Postal Services in Scotland - Scottish Affairs Committee Contents

Examination of Witnesses (Question Numbers 1-44)

Adam Scorer, Richard Bates and Douglas White

8 December 2010

Q1   Chair: I want to thank Consumer Focus Scotland very much for coming along this afternoon. My name is Alan Reid; I am the Vice-Chair of the Committee. I am deputising for Ian Davidson who cannot be with us this afternoon. Maybe you want to start off by introducing yourselves and making a brief opening statement about our inquiry.

Adam Scorer: I am Adam Scorer, the Director of External Relations at Consumer Focus. I am sitting in for Douglas Sinclair, who is the Chair of Consumer Focus Scotland. He fought the snow but lost.

Chair: I think he's not alone in that aspect.

Richard Bates: I am Richard Bates. I lead the Community & Public Services Team at Consumer Focus.

Douglas White: I am Douglas White. I am a Senior Policy Advocate with Consumer Focus Scotland, covering postal issues. I also fought the snow this morning and at the moment am winning, but I still have to get back to Scotland. So we'll wait and see.

Q2   Chair: Hopefully, you'll be fortunate. I think the thaw is on Thursday, but, hopefully, you'll get home tonight all right. Maybe each of you wants to make a brief opening statement or perhaps one of you wants to speak on behalf of the other two.

Adam Scorer: I will just touch on a couple of things. A lot of the focus of the Bill has been around the issue of the privatisation of Royal Mail. At Consumer Focus we are reasonably neutral about that. We can see reasons why Royal Mail and a separate Post Office Ltd could be good news for consumers in a private or public world. The concern for us is that the passage of the provisions in the Bill and their implementation must start from the position of welfare gains, or at least welfare protection, for consumers. In that regard we see a number of areas where we think the Bill could be toughened up a bit and the legislation could be clearer, in particular about the transfer of regulatory powers from one regime to the other where we know the intention is to transfer over the thrust of the licence conditions, but we are a little anxious about the lack of a prescription. Notwithstanding the drive for less and lighter-touch regulation, we are a little anxious about the range of "mays" rather than "musts" in relation to the obligations on Ofcom, in particular in relation to some fundamental issues of consumer protection around complaint handling, redress arrangements and information provision to consumer organisations so that we are able to keep an eye on the performance of Royal Mail under the new arrangements. Both Richard and Douglas will be able to answer questions in greater detail on these.

We are also anxious that the Bill doesn't allow for any unforeseen consequences from the changes in the regulatory arrangements for rural, remote and urban-deprived communities. That's a particular focus of ours and of Consumer Focus Scotland. They may not be issues right on the face of the Bill, but we want to make sure that some changes do not have those consequences.

Indeed, the last thing relates, I suppose, to Consumer Focus as an organisation which itself will be transferring its functions during the process of two fundamental transformations of both Royal Mail and the review of the Universal Service Obligation that happens a time after Royal Assent, but also in a fundamental transformation of the Post Office network. That relates particularly to the requirement that Mail has to provide information to a new consumer organisation to allow it to exercise its vigilance and scrutiny of the way it discharges its responsibility as a USO provider.

Q3   Chair: What would you like to see added in to the Bill to strengthen the consumer in relation to the new private service?

Adam Scorer: I will pass over to Douglas and Richard. One of the key issues, though, has to be a little more prescription. One of the questions is not that they are absent from the Bill but it's just a lack of clarity about whether Ofcom will place USO providers under an obligation to have redress powers and provide information around complaint handling, but maybe I will hand over to Douglas first of all to pick that up.

Douglas White: The Bill recognises some key and very important components of the Universal Service Obligation: the need for collection and delivery of mail six days a week and the uniform tariff across the United Kingdom, which is clearly extremely important for consumers in Scotland. Therefore, we very much welcome the fact that the Bill recognises and places in legislation those very important points for consumers. We have some concerns, as Adam says. There are a number of issues around consumer protection where the Bill uses the term "Ofcom may undertake".

Q4   Chair: Can you give some examples?

Douglas White: Yes. The provision of information is a key one of those. The Bill at present suggests that Ofcom may require postal operators to provide information around the operation of that service. That obligation exists at present in Royal Mail's licence; it is required to do that. The Bill doesn't necessarily mean that that obligation will remain in place once it goes through. As it reads at present, it will be for Ofcom to determine whether that obligation should remain. We feel it should be strengthened so that the existing obligations are carried through and that that's on the face of the Bill to make sure that happens.

