Examination of Witnesses (Question Numbers
160-179)
NATIONAL FEDERATION
OF SUBPOSTMASTERS
31 MARCH 2009
Q160 Mr Oaten: So we have two core
services.
Mr Jones: I think I would break
it down into mails, banking, which would be your Post Office Card
Account and access to some of the partner banks.
Q161 Mr Hoyle: There are lots of
services.
Mr Jones: There are many, many
more than four. I think we tend to concentrate on the negative.
Most services are available at all post offices, that is a factual
statement. The things that are client driven—for instance,
you cannot get your car taxed in every post office.
Q162 Mr Oaten: I am just trying to
get a sense of what are the core things that you can absolutely
guarantee that every single post office has, and you could probably
give me a list.
Mr Jones: We certainly could.
Q163 Mr Oaten: That would be useful
to understand what the basic core is. Let us just look on to the
future and some of the recommendations you have in the six steps
for a sustainable post office. You talk and the report talks about
the great potential there is to take on quite a lot of services
provided by central government and local government, and in it
you talk about maybe being able to house JobcentrePlus terminals,
being able to run the administration of the Department of Work
and Pensions social fund. You even talk about, if they ever come
to light, being able to do ID cards and biometric passports. Are
these really realistic services that you could be able to provide?
Mr Thomson: Well, they are more
than realistic, because last week there was an announcement by
the DVLA and the Post Office that 750 of the largest offices will
actually do the ID cards for the DVLA, in terms of renewing them,
so the technology is about to go in place, so it is absolutely
realistic. I think there is a big issue here. Local authorities,
for example, and government, they have best value, and many local
authorities have pushed people towards direct debit for paying
their council tax and their rent or whatever. They have been doing
that for many, many years. The problem we have is that the physical
post office network should be treated equally to any other outlet,
any other way, for example, of internet or telephone or direct
debit. The local authorities should treat it as an equal choice,
and I think what concerns me is if you look at some of the tenders
that go about, it is the most economically advantageous tender,
the meat tender. I believe when it comes to local authorities
looking at putting work through the post office network, you should
be looking at the most economically advantageous price. The Post
Office will not always be the cheapest price, in particular when
you have PayPoint paying their agents next to nothing, it is very
difficult to compete with that kind of cost, but when the Government
and local authorities start looking at work in the future, and
I hope your Committee, you should be looking at what is the most
economically advantageous price which takes in the whole holistic
approach of if, for example, a post office closes and the old
woman has to go five or six miles to get her benefit, have you
taken that into account? Or if someone who can no longer buy their
groceries in the last shop in the village because the post office
has closed down, if that person loses their independence to actually
stay in the community, how much does that cost society? So when
the government and local authorities actually start looking at
the post office network in the future, price is important, of
course it is, but it should be the most economically advantageous
price.
Q164 Mr Oaten: Let us imagine all
that is true, and there is a big increase in the amount of services
which can be put into post offices. If that came true, would that
mean that you would not be talking about 8,000 post offices which
are not profitable, would it suddenly start to make them profitable
if you got these services?
Mr Jones: Profitable to whom,
is my immediate response to the question. Post Office Limited—
Q165 Mr Oaten: Well, to POL and then
to the sub-post office themselves. Let us deal with POL, would
it make it profitable to them?
Mr Thomson: It depends about income.
The post office network have always had large parts of the network
that have been unprofitable, but if the centre is generating enough
income, for example when we had £400 million a year from
DWP for the benefits, when the centre is profitable, it can afford
to keep all these offices open, and it does not need to talk about
losing money or not. When things become far harder, that is when
they actually work out, and they have had to do it for the social
network payment, that 8,000 offices are losing money. Now undoubtedly
if you bring more work into the network, the percentage of offices
losing money would drop, that is common sense. It would not disappear,
but if you can bring in volumes of work, it means many of these
offices that are loss-making would go into profit. Not all of
them, it could be 1,000, 2,000 or 3,000 more. So the key is for
the government to start putting work into the post office network.
We have had this for a long time. The post office network for
20 years from all political parties has been seen as a problem
that we have to solve, rather than a national asset that could
be utilised, and I said it last week, if you think about this
logically, when we had the situation with the banks in October,
the banks were within one or two days of going belly up, at least
for a period of some weeks. Twenty-two million people in the UK
received benefits and allowances either through the post office
or through automatic credit transfer, and there could have been
a period where the government would have had to have provided
every benefit recipient in the UK with their money through the
post office in a national emergency. Now that could have been
done, because we have 12,000 branches, and it could have been
done because we have a cash in transit mechanism. So it is not
just about goods and services, this is a national asset which
is part of the economic infrastructure of the UK.
Q166 Mr Oaten: So it could make a
difference but not such a big difference that it would turn all
of them around into profit; some of them would be turned into
profit?
Mr Thomson: Absolutely.
Q167 Mr Oaten: What is the impact
then for the individual sub-post office, and particularly how
should the funding be put in place for the subpostmasters, particularly
given the fact that to do some of these things, particularly if
you are getting into biometrics, a massive investment of technology
is needed and a massive investment of training and staff time
as well, so who is going to fund that, and is that going to end
up really making life harder for the subpostmasters, are they
going to see any profit out of this?
