, very few — only 55 — use them for council tax, rent payments, and other local government services. Most just use them for one type of local authority service.[129] As with central government services, the Committee received many suggestions for services that local authorities could offer through the post office network. These are summarised below in Table 3.

Table 3: Suggestions for possible new local government services

Paying rent for Council properties
Travel passes and parking permits
Leisure pass
Disabled badge issuing
Parking and other fines payment
Payment for Social Service provision
School uniform vouchers
School meal vouchers or payment
School lessons/extras
Council Tax payment
Congestion charge
Building regulation fees
Garage/allotment/hall hire fees
National Non Domestic Rates
Local Authority payment collection point
Local Authority information provision
Consultation exercises on local matters
Vehicle removal/towing fees
Commercial waste fees
Recycling bag collection point
House clearance fees
Registration of change of circumstances

111. As with central government services, many suggested that post offices could be a 'one-stop shop' for local government services.[130] Post offices could act as a payment collection point for local authorities, including:[131] rent for Council properties;[132] council tax;[133] social services such as 'Meals on Wheels';[134] commercial waste fees;[135] house clearance fees;[136] vehicle removal fees;[137] congestion charge fees;[138] leisure passes;[139] parking and other fines payments,[140] and school meal vouchers and other payments to schools.[141] The Scottish Grocers Federation points out that Proof of Age cards are only available through local authority offices, and suggests that they should be made available through the entire post office network.[142]

112. Local transport transactions could also be dealt with at post offices. Post offices could sell travel passes and parking permits,[143] which is already being done in some areas. For example, the Mayor of London submitted that post offices will process applications for London's new half price Bus and Tram discount scheme.[144]

113. Essex County Council suggested several other local government transactions that could be done in post offices: garage, allotment, and hall hire fees; building regulation fees; business rates; and school uniform vouchers.[145] North Yorkshire County Council gave an example of how this might be done:

146

114. Other local government services that could be offered through post offices include disabled badge issuing[147] and recycling bag collection.[148] Post offices could be a centre for general local authority information,[149] or for consultation exercises on local matters.[150] They could also be a place for citizens to register change of circumstances details, such as change of address, births, marriages and deaths.[151] One person suggested that post offices could have 'over the counter hotlines' to enable customers to learn about government services.[152]

115. Post offices currently offer a checking service for some central government services. The North Yorkshire County Council suggested that this service could be extended to include benefits forms. They cite the example of the 'Validate' programme, in which local authorities use post offices to help with change of circumstance declarations to assist fraud detection and reduce housing benefit overpayments, and state that this pilot programme should be extended to all local authorities.[153] This pilot programme appears to be successfully used in Wales.[154]

116. Some local authorities are already piloting innovative uses of the network. For example, when the Committee visited Essex, it learned about neighbourhood policing teams using local post offices as a place to engage with the community. Essex has also established community information points in some post offices that have been 'rescued' by the County Council from the closure programme. These are web-based service access points, and the Council sees them:

155

117. In Camden, Lambeth and Sedgemoor, pilot schemes have been set up in which post offices deliver consultation exercises, communicate with residents, and meet housing benefit intervention targets.[156] Nottingham City Council allow customers to pay rent or council tax at post offices, and although they pay Post Office Ltd a commission for each transaction, "this is a significantly cheaper option than processing payments at housing offices".[157] Some councils employ technology to support the use of post offices. For example, Torbay Council use barcodes on council tax and business rates bills, and these can be paid at any post office.[158]

118. While these ideas and pilot projects are welcome, there is no uniformity about the extent to which local government services are available through the post office network. It depends entirely on the enthusiasm of the local authority in question. Even though local authorities have been vociferous in opposing post office closures, many local authorities provide no services at all through post offices. Local authorities use post office services even less, and less consistently, than central government. Many are quick to say they support post offices, but then are slow to offer their services through them — the support that really matters. They should try harder to provide their services through post offices — those who have piloted such services have been enthusiastic about the results. The Local Government Association should lead efforts to expand the availability of local government services through the post office network.

