Memorandum submitted by the National Federation
of Sub-Postmasters
The National Federation of Sub-Postmasters (NFSP)
is delighted that the Business and Enterprise Committee is conducting
this inquiry, which provides us all with an excellent opportunity
to maximise the use of an exceptional national asset—the
post office network. We have reached a critical point at which
we can either work to enhance this essential piece of the nation's
critical infrastructure, providing the social and economic glue
that holds communities together, or sit back and watch its slow
and continued decline.
(1) What services should the Post Office
network offer from government
1.1 Post offices have traditionally provided
a wide range of government services. Currently this includes access
to state pensions and benefits and tax credits through the Post
Office card account (POCA) and the Exceptions Service (green giros);
driving licence applications and checking, fishing and game licence
applications; issuing of vehicle licensing; statutory off road
notification. Other government-related services include passport
application and checking and European Health Insurance Cards.
1.2 The post office network is the natural
outlet for government services in local communities across the
UK. Post offices have an unparalleled local reach, established
infrastructure, experienced staff and receive high levels of trust
from the public. Not only are government services extensively
used at post offices, but also they are highly effective. For
example, 77% of customers use post offices to access government
forms.1 Passport applications processed using the Post Office
"check and send" service see error rates of only 1%;
error rates are 15 times greater for applications returned directly
by post.2
1.3 The NFSP strongly believes not only
that the post office network should retain its current government
services, but that these should be extended so that the network
can provide a comprehensive range of government-related payment
transactions, information provision, and form access and checking.
It is essential that government departments and agencies offering
their services via post offices should clearly inform the public
that this is the case; some, such as DVLA, do not always do so.
The BBC TV licence contract should be re-instated to the Post
Office and new services should be added. For instance, if ID cards
and biometric identity processing are introduced nationally, these
should be available via post offices. Other types of service should
also be considered, such as the Irish government's recent plans
to oblige benefits claimants to sign on at post offices to help
prevent benefit fraud; housing Jobcentre Plus IT terminals within
post offices; Post Office Ltd (POL) taking over running the administration
of the Social Fund from the Department for Work and Pensions (DWP);
using POL to extend the government's role in overcoming fuel poverty
by providing access to utilities at affordable rates. The NFSP
holds that the Government must use the network far more effectively
and actively encourage departments to make their services available
through post offices, both to maximise citizens' access to government
information and services, and to increase post offices' footfall.
1.4 In addition to formal transactions,
post office customers often bring in government forms obtained
at post offices or received through the post and ask subpostmasters
to check them. Subpostmasters also frequently sign official documents,
such as passport applications, for their customers. These are
goodwill gestures and subpostmasters are not remunerated for offering
them. There is strong evidence that this informal assistance is
extensively drawn upon throughout the post office network—between
35% and 41% of customers do so.3
1.5 The NFSP believes this informal role
of subpostmasters should be enhanced and formalised into a face-to-face
service for direct access to government information and services.
This service should draw on the experience, and learn lessons
from the government's previously proposed Government General Practitioner
service of trained and IT-enabled staff acting as a guide to government,4 where
subpostmasters and their staff would provide information and advice
on central and local government issues and allow citizens to carry
out routine transactions with all government bodies. Research
on the very limited trial version of the proposal, suggests this
type of service is effective and popular. Ninety percent of users
reported satisfaction with the service and those in vulnerable
groups particularly said it made them more likely to want to find
out information on government services and would make it easier
for them to do so.5 A one-stop shop for government information,
offering a face-to-face service complementing the DirectGov website
would provide convenient access to government services right in
the heart of local communities, as well as a reinforcing a key
facet of the Post Office's offer.
from local authorities
1.6 Post offices are the ideal venue for
providing payment collection facilities for local authorities.
For local authorities this has the advantage of providing a direct
means to support all local post offices; it also frees up administration,
particularly regarding residents who need or wish to make very
frequent low value payments. Currently many local authorities
offer some payment facilities at post offices—this may include
rent payments, council tax, payment for social services provision,
meals on wheels, travel permits and passes, blue badges and leisure
centre passports (see Appendix for a list of suggested examples
of local authority services which could be channelled through
post offices). Local authorities use a range of mechanisms for
collecting these payments such as swipecards and stamps. The NFSP
would like to see the current arrangements extended across the
board to all local authorities and for all regular payments for
services. This should be co-ordinated centrally by an agency such
as the Local Government Association, rather than negotiated and
implemented on a piecemeal basis, as is currently the case. Central
co-ordination would enhance take-up among local authorities and
reduce time expended by councils each navigating their own arrangements
from scratch.
