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).
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