The
Committee consisted of the following
Members:
Chair:
Mr
James Gray
†
Brown,
Lyn (West Ham) (Lab)
†
Coffey,
Dr Thérèse (Suffolk Coastal)
(Con)
†
Davey,
Mr Edward (Parliamentary Under-Secretary of State for Business,
Innovation and Skills)
†
Gapes,
Mike (Ilford South)
(Lab/Co-op)
†
Griffith,
Nia (Llanelli) (Lab)
†
Gyimah,
Mr Sam (East Surrey)
(Con)
†
Hancock,
Matthew (West Suffolk)
(Con)
†
Jones,
Andrew (Harrogate and Knaresborough)
(Con)
†
Lammy,
Mr David (Tottenham)
(Lab)
†
McDonagh,
Siobhain (Mitcham and Morden)
(Lab)
†
Maynard,
Paul (Blackpool North and Cleveleys)
(Con)
†
Mowat,
David (Warrington South)
(Con)
†
Newmark,
Mr Brooks (Lord Commissioner of Her Majesty's
Treasury)
†
Pugh,
Dr John (Southport)
(LD)
†
Ruddock,
Joan (Lewisham, Deptford)
(Lab)
†
Sandys,
Laura (South Thanet)
(Con)
†
Sharma,
Mr Virendra (Ealing, Southall)
(Lab)
Simpson,
David (Upper Bann)
(DUP)
Annette Toft, Committee
Clerk
† attended the
Committee
First
Delegated Legislation
Committee
Monday
20 December
2010
[Mr
James Gray
in the
Chair]
Draft
Post Office Network Subsidy Scheme (Amendment) Order
2010
4.30
pm
The
Parliamentary Under-Secretary of State for Business, Innovation and
Skills (Mr Edward Davey):
I beg to
move,
That
the Committee has considered the draft Post Office Network Subsidy
Scheme (Amendment) Order
2010.
It
is a pleasure to serve under your chairmanship, Mr Gray, and
to debate—again—issues relating to our post office
network. A number of veterans of the Postal Services Public Bill
Committee, which deliberated for a few weeks, are present, including my
hon. Friend the Member for Braintree and the hon. Member for Llanelli.
We had some stimulating debates and I have a feeling that we might go
over some of the same ground
today.
The
Bill was published in October, and it was followed by our post office
policy statement, in which we made clear our strong commitment to a
sustainable post office network. Moreover, our announcement on
27 October of £1.34 billion of funding for the post
office network over the spending review period—subject, of
course, to state aid approval from the European Commission—was
indicative of the Government’s support of, and commitment to,
the post office network. The policy statement “Securing the Post
Office network in the digital age”, which was published on 9
November, sets out our plans and commitments in more detail. I will
expand on them later, because I think they are relevant, but first I
will address the substance of the
order.
The
previous Administration introduced the Post Office Network Subsidy
Scheme Order 2007 under provisions in section 103 of the Postal
Services Act 2000, which allow the Secretary of State to make an order
permitting payments to assist either the provision of public post
offices, or the provision of services to be provided from public post
offices. Under the terms of the subsidy scheme order, the Government
can provide funding to keep post offices open or to enable the
establishment of post offices in areas of the country in which, without
funding, it is unlikely that they would be
provided.
The
current scheme allows the Secretary of State to make payments of up to
£160 million in any 12-month period beginning on 1 April. We
want to provide more funding, so the order before the Committee will
increase the limit to £500 million. For the next four years, the
largest tranche of funding that we have committed in any one year is
£415 million. Increasing the cap on the level of
payments made under the subsidy scheme order to £500 million
allows for some flexibility and contingency—for example in case
of changes to the tax treatment of the funding.
This is a large
increase, but I am sure that every member of the Committee will agree
that the Post Office is a valuable national asset. It is much more than
simply a commercial entity, and it serves a distinct social purpose,
which is why the Postal Services Bill ensures that the Post Office will
not be for sale and that it will either remain under 100% Crown
ownership, or will have the potential be transferred to a relevant
mutual.
The
Chair:
Order. I wonder if I may be rude enough to
interrupt the Minister for a moment—not for his benefit, but for
that of the Committee. I wish to be strict about restricting
today’s debate to the statutory instrument before the Committee.
Wider policy matters in relation to the Royal Mail or the Post Office
will not be allowed to be
debated.