1.7 POL is currently trialling Validate,
a service designed the help prevent fraud and overpayments in
housing benefit. It works by mailing customers and requesting
them to produce evidence of any changes in their circumstances
at a local post office, details of which are then transmitted
to the local authority for reassessment of the benefit claim.
POL has also piloted a consultation service enabling councils
to use local post offices to conduct public consultations. The
NFSP welcomes these pilots and would like to see such services
extended throughout the UK. However, we note comments from POL
regarding the difficulties in reaching the right decision makers
within local authorities. Again, this seems to be evidence of
the necessity to centrally co-ordinate local authority services
available through post offices.
1.8 In addition to the more transactional
services, the NFSP would like to see all local authorities formalising
arrangements and remunerating post offices for their informal
role as a communications channel providing information and signposting
to residents and visitors on local services.
from other sources, including services in competition
with Royal Mail Group
1.9 The NFSP believes that banking should
be a major service provided by the post office network. Post offices
are perfectly placed to meet the need for local access to cash
and banking services, for individuals and small businesses. Even
after the post office closures under the recent Network Change
programme, the Post Office has unrivalled coverage across the
UK, with more branches than all banks and building societies combined.
The Post Office's coverage is particularly strong in deprived
urban and rural areas where many bank branches have closed. Currently
4% of villages have banks whilst 60% have post offices.6
1.10 The NFSP believes that Post Office
banking, over and above the POCA, should have two elements. Firstly,
a Post Office branded bank, or Postbank, should be created, building
on the POCA to provide a full range of basic, current and business
accounts. The Post Office is a trusted brand name, particularly
among marginalised and vulnerable members of society who view
the Post Office as both more trustworthy and more accessible than
the banks. It is not the NFSP's intention to determine the detailed
mechanics of how a Postbank should be operated at the Post Office,
but we believe that the government and POL should urgently look
at this proposal. The NFSP notes the growing calls for a state
bank from commentators ranging from John McFall MP, chair of the
Commons Treasury Committee, to Jim O'Neill, chief economist at
Goldman Sachs.7 We urge the government to give serious consideration
of the creation of a Postbank at the Post Office.
1.11 The second element of Post Office banking
needs to be post office access for all major high street bank
accounts. Comprehensive access to all current, basic and business
accounts over the post office counter would constitute an excellent
free community banking service. At present, although a number
of banks do offer banking services at post offices, significant
numbers of bank accounts still remain unavailable at post offices;
and many of the banks that do offer post office access severely
limit the range of transactions available. The universal availability
of these services would also make post office banking easier to
promote. Currently the banks do not advertise their post office
accessibility; and the restrictions on the number of accessible
accounts and the range of transactions make it a difficult message
for POL to promote. Germany provides a model for this, with Deutsche
Post offering full access to all bank accounts alongside its own
Postbank.
1.12 Post offices now offer a range of other
financial services including Post Office home and motor insurance,
savings products and credit cards. These services have proved
popular with many post office customers and the NFSP is delighted
at these achievements and believes these services should continue
to be offered. Similarly travel (insurance, money cards, bureau
de change) and telephony (Post Office phone service, broadband,
phone cards, mobile E top ups) have been well-received and should
continue to form part of the Post Office's services.
1.13 Bill payment facilities are, and should
continue to be, an important part of the Post Office's services,
enabling people to pay their bills in person by cash or cheque.
Over half of all household bills paid using cash and cheques are
handled at post offices.8 Bill payment services are particularly
well-used by people on lower incomes who are considerably less
likely to pay their bills by direct debit, and for budgeting reasons
this is likely to remain the case.
1.14 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. We support the new mail services being
introduced at the Post Office, such as e-fulfillment services.
In future, post offices may be used increasingly by Royal Mail
letters for the public to pick up packets and parcels; they tend
to have more convenient opening times and are better located that
Royal Mail Callers' Offices. A further possible new source of
mails income for the post office network may derive from the liberalisation
of the UK postal market. Postcomm 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.
However, to maintain the network's integrity, this should be agreed
on a network-wide basis, rather than by arrangements with individual
post offices.
1.15 Post offices already provide an extensive
and well used range of services for overseas travel; but are also
well-positioned to take up a new role as local travel centres.
Providing comprehensive information, timetables, tickets and passes
for local bus and train services would be particularly valuable
for the more vulnerable and digitally excluded members of society.