119. As with central government services, it is clear that there is substantial scope for more use of the network by local government. The NFSP submitted that they:

159

Post Office Ltd also has a role to play here, in publicising the services it can offer local authorities, and standardising them as far as possible.

120. It is not appropriate for the Government to dictate to local authorities the extent to which they provide services through the post office network. However, we believe more could be done to raise awareness of the potential of the network. Post Office Ltd should take the lead in developing services that can be easily accessed by local authorities. It should then work with the Local Government Association to ensure that every local authority is provided with information about the services post offices can offer.

LOCAL GOVERNMENT SUPPORT FOR POST OFFICES

121. The Committee visited Essex, Devon and Wales during the course of the inquiry because each has taken an innovative approach to keeping its post offices open. The 'Essex model', whereby the local authority provides the funding to maintain the network, has successfully reopened post offices in Essex that would have otherwise been lost to the community. These post offices also provide a number of new local government services. The Committee had an opportunity to visit one of the post offices reopened recently thanks to council funding — that in Epping — and heard from local businesses and customers how important the council's role was in restoring a vital service.

122. There has been tremendous interest in the Essex model, with many local authorities approaching Essex County Council to learn more about it. Essex County Council suggested that local authorities might even become responsible for post office provision in their areas. The Committee does not see this model as appropriate to extend throughout the network. Relying on local authorities' funding to maintain the network would result in poorer local authorities providing fewer or poorer services. This would undoubtedly undermine the uniformity of service, which we have heard is a desirable — some might say necessary — characteristic of a sustainable post office network.

123. Devon County Council has taken a slightly different approach to Essex. Based on the recommendations of the Devon and Torbay Post Office Task Force, which was formed in response to the closure programme, the council set up a three-year strategy. This strategy includes giving business advice and grants — to replace salaries that are no longer paid by Post Office Ltd — to partner outreach branches that represent the sole remaining shop in a village. The Committee visited one such branch in Kennerleigh (see Figure 1 at the beginning of this report). This village shop and post office is being sustained partly by community involvement, but substantially by the county council's annual grant of £5,000 for three years. The council is also providing free business advice to post offices such as the one in Kennerleigh, to help them devise business strategies to become sustainable after the withdrawal of support from Post Office Ltd.

124. The Welsh Assembly Government has taken yet another approach to support post offices. In addition to the pilot project for the 'Validate' programme, discussed above, and a pilot project to use rural post offices as internet hubs, it has made available a Post Office Development Fund. This fund allows subpostmasters to apply for capital grants and revenue funding to improve the non-post office elements of their businesses. The capital grants can be as much as £20,000; revenue grants can be as much as £15,000. Examples of supported projects include the introduction of a new retail business, improvement of the sustainability of the non-post office aspects of the business, and helping disadvantaged groups. Training is offered, and grants can include funding to cover staffing costs that make it possible for subpostmasters to get such training. As with Devon, the intent of this programme is not indefinite support of the post offices in question, but rather, ensuring the long-term self-sustainability of vulnerable branches through business improvement.

125. Post offices are community assets, and we welcome the approaches to support them that we have seen. Essex, Devon and Wales are showing commendable initiative. Undoubtedly there will be many other examples throughout the United Kingdom. In providing services through the post office network, Essex is giving an example of a local authority using post offices as a resource. We were particularly impressed by the effort that the Welsh Assembly Government and Devon County Council have made to improve the underlying businesses associated with sub-post offices. Helping businesses in this way not only supports the network, but safeguards other facilities for the local community.

Financial services

126. The post office network is already a major financial network and provides financial services to people who would otherwise be unbanked. Post offices are used to receive cash, pay bills and operate some accounts. The fee-free ATM network expanded to almost 1,700 this year, and in some communities the post office provides the only free access to cash.[160] The Treasury Select Committee has drawn attention in repeated reports[161] to the importance of the network in ensuring financial inclusion. Appendix B lists the bank services available from Post Office Ltd.

