4 A Sustainable Post Office Network?
The Network in Scotland
57. The NFSP highlighted the key role of the Post
Office in rural, remote and urban deprived communities in Scotland.
First, they noted the important social role of the Post Office,
in offering regular and reliable contact with every household,
including with vulnerable people. The NFSB suggested that Post
Offices are used most by the more vulnerable members of society,
for example, 63% of people over 65, and 63% of disabled people
in Scotland, visit a Post Office once a week or more often. People
on low incomes are also frequent users54% in socioeconomic
group 'DE' visit a Post Office at least once a week, as do 61%
of those with incomes of less than £15,000 a year.
58. Furthermore, CFS noted that broadband penetration
in Scotland is less well developed than elsewhere in the UK, and
consequently there is a greater reliance on mail services.[100]
Government figures show that 35% of all households have no internet
connection, and it is predicted that the proportion of digitally
excluded adults in the UK will be 31% in 2015, with the highest
proportions among older people and low income groups.[101]
59. In rural and remote communities, Post Offices
play a significant role in providing face-to-face interface with
government. Again, this function is particularly valued by the
more vulnerable members of society. For instance Age Concern (now
Age UK) described a sense that the Post Office is the "local
representative and link to wider civic society".[102]
Research finds 54% of UK households use a Post Office for picking
up forms or leaflets, 50% for paying car tax, 27% to apply for
a passport, driving licence, European Health Insurance Card or
fishing licence.[103]
60. Post Offices are also key providers of access
to cash and banking. In the UK £86 billion of cash passes
through the Post Office every year. For every £1 transacted
in the UK, 14p is handled through the Post Office network. Royal
Mail Holdings, Report and Accounts Year Ended 29/3/09 UK,
shows that Post Offices make £24 billion of benefits payments
every year, and in Scotland 32% of consumers used the post office
in the last year to pay bills. A rural survey revealed 43% of
older people use Post Offices to access cash.[104]
61. Post Offices are important providers of local
shopping facilities. Eight in ten post offices are run alongside
a shop. These shops are often the only shop in the areaan
estimated 57% of rural SubPostmasters provide the only retail
outlet in their village.[105]
These shops are very much co-located with the Post Office part
of the business; research by the NFSP found that, in Scotland,
two thirds of attached businesses would be unlikely to remain
open if the Post Office part of the business closed.[106]
62. Finally, Post Offices are also sources of informal
advice and support, in a "trusted local environment".[107]
Postcomm estimate that two thirds of rural SubPostmasters "keep
an eye on" more vulnerable residents.[108]
Post Offices have been described by Help the Aged (now part of
Age UK) as "crucial outreach points" helping older people
to go on managing their own affairs.[109]
63. The NFSB indicated that research carried out
for the regulator Postcomm in 2009 calculated that Post Offices
therefore have a 'social value' of up to £10 billion, and
concluded that the network "provides a major social net benefit
to the UK population".[110]
They argued that the social role of Post Offices displaces some
of the cost to government as a "key institution in
the local community encouraging social interaction, [it] can help
reduce social care and health care costs, enabling people to live
independently for longer".[111]
ACCESS CRITERIA
64. In its report, Securing the Post Office Network
in the Digital Age, the coalition Government has set out its
criteria for access to the Post Office network as follows:
·
99% of the UK population will be within three miles of their nearest
Post Office outlet;
· 90% of the
population to be within one mile of their nearest Post Office
outlet;
· 99% of the
total population in deprived urban areas across the UK will be
within one mile of their nearest Post Office outlet;
· 95% of the
total urban population across the UK to be within one mile of
their nearest Post Office outlet;
· 95% of the
total rural population across the UK to be within three miles
of their nearest Post Office outlet; and,
· 95% of the
population of every postcode district to be within six miles of
their nearest Post Office outlet.[112]
65. The current access criteria could be met by 7,500
Post Offices, but the Government has made a commitment to preserve
the network of 11,500 Post Offices.[113]
There is significant scope for closures in the current network,
while still allowing the Government to meet the access criteria.