To what extent would these increase the network's
commercial viability? Is there a case for any service to be subsidised,
and if so, to what extent?
1.16 In considering the impact of any service
on the network's viability, a distinction needs to be drawn between
income accrued centrally to POL, and to post office outlets or
certain categories of post office outlet. For the network to be
viable, individual sub post offices must also be viable. In order
to be viable, individual sub post offices require a comprehensive
range of government, mails, banking and other services which attract
regular customer visits.
1.17 In 2007-08, government-related services
represented 26% of POL's revenue, a sharp decline from the 43%
in 2003-04. Whilst much of this loss is due to the change in the
way benefits are paid, the NFSP holds that the provision of government
services should play a greater part of the post office network's
offer. All government-related services provided by the Post Office
need to be paid for; and an increase in the range of specific
government services available at post offices should produce a
corresponding increase in revenue. It is also absolutely essential
that the rates at which POL and subpostmasters are paid for delivering
these services are realistic. Contracts that pay at rates below
the cost of providing the service will not deliver a long-term
future for the post office network. The NFSP is extremely concerned
about this issue, and notes for example, that the vital new POCA
contract pays POL at a rate significantly lower than the previous
contract.
1.18 A government shop front service, extending
the Post Office's current role, would need to provide revenue
directly to the individual post offices offering the service.
It is also likely to provide considerable indirect income through
increased post office visits. An evaluation of a previous trial
of this type of service concluded that the pilot may have increased
footfall in participating post offices by 9%, while subpostmasters
reported increases in Post Office business and private retail
sales as a result.9
1.19 Bill payment services constitute a
significant part of a sub post office's income—on average
5% of total post office income, and 9% in urban deprived areas.
10 An increase in bill payment services offered at post offices—local
authority, utility and others—will lead directly to increased
income for subpostmasters. It is also likely to lead to increased
footfall, as these transactions are regular transactions bringing
customers onto the premises on a frequent basis, and these customers
are likely to undertake other transactions or purchases in the
post office and/or its attached business whilst paying their bills.
1.20 Banking services have the potential
to bring in a considerable income to post offices, both through
direct payment for providing the service and also indirectly through
increased footfall. In the past banking has not brought in particularly
large sums for subpostmasters—around 1% of post office income
in 2006. 11 We believe this is largely due to inadequate publicity,
particularly from the banks themselves, and limited access to
high street banks. The NFSP believes that introducing a Postbank
and comprehensive well-publicised access to high street banks
could provide a good income for post offices. A public survey
in 2007 found that the main factor that would encourage people
to make more use of post offices was access to high street banks
(Postbank was not asked about). 12 The evidence from overseas
is that Post Office banks can provide significant income for national
Post Offices. For example 22.6% of La Poste Group's turnover in
2007 was generated by La Banque Postale; the launch of BancoPosta
led to a net profit for the first time in 50 years for Post
Italiane.
1.21 The range of Post Office financial
services has expanded considerably over recent years. Whilst these
may be bringing in a considerable proportion of POL's revenue
and are essential to the company's viability, the NFSP is concerned
that their impact on individual sub post offices should not be
overstated. Ipsos MORI research found that in 2006, subpostmasters
earned a very small proportion of their monthly income from Post
Office financial services. 13 Income on these products is increasing,
but it is still a very small part of sub post office income. Sales
of financial services largely directly benefits other parts of
the network; 60% of financial services product sales are made
by Crown post offices. 14
1.22 Mails income is absolutely critical
to the post office network; last year it brought in 35% of POL's
revenue. The network must continue to offer these services. New
services such as parcel and packet picking up and working with
eBay and mail order houses, are very well received by the public
and post offices are the natural and right home for such services.
1.23 Whilst providing access to all the
relevant postal operators' services—providing dropping off
and collection hubs for all mails companies—may become an
important function for the network, we caution about this bringing
the sub post office any additional income. With mails volumes
reducing significantly, new business from alternative operators
will be at the expense of losses of Royal Mail business.
(2) How much account should be taken
of
(a) costs to the taxpayer in providing
services through the Post Office rather than through cheaper channels;
and
2.1 The issue of cost is complex. Although
the move by the DWP to pay state pensions and benefits through
bank accounts has had most impact in reducing government work
through post offices; other government work has been re-channelled.
For instance, in June 2006 the BBC decided to discontinue
the provision of licensing services through post offices; the
DVLA encourages internet renewal of vehicle excise duty. Such
decisions have led to a reduction of income for the network and
another government department stepping in to provide financial
support to prevent the total collapse of the post office network.