127. The POCA gives people on low incomes and pensioners access to cash in their communities: the Commission for Rural Communities estimates that 300,000 people in rural England do not have a bank account;[162] HM Treasury reports that in 2006-07, almost 5% of adults in the UK were unbanked.[163] Without access to a nearby post office, people on low incomes may have to spend money to get money. As the NFSP pointed out, the post office network's "coverage is particularly strong in deprived urban and rural areas where many bank branches have closed. Currently 4% of village have banks whilst 60% have post offices".[164]

128. The availability of banking services is also exceedingly important to small businesses, which might use their local post office for getting change for their tills, receiving payments from customers and depositing their takings at the end of the day. Many small businesses would like to see more banking services available through post offices, including access to more banks and building societies, which would enable them to access their business accounts locally.[165]

NEW FINANCIAL SERVICES THAT MIGHT BE OFFERED

129. As shown by the summary of suggestions received by the Committee (Table 4, below), there is a tremendous appetite for improved and broadened financial services provided through the post office.

Table 4: Suggestions for possible new financial services

Comprehensive current/basic/business
accounts
Ability to deposit cash and cheques
Ability to withdraw cash
Extend links with credit unions
Introduce free-to-use cash machines
Utility service bill payment facility
Savings Accounts Gateway
Loans for SMEs
Small personal loans / micro loans
Financial advice
Extend ability for POCA users to accumulate weekly payments into a holding account for payment on a monthly basis to help those on fixed weekly or low incomes plan for direct debits
Establish a 'People's Bank' / Postbank
Community group bank accounts
Children's 'passbook' savings account

130. In some cases, there is simply demand for more universal access to the accounts customers hold with other banks, since those that offer services through the post office do not necessarily make all their usual services available. Consumers want the ability to withdraw and deposit cash, and deposit cheques at post offices. Citizens Advice noted that:

166

131. Additional savings products are also in demand. Postcomm suggested that the new Savings Account Gateway programme, which is intended to promote savings by people on benefits, might well be delivered through post offices.[167] Other submissions suggested post offices could offer a "children's passbook savings account to get the new youngsters into the habit of saving" to address the current 11-year age limit for card-operated accounts.[168] One person recalled their own childhood experiences with a Post Office Savings Account, for which they could buy 'Sixpenny Savings Stamps'.[169]

A post office bank?

132. There have been calls for the establishment of a full commercial bank as part of the post office network. The NFSP proposed a "Postbank", because "the post office network's geographical reach and high levels of trust present an enormous opportunity to increase banking provision for communities and small businesses throughout the UK".[170] The NFSP did not provide specific recommendations other than "bringing National Savings and Investments (NS&I) with an enhanced portfolio of banking products out of the Treasury and back into the Post Office" and "transferring the banking licenses of the recently nationalised banks to the Post Office".[171]

133. There is also support for a slightly different post office bank model: one that would fill a special role and improve financial inclusion. For example, the Post Bank Coalition's[172] model would "operate independently and while it will run a commercial operation which will make a profit, the Government could use the Post Bank as a vehicle to tackle financial exclusion and help those on low incomes." The Post Bank is meant to be publicly owned and community based, "with a diversity of services and partnerships such as credit unions and community development finance institutions".[173] The Post Bank Coalition envisages a 'Universal Banking Obligation', modelled on the Universal Service Obligation for mail services.

134. A number of submissions saw the current credit crisis as an opportunity for the post office and an associated post office bank to use its trusted brand to provide credit. Loans for small and medium-sized enterprises,[174] and small personal loans or micro loans[175] were suggested as possible new financial services. Another submission suggests small loans of £50 to £500, and proposes that a post office bank could deliver the Social Fund, which Jobcentre Plus currently administers, to support people on low incomes with loans and grants to meet unforeseen costs.[176] Similarly, CWU and Unite the Union suggested in their submission to the Committee that post offices could give debt and financial planning advice.[177]

135. Cornwall County Council saw a role for post offices in providing banking services for community groups, seeing a need for:

178

136. Extending links with credit unions was seen as a possible avenue for improving post office services and financial inclusion.[179] North Yorkshire County Council stated that the post office network could provide access to credit union customers:

180

137. In its appearance before the Committee, Post Office Ltd spoke of its ongoing efforts to increase the financial and banking services available through post offices. All basic bank accounts are accessible through the network, and many, although not all, banks allow access to other services.