This could lead to many closures in Scotland. Mr Davey told us
that the access criteria ensure the geographical dispersion of
the network, "so that communities, including remote, rural
communities in Scotland, have to have Post Offices that meet those
access criteria". He explained, "we want 11,500 [Post
Offices] and we have given them [Post Office Limited] the money,
but they need to make sure that the Post Offices are geographically
dispersed, to meet the access criteria".[114]
66. However, when asked if he could guarantee that
there will be no further closures of Post Offices, Mr Edward Davey,
the Minister for Postal Affairs told the Postal Services Public
Bill Committee:
We have made it clear that there will be no repeat
of the closure programmes [...] I think you will believe it is
reasonable for me to say, because every other Postal Affairs Minister
before me will have had to say, that I cannot guarantee that a
Post Office in any particular village or town will not close at
any time. That is for this reason97% of sub-post offices
are privately owned, and people may die, retire, move away or
a range of things may happen that we cannot control, which is
important to recognise. However, we have made a legal agreement
with Post Office Limited and provided the funds so that,
over the next four years, there will be 11,500 post offices in
the United Kingdom, which is a pretty big step forward compared
with what we have been used to in recent years.[115]
Mr Davey repeated to us that the policy of the coalition
Government is "no closure programme for [the] Post Office".
While he described this as a "very strong policy", he
said that the Government cannot "prevent an individual Post
Office from closing or a postmaster from trying to sell. It is
impossible to do that".[116]
67. The National Federation of SubPostmasters (NFSP)
warned, however, that we should "be conscious of the financial
risk to many existing branches". They said that there was
no guarantee in the Postal Services Bill to keep the network at
its current size or that there will be any duty to sustain the
network in the future. It is likely therefore that Post Office
closures will continue as SubPostmasters leave and are not replaced.[117]
68. We welcome
the Government's 'access criteria' which guarantee the geographic
dispersal of the Post Office network, which are crucial in maintaining
the network across the whole of Scotland. However, we are concerned
that the Bill neither makes provision for the number of Post Offices
nor sets out access criteria. This is of particular concern given
that the Government could meet its current access criteria with
a network of 7,500, but has stated that it is committed to preserving
a network of 11,500 branches. We recommend that the Government
give assurances to this effect during the passage of the Bill.
69. The distinction
between a closure programme and a readiness to let unviable post
offices cease to trade may be a genuine difference of policy but
it may result in similar or worse effects. After all, the closure
programmes were undertaken with the declared intention of supporting
the viability of the remaining offices. If the policy is instead
to let offices close in an unstructured way, it is not necessarily
any sort of improvement, nor does it offer much hope of sustaining
the post office network in Scotland. A policy of "no closure
programme" is only a cause for optimism if it is backed by
a policy of support for the remaining network.
OUTREACH SERVICES
70. As part of the most recent closure programme,
102 Post Office branches in rural and remote parts of Scotland
were closed and replaced with Outreach Post Offices. Outreach
services are primarily designed for rural areas, where the importance
of a Post Office was clear, but where low transaction levels led
Post Office Limited to conclude that a full time conventional
Post Office was not sustainable. Out of a total of 1,446 Post
Offices in Scotland, 140 (10%) are now provided by Outreach servicesa
particularly high proportion reflecting Scotland's large rural
area. The NFSP explained that these services are run by a visiting
SubPostmaster, typically on a part-time basis, in premises such
as village shops and community halls, or using specially adapted
mobile vans. The 140 includes 39 mobile services and 71 'hosted
services'. 19 of these are 'partner services', where a local business
runs a Post Office from their premises, under the supervision
of a nearby Post Office, and 11 are home delivery services, where
a SubPostmaster offers a limited service to registered customers,
delivering to their door.[118]
71. Research shows that customer satisfaction with
Outreach services is "generally positive" and that "consumers
have adapted well to the new arrangements".[119]
CFS further reported that the public is "broadly satisfied"
with Outreach formats, although 33% of outreach users say they
use Post Offices less since their traditional Post Office closed.