Serious consideration should be given as to whether the use of
ostensibly cheaper channels has meant that the overall costs to
the taxpayer have actually been reduced, or whether the result
has simply been "taxpayers' money…going around in a
circle". 15 The same issue arises when contracts do not pay
at a high enough rates to cover POL's and subpostmasters' costs
of providing the service.
2.2 The provision of services through non-Post
Office channels which ultimately leads to the closure of post
offices is also likely to result in increased costs to taxpayers.
Post offices form part of our critical national infrastructure,
playing a unique social and economic role in providing services
and supporting retail in local communities. Post office closures
frequently results in inconvenience and increased transport costs
for many. The closure of local post offices will create a long-term
environmental cost through obliging individuals to undertake more
journeys by car, rather than walking to access vital services.
Research also shows that older people, people who are less mobile
and those who do not have their own transport often become dependent
on others following the closure of their local post office. 16
The erosion of the fabric of a community—to which the closure
of a post office may contribute—is likely to lead to the
need for more formal services for the most vulnerable residents.
In turn this may also lead to increased costs for taxpayers.
(b) consumer preference for alternative
channels
2.3 In geographical terms the post office
network is the UK's most accessible face-to-face channel for mails,
banking and government services. Seventy-nine percent of small
businesses say that a local banking facility is either important
or very important for their business. 17 Research also shows 79%
of small businesses use their local post office for sending parcels,
and 78% for purchasing stamps. 18 Face-to-face, locally accessible
channels are also extremely important for the most vulnerable
members of society. Government figures19 show that 35% of households
have no home internet connection, and it is predicted that the
proportion digitally excluded adults will be 31% in 2015, with
the highest proportions among older people and low income groups.
20 Society has a duty to these groups, and these duties should
not be overridden by consumer choice.
2.4 There is a balance to be found between
short-term, narrow cost savings in limiting the choice of channels;
and allowing genuine access to all sections of the community through
a range of channels, including post offices. Whilst offering services
only through digital channels may be welcomed by some sections
of the public, the unintended consequences and their wider financial
costs may not.
(3) To what extent would a desire for
the presence of a Post Office or Post Office services translate
into actual use of those services?
3.1 The NFSP holds that it is essential
the use of the post office network is maximised—it should
offer comprehensive access to government, banking and mails services.
More services available will mean more reasons to visit the post
office. Customers in the post office for one transaction or product
are also likely to make use of other services or buy other goods
whilst they are there. Banking transactions are particularly important,
as people frequently spend their cash where they access it.
3.2 Research confirms that the two factors
the public say are most likely to make an impact on their future
use of post office services are the ability to access the high
street banks (62% said this would increase their use of post office
services) and the availability of more goods and services (58%).21
(4) What are the impacts of the availability
of post office facilities for business and local residents; and
in particular how significant is the network in aiding social
nd financial inclusion;
4.1 The evidence for the social and economic
contributions made by post offices is overwhelming. Many studies
have highlighted the extremely valuable role played by the network
in supporting local communities over and above that of providing
mails, government, banking and financial services. This includes
assistance for vulnerable residents—informal advice, interpreting
official letters, fielding lost property, taking messages, offering
emotional support and providing a focal point for communities.
4.2 Post offices provide an important function
in supporting local retail. Around 75% of post offices also house
a shop or other business. In deprived urban and rural communities
post offices are frequently the only local place to take out cash.
Post offices provide services for local businesses, especially
through cash and deposit facilities, stamps and mailing. The Federation
of Small Businesses (FSB) found 20% of small businesses use the
post office every day and 47% use it more than once a week. 22
Eighty-two percent of small businesses told the FSB that the closure
of their local post office would have a significant impact on
their business. The main impact would be increased travel time,
which is damaging to small businesses because it takes time out
of the business day. This costs the business money, a particular
concern at a time when businesses are facing the greatest financial
pressures for decades.
4.3 Post offices play an essential part
in supporting local economies. A study by the New Economics Foundation
(NEF) emphasises the role of post offices as an anchor for local
economies. 23 Based on detailed analysis of Manchester post offices,
NEF concluded each post office contributes around £310,000 to
the local economy each year, of which £120,000 is direct
spending on local goods and services. In addition, NEF's analysis
reveals that each post office saves small businesses in their
direct vicinity in the region of £270,000 a year.