Mr
Davey:
Thank you, Mr Gray. That is a useful ruling, not
least because it means that my speech will inevitably be
truncated.
The
substance of the order is simple and I think that I have set it out in
relatively clear detail. It raises the previous subsidy scheme
order’s limit of £160 million to £500 million,
which is important so that we can ensure that the post office network
has the resources it
needs.
4.34
pm
Nia
Griffith (Llanelli) (Lab):
The order amends the 2007 order
to increase the maximum amount payable by the Secretary of State to
Post Office Ltd in a year from £160 million to £500
million. I understand that 48% of the funding package is to continue
the subsidy of the current network that was put in place by the
previous Labour Government. We set aside £150 million a year
until 2011, and £180 million for the financial year of 2011-12.
The subsidy was set up to maintain not simply the number of local post
offices required to meet the access criteria for post offices that
Labour introduced, but the current network of 11,900 post
offices.
Approximately
half the subsidy—some 48%—will continue to subsidise the
network from 2012 to 2015. We welcome that step because we know how
much having a local post office matters to many people in our
communities, particularly those who have limited mobility or transport
options. For many of our communities, the post office provides not just
vital services, as the Minister said, but a friendly face. We can all
name sub-postmasters and sub-postmistresses who take a personal
interest in the well-being of their customers.
Moving on from
the 48% for the network subsidy to maintain the current post office
network, it is not clear to me whether the other 52% of the money will
be used to make post offices more viable. That would surely be
desirable, and the document to which the Minister referred mentions
trying to decrease the amount of subsidy in the long term. What post
offices need, and what the taxpayer wants to see, is good value for
money. The purpose of investing in business is to create going
concerns—successful businesses that are viable. That is
particularly important if, as the Government seem to intend, the post
office network should become a viable going concern before any plans
are implemented to turn it into a mutual, as laid out in the Postal
Services Bill.
The network has to be viable, otherwise no one would want to invest in
the mutual.
What will the
remaining 52% of the money do to make post offices more viable?
Paragraph 41 of the recently published document “Securing the
Post Office network in the digital age”
states:
“Revenues
from postal services will remain a mainstay of the Post Office.
Proposed network changes, when allied with investments in technology
such as fast self-service machines, will make the Post Office more
convenient and an even stronger retail partner for the Royal
Mail.”
We
all want to hear that the Post Office would be a retail partner for
Royal Mail. However, in our discussions on the Postal Services Bill,
the Minister insisted that he would not be able to influence an
inter-business agreement between a privatised Royal Mail and the post
office network. Furthermore, he steadfastly refused to specify in
legislation a minimum number of access points for Royal Mail
services—that is, a minimum number of places where one can post
a parcel or send a letter by registered post. There is therefore
nothing to stop Royal Mail from choosing another retail outlet for its
counter services, thus depriving the post office network of a third of
its income.
The
Chair:
Order. I was rude enough to interrupt the Minister,
so perhaps I may be rude enough to interrupt the shadow Minister. We
must restrict our remarks to the topic of the statutory instrument,
namely the amount of subsidy allowable to the post office network.
Anything else is outside the scope of the
debate.
Nia
Griffith:
I am sorry, Mr Gray.
If paragraph
41 of “Securing the Post Office network in the digital
age” is about the post office becoming an even stronger retail
partner for Royal Mail, will the Minister clarify exactly what he means
in the document by “Proposed network changes”? Does that
mean that post offices will close? Will any of the subsidy be earmarked
for packages for sub-postmasters who finish, or employees who are made
redundant?
Returning to
the detail of the subsidy, will the Minister confirm that the
words
“allied with
investments in technology such as fast self-service
machines”
mean
that some of the remaining 52% of the subsidy will be used for such
machines? Would that be part of the 7% that is to be spent on
technology, or the 37% that is to be spent on modernisation?
If the
installation of equipment makes it more likely that Royal Mail will
wish to use the post office network as its outlet, that is all to the
good. Staff and customers alike will appreciate an upgrading of
premises with new counter and computer equipment, and that would be not
unlike the initial post office development schemes set up by the Welsh
Assembly Government. New counters may be welcome and may make a post
office a more pleasant place to work. They may also initially attract
new custom as word goes around the local community. However, by
themselves, the new counters do not create any new business streams.
