Memorandum submitted by the Commission
for Rural Communities
The Commission for Rural Communities (CRC) became
an independent body on 1 October 2006, following the enactment
of the Natural Environment and Rural Communities (NERC) Act.
The CRC provides independent advice to Government
and others and works to ensure that policies reflect the real
needs of people living and working in rural England with a particular
focus on tackling disadvantage.
The CRC has three key functions :
The CRC is responsible for hearing and capturing
the concerns and priorities of rural people and their representatives
and communicating these concerns publicly and to Government.
SUMMARY OF
CONSULTATION RESPONSE
Our response concentrates on issues of particular
concern and relevance to rural areas of England. The areas covered
in this memorandum are:
Financial inclusion
— the role of the Post Office in providing
a range of financial services for vulnerable people;
— the scope for the Post Office in providing
banking services; and
— the case for working in partnership with
credit unions.
The rural economy
— the importance of the Post Office to
rural businesses, home-workers and self-employed people; and
— relationship with the village retail
sector.
Local authority initiatives
— emerging good practice to retain post
offices and village shops; and
— increased use of the Post Office by Councils
for conducting their own business and acting as a community hub.
Outreach services
— need for an evaluation of the current
provision.
FINANCIAL INCLUSION
1. Research[21]
by the CRC into financial inclusion has found that limited financial
services in rural areas hit the most vulnerable people more. Access
to cash is a major problem for rural communities, where an estimated
300,000 people in rural England do not have a bank account.
Around 12% of banks and building societies are in rural areas
although 20% of people in England live in rural areas. Less than
10% of all cash points are sited in rural areas, with only 46%
of these being free to use (62% in urban areas). The limited financial
services in rural areas are made even more inaccessible by the
transport barriers that people face.
2. In a report by the CRC[22]
it was noted that Post Office Ltd had extended the range of financial
services that branches can provide and has therefore become an
increasingly important means of addressing financial exclusion
in rural areas.
3. We feel that there is scope for the local
post office to enhance its role as the financial hub for the community.
The Post Office already gives access to basic bank accounts (including
cash withdrawals and receiving payments) through arrangements
with a range of 17 UK banks and building societies. There
is therefore potential for the post office to expand its role
as a local bank by extending the availability of local credit.
This would help local residents and businesses alike, help to
stimulate the local economy and place the post office on a sounder
business footing and give it a greater sense of purpose.
4. Even after the recent Network Change,
the post office has an extensive geographical coverage approaching
12,000 offices in the UK, rather more than half of which
are in rural locations. This is roughly equivalent to the total
number of branches of all UK banks. Allowing post offices to act
more like banks would not only double the number of outlets but,
more importantly, provide banking services to communities presently
without such provision. At a time of turmoil for the banking sector,
expanding the role of a respected brand such as the post office
is an attractive proposition. This would help build on the welcome
decision by the Government to award a further contract to the
Post Office for the Post Office Card Account, until at least 2015,
which already provides for the payment in cash of pensions and
other benefits.
5. As an alternative, the Campaign for Community
Banking Services has advocated the use of a shared banking for
some smaller rural communities within post offices where there
is no other banking presence.[23]
This would provide a further means of addressing financial exclusion
in rural areas. In view of the relatively low level of sales at
such locations, there is unlikely to be much conflict of business
interest.
6. We also consider that there is a case
for post offices to become an outlet for local credit unions and
also building societies. Credit unions can provide low cost finance
and offer an alternative to mainstream financial institutions
whose rates of interest may be punitive for those on low incomes
and rural businesses. This is particularly significant in the
current economic downturn where there is a general reduction of
credit and tighter lending terms which is affecting all businesses.
However the geographic coverage of credit unions is uneven and
particularly in rural areas where financial sustainability is
a problem due to the lack of a critical mass of customers. A partnership
with post offices would create a wider accessibility to credit
unions and help many communities currently without access to low
cost banking. In rural areas, post offices are a particularly
important resource for certain disadvantaged groups who face difficulty
travelling, including older people, those without their own transport,
people on low incomes and people with a disability.
7. The CRC supports the Government's proposal
to contract local organisations, such as credit unions and community
development finance institutions, to offer credit alongside advice
and other financial services that will continue to be available
after individuals have left benefit and returned to work. We also
support the Government's proposal to establish a single credit
facility for social funds proposed in the recent Government consultation.[24]
However, this would need to have national coverage to ensure equitable
access for rural areas. The Social Fund Reform Feasibility study
pointed out that delivering the social fund through credit unions
would mean coverage in rural areas would be patchy and in some
areas non-existent. A partnership approach with the post office
would help to overcome these access problems.
8. The CRC is working closely with the Department
for Work and Pensions on matters of financial inclusion in rural
areas and we would be pleased to provide further information to
the Select Committee as this work develops, including the role
that the post office could play in addressing matters of financial
inclusion.