Mr Jones: I think the answer to
that question lies in the fact that only 750 post offices will
get the new photocard driving licence application process, and
that is out of a network of 12,000, so whether it is going to
be a first phase or whether that is it, we do not know, but of
those 750, it is not going to save the network, neither is the
Post Office Card Account.
Q168 Mr Oaten: You have not answered
my question. How is it going to actually affect the individual
subpostmasters and their profitability? Not necessarily just because
of that scheme, but generally if you had all the government schemes
that you have been talking about coming into the post offices,
do you think that will have a big impact on the subpostmasters?
How are they going to cope with that?
Mr Jones: The answer to the question
is it depends on the contract price. Anybody can get work, the
trick is to get profitable work that is going to feed through
to generate income from Post Office Limited and sub-postmasters,
and it would depend on what work it is, what the contract price
is, and what percentage of that contract price actually flows
down into the network, so there is no answer to your question,
but we do not want subsidy. Sub-postmasters do not want to be
seen as subsidy junkies.
Q169 Mr Oaten: But it would have
to be subsidised. To put all the technology in to do the things
in your wish list, you would have to have some level of subsidy.
Mr Jones: We need capital investment,
that is different from an ongoing subsidy. If we get the capital
investment that is going to—
Q170 Mr Oaten: Who is that coming
from, that capital investment?
Mr Jones: There are lots of different
ways to do it. Traditionally, what has happened is the equipment
is supplied by Post Office Limited, but actually, if there was
enough margin in the product, and sub-postmasters can see a return
for their investment, they are not stupid people, they would be
quite prepared in some cases to make that capital investment themselves,
provided there was a long-term contract and they can actually
see a return on that investment.
Q171 Chairman: We are going to have
one last big area of questioning, but just a couple of follow-ups
before we do that, Lindsay has some on banks, but on this question
of investment, some sub-post offices look very tired these days,
they obviously need a refresh; that investment comes typically
from the subpostmaster or from POL, or both?
Mr Jones: It comes typically from
the sub-postmaster. There have been a couple of schemes in recent
years where under the network change programme, a sub-postmaster,
if he was receiving work from a neighbouring office that closed,
he could apply for a grant to put in extra counter positions or
create disabled access or something like that, but the actual
physical responsibility for the environment in which the business
is conducted falls on the subpostmaster.
Q172 Chairman: And the lack of profitability
and the uncertainty combine to make that investment unattractive
to make, as a rational business proposition?
Mr Jones: Absolutely.
Q173 Chairman: Just one final question
before I hand over to Lindsay. You make great play in your document
about the need to return one particular service to POL, which
is the BBC television licence. The truth is, is it not, that POL
was ripping off the BBC for a long time, charging an extortionate
amount of money for the service. A bit of competition came in,
and PayPoint has a different model, I agree, in terms of the remuneration
package for subpostmasters, but also a leaner, meaner headquarter
staff, a very efficient organisation, good technology. It could
offer the service much more cheaply and therefore is not the BBC
a beneficiary of that cheaper revenue collection service? I mean,
has not competition brought benefits and do you really want to
isolate Post Office Limited and sub-post offices from competition?
Mr Thomson: We do not want to
isolate anyone from competition, but on the BBC in particular,
it was not just about price, Peter. The top executives of the
BBC will tell you that. Because the Post Office was such a trusted
brand, we were a roadblock to people paying their BBC licence
by direct debit, and from all the facts and figures I have had,
there has been a significant upsurge in direct debit for paying
the BBC, there is something like 2 million less people now paying
it on the High Street. I suppose we want people to have the choice,
but the Post Office did sharpen their pencil, maybe not to the
extent it should have, they probably would sharpen their pencil
more now, but there was another agenda by the BBC, and that was
to take people to the cheaper method, which was direct debit paying
your BBC TV licence. In fairness, if PayPoint had won the Post
Office Card Account contract, that would have happened again.
Q174 Chairman: But you do recognise,
do you not, that Post Office Limited has not been a good negotiator
over the years with the service providers it wants to get contracts
from? It has tended to say, "Here is your price, take it
or leave it", knowing it would get it, so there is no competition.
Mr Thomson: I think it is fair
to say for a long time in the bill payment market, apart from
paying through your bank account, we were the only game in town
and maybe people got a bit blase« regarding that and should
have sharpened their pencil a long time ago. I have no doubt that
if Alan Cook had taken over two or three months before he did,
the BBC contract may have been retained, because he recognises
that you have to give service and give a good price at the same
time.
Chairman: Thank you very much for that.
Banking, Lindsay.
Q175 Mr Hoyle: Can I take you on
to the banks and the financial services? Just before I do, you
just made one quick point, and you said it is about subpostmasters'
and mistresses' loyalty to the company. Do you feel that the same
loyalty comes back?