Q5   Chair: What are the existing obligations that you would want to retain?

Douglas White: There is a range of different obligations. We would be happy to write to the Committee with details of each of them, if that would be useful. The provision of information is one of them; there are others around mail integrity and consumer protection that are also important. One of the things the Bill doesn't do at the moment is to give Ofcom a requirement to impose a regulation upon postal operators to join a redress scheme; it only says that Ofcom "may" impose that condition upon postal operators. We think the Bill should say "must" on that very important point which is absolutely fundamental to consumer interests.

Adam Scorer: It is worth picking up that particular point. Our experience as a cross-economy consumer organisation with permissive opportunities for regulators to impose requirements on complaint-handling and redress in energy and financial services and other markets makes us strongly of the opinion that this is a fundamental prerequisite.

Q6   Chair: Are there other areas where the legislation says "must"?

Adam Scorer: The regulator says "may" rather than "must".

Q7   Chair: I am sorry. Are there other sectors where the legislation says the regulator must introduce, say, a complaints and redress handling system?

Adam Scorer: In the changes that happened in the energy market, it was certainly provided that not only did the big six energy companies have to be members of an Ombudsman Scheme and complaint-handling standards had to be established, but Ofgem in that case had a role in making sure that companies fulfilled those. The consequence of having those laid out in statute and then carried through in regulation is not only that the regulator has a greater obligation to have regard to standards; it also means the hard-wiring of the experience of consumers in receipt of a service into the way they understand the performance of the market in general. Our experience is that some regulators are not inclined to do that unless there is a certain amount of prescription.

Q8   Chair: Can you give an example of a sector where the legislation doesn't put that requirement on the regulator and you feel the system has let the consumers down?

Adam Scorer: Of course, the worry is that it might be postal services. I am not sure of other sectors; we can certainly get back to you with some concrete examples of that.

Chair: Thank you. Those are my questions. Lindsay?

Q9   Lindsay Roy: Thank you very much, and welcome to the meeting this afternoon. I am aware there have been a number of closures of post offices in Scotland. What has been the impact on these communities, and what have Post Office Ltd been doing to try to sustain post offices over the last few years?

Richard Bates: History teaches us one important thing in relation to the post office network: if it repeatedly sustains heavy losses there will be a threat of closures. From this point on we need to look forward at how we can make the current network viable so there is not another closure programme. I think the Post Office has some pretty impressive strengths on which it can build to grow into a viable business. You will be familiar with a number of these: it is a highly trusted brand; the size and distribution of the network means it can reach those communities that other retailers can't or choose not to; it's local in nature; it plays a vital role as a community hub; and it will continue to offer face-to-face services as other service providers switch to digital means and remote channels of access. But in order to build on those strengths it has to work really hard to understand those consumers that are reliant on the Post Office and the communities it serves to see what kind of services those communities need in the 21st century that we as the Post Office are well placed to offer. It can then start to work with Government and private sector providers who can put business through the Post Office to offer those services.

Our work has identified some key areas where it is well placed to develop new revenue streams. In financial services it is well placed to be a neighbourhood bank, ensuring access to core banking services, including those of other banks that don't have a presence in certain areas, but also offering its own services. One major piece of work we've done has identified its great potential to offer a customised account to low income consumers that meets their needs better than the Post Office card account or basic bank accounts. As I say, it is a highly trusted brand that low income consumers feel very comfortable using. A possible credit union tie-up is being seriously considered which we would very much welcome.

Beyond that, it is well placed to be the front office of Government at all tiers—whether that be central Government, devolved Government or local government—continuing to offer face-to-face transactions, interactions and an information point. It is very well placed to be able to bridge the digital divide. A number of Government and private sector businesses are taking their services online as the default channel. The Post Office will still be there to offer a face-to-face service and be able to process paper-based applications and the like, so it is very strongly placed to be a kind of digital bridge as we move increasingly into the online world.

Q10   Lindsay Roy: That is very comprehensive and helpful. I just wonder to what extent the population at large know of the range and quality of services that are available. What is being done in relation to marketing to ensure there is that pick-up by the population at large?

Richard Bates: I think you identify a key challenge for Post Office Ltd. For saying it's a business involved in communications, communication has not always been its strongest point. We have seen that in the roll-out of its Outreach services in rural areas. Some of the communities that Outreach services are serving are unaware there is an Outreach service there. There is also confusion about the services available through the Outreach model. So, clearly, it needs to up its game in terms of marketing its offer and making clear what those services are. There are also some challenges where Government may be able to assist it here. One is around banking services, which I touched on. The Post Office is very well placed to offer universal access to all bank accounts. At the minute there are two major banks—Santander, or a number of its brands, and HSBC—that refuse to make their current accounts available through the Post Office. That stops the Post Office having a simple universal message: "All accounts available here". So communication is a challenge; it can do more.