138. Mr Cook, Chief Executive of Post Office Ltd, said of the Post Bank Coalition's proposal:

181

In principle, Post Office Ltd supports the Post Bank Coalition's efforts, because "it is getting the nation talking about the Post Office as a provider of financial services, and that is what we want".[182] However,

183

139. Post Office Ltd described how it had expanded financial services over the past four years:

184

Post Office Ltd recognised the limitations of its banking model in its present state of development:

It is still in some senses a bit of a niche player because we do not have every product that everybody else has and some of the bigger omissions are things like a current account, but we are addressing them".

Mr Cook told the Committee that Post Office Ltd hopes to launch a current account next year and that there is "no reason why that would not be in every single branch".[185] The current account would be provided in partnership with the Bank of Ireland,[186] a model that has also been chosen by other post offices across Europe.[187]

140. Post Office Ltd has no plans to obtain a banking licence — a prerequisite to the establishment of a post office bank — and it does not necessarily accept that it is desirable: "It is not automatically the case that being an insurer or a bank in its own right is necessarily good but, if we did aspire to it, it would require significant funds".[188] Post Office Ltd's current financial situation would certainly present challenges to obtaining the necessary capital to get a banking licence. It would very probably have to come from public funds.

141. Moreover, if Post Office Ltd moved toward becoming something closer to a normal retail bank or to the community-supporting model backed by the Post Bank Coalition, it would require staff trained to offer financial advice, and premises which could provide the privacy necessary for complex financial transactions to be carried out. This is not impossible, but it would be a radical change from the current way in which post offices provide their services, and probably to the relationship between subpostmasters or other network providers and Post Office Ltd.

142. Mr Cook told us that the risks of the current model of partnership with Bank of Ireland are much lower:

there are two things going on, those who underwrite the risk and take the financial risk of the event happening and those who sell the policies, and the latter is a much more secure model. When we sell car insurance and house insurance we are not vulnerable as Post Office Limited to a loss of profitability in those marketplaces because we just earn a commission off of selling the policy.

143. It is clear that there is huge demand for wider availability of banking services through post offices, and this Committee strongly endorses the widely held view that banking is essential to the network. What is less clear is the model that should be used to expand banking services. The choices appear to include: continuing down the path chosen by Post Office Ltd, which is an expansion of the current relationship with the Bank of Ireland; the establishment of an all-new post office bank; and the pursuit of a network-wide relationship with a new partner.

144. The existing model for the expansion of banking services — that advanced by Post Office Ltd — is an incremental approach. Post Office Ltd must negotiate with each bank if it wants it to provide banking services, such as cash withdrawals, from post offices: "we have to persuade the bank itself that they would value the additional service for their customers of them being able to withdraw their money at the post office counter".[189] This model produces results slowly, and its results have been a patchwork of services available for only a selection of banks through post offices.

145. The current model also relies on the partnership with the Bank of Ireland, which also has its critics. Post offices receive a commission for introducing the customer to the Bank of Ireland service. This introduction often leads to long-term customers for the Bank of Ireland for a wide range of services, but the post office concerned does not benefit financially beyond the initial introduction. Surely, the reasoning goes, the establishment of a post office bank would earn more profit for the network from banking services than it does with the Bank of Ireland model. There is some suggestion that something like the Girobank, which became a financial success just prior to its sale, could be implemented to capture more of the profit for the post office network.

146. There is also a public perception that, since the public already partially owns some UK banks and has already invested a lot of money, there has to be a way to turn one of these banks into a post office bank that would allow the network to earn more profit in the long term compared to simply being an agent for the Bank of Ireland. There is no reason why banks in which the public has a stake could not provide more of their services through the post office network. However, suggestions that Post Office Ltd could simply assume the banking licence of one of the nationalised banks are misguided. Northern Rock, for example, may be sold as early as the end of 2009.[190] In addition, there may be state aid implications of using a nationalised bank as a post office bank.