POST OFFICES
AND THE
RURAL ECONOMY
9. A characteristic of the rural economy
is the prevalence of micro and small businesses. A survey carried
out by The Federation of Small Businesses in October 2006, prior
to the recent Network Change, found that 20% of their respondents
used the post office daily and almost half more than once a week.
Research on behalf of Postcomm has also confirmed that access
to post offices is important for small business : they tend to
use their local branch more and already had to travel further
to an office, even before the recent round of closures.
10. In addition to small businesses, home-based
workers and self-employed people are more common in rural than
in urban areas : both are increasing at a faster rate in rural
locations. In rural England around 12% of the workforce work from
home and 17% are self-employed whilst the proportions for urban
districts are 8% and 11% respectively. These groups rely heavily
on local facilities, in particular village shops and post offices.
11. Given this background, the CRC has repeatedly
drawn attention to the important relationship between the post
office and village shop, notably where the two are co-located.
Withdrawal of the post office from a village will have a significant
impact on the remaining shop business. If customers are required
to travel elsewhere to reach a post office, the tendency will
be for them to carry out other shopping at the alternative location.
Prior to the Network Change our research showed that 78% of sub-postmasters
in rural England also ran an associated business, usually in the
form of a general store providing day-to-day requirements for
the community. Further, our research indicated that the majority
of sub-postmasters (80%) felt that without the post office, the
village shop would not provide a reasonable living and would also
close.
12. Figures from the Network Change programme
show that of the 1,010 rural post offices to be closed in
England, some 428 (42%) also housed the sole remaining retail
store (ie providing critical supplies such as bread, milk). From
our previous research, therefore, it is conceivable that as many
as 342 last remaining general stores could close as a direct
result of the post office closure. This will create added social
and economic pressures for those communities affected. In addition,
of these offices to be closed, 533 provided the sole access
to obtaining cash in the settlement which will add the financial
inclusion problems identified above. The CRC intends to carry
out further research on the effects of these closures on associated
businesses and we would hope to be in a position to furnish the
Committee with more information in due course.
LOCAL AUTHORITY
INITIATIVES
13. These damaging effects on local communities
have been recognised by a number of local authorities, many of
whom have been looking at the feasibility of retaining some of
these post offices and local shops. Such initiatives are very
welcome. One authority taking action is Devon County Council who,
working in partnership with others, such as the Rural Shops Alliance,
is launching a business advice scheme complemented by annual grants
(for up to three years) of £5,000 to help retain the
only convenience store in the community affected by a post office
closure. The intention is to retain the post office as a form
of partner outreach service and 15 village shops are being
supported under these proposals in order that post office services
continue to be provided and the shops remain viable.
14. A further element of assistance that
local authorities can provide is to use post offices for their
own business such as the payment of council tax, business rates
and general invoices. By bringing additional transactions to the
post office this will help to sustain the viability of the outlet
into the future and encourage people to use their local office
and village shop. Local authorities and their partners under the
Local Strategic Partnership, such as health, police and fire authorities,
may find other services that they could deliver through post offices.
15. Post offices can also act as a focal
point for community information and advice. This is a feature
of the model being created by Essex County Council for re-opening
some post offices in their area.
16. We are already monitoring these local
authority initiatives with the intention of making examples of
good practice more widely known. We feel there may be further
scope for the integration of the post office with other local
services to help sustain a more vibrant community—examples
might be the pub or farm shop.
OUTREACH SERVICES
17. The CRC has welcomed the development
of outreach services in rural areas as a means of providing a
basic level of post office service. Whilst it is recognised these
help to give a cost effective service, where a fully fledged office
cannot be sustained, we would add a note of caution about converting
more offices to outreach before the performance of the current
models have been assessed. The limited days and hours provided
by these alternative methods will not suit everyone, in particular
the business sector who require a more regular service.
18. We consider that the performance of
the current 500 or so outreach services, more than half of
which are in England, should be fully evaluated before this service
is extended further. The CRC is therefore keen to participate
in the monitoring and assessment of the current outreach service
and would be willing to work alongside the Post Office or others
to achieve this. Again we would be able to share the results of
this work with the Committee when available later in the year.
RECOMMENDATIONS
1. Encouragement should be given to the
Post Office to offer more banking services.
2. The Post Office should aim to work in
partnership with credit unions.
3. The role of the Post Office in assisting
local business should be more widely recognised, in particular
supporting the local retail sector.
4. Local authorities should be encouraged
to aid the sustainability of post offices through business advice
and grants.
5. Local authorities should aim to use post
offices as much as possible for conducting their own business
and as a focal point for community information. By working with
their local strategic partners, they could also offer an added
range of services.
6. The provision of current outreach services
should be evaluated before consideration is given to expanding
the service further.
January 2009
21 Financial inclusion: boosting rural communities,
Summary Report, 2008. Back
22
"Rural Disadvantage: reviewing the evidence", September
2006. Back
23
"Bank closure problems-one solution fits all", November
2007. Back
24
"The Social Fund: a new approach", DWP, 2008. Back
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