72. The main reported drawback of Outreach services
is the restricted hours and days of opening. A reduction from
five and a half days a week with the former Post Office, to three
part days per week at the 'Outreach' is typical. Mr Graham Neal
wrote: "We were promised a mobile unit which would replace
the Post Office which would have all the facilities including
waiting space for a number of customers. In reality, we have a
small LDV van for a very limited number of hours and with no waiting
space which affords any privacy for customer's transactions. Waiting
outside the van for service in winter in north east Scotland is
no joke".[120]
73. CFS claimed that the Post Office has failed to
promote Outreaches effectively: one third of consumers were unaware
that an Outreach Post Office actually operated in their village.
They also noted that improvements to the reliability and robustness
of Outreach services were "urgently required". They
registered "increasing concern" that the long-term viability
of many Outreach services might be compromised unless Post Office
Limited supports its Outreach locations and commits to building
their viability.[121]
74. The Minister made clear, that in relation to
mobile services, "our policy is not about massively expanding
this service [...] it's the last resort".[122]
He said: "our strategy isn't built on turning the Post Office
Network into one big Outreach Service".[123]
While he acknowledged that a van stopping at five locations in
one day could be counted as five different "access points,"
he denied this was a way of enabling Government to "somehow
meet our access criteria by the back door".[124]
75. We note
the high number of Outreach services in Scotland. While this is
better than no service at all, it is not a long term solution.
We are deeply concerned about the reliability and quality of the
service currently being provided by Outreach services. Long waiting
times, unreliable arrival times and failures in the technology
severely compromise the value of such a service. Significant improvements
are required to make Outreach services sufficiently robust in
order to provide a reliable and satisfactory service. We recommend
that the Government impress upon the Post Office Limited and on
the regulator the need to ensure that such improvements are delivered
as a matter of urgency.
76. We are also
concerned about reports that the drop in the number of services
provided by Outreach services lead to a drop in the number of
Post Office customers, as consumers are forced to take their
business elsewhere, for example, to a bank or travel agent. We
fear that this will become a vicious circle, whereby the reduction
in the Post Office's footfall further threatens the financial
viability of the service. This could lead to further Post Office
closures, thereby increasing the need for Outreach services. If
this cycle continues, the short term solution provided by Outreach
services could, in the longer term, lead to a downgrading of the
network and the level of service provision across Scotland.
POST OFFICE LOCAL
77. In the last two years, Post Office Limited has
been conducting pilot trials of a new type of service, 'Post Office
Local', where Post Office businesses reinvest their surpluses
in the organisation or community.[125]
There are now over 50 pilots across the UK and 8 in Scotland.
The Royal Mail Group explained that model reduces the cost of
operating a Post Office, because it enables the "integration
of both space and staff resource in store, between the Post Office
and retail business".[126]
Extended opening hours are a key element of the Post Office Local
model. Where Post Office Local has replaced a standard sub Post
Office in the pilots, the opening times have, on average, increased
by 45 hours per week.[127]
78. Paula Vennells, Managing Director, Post Office
Limited, explained the advantages of Post Office Local "is
that it enables them to offer Post Office services for longer".
She illustrated that her local Budgens:
currently has two Post Office counters [...] behind
the fortress glass, so it is a typical sub-post office. The local
shop is open from 6.30 in the morning until 10.00 at night and
the Post Office is open from 9 until 5.30. In the two shoulder
periods, there are no post office services available to the customers
and no possibility for the sub-postmaster to earn off the back
of that. If they convert to a Post Office Essentials, we dismantle
those one or two Post Office counters [...] They put the Post
Office Essentials offer on their main counter. That is then open
from 6.30 till 10.00 in the evening. The big saving for the Sub-Postmaster
in that is on staff. Previously, they were employing two additional
members of staff to work on the dedicated Post Office counters,
who could not work in any other part of the shop because they
are frozen off by the fortress glass.[128]
79. The coalition Government has suggested that the
new model will play a critical role in securing the long term
future of the network. In a letter to the Committee, the Department
for Business, Innovation & Skills wrote:
The Post Office Local model is designed with the
consumer in mind and is able to offer longer opening hours and
quicker service. The Government believe that this model is particularly
appropriate for many smaller sub-post offices across suburban
and rural Britain. Initial findings from the pilot locations
show that, on average, post office services provided through a
'Local' branch have been available for more than six hours extra
per day than previously. However, this does not mean a significant
reduction in services offered: 86% of Post Office services are
available through Post Office Local, including all core products
such as posting letters and parcels, paying bills and collecting
pensions and pre-ordered travel money.[129]
80. However, the NSFP expressed concerns over the
coalition Government's plans to "transform 2,000 sub-post
offices into 'essentials' or 'local' post offices by 2014".[130]
They are particularly concerned that this "slimmed down"
and "limited service" will be "a blueprint for
the future and heralds a significant downgrading of the network".