Q11   Lindsay Roy: There is work to be done there. To what extent have the joint ventures with companies like W H Smith been successful?

Richard Bates: From where we sit I think they have helped to preserve access to post office services in key areas. Frequently, the W H Smith partnership has been in areas where there was a Crown office before. If the choice is between losing the service completely and having W H Smith provide it, I think it is to be welcomed that they are playing a role in the post office network. As you will know, there is a range of multiple providers. The Co-op Group is one good example. They are key partners in providing post office services, so I do not have any immediate concerns there. We welcome their role in helping to sustain access to post office services. I don't know whether Douglas wants to come in.

Douglas White: I would just come in with a few general points that probably cut across a number of the issues you raised. Research that we carried out last year really underpins the extent to which the post office network is still a vital resource for consumers in Scotland, even in light of the challenges that we have discussed: previous closures and the issues that the network faces at the moment. Some of the figures from that show that over 80% of consumers say they visit a post office at least once a month. Particular demographic groups include older people, the disabled and those on lower incomes. A particularly interesting finding from our research was that three quarters of Post Office customers in Scotland normally use the post office nearest to where they live. I think that's a key selling point that the network carries; it's the convenience that it offers to consumers. Even with the reduced numbers from what it had previously, it still offers consumers, generally, a service in an area that is close to where they live. But, as Richard said and as you highlighted in your question, the network faces a number of challenges with regard to its future. The key now is to think about how we can address those to ensure there is a sustainable and viable network for consumers to use and benefit from as we move forward.

Richard Bates: Your question touches on quality of the service. If you look at this on a network-wide basis you will find that consumers often value the post office but they are often frustrated when they have to use it; and in some instances if they don't have to they won't. This is a key challenge for the Post Office to address as we move forward. If it is going to be a viable, thriving business, it has to offer the services consumers need and the quality of service they come to expect in this day and age.

Chair: We appreciate your coming and all that you are saying, but we have a fair number of questions we would like to ask, so can we plead for more concise answers?

Fiona O'Donnell: We are allowed only five minutes.

Lindsay Roy: There is something on which I want to come back.

Chair: We should have time at the end to come back. I think Fiona is next.

Q12   Fiona O'Donnell: I am particularly interested in access criteria, but I think what I will focus on with you guys is financial services. Do you think it's a mistake and we've missed a trick here that we are not now going to have the Post Office bank?

Richard Bates: I think that is an issue for Government rather than us. I know they have set out the reasons why they won't be moving forward on that basis, but there is still potential for the Post Office to be a good provider of financial services. Granting universal access to all high street bank and building society accounts is a positive thing. The credit union tie-up would also be an immensely positive thing for both parties, and there is a great opportunity that I have outlined for the Post Office to offer the kind of customised account that would meet the needs of low income consumers.

Q13   Fiona O'Donnell: Presumably, we know that banks still often decline to offer people a bank account. They don't make them aware of the fact that at least a bank account is available. I am constantly surprised and depressed by the number of people who do not have a bank account, especially those on lower incomes. Is there any hope in this Bill of increasing access, or is this something that needs to work itself out further down the line?

Richard Bates: There is nothing directly in the Bill about financial services at the Post Office, but if you look at the wider landscape of activity at the minute there is the new BIS policy statement on the future of the Post Office during this Spending Review period. That recognises financial services will be a core area for the Post Office. There is significant potential for the Post Office to grow in that area and build on its trusted brand, its local nature, the opportunity to be a neighbourhood banking centre and generate a viable revenue stream.

Adam Scorer: From the point of view of financial inclusion it is clear that it is not just a lack of trust and engagement with mainstream banking; it is also that the products available are almost designed to exclude people. These are neglected consumers who won't trust the institutions. Banks don't have products designed for them and consumers don't get a level of service or welcome in mainstream banking that they find useful. The research we have done shows that these consumers in particular trust and would like to see financial products available from the Post Office. If Post Office Ltd, when they are separated, are going to have a plan for growth and continuity, they have to argue for it. It is not on the face of the Bill but it is something they have to do.

