Examination of Witnesses (Question Numbers
220-239)
FEDERATION OF
SMALL BUSINESSES
31 MARCH 2009
Q220 Mr Bailey: That is an interesting
response. Sorry, did you wish to add to that?
Ms Diallo: Yes, just really to
emphasise that. It is not a lesser version of a bank that we are
asking for with the Post Bank proposal; it is a fully-fledged
retail bank that would indeed offer the business account side
of things and also give access to every other retail bank, because
one of the things that came through in the survey is a lot of
small businesses already use the post office for some of their
banking needs, but they felt that if they had full access then
that will be a great help to them. Particularly in many rural
communities of course the bank may be shut but there may still
be a post office, so if full retail banking services could be
provided that would be a great help.
Q221 Mr Bailey: I am slightly surprised
by the conviction of your response given the fact that only 38%
of your respondents thought that a Post Bank, which as far as
I can see is the only idea on the table for a full banking service,
should be provided. Why is there this discrepancy between the
level of your conviction on this and the support for it amongst
your members?
Mr Davenport: As we said earlier,
this survey was done six weeks ago and in the meantime we have
had our conference so there has been a lot of communication with
our members. We have had some quite vociferous comments about
it so what we are doing really is reflecting the very latest information.
Q222 Mr Bailey: So in effect that
38% would reflect to a certain extent a lack of comprehension
about what was being proposed?
Mr Davenport: I think so, yes.
I think from the time of the survey to the time of the conference
people have started to get their head much more around it, and
of course they are having problems as far as the banks are concerned
anyway and so they are looking for alternatives. That is why we
had the stronger comments that we had at conference.
Ms Diallo: Can I just make a bit
of a clarifying point there. The 38% refers to members who say,
"Yes, it is a great idea and, yes, we would bank with a Post
Bank," suggesting that they would leave the bank they are
currently with and go and bank with Post Bank. We feel that 38%
is quite a significant number because we did not expect our members
to so willingly say yes, they would bank with a Post Bank, as
it is just a proposal on the table. A lot of our other respondents,
which we have not made clear in our response here, said, "Yes,
it is a good idea if it is saves the post office network but I
am not sure I would go and bank with it." We are happy to
provide those figures for the Committee later.
Q223 Mr Bailey: Just exploring this
slightly because at moment I think it is fair to say that the
Post Bank is a vision rather than a model, would your members
be keen to participate in consultation about the services and
the development of a model, if you like?
Ms Diallo: I think the response
suggests that, yes.
Q224 Mr Bailey: Given the importance
of banking facilities to SMEs, and of course the very specific
needs of SMEs, it would seem that there is a natural need for
the two to get together.
Ms Diallo: Absolutely, and particularly
given the fact that small business at the moment find access to
credit extremely difficult with the banking system as it is. I
think an alternative that promises to be different and to offer
a different range of services is a welcome one.
Q225 Mr Bailey: I was going to ask
you about the existing banking facilities through the post office
network and whether those could be expanded to meet the needs
of your members. From what you said, it would appear that implicitly
you are saying no, or that they would not meet the range of needs
that your members would appreciate. Is that a fair comment?
Mr Davenport: Yes.
Ms Diallo: Yes.
Q226 Mr Bailey: The Post Bank proposal
also includes ideas about bonds, credit unions and community support.
Do you think your members would get interested and involved in
this?
Mr Davenport: I think they would
need to know exactly what the detail is. It needs to be done quickly
if it is going to be done at all but it needs to be evolved quickly
and consultation, not just in Westminster but nationwide, would
be the best way to do it.
Q227 Chairman: Before I hand on to
Lembit for the last few questions, can I test you a bit on this
Post Bank idea. I think there is an emerging consensus that Post
Office Ltd needs to increase the financial services that it offers
and that it is a good argument in its own right and it would help
the post office network. The Post Bank proposal, to which you
were partners, was launched a couple of weeks ago in the House
of Commons and is a very high-level document with very little
detail about what might be offered. The only detail that surprises
me that the Federation put its name to is the suggestion that
it would not be a profit-making bank at all. "We have a choice—free
banking or charges that are lower than those of commercial banks."
"It must signify a significant departure from profit-driven,
speculative banking practices ... " First of all, I do not
see how we would ever get through Europe and the state aid procedures
a state-run, subsidised bank that did not make a profit, but also
is that really a credible model for a bank?
Mr Davenport: We have got to look
at whether we are looking at a community or the individual as
far as small businesses are concerned. It is a difficult one to
answer, but what we are saying is that what small businesses require
is consistency, which they are not getting at the moment, and
they need to see that whatever borrowings that they do have remain
consistent throughout the service of the loan. Those are the sorts
of things that are causing businesses more trouble than anything
else at the moment, being objective about the way their overdraft
facilities and criteria are run. Two months ago you could do this,
this and this and now you cannot do this, this and this, it has
changed, because head office have said something different, and
so what was a viable company is no longer a viable company because
they have got no cash flow. As was said earlier by Brian, cash
flow and profitability are two completely different things and
cash flow can quite easily bring a company down. That is what
we are looking for; we are looking for consistency.
Q228 Chairman: A lot of that can
be addressed by getting existing banks and government funding
systems to deliver what they are already promising. There is a
whiff of idealism—and I love idealism, I think it is fantastic,
and we do not get enough of it in our society these days—in
this Post Bank proposal, is there not? It is a very fluffy, cuddly
bank and in practice we are not going to see this model implemented
as suggested. This is a negotiating position, is it not, for the
Coalition?