Paula Vennells told us that the point about Post Office Essentials
is that it deals with "95% of customer visit requirements
and 85% of all the products and services that we offer".
However, she conceded "you are quite right that there will
be some things that cannot be done in Post Office Essentials,
but in the vast majority of instances those products and services
are available".[131]
81. We welcome
the Minister's assertion that Outreach services are not part of
the coalition Government's overall strategy for the network. However,
we fear that 'Post Office Local' or 'Essentials', which are the
Government's preferred option, may also represent a diminution
in service, as while they meet 95% of customer visit requirements,
they provide only 85% of Post Office services. While we welcome
the potential for extended opening hours and for cost savings
to be made, we fear that the trade offa slimmed down and
limited servicecould lead to a significant downgrading
of the network and the service to consumers. This has particularly
severe consequences in remote areas, where travelling times and
distances to a main Post Office may be prohibitively difficult
and expensive. We recommend that in expanding the pilot, or in
rolling out Post Office localthe Government take the necessary
steps to provide a full range of services at all branches.
Post Office and Postal Services
SMALL BUSINESSES
82. Postal services are crucial for small businesses
in Scotland. The NFSP noted that small businesses are "extensive
users" of postal services.[132]
Postcomm note that 91% of SMEs in the UK use a Post Office, and
59% of all small businesses using a Post Office use it once a
week or more often. The Federation of Small Businesses (FSB) reported
that 98% of their members use mail services on a weekly basis.
[133] The FSB
comments that although there is a common perception that generally
all things postal have gone electronic, this is not the case in
the small business sector. Around 11% of Scottish FSB members
did not use the internet at all in 2009, thereby indicating that
there are some Scottish small business owners who "appreciate
access to hard copy forms or obtain assistance in submitting information
electronically".[134]
83. In depth studies carried out in 2006 confirm
the essential role Post Offices and postal services play in supporting
local businesses in the most remote parts of rural Scotland. The
CFS confirmed that many rural businesses conduct a significant
amount of trade by mail order. Mr Don Dennis, Director of International
Flower Essence Repertoire illustrated this point. He moved his
business from Hampshire to the Isle of Gigha, and said that one
of the key elements which enabled him to do so "was the existence
of the daily services of the Royal Mail and Parcel Force on the
island." He noted that should these services be curtailed,
he would have to re-locate his business to the mainland. He noted
that he sends approximately 12,000 small parcels a year, 96% of
which are sent via the Royal Mail.[135]
In their written evidence to the Committee, RMG noted:
Royal Mail is the only provider of a universal parcel
service, while Parcelforce Worldwide operates in a purely commercial
market place. Over 12 main parcel operators serve Scotland. In
many rural areas and on the Scottish islands, it will be Royal
Mail which delivers Parcelforce Worldwide parcels.
In 2005, Parcelforce Worldwide introduced a Scotland
Intra rate; this means that if you post from Glasgow to Inverness
only one charge applies. Extra charges do apply to the Islands
given the distances involved and the transport methods which need
to be used. Parcelforce believes that it offers competitive rates
for these parcels, given the distance they travel. Other Operators
use a zonal system across mainland Scotland. Parcelforce doesn't
charge a southbound charge for parcels from Scottish based locations,
assisting Scottish Businesses to trade with the rest of the UK.[136]
84. The FSB told us that a level playing field for
all Scottish businesses, regardless of their location, is key,
and continuation of the Parcelforce service and standard pricing
structure is crucial to the delivery of a level playing field.