Q14   Fiona O'Donnell: Do you think that if there are new services and people do things like signing on at post offices, that will make people less likely to access other services? Do you think there is a conflict there? If it is the place where you sign on, then it is not the place where you want to do your banking.

Richard Bates: That is not something we have assessed directly in our research but, as Adam is saying, there is clear potential there for the Post Office to meet the financial inclusion needs of low income consumers.

Q15   Fiona O'Donnell: The credit union option is something that interests me particularly. I do not have a credit union in my constituency, but you need the physical presence of post office branches. Do you think this Bill does enough in terms of access criteria? From what I can see, it talks about numbers but it does not enforce how close your nearest post office will be.

Richard Bates: The Post Office access criteria are currently set out in an agreement between Post Office Ltd and the Government.[1] There is nothing in the Bill that covers that. That agreement commits the Post Office to preserve the network at the current level, which is around 11,500 post offices, but if you look at the technical aspects of that agreement and the access criteria within them it is technically possible to meet those criteria with a smaller network of around 7,500 branches. What we would like to see in the Bill is the network of the current size protected by bolstering that agreement to say that the access criteria must be based on the current level—11,500—and with the current distribution touching all communities of the post office network, and then that being mirrored by a similar obligation on Royal Mail going forward; which would say that in the future, as you renegotiate agreements, you should continue to provide mail services and have a mail gateway at around 11,500 post office points. By doing that, I think you create the kind of level playing field between Post Office Ltd and its competitors for when the agreement with Royal Mail comes up for review to ensure it is in the strongest possible position to keep that mail business and the network going.

Q16   Fiona O'Donnell: I am very excited. I have a one-minute warning so I will press on with some questions about regulation. What kind of resources will Ofcom need? I know the resources I need to deal with complaints concerning Royal Mail. What kind of resources will Ofcom need? Is there any indication of how much Government are to invest to meet that need?

Douglas White: I think it is really important that the postal sector is properly resourced within Ofcom to make sure it is able to carry out the regulatory scrutiny that the sector requires, particularly as the sector undergoes the kind of fundamental changes we are speaking about and when there is any sort of provision to look at the scope of the Universal Service Obligation in the future and to review that. Obviously, that needs to be thoroughly resourced. That will require a great deal of work and consideration to tease out what it is that consumers need from the Universal Service Obligation to make sure that that continues to be provided. More broadly, I think the merger of Postcomm and Ofcom brings benefits for consumers in that it makes sure that the two markets—postal providers and communications providers—which were often in competition with each other, are regulated within the same organisation. I think that will help to create a coherent and joined-up regulatory framework which will be beneficial for consumers.

Q17   Cathy Jamieson: If I can pick up the relationship between Royal Mail and the Post Office, I was interested in the written evidence that Consumer Focus Scotland submitted. It highlights some of the issues around the potential dangers for post offices in rural areas if their ability to cross-subsidise from the more profitable urban branches is lost. I wonder whether you can say a bit more about that.

Richard Bates: Yes. I touched on it a minute ago. The relationship is currently enshrined in the inter-business agreement. This is a contract Royal Mail has with the Post Office for the latter to provide access to mail services. That is worth around £343 million a year, which is about a third of Post Office revenue. Government has committed to refreshing the Bill ahead of the separation, but our fear is that, as the two businesses separate as a result of the Bill going through Parliament at the minute, once that expires, there is a risk that Royal Mail may look to competitors to provide its services in certain locations, possibly cherry-picking the urban populated centres where competitors are concentrated. The big risk here is that if the Post Office starts to lose that business and the vital revenue stream it will not be able to cross-subsidise in the way it does currently. Those profitable urban post office branches will not be generating the revenue that currently helps to sustain those branches in rural and urban deprived areas, which are the kinds of communities that have greatest reliance on the Post Office. Unless there is some clarity and certainty about the future of the inter-business agreement, it will be those communities that are at greatest risk.

Q18   Cathy Jamieson: Just so that we have got it absolutely on the record for people who may want to pore over the Committee notes at some later stage, is your view that a new inter-business agreement is required? Should that be similar to what is in place, or do you think that could be improved?

Richard Bates: There is a commitment from Government—Royal Mail has backed this—that, when the Bill finishes its passage and it is enacted, the current agreement will be refreshed for as long as legally possible. I would urge you as scrutineers of the Government to establish some clarity on that.

Q19   Cathy Jamieson: To press you on it, do you know what that means?

Richard Bates: We would welcome some clarity on how long "legally possible" is.

Q20   Cathy Jamieson: I do not know what that would mean.