4.4 The All Party Small Shops Group has
reached similar conclusions and highlights the fact that at the
local level, small shops clustered together rely on each other
for survival. 24 Post offices are particularly key because of
their unique social value and the sheer diversity and range of
services provided which distinguishes them from other retailers.
4.5 For financially excluded groups post
offices provide trusted and local access to a wide range of banking
and financial services (including the POCA) as well as government
services and mail.
(5) What level of subsidy—if
any—per Post Office would be reasonable in the long term;
for example, should it be £20,000 or £200,000?
5.1 Between 2003 and 2011, the Government
has contributed £150 million a year in the form of the
Social Network Payment (now Network Subsidy Scheme); this annual
figure has not increased with inflation over the period. POL figures
show that only 4,000 post offices are profitable for them,
the government funding is paid to POL to support essential infrastructure,
but individual post offices are not directly remunerated. The
NFSP holds that this government funding needs to continue; and
POL should carefully look at targeting elements of this payment
at post offices that would otherwise close.
5.2 Research for the NFSP found that in
2006, 40% of subpostmasters made a loss and were unable to cover
their post office staff costs, overheads and personal drawings
from the net post office pay. 25 Such findings are a matter of
serious concern for the future of the network as a whole.
5.3 The recent Network Change programme
was designed to improve the financial position of the post office
network by cutting central costs and making individual post offices
more profitable. Individual post office profitability should increase
because of customers moving their business from closed post offices
to the remaining ones and also because a more planned approach
ought to mean the location and services of the remaining post
offices are more appropriate to the needs of local communities.
But the NFSP was always clear that closures alone would not deliver
viability to the network. The other part of the solution is to
increase income for the remaining offices—this must be by
bringing additional and improved services into the network and
ensuring that the payment for existing and new services to both
POL and subpostmasters themselves is sufficient. Contracts that
give work to POL and subpostmasters, but at cut-throat prices,
will leave the network needing additional government funding from
other sources or risk further widespread post office closures.
5.4 For the post office network to be viable
there has to be a stable, critical mass of post offices. It is
essential for subpostmasters to know their offices have futures,
both individually and as part of a wider thriving network; and
for POL's clients to know the number of post offices is stable.
Fears of an ever diminishing network are not likely to bring in
new business or renewed contracts if there are alternative networks
or methods of service delivery. The strength of the network lies
in its depth and reach; an ever reducing network would inevitably
undermine its future viability.
REFERENCES
1. Ipsos MORI, January 2007, Stakeholder Consultation.
Conducted for Postwatch
2. National Audit Office, October 2003, Difficult
Forms—How government agencies interact with citizens
3. Postcomm, 2001, Serving the Community I &
II—evidence of the community value of post offices
4. Performance and Innovation Unit, June 2000,
Counter Revolution—modernizing the post office network
5. MORI, 2002, Consumer Usage Survey (2)—the
Your Guide Research Programme. Conducted for POL
6. Treasury Committee, March 2005, Cash Machine
Charges
7. The Guardian 9/1/09, Evening Standard 15/12/08
8. Postcomm, November 2008, A Year of Transition—annual
report on the network of post offices 2007-08
9. Department of Trade and Industry, 2002, Evaluation
of the Pilot of the Your Guide Service of Post Offices as Government
General Practitioners
10. Ipsos MORI, March 2006, Subpostmaster Income
Wave 3. Conducted for NFSP
11. See 10
12. See 1
13. See 10
14. See 8
15. Trade and Industry Committee, October 2006,
Royal Mail Group
16. Postwatch, November 2002, The Impact of Post
Office Closures in the Rural Community
17. Federation of Small Businesses, 2006, Lifting
the Barriers to Growth in UK Small Businesses
18. Federation of Small Businesses, December
2006, Small Businesses and the UK Postal Market
19. Department for Communities and Local Government,
October 2008, Understanding Digital Exclusion
20. Demos, November 2007, Web I'm 64
21. See 1
22. See 18
23. New Economics Foundation, December 2006,
The Last Post
24. All Party Parliamentary Small Shops Group,
February 2006, High Street Britain: 2015
25. See 10
APPENDIX
Suggested examples of local authority payments
which councils could run through post offices:
— Council rents/mortgages.
— Social Service bills, including Home
Helps, Meals on Wheels, residential and day care homes.
— School lessons/extra school activities—eg
music tuition, gymnastics.
— Residents' parking permits.
— Bus tickets and passes.
In addition, councils could make use of local
post offices to allow citizens to access council information and
services:
— Display information, eg.
— Courses, meetings and events.
— Information on police and fire service.
January 2009
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