More recently, the Welsh Assembly Government have changed emphasis. The
latest funding that post offices may apply for is the post office
diversification fund, and the emphasis is on creating new streams of
business, such as a cyber-café or photo
booth. Will the emphasis of the UK Government’s new investment be
on creating new business streams? What will the criteria be for
accessing the additional money? Will post offices have to demonstrate
that they are making themselves more viable?
The recent
document also mentions two areas with growth potential: the post office
acting as a front office for Government; and boosting financial service
revenues. Taking the first of those, will the Minister clarify what
extra services have been agreed between the Government and the post
office network? I am aware of the suggestions in the document, and I am
also aware of the letter sent by George Thomson of the National
Federation of SubPostmasters to the Secretary of State for Work and
Pensions detailing the extra services that the post office network
could provide. We see some of those details in paragraph 43 of the
document, but will the Minister confirm whether any of those
possibilities have been agreed? Will he give us an update on the
renewal of the contract for benefit cheques—the so-called green
giros—following newspaper reports that the contract might be
awarded to a rival? Will he also explain how this new funding might
make it more likely that post offices will secure additional Government
business? Is there anything for which the money is to be used that
would specifically facilitate the Government’s putting more
business streams through the post office
network?
On
the other area for potential growth identified by the document, what
will the subsidy contribute to the aim of boosting revenues from
financial services? The Government have abandoned Labour’s plans
for a people’s bank operated through the post office network,
and the document does not clarify how the Government intend to boost
revenues from financial
services.
Although
money is being put in, there is a missed opportunity for producing new
revenue streams for the Post Office. What progress has there been, for
example, on Post Office Ltd’s negotiations with Santander and
HSBC on their agreement to provide access to all their current accounts
through the post office
network?
I
understand that some of the money is to be used to create post office
locals. My concern is that they will offer only 86% of post office
services, and it would be annoying if precisely the service that a
customer wants is the one service that is missing. That could lead to
people bypassing a post office local and going to a larger post office
to avoid wasting time in the fear that the service they require will
not be available, thus driving away custom. My hon. Friend the Member
for Linlithgow and East Falkirk (Michael Connarty) cites the example of
Linlithgow bridge, where a local shopkeeper who had set up a post
office essentials counter—that scheme is similar to that for
post office locals—found that it was more trouble than it was
worth and decided to abandon it and use the space for other purposes.
Thus the community lost its post office and people now have to go to
the other end of town to access
services.
The
Department’s document states that the aim is to
transform
“the
underlying economics of the Post Office
network”.
Dr
John Pugh (Southport) (LD):
The hon. Lady makes a fair
point, but is she suggesting that the grant should be somehow
contingent on certain behaviours from sub-postmasters? In other words,
should they be
incentivised to do things that are regarded as business expansion and
the like? Is that the basic point that she is trying to make—she
seems to have said as
much?
Nia
Griffith:
My point is that a very large amount is being
put aside. Some of it is to maintain the post office network as it is
now, but the taxpayer will ask what the other part of the money is
being used for. What are the criteria under which it will be given
out?
Dr
Pugh:
What does the hon. Lady suggest would be the Labour
party’s preference? I am not saying that it would be wrong to
give the money with strings attached so that sub-postmasters or whoever
are encouraged to expand their business, rather than simply to accept
the subsidy and run their business as
usual.
Nia
Griffith:
The main point is that the taxpayer will be
wondering what the Government are doing to scrutinise the use of the
money and how the Government are asking Post Office Ltd to explain its
use of the money. Quite clearly, when taxpayers’ money is being
used for something, the Government have to direct clearly what they
want that money used for. There has to be accountability, and there has
to be an evaluation of how well that money is used and whether it
achieved the purposes for which it was set out. I feel at the moment
that those purposes are not very clearly defined and, therefore, it
will be difficult to evaluate the use of the
money.
Returning
to our questions about transforming the underlying economics of the
post office network, we want to know, as I have explained, the criteria
that will be used for the allocation of the additional funding. How
will it transform the underlying economics of the post office network
and make post offices more viable? Will the Government place any
restrictions on Post Office Ltd to regulate it and state exactly how it
will be expected to spend the subsidy? What independent scrutiny is
there to be of the Post Office’s plans to spend the subsidy and
the way in which it does spend the subsidy? Who will ensure value for
taxpayers’ money? How will the Government ensure that the Post
Office does not end up cross-subsidising the parts of its business that
compete with independent commercial operators? That is causing such
operators concern, and the practice would not be within EU competition
rules, so we would like the Minister to address that point.