Richard Bates: That is our first concern. Let's see how long that is and what opportunity it gives the Post Office to diversify into other areas and grow revenue streams in other areas that leave it less vulnerable to losing that, but that also helps it to be better prepared to compete for that contract. Our second concern is that if, when it comes up for renewal, it loses some or all of that contract there is a potential risk of some pretty grave consequences in terms of closures in those areas most reliant on the Post Office.

Q21   Simon Reevell: Could I just try to understand a little more about your organisation? I know from the written evidence you have provided that you describe yourself as the statutory consumer watchdog for postal and Post Office services. Do you have a role beyond that which wasn't referred to because it wasn't irrelevant, or is that the full extent of your remit?

Adam Scorer: No. Consumer Focus has a cross-economy role. We have particular obligations under the Consumers, Estate Agents and Redress Act in relation to the energy market and postal services and post offices. As a result of a merger with Postwatch, Energywatch and the old National, Scottish and Welsh Consumer Councils, we are able to act across any area of the economy where we see sufficient evidence of consumer detriment and a need for the representation of the consumer interest. Therefore, we work across financial services and issues across other areas of the converging communications economy and conduct investigations into discrete parts of markets.

Q22   Simon Reevell: Is there a discrete part of your organisation that deals with issues emanating from or involving the Post Office?

Adam Scorer: It cuts across a number of teams that look at issues around post offices in particular and Royal Mail. In particular we have a team based in Glasgow called the Extra Help Unit which looks after particular sorts of complaints from energy and postal consumers. We have a team in Northern Ireland that address only postal issues there, and there are colleagues across the different organisations who do it. It is spread. We have a particular income stream that comes from Royal Mail to look at issues around post and postal services. We fulfil that and spend that money in wise ways across the organisation.

Q23   Simon Reevell: No doubt they are the wisest of ways. How much is it?

Adam Scorer: I am trying to remember what it is. I think it is around £3 million. We will certainly come back with the specific detail of how the income stream breaks down, but we are obliged to spend that purely on issues relating to postal services and post offices.

Q24   Simon Reevell: How many people are involved in the work funded by that amount of money?

Adam Scorer: I am afraid that, on the precise detail, that is another thing on which I would have to get back to you.

Q25   Simon Reevell: I am just trying to get an idea of the size of your organisation; that's all.

Adam Scorer: I am trying to think. There are three issues. First, we would spend the money in relation to researching the experience of consumers across the postal and post office market. We have a number of people whose primary focus is on the postal service and post offices. That could number around 10 to 15 people. I don't want to be too precise about that. Of course, there is a contribution from that money to the running costs of the organisation as well, but we can give you a breakdown.

Q26   Simon Reevell: There is a core team of whatever size that deals with issues relating to the Post Office?

Adam Scorer: Yes.

Q27   Simon Reevell: So, when there is a post office matter, such as a new Bill, there is a pool of expertise on which you can draw from within your organisation?

Adam Scorer: Yes; and when there are issues around business—usually, closures or a closure programme—we have resources that we would apply to that.

Q28   Simon Reevell: You said that the people in place who deal with post office issues do that primarily, but I assume that is the majority of the work they undertake. I am trying to understand the depth of the resource you have.

Adam Scorer: The people who work on our postal and post office services are concerned primarily with that, so it could be that even all their time is focused on those areas. Therefore, we have a dedicated, funded, ring-fenced group of people whose job is to ensure that the interests of consumers are properly represented in postal and post office matters.

Q29   Simon Reevell: Does that group of people look at things nationally or within Scotland, for example? Obviously, we are considering Scotland today. You mentioned a specific organisation or branch in Northern Ireland.

Adam Scorer: Yes; and Douglas does a lot of our work in Scotland. We have a national team because post is not a devolved issue; it is a retained issue. It is a national market and the agreements are national. We have a team that looks at the way the market operates, but we also have colleagues in Wales and Scotland and a team in Northern Ireland to make sure we have a particular focus on the characteristics and priorities for the markets in Scotland, Wales and Northern Ireland.

Q30   Simon Reevell: Presumably, the research you refer to when talking to us is specific to Scotland.

Adam Scorer: It would be a combination of the research that is done specifically in Scotland. Maybe Douglas can touch on that.

Douglas White: The research I mentioned in my evidence earlier was specific to Scotland. That was a survey of 1,000 consumers across Scotland. We would be happy to provide a copy of that report to the Committee if that would be helpful.[2]

Simon Reevell: Thank you very much; that is very helpful.