Mr Thomson: Well, sometimes we
feel neglected, absolutely, and we have always made the point
that it is better to try and win people over by carrot rather
than stick, and sometimes I find the business forgets that. You
are better to take people with you. But do subpostmasters feel
unloved and unwanted? They probably do. They are happier that
we have won the Post Office Card Account, and when people listen
to Lord Mandelson and Pat McFadden, they actually feel that for
the first time for a long time we could have a future. But again,
our job as a National Federation of Subpostmasters is to make
sure that these warm comforting words turn into concrete actions
on the ground.
Q176 Mr Hoyle: My word, you are the
only person that took comfort out of Pat McFadden. It took a lot
of arm twisting to get him to change his mind, I will tell you,
but there we are, at least he did. Just moving on to banking,
why have you not joined the Postbank coalition?
Mr Thomson: The Federation's policy
for the last two years is to create a Postbank, so much so that
when Alistair Darling was at the DTI, before he went to the Treasury,
at specific request from the Federation he had a team of civil
servants looking at the possibility of bringing NS&I back
into Post Office Limited. It was the Post Office Savings Bank
from 1861 until 1969, so it was part of the Post Office for 108
years. Now I believe the phraseology was it was too big an ask.
That was before the credit crunch. We feel that a Postbank, a
new creation of a bank without any toxic assets, taking banking
back into the communities, would be a tremendous thing for UK
plc. The Federation's policy on this is quite clear, we do not
want to just unblock the pipeline, we want to extend the pipeline
into 12,000 communities. The reason that we are not behind the
campaign, we support it and we are pushing it through our booklet,
is we do not think it is a silver bullet on its own. A Postbank
is a major pillar of the future of the Post Office, but it is
not a silver bullet on its own. It has a role to play, and the
Irish Republic have set up a Postbank last year, and myself and
Mervyn have been across twice, meeting the chief executive, Martin
Sweeney, so we do support the creation of a Postbank. Once we
get through this recession, I think it is important that the British
public rediscover a balancing act between consumption and savings,
because the country and individuals have been living way beyond
their means for a long time, and once we come out of this recession,
it is important that people start saving again. We believe that
postmasters could be the secret weapon to get the communities
to start saving again for the future.
Q177 Mr Hoyle: I totally agree with
you, I am with you all the way, because in fairness, the Post
Office Card Account is short-term. We all know that when people
retire, they do not want to turn up at the post office in general
to collect their money, so it is declining, it is ramping down
rather than ramping up, so the bank would actually ramp up the
services of post offices, and give real competition. My view is
simple: you should have a bank, you should have competition to
the High Street, there are no better people to run it than yourselves.
Now my view would be, and I notice you mention it, or it has been
mentioned, why do you not use, say, Northern Rock to create a
new Postbank because the one thing that Royal Mail has not got
is a banking licence and therefore in order to run a bank, you
have to have a banking licence, and there is a short-term measure;
the Government now owns Northern Rock, they need new customers,
no toxic debts, could this be the win/win that you need?
Mr Thomson: It certainly could
be. I think we could get the banking licence from Northern Rock.
However, I have to say, my preferred option for the post office
to become a bank, to bring stability to 12,000 post offices, to
take banking into local communities up and down the UK, is for
NS&I to be made part of Post Office Limited with a full new
range of products that takes banking back into communities and
that gives you stability and it helps the government as well.
That would be the preferred option that I would have. However,
I know it is probably the most difficult option, but if a government
was really forward thinking, really concerned about underpinning
banking in local communities, really concerned about keeping together
the fabric of these small towns and villages, then that would
be a tremendous policy for the government to carry out.
Q178 Mr Hoyle: And of course because
they have all the services they could put them in, all the infrastructure
is there, so much cheaper and it is about doing something instantly
rather than a long drag factor to try and re-invent the wheel
that is already there. Do you see the Postbank services being
made available in every post office, if it was to happen?
Mr Jones: That would be our preferred
option. If we have a network of 12,000 offices, let us use them
in every community in the country.
Q179 Mr Hoyle: Because what I do
not want to see is a two tier post office system. What I would
like to see is one tier where it is open to all and it is about
bringing banking in—if you take a constituency like mine,
where I have rural and urban, it is about bringing the opportunities
and choices there, so I am pleased we do say that. Just to play
devil's advocate a little bit, why do you need the banking system,
why can you not add to the functionality of the POCA, and why
would not that be a system that you could build on, rather than
having to bring the bank in?
Mr Thomson: What we need to do,
Lindsay, is two things. First and foremost, we need to create
a Postbank, but secondly, you are absolutely correct, the POCA
contract is a short-term contract which will run out in five years'
time, and if we create a Postbank, I would envisage that every
person who is left on the POCA towards the end of the fifth year
should be given a basic account in the British Postbank. That
touches all the right bridges. It is quite funny at this moment
in time, or not funny, I suppose it is the way things are happening,
with the recession being so deep, that there is quite an uptake
lately on people using the exception service, which was the old
green giro, the figures are starting to increase. Also for the
first time for a long time, there are actually more POCAs now
being opened than are being closed, and what that tells you is
that the recession is kicking in. In other words, if you have
been made bankrupt or you have lost your house or if you have
a lot of debt, you do not want your benefit going in a bank account
that can be taken away, so it looks like the POCA is heading towards
about 4 million a year again.
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