To sum up, it
is important to put on record that we want to know exactly how the
subsidy will be used, how it will be evaluated and what it will do to
make post offices more viable. Our evaluation of the order will be
based on whether it increases the viability of the Post
Office.
4.46
pm
Mr
Davey:
I welcome the hon. Lady’s welcome for the
order, as she mentioned at the start of her remarks. It is good to know
that we have the Opposition’s support for the
legislation.
The
hon. Lady made a range of comments, starting with how the money will be
used, which was a theme she carried throughout her remarks. She noted
that
48% of the cash allocated over the spending review is for subsidy. As I
pointed out to her in previous debates, page 19 of our policy statement
sets out where the rest of the money will go: 37% will go to network
modernisation; 7% will go to technology; 5% will go to project costs;
and a small amount will go to a number of other items. Although we have
set that out, it is true that the full modernisation plan—with
details of implementation—is still being finalised, not least
because the structured programme of conversions to post office local
will not really start being rolled out in any dramatic way across the
country until 2014, as the document says. Although we like to be
far-sighted in the Department, planning everything in detail for 2014
in 2010 is not advisable. I can say, however, that the programme will
recognise that many sub-postmasters have invested significant sums of
money in their branches. If their contract changes in any way through
the implementation of post office local, there may well be need for
financial recompense.
When asking
about the post office local model, the hon. Lady said that only 86% of
products and services that are available at a main post office will be
available at a local. Although that is true, she did not point out to
the Committee that by volume of transactions, 97% of post office
transactions will be available at a post office local. It is only the
less well-used services that will not be available. That figure shows
that post office local will, I believe, be providing a lot of services.
All the market research shows that it is a very successful model in
terms of both customer and operator satisfaction and we will learn from
those pilots before we go to a major
roll-out.
The hon. Lady
asked about the extra services being provided by the Government, and
she referred to the document, which gives quite some detail on those.
She did not, however, really share that level of detail with the
Committee in relation to the generic services that Post Office Ltd will
be bidding for, such as ID verification projects, payment projects and
document processing projects.
Nia
Griffith:
No, I did not repeat the whole list of services
that the document mentions, but I did ask the Minister whether any
agreement has been met on those services, and whether any of them have
materialised as a bankable contract for the Post
Office.
Mr
Davey:
The hon. Lady will know, from the document and our
discussions, that we have announced a number of pilots—of
course, you have to pilot something before a Department will tender a
contract for it, and there are a number of opportunities
available. She is absolutely right—and I do not wish to shrink
from it in any way—that we have some way to go to ensure that
more Government services are being provided by the Post Office.
However, under the previous Government, we saw the number of Government
services on a very steep downward trajectory, which was what caused
many of the financial problems in the post office network. The
Government are trying to make that an upward trajectory, and I will not
apologise for the fact that it takes some time to pilot and contract
such services. Given the previous Government’s shocking record
in that area, I do not think that we have anything to apologise
for.
The
hon. Lady has mentioned financial services, and she knows that we are
looking at payment services, but she also knows that the Government
helped Post Office Ltd
to negotiate with RBS, so that its customers could use the post office
network to access their current bank accounts. That means that nearly
80% of current bank accounts can be accessed through the post office
network, which is a big step forward in terms of getting footfall
through the network and which is a very commercial approach. The hon.
Lady has asked for an update on negotiations with Santander and HSBC,
and I must tell her that it would be quite wrong for a Minister to give
a running commentary on commercial negotiations between private banks
and Post Office Ltd. All that I can say is that they are discussing the
issue.
Mike
Gapes (Ilford South) (Lab/Co-op):
The Minister has
referred to the record of the previous Government. To go back a bit
further, will he confirm that more post offices were closed before the
previous Government than were closed during the previous Government?
The fact is that that is an exorable trend that has been going on for a
long
time.
The
explanatory memorandum, which has been circulated with the order,
states:
“This
funding will ensure that the Post Office network will remain at its
current size of around 11,500
branches”.
For
the benefit of the House and the public, will the Minister place on the
record an absolute assurance that there will, at the end of the
Government’s time in office in 2015, be 11,500 post offices
still in
existence?