Chair: Thank you. Are there any Members who have not been in yet?

Q31   David Mowat: Thank you very much. Just picking up what Simon said, does any of the evidence you sent us in written form and also your comments today apply specifically to Scotland, or does it apply generally to the UK but more so in Scotland because of the rural aspect?

Adam Scorer: I think that is largely the case, but maybe Douglas can pick that up.

Douglas White: I think that the issues consumers in Scotland face across a range of postal issues are very similar to those experienced by consumers in other parts of the UK, but it is how they play out. As you say, the rural dimension is a particularly important one. For example, mail is a particularly critical service in rural areas where people would have to travel longer distances to access face-to-face services, and where broadband services are often poorer than they are in other parts of the country.

Q32   David Mowat: I understand that. I understand that the rural element applies a lot in Scotland. Other than that, your comments would apply to other parts of the UK in terms of where you are in Consumer Focus.

Adam Scorer: Yes.

Q33   David Mowat: In his evidence, Richard talked about the 11,500 post offices right now. I think you said that the access criteria implied that it could be done with 7,500 and that could be an issue in the future, because if those are the access criteria and it could be met with 7,500 it would mean the closure of 4,000. I am interested in why you think 11,500 is the right number.

Richard Bates: The starting point is that this is where we are now. In all the work we do with communities across the UK, nobody is telling us, "We're not using our post office; we don't want it any more and we'll volunteer to give it up." As a crude starting point, communities want post offices; they want a viable post office network that is relevant in the 21st century and offers the kind of services they need. If you look at it, the consequences of reducing the network by up to 4,000 is that inevitably in certain communities—possibly it will be the rural and urban deprived ones with the greatest reliance on the Post Office—they will be pushed further away from those services that they currently access through the Post Office. That is something we would want to avoid and that is why in all the evidence we are giving we absolutely support the various pathways to make the Post Office a viable and thriving business with 11,500 branches.

Q34   David Mowat: I understand that and I am interested to hear you say that. You have been set up as a statutory body on behalf of consumers. It seems to me there are two sorts of consumers you could represent: one is the users of the post offices. Richard just made the case for them in terms of subsidised use. I suppose the other is the consumers who are doing the subsidising, many of whom also may be from deprived areas—inner cities or whatever—and therefore pay the subsidy through a higher postal charge than would otherwise be the case. I am just interested that the whole thrust appears to be on one lot of consumers and not the other, or have I misunderstood that?

Adam Scorer: No. I think our thrust is to recognise that there are some issues in the postal and post office market that affect everybody a little bit and some issues that affect some people a lot, and we try to get the balance right. In relation to the Bill, one of our anxieties—it is often the case either through regulatory interventions or legislation in markets—is that the group of consumers who through unintended consequences lose out tend to be those with the least amount of market power, because especially a privatised Royal Mail will look to see how it can drive and grow its business and provide the greatest value to people who are most lucrative to it. It is often the case that certain groups of consumers miss out, even though they are the ones for whom we have put in the protections. We are concerned with the operation of an effective and value-driven Royal Mail and Post Office service that provides value for everybody who accesses that and enables income streams to get to Mail, but we also have a particular concern that it is the same group of consumers who tend to lose out across a range of markets.

Richard Bates: It is also worth pointing out that the subsidy is from Government; it is not from Mail customers. The money it receives from Royal Mail is in return for the counter access and mail services it offers. The money that comes from Government is for the Post Office to provide universal access to services of social and general economic interest, whether that be mail services, access to pensions and benefits or public service interactions and transactions. In an ideal world I would like to see a Post Office network that did not require any subsidy and did so well that it returned a dividend to the Exchequer. For a commercial entity that also serves a vital social purpose, we are unlikely to see that. I suspect there will always be a need for some subsidy, but the key challenge is: if we can make it a thriving, viable business, that call on subsidy will be as minimal as possible.

Chair: Thank you. I am afraid we need to move on.

Q35   Dr Whiteford: Thank you very much. First, may I apologise for being here so late this afternoon? I had some trouble getting here from the far-flung northern reaches of the land. When I read the written evidence you submitted, I was struck by the way you highlighted the whole issue of access to and cost of broadband in rural areas. That is certainly something I am glad you drew attention to. I want to ask you about the Outreach services. I am aware of Outreach schemes that run in my own constituency and I welcome that innovation. However, I have to say that the feedback from that has been some way short of wholly positive. Some of the consistent concerns that people have raised with me are with mobile services and problems with phone reception—people being in black holes for basic reception for the equipment. The other thing is that, if you are going to have a mobile service, queuing in temperatures like this throughout the winter and well into the spring is a really unpleasant experience and also people are glad to have some service. When they are standing in rain, wind, snow and what have you, they think it is a lot less than they had before. Another point that has been raised with me by more than one community is the unreliability of the equipment and computer problems that dog the system.