147. The Committee has not sought access to the detailed business agreement for the current Post Office Ltd arrangement with the Bank of Ireland, it has not discussed alternative arrangements with other possible partners, and it has not been provided by the Post Bank Coalition with any detailed business case for their proposition. Similarly, the Committee does not have the expertise to comment on the detailed advantages and disadvantages in both banking and commercial terms of any of the options available to Post Office Ltd to take forward banking services. We are not bankers; we are politicians and we do not feel confident in these circumstances in making a detailed recommendation on the future banking arrangements that must be provided through post offices. The Committee strongly supports greater provision of banking services through the network. However, it is not obvious how a new post office bank would be funded and secured, whether it would entail ending existing arrangements with the Bank of Ireland, and if so, what would be the financial consequences of terminating these arrangements. At this stage, the priority should be to extend financial services as quickly as possible. The existing agreement with the Bank of Ireland may be the best way to do that. Alternatively, it may be appropriate to seek a new arrangement with a UK bank. If neither of these courses works, a post office bank may be appropriate.

148. The Government should review urgently the effectiveness of Post Office Ltd's strategy for expanding banking services, but it is the outcome that matters (more access to banking through post offices) and not the means. Post Office Ltd must prove that its current model, involving the gradual expansion of financial services, is, as it contends, the best way to improve banking services. It must do so by providing more banking services through the network and substantially broadening access arrangements with high street banks. The Government should use its influence to ensure that the banks in which the public is a shareholder provide services through post offices. We appreciate that the Government wishes to leave the banks to run themselves, but there is currently a unique opportunity for the public to gain a specific and valuable benefit from its shareholding.

Other financial services

149. Even if the time is not right for a fully fledged post office bank, there is scope for post offices to be used to increase financial inclusion. Post Office Ltd has said that it is pursuing a 'financial inclusion' agenda through a dialogue with the Association of British Credit Unions, but sees this as supplementing, rather than replacing, its more commercial financial services, such as those offered through its Bank of Ireland partnership.[191] We support this approach - credit unions fill a valuable niche and promote financial inclusion, but they cannot address many of the banking needs identified as desirable from the post office network. The nature of their work means that credit unions are not cheap - they have a high loan default rate and so must have high interest rates. Nonetheless, they provide valuable services to their customers, and we would welcome any partnership between the credit unions and the post office network. However, that partnership should bear in mind the legitimate need for Post Office Ltd's retail partners to be paid for the work they undertake.

150. There were several ideas for post office banking services that could improve financial inclusion. Many of those related to the POCA, which is a matter for the Department for Work and Pensions (DWP), rather than Post Office Ltd itself. The POCA offers only cash withdrawal and balance enquiries. Some felt that direct debit and standing orders should be possible through the POCA.[192] Ofgem suggested that the POCA should be made more flexible to facilitate cheaper direct debit bill payments:

193

Similarly, Water UK proposed a 'Saving from Poverty' scheme using an enhanced POCA to collect income and benefits "and make direct payments for essential services such as water, gas and electricity, on an agreed customer — creditor basis, without the penalty payments associated with the current direct debit systems".[194]

151. The DWP, which administers the POCA, emphasises the importance of keeping the POCA simple. While it is making some improvements to the POCA — simplifying account opening, giving access to post-office owned cash machines, and speeding up payment clearance — it resists any efforts to make the POCA more like a bank account:

195

152. The Government could do more to use the post office network for services that improve financial inclusion. The greater availability of fee-free cash machines and the renewal of the POCA contract are welcome. However, more can be done; for example, the new savings vehicles mentioned above — the Savings Account Gateway programme and a children's passbook savings account. Similarly, the Committee sees no reason why the Government could not work with Post Office Ltd to make the POCA more flexible to facilitate direct debits; for example, by allowing POCA holders to accumulate weekly payments into a holding account for payment on a monthly basis. Meanwhile, we recognise that the POCA is unlikely to be renewed again when it expires in five years. This gives added urgency to the provision of better banking services through post offices to enable migration to these services as the POCA is wound down.