Mr Davenport: Effectively, yes.
Ms Diallo: Just to add to that,
it is a coalition of organisations that traditionally would not
be seen to be co-operating possibly around these ideas. The angle
that the Federation of Small Businesses is coming at this from
is essentially to save the post office network because we feel
with a Post Bank that would fundamentally strengthen the post
office network and bring in much needed revenue, so that is really
the main aspect for us. Then we did the survey and 38% of our
members said it is a great idea, we would bank with the Post Bank,
so that has made us re-think. You are very right in saying that
this is not a sorted-out deal of course, and with the Post Bank
Coalition at the moment we are in the process of taking advice
from financial experts, et cetera, to see how this could
be funded and how this bank could be put in place. It is not going
to happen overnight, we are very realistic about that, but we
think it is a good argument to bring to the table.
Q229 Chairman: There is a lot of
attractive stuff here, localism, local fund-raising, the involvement
of the credit unions, some very attractive ideas wrapped up in
it, but a tantalising lack of detail.
Ms Diallo: We take that on board.
Chairman: Thank very much. Lembit Opik?
Q230 Lembit Opik: I want to
talk about the details potentially contained in your Local Small
Business Hub. Who do you think should pay for those services?
Mr Davenport: I think initially
the Government needs to start it but, again, it is the way it
is structured. If it is structured correctly then it will function
properly and once the funding is sorted then it should stand on
its own two feet in a fairly short space of time and it should
be structured that way. There is no point in doing business hubs
on a non-profit making basis. There is no logic in that.
Q231 Lembit Opik: You are saying
basically you would want the Government to pump-prime it and that
it would be presumably profitable for the Post Office? Do you
see the Post Office making money out of that?
Mr Davenport: I do not think so,
no, not a great deal. What we do not want is excessive profits
from any of these proposals at the moment because business just
cannot afford it.
Q232 Lembit Opik: You would
say that, would you not?
Mr Davenport: Yes I would.
Q233 Lembit Opik: Because they
will say that there is an opportunity cost for us doing that extra
work.
Mr Davenport: But 100% of nothing
is still nothing if you overcharge and people do not use it.
Q234 Lembit Opik: I suppose
that is true. You would not have an objection though that once
it is set up there would be some sort of revenue return to the
Post Office?
Mr Davenport: Most businesses
realise that everybody has to have a profit to function. It is
just the level of that profit, and transparency would be a nice
one as well.
Q235 Lembit Opik: We tend to
agree with that one but that is for another time. Community policing
was one of the things that you said could be connected with a
post office. Who pays for that extra thing, once again government?
Mr Davenport: Community policing
is already functioning. The idea was that post offices are traditionally
in certain areas, and what we are looking at is should those areas
be where they are now or could the post office be in different
areas, could the post office not provide, as was said earlier,
different services, council services and things like that, instead
of having to go all the way into the local city centre or whatever
to get services. Even in Cardiff where I live if I wanted a council
service and I had to sign something I would have to go 10 miles
to do it.
Q236 Lembit Opik: We have been
talking about the prospect of having a Government Office concept
for post offices so that you can access all government services.
Is that the kind of thing?
Mr Davenport: That is the sort
of thing, yes, because that means from a business point of view
whatever facilities they require, whether it be government facilities
or whatever, they can go into that one central point. It could
be said that there is lots of funding, BERR do lots of business
funding, so why could that not go through that sort of a system.
Ms Diallo: It is also a matter
of increasing the footfall into the post offices because, as was
discussed in the previous session, there is often a small shop
attached to it and the more people you can bring into the post
office to use the various services that potentially could be offered
there, the better that would be for all basically, so that is
also the idea behind it.
Mr Davenport: We did see footfall
changes when post offices closed. We had some verbal comments
about the percentage of footfalls, but I would not like to say
them because they vary so widely and I think some were perceptions
rather than actual fact. However, it is quite substantial. You
can have one key business in the case of a post office close,
or it could be a different shop, and you can have a 30% reduction
in footfall. To give an example, in one of the arcades in Cardiff
one shop closed and the arcade dropped 30%. Because it is an arcade
and it is a tube, it is easy to measure the footfall and one shop
and a 30% reduction is substantial.
Q237 Lembit Opik : By contrast,
have you got any even circumstantial data about how much you think
business could improve if you had the kind of services that you
describe in your submission, perhaps because it has been done
in some part of the UK and we can make a comparator?
Ms Diallo: No, we have not.
Lembit Opik: That leads me to two
other questions. One is—and you probably cannot answer this
straightaway—do you have a picture of what minimum services
you think should be provided in a post office, a very clear, specific
list of things? If so, we would invite you to write to us.
Q238 Chairman: Not things that you
could add on to make it viable. What are the absolute minimum
that you as businesses need in a post office, not desirable extras
which the Committee may sympathise with you about, but core services
that are crucial to business?
Mr Davenport: We can certainly
get that back to you, no problem.
Q239 Lembit Opik: I think it
is better to do that in writing. It is the core proposition, not
the add-ons that you have got in this section but the core proposition.
Mr Davenport: You do not want
the fluffies.
Lembit Opik: We like the fluffies
too but what is the very minimum beneath which—
Mr Hoyle: Some more than others!
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