I am throwing those points out there. Perhaps I am hearing this because I represent people who experience this at the coal face. That is not a reason not to innovate, but it flags up some of the inherent weaknesses of having mobile services as opposed to going down the road of some of the more experimental Post Office Local models that try to put businesses alongside each other. I don't know whether you have any further thoughts on that.

Richard Bates: The first thing I would say is that we have done a significant piece of research on Outreach services. We are also picking up on the ground intelligence through our network monitoring. What it tells us is that the Post Office deserves some credit. It got 500 of these Outreach services up and running in rather difficult circumstances during the last closure programme. As communities have adapted to the Outreach model, satisfaction has grown. In most communities around two thirds of people are happy to use an Outreach service at the minute, but you are right in your concerns; it is far from perfect. Our research shows that around 21% of people are dissatisfied with the service. Again, there are key issues around communication. As I said earlier, there is lack of awareness that the service exists in some communities and confusion about the services actually being offered. You are absolutely right to flag up some very serious concerns around reliability and contingency arrangements. Again, if for whatever reason the service is unable to operate, Post Office Ltd needs to communicate that to those who are reliant on it and put alternative arrangements in place. If there is a day or week when the Post Office Outreach service is unable to operate, you can imagine scenarios where that starts to cause significant detriment, especially to vulnerable groups and the older people in our communities who need to collect their pension or benefits payment. They then ask, "Can I pay my bills or not?" if they are unable to collect it because the Outreach is failing, or, "Do I pay £20 for a taxi to the nearest post office to collect my pension?" There is a range of scenarios where detriment could arise.

It is key from this stage forward with the Outreach model that the Post Office designs out some of those problems. It is also key that it goes back to the communities where the Outreach models operate and starts to engage with both consumers who use the service and the operators to see whether the service is properly meeting the needs of this area. Is the model of Outreach you have the best one? I note what you say about problems with the mobile service. In those instances, could a hosted service, maybe in a village hall or another community facility, work better for that particular community? If you have a particular instance in mind I will be happy to take it up with you outside the Committee.

Chair: Thank you. Is there anybody else who has not been in?

Q36   Mike Freer: You might have to write in on this. You mentioned that 1,000 people had been surveyed. Could you provide details of the geographic and socio-economic spread? I would also be interested to see whether you have done any micro-analysis of individual local markets—I assume that 1,000 people across Scotland could be far-flung—to see if there is a variance between the Highlands and the outer reaches of the major conurbations. Your evidence is somewhat reliant on the views of those 1,000 users. What about the non-users? What research have you done as to why they have stopped using the Post Office and what they would need to re-use it?

Douglas White: I can deal with each of those points fairly briefly. As to the first one, I cannot give the data off the top of my head, but, yes, I can certainly provide that.[3] Secondly, in terms of breakdown at different levels that was done by six different classifications used by the Scottish Government to define areas that range from urban to remote rural. There is some analysis in the report and the data about that which you might find interesting. Thirdly, in terms of non-users and the way that survey took place, the first question asked was, "When did you last use the post office?" Anyone who had used one within the last year was then taken through the rest of the survey. I believe very, very few people said no to that question and therefore were screened out. The other point I make is that that was only one piece of research conducted by Consumer Focus Scotland. The pieces of work Richard has been speaking about in relation to financial services, Outreach and so on have been broader work across the UK. The piece of work I referred to is only one. There are other pieces of research the organisation has done that captures a broad range of views.

Q37   Mike Freer: Is that available publicly?

Douglas White: Our report—yes. I will make sure we send that to the Committee with the classifications as well.

Q38   Chair: Thank you. I just want to follow up one or two things you raised earlier. You said earlier that you would want to keep the current 11,000 post offices and the current distribution. I certainly would and I'm sure most of us would. But how do you write that into legislation? Surely, you can't write into the Bill that no post office must ever close. How do you get into the Bill that you are keeping the present numbers and distribution?

Richard Bates: You are the expert legislators and I defer to you on the best way to achieve it. I think it is key to find a way to codify the agreement that currently exists, specifying that number and distribution across all the communities in the UK.