Mr
Davey:
The deal that we have struck with Post Office Ltd
runs for the next four years—the duration of the spending
review—and, in that deal, we have said that we need a post
office network of at least 11,500 post offices. I do not
need to put that on the record today, because I have already done so on
many occasions, which the hon. Member for Llanelli can attest
to.
The
hon. Gentleman is completely wrong about the number of post offices
that have closed. When we looked at this in detail, it appears that
between 1979 and 1997—a period that I do not normally
defend—
Siobhain
McDonagh (Mitcham and Morden) (Lab):
Well, you are
now.
Mr
Davey:
No; I am just giving the facts. I think that the
hon. Lady would like to deal with facts, and the fact is that fewer
post offices closed during 18 years of Conservative Government than
closed during 11 years of Labour Government. The hon. Member for Ilford
South is wrong on that
point.
Nia
Griffith:
Will the Minister acknowledge the anniversary of
the start of the internet in 1990 and the effect that that has
had on post office
closures?
Mr
Davey:
Of course, the hon. Lady is right to say that the
internet has had an impact on not only post offices, but Royal Mail
and, indeed, many other parts and facets of our lives. The question is
whether we have a Government who are prepared to grapple with that. She
quite rightly said that the internet was started in the early 1990s,
and I had to deal with that when I was a management consultant before
being elected. As part of that, I looked at the impact that the
internet would have on mail volumes, particularly in Sweden. Between
1997
and 2010, when her Government was in power and when the internet was in
full force, we did not see a strategy to deal with the internet. We now
have a strategy to deal with that challenge for both Royal Mail and the
post office
network.
The
hon. Lady has made some important points about how Parliament will be
kept informed of how the money will be spent and audited, which is a
fair question. I refer her to clause 11 of the Postal Services Bill,
which requires the Post Office to produce an annual network report
including details of everything from the number and location of post
offices to the services that they offer and their accessibility. I am
sure that she will remember that clause 11(4) permits the Secretary of
State to require the report to include other information. Reporting is
a statutory requirement, and those reports will be published alongside
Post Office Ltd’s financial statement. There will be a detailed
commentary on how post offices are progressing in implementing the
strategy that lies behind the £1.34 billion funding
package.
Dr
Thérèse Coffey (Suffolk Coastal) (Con):
I am
a little surprised that the trebling of the subsidy to one of our most
valued institutions has caused such controversy.
Wangford
currently has no outreach service. Will the order allow the Post Office
some discretion in how it supplies outreach services to people such as
the residents of Wangford, who have been deprived of their post office
service for 10 months
now?
Mr
Davey:
I confirm to my hon. Friend that Post Office Ltd
has complete discretion in how it organises the post office network,
save that it must meet any legal requirements in both the contract that
we have for the spending settlement—which contains the provision
for at least 11,500 post offices—and the access criteria, which
we have kept intact from the previous Government. It must also meet the
regulatory requirements for access points in the Bill, which are
effectively very similar to the existing regulatory regime. Within that
regulatory framework, Post Office Ltd has discretion, and therefore if
a community wants to see outreach services it has every right to lobby.
I am sure that with a very effective Member of Parliament we will be
lobbied to ensure that those services are there for the
public.
The
hon. Member for Llanelli has made a number of other points, including
whether the programme would place Post Office Ltd in a better position
to win more contracts from the Government. It will do so in a number of
ways. The investment in main post offices will make them more customer
friendly, and self-service technology will be introduced to reduce
queues. The post office local programme, as it rolls out following our
pilots, is geared to increasing the number of hours that local post
offices are open. The hon. Lady knows from our many debates that the
pilots in 52 outlets have shown that the opening hours increased by an
average of six hours a day. That is a real improvement for customers
and people who seek to contract with the Post Office have already
noticed that improvement, which will put it in a strong position.
Longer opening hours and shorter queues are the way to improve customer
service and get people into the post office. That is the commercial
approach that we are taking.
I have dealt
with most of the issues that the hon. Lady has raised, at least with
respect to the order. I am proud that the Government want to put more
money
into the post office network to ensure that we do not see closure
programmes such as we have seen in the past. The previous Government
put money in to fund the closures; this Government are putting money in
to avoid closures. That is a distinct difference. Although we have had
a little bit of partisan to-and-fro during the
debate, I hope that the Opposition will support the order: it would be
rather interesting if they did not. I commend the order to the
Committee.
Question
put and agreed
to.
4.48
pm
Committee
rose.