153. The Committee whole-heartedly supports the rapid expansion of fee-free cash machines throughout the post office network, and urges the Government to consider providing more innovative tools to enable financially excluded individuals to take advantage of direct debit bill payment discounts. The Government should also use the post office network to promote savings programmes for children and to deliver the Savings Account Gateway programme.

Bill payment

154. There were many submissions calling for the ability to pay all utility bills through post offices.[196] One submission said:

197

155. The Committee received some innovative suggestions for using the post office network to give consumers, particularly those with low incomes, access to utilities at affordable rates. The National Federation of SubPostmasters submitted that the network could help overcome fuel poverty by improving access to affordable rates.[198]

156. Attractive though these ideas are, neither the Government nor the Committee have or should have the power to require private sector bodies to provide payment services through the post office network. Moreover, as we discuss later in this report, the Post Office has to earn its place in society; it cannot be left without competition. Some of the proposals put to us relate to regulated industries. Regulators should consider these proposals, and in particular should consider the extent to which payment services are available across the whole country, but we have not included this in our remit.

Community services

157. The intangible community services provided by post offices are the most valued of all for some of those who submitted evidence to the Committee. It is perhaps its broadest and most ill-defined role, and the one least reflected in the network's finances and sub-postmasters' incomes. Post offices are critical, particularly to individuals in rural communities and to the abundance of small businesses that would find it difficult to function without the postal and banking services of the post office. In some communities that suffer from a scarcity of shopping facilities, the post office helps to prevent the shop where it is based from going out of business.[199] This is particularly important in rural areas, where "an estimated 57% of rural postmasters provide the only retail outlet in their village".[200]

158. Other community services informally provided by some post offices include repeat prescription pick-up,[201] acting as a local tourist information centre,[202] "assistance for vulnerable residents — informal advice, interpreting official letters, fielding lost property, taking messages, offering emotional support and providing a focal point for communities".[203]

159. Torbay Council gave us a number of ways in which post offices aided social and financial inclusion, including providing a community focal point "where people can meet each other and find out about issues that affect them" and representing an "unofficial alert system that post masters operate for customers who have not been seen when expected to be".[204] A poll conducted for AgeConcern suggested that 90% of older people viewed their local post office as a 'lifeline'.[205]

160. The social role of post offices is linked to the government services role, in that by filling this role, post offices displace some of the cost to Government.[206] As one submission pointed out: "In many communities the PO provides our social glue. It is often a key institution in the local community encouraging social interaction and as such can help reduce social care and health care costs, enabling people to live independently for longer".[207] The social role of the network has been acknowledged by the Government and by communities, but no value has been put upon it, although the Network Subsidy Payment to Post Office Ltd could be construed as a valuation of sorts.

New community services that might be offered

161. The Committee received many innovative ideas for additional community services that could be offered through the post office network. Some are already offered in a few branches on a pilot basis; most would be entirely new services. The suggestions sent to the Committee are summarised below in Table 5. Most ideas leverage the fact that the network is a natural communication tool because of its reach and distribution. Citizens Advice research done to support their submission to the Network Change consultation showed that 32% of post office users already use post offices for finding information.[208]

Table 5: Suggestions for possible new community services

Police consultation and advice
Information on help for small businesses
Citizen Advice Bureau kiosk
Information on government policy
Community transport information
Community information such as opening times for other services
Tourist information accommodation booking
Small meeting rooms for hire
Job Centre Plus IT terminals and job vacancy adverts
Social Services information
Facilities to print government forms and documents
Telephone 'befriending' service for vulnerable people
Local 'outreach' service to vulnerable people
Passport photo booths
Internet terminals with access to a range of approved retailer sites
IT and info point
Internet access or 'e-terminals'
Administration of the Social Fund
Travel agency services
Using PO Ltd to overcome fuel poverty by providing access to utilities at affordable rates
PCT prescription collection and delivery
'Hot Desking', Skype and video conferencing
MP or local councillor surgeries
Greater use of electronic terminals for routine processes (stamp sales etc) to free staff up for information provision, application checking etc.
Deliver consultation exercises on local matters, e.g. planning
Use free space for courses, meeting and events
Local coffee mornings
The 'Saving from Poverty' scheme
Local employment fairs

162. The communication of information via post offices can go well beyond the provision of information about local and central government. Some suggested that post offices could provide general community information,[209] such as opening times for health services, police, local support agencies and charities, or community transport information.[210] These services are offered in some post office branches on an informal basis already, but there is support for their network-wide provision.