Q39   Chair: The current Government guidelines, as we have already heard, on access criteria could be achieved with 7,000. We have 11,000 because the Government have agreed that number. How do you write that into legislation?

Richard Bates: We were talking of bolstering the criteria so they reflect the current distribution and numbers. We would look to find a way to have that reflected in the legislation. One thing I would add is that we do not advocate that that be there for eternity. We recognise that consumer behaviours change and it could possibly end up being a millstone for either the Post Office or Royal Mail in some respects. So, alongside it, we would like to put a review process where those criteria can be reviewed from time to time in a way that receives the full scrutiny of Parliament.

Q40   Chair: Thank you. Time is short and I know Lindsay wants to come back in. I have another question. What sort of feedback have you had from consumers in Scotland about parcel deliveries?

Douglas White: We published a paper last year on parcel delivery issues in Scotland. I suppose we picked up four main issues of concern to consumers. The first is the issue around actually being able to have a parcel delivered to you in a cost-effective and timely way. Consumers living in rural areas in particular often find that a surcharge is applied to a parcel that is delivered to them, or they face a longer delivery time, or even that simply a parcel will not be delivered to their particular postcode. Obviously, those are issues of concern. Secondly, there is an issue around clarity for consumers who purchase things online and want them to be posted to them. That clarity concerns the stage in the transaction when you find out that a surcharge or longer delivery time may be applied. That is important because it may impact on your desire to carry out that transaction. Clarity is also to do with whether your particular postcode area will be affected by a surcharge or one of the other issues. Some websites use fairly vague phrases such as "northern Scotland", which is very unclear to consumers. How do they know whether or not that applies to them?

Q41   Chair: And often they say that Campbeltown is in northern Scotland.

Douglas White: Yes. You see different websites that define it in so many different ways; and there are other vague terms such as "some Scottish islands" and things like that. The third issue is probably around choice. When you buy an item online and want it sent to you, very rarely do you have the option to have it delivered within a certain time scale for a certain cost and posted to you at a certain place so that you can pick it up, compared with two or three other options. Clearly, to give consumers that choice is important. Because time is short, I have one final point on that. The fourth issue is around fulfilment and getting hold of the parcel once it has been posted to you. Often people have to travel. If they are not in when it is delivered they have to travel to a depot, which is time-consuming and costly for them. Obviously, that is also an issue of concern to consumers. Therefore, there are four broad points.

Chair: Thank you very much. I know Lindsay has a follow-up question.

Q42   Lindsay Roy: There is another issue of access. I understand that throughout the UK there are 70 offices, some of them former Crown post offices, which are either downstairs or upstairs in another facility. In my own constituency that has caused a real problem in terms of access and lifts. People feel claustrophobic and have to go through the footprint of a big store to get to a post office upstairs. From their point of view it is much less satisfactory than the previous provision. I just wonder how much you were aware of that and the issue around that in terms of health and safety.

Richard Bates: Our predecessor body Postwatch was certainly very aware of that because it was a key issue that came out of some of the changes during the last closure programme, particularly as Crown branches moved to W H Smith, as we touched on earlier. I can look back at some of the issues raised then and the steps taken to address them, and get in touch with you, and then pick up any current concerns you may have.

Chair: Thank you. Perhaps we can have a brief question from David and a brief answer.

Q43   David Mowat: On the 11,500 figure, you said that that was the current position. If it was 12,500, would your position be that that is the number we should have?

Richard Bates: I start from the basis that we have 11,500. Consumers want a viable, thriving post office network. They do not want to see further closures. If success gets to the point where the Post Office is expanding again and there are 1,000 more post offices, I think we would all welcome that.

Q44   David Mowat: But, specifically, if we had 12,500, not 11,500 as now, your view would be that we should keep that because that would be the starting point?

Richard Bates: Clearly, if there are 1,000 that no one is using and communities have no need for them, I would not be here defending dormant post offices.

Chair: I am afraid time is up. We very much appreciate your coming and your answers. I know you promised to send in some information. Could I ask you to send it in as soon as possible, please, because this inquiry has a short deadline? We want to complete it before the Bill comes back for its remaining stages on the Floor of the House. Thank you all very much.

1   Note by witness: The basis of the access criteria is stronger that the agreement referred to in Q15. The criteria reflect requirements that were mandated by Government in the DTI's paper, 'The Post Office Network: Responses to the Public Consultation' (May 2007).


2   Ev 99 Back

3   Ev 99 Back

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