163. Post offices could also be useful locations for local MP or councillor surgeries,[211] and while they are already used in some locations for police consultations and advice, there were several suggestions that this role could be extended further across the post office network.[212]

164. Citizens Advice and others suggested that post offices could host Citizens Advice Bureau kiosks, which could provide advice on issues ranging from energy efficiency to mobile phone mis-selling.[213] Citizens Advice's vision is that:

214

165. Consumers could also be served through post offices supplying internet terminals with access to a range of approved retailer sites, with the branch earning a commission when customers make purchases from a post office terminal:[215]

216

166. Internet terminals in various forms came up in several submissions to the inquiry. One County Council thought that, as in the 'Essex model', local authorities could rent space from the post office to host an internet hub for local government information and electronic payments.[217] In general, internet access or 'e-Terminals' were seen as a good fit with the post office network.[218]

167. The role of post offices as the 'lifeline' for the vulnerable and isolated could be formalised by providing more social service information.[219] For example, some submissions proposed a telephone 'befriending' service for vulnerable, isolated people in the community, providing local social service outreach.[220] Age Concern described what this programme might look like:

221

168. Another social service presently provided by some post offices on an informal, unpaid basis is prescription collection and delivery. The Committee received submissions supporting the formal provision of this service through the post office network, depending on the location.[222]

169. The Committee received several suggestions for post offices taking even more of a tourism role than they already informally fill. For example, post offices could provide tourist information and accommodation booking.[223] One submission suggested that post offices could partner with high street travel agencies to offer services complementary to Post Office Ltd's existing currency and insurance services.[224]

170. Some of the services proposed for the post office network could particularly help small businesses. For example, post offices could provide: free spaces for courses, meetings and events;[225] small meeting rooms for hire; 'hot desking', and skype and video conferencing facilities.[226] However, this suggestion depends on the post office premises in question having the space for such facilities.

171. Our witnesses suggested a wide range of community services which could be offered through post offices. The extent to which each is practicable depends on local circumstances. There may be scope for a rural post office to double as a tourist information office. There may be circumstances where it would be possible for a post office to be combined with business premises. There may be circumstances in which a prescription collection service could be offered on a commercial basis. We do not believe such things can be mandated; they depend on the drive of the individual who runs a particular post office, and indeed, on the community surrounding the post office. However, they demonstrate the potential strength and flexibility of a system where services are provided through a partnership between the central company (Post Office Ltd) and other partners. There is a role for Post Office Ltd in making these arrangements easier; for example, by helping with technology, arranging template agreements and articulating best practice.

70 Edward Bennett, The Post Office and its Story (London Seeley, 1912) Back

71 Ev 145 [NFSP] Back

72 Business, Enterprise and Regulatory Reform Committee, Tenth Report of Session 2007-08, Post Office finance: matters arising from evidence taken on 10 June 2008, HC 662 Back

73 The Future of the Universal Postal Service in the UK, Cm 7650, Feb 2009, p 17 Back

74 Ev 160 [North Yorkshire County Council]; Ev 175 [Postcomm]; Ev 87 [Association of Convenience Stores]; Ev 144 [National Federation of SubPostmasters]; Ev 132 [Intellect]; Ev 191 [Scottish Grocers Federation] Back

75 Ev 175 [Postcomm] Back

76 Ev 176 [Postcomm] Back

77 Business, Enterprise and Regulatory Reform Committee, Fifth Report of Session 2008-09, The Postal Services Bill, HC 172-II, Ev 51 Back

78 Ev 109 [CWU/Unite the Union] Back

79 Q 334 [Mr Cook] Back

80 Q 333 [Mr Cook] Back

81 NFSP, Six Steps to a Sustainable Post Office Network, 23 March 2009, p 9 Back