Charging higher tariffs for delivery to, and collection from,
remote and rural areas disadvantages rural businesses in comparison
to their urban counterparts.
85. The FSB said that proposed changes to the postal
services, particularly the universal service obligation, cause
concern amongst its Scottish members, who were "only too
aware of the significant impact delays in receipt or dispatch
of payment can have on small businesses with limited cash-flow".
They explained that the impact is proportionally more adverse
than for large business and in Scotland where 93% of the private
sector is made up of small businesses with fewer than 10 employees.[137]
Businesses in remote areas in many ways represent
the lifeblood of those areas and have a proportionally larger
impact on community and economic resilience than similar businesses
in more urban settings. Improvement in efficiency of the postal
service should facilitate not present an obstacle to
commerce in remoter areas. There are opportunities to maximise
the positive effects the postal services can have on small rural
businesses as outlined above, but a further withdrawal and contraction
of the service's reach could contribute to disastrous outcomes
for these same businesses, and could ultimately lead to greater
community dependence on the public purse, thereby negating any
efficiencies gained by the reduction of service.[138]
86. Small
businesses are the life blood of small, remote communities in
Scotland, both on the mainland and in the islands. The Post Office
network and the provision of postal services are vital in enabling
small businesses to exist and operate from these locations, and
therefore also crucial for the viability and sustainability of
the communities of which they are part. The Government should
ensure that the Bill does not jeopardise the USO, that customers
pay the same price regardless of where they are sending the letter
to and from within the UK, and that Royal Mail collect and deliver
once every working day to every address.
PARCEL DELIVERY
87. CFS noted that the growth in online retailing
and parcel delivery offers significant benefits for consumers
in more remote and rural areas, providing them with access to
goods and services they might otherwise be unable to access. It
also offers opportunities for small businesses who wish to locate
to rural or more remote parts of Scotland. There are two issues
here: (i) the cost and convenience for consumers of receiving
parcels; and, (ii) the cost and efficiency by which small businesses
can despatch parcels.
88. Douglas White, Senior Policy Advocate, Consumer
Focus Scotland, identified four main issues of concern to consumers.
The first is the issue around 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.
89. Second, 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.
These restrictions vary depending on which parcel operator is
used. Furthermore, many online retailers do not offer a choice
of which parcel operator to use to make a delivery.
90. The third issue is 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. Research
undertaken by Consumer Focus suggests that many consumers would
be willing to pay for delivery of parcels at a specified time
or at weekends. 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.[139]
91. Online retailing
is an expanding market which should provide a major source of
revenue. Evidence suggests the customer would like to choose the
method of delivery according to the standard of service as well
as price. In particular this includes the time of delivery and
the ease of pick up from a depot if the parcel is undelivered.
The Government and the regulator should do all they can to encourage
retailers to offer the online shopper the choice of which company
delivers their parcel and to make it clear on their website that
Royal Mail is an option.
92. Transparency
of price is crucial for the parcels market in Scotland. Online
retailers should make it clear if a surcharge will be added to
remote areas at an early stage in the purchase transaction, and
provide a comparison with the service offered by Royal Mail.
New Services
93. The coalition Government's reports Delivering
for the Future: A Universal Mail Service and Community Post Offices
in a Digital Age, published in October 2010,[140]
and Securing the Post Office Network in the Digital Age,
published in November 2010,[141]
set out specific plans for the future of the Post Office
network. The coalition Government identifies two areas
of business with "real growth potential:" (i) increasing
the number of government services offered at post offices, with
the Post Office acting as a "genuine front office for government";
and (ii) boosting the number of financial services provided at
Post Offices.
94. In these reports, the coalition Government describes
Post Offices as a "natural place for citizens to access government
services face-to-face", and also in having an important role
in "supporting the growth of e-government for those without
internet access at home".[142]
Mr Davey highlighted three particular services that the Post Office
could provide for government: identity verification, document
processing and "pay out" whereby and individual receives
a bar-coded letter, which, when taken to the Post Office, authorises
the SubPostmaster to release cash.[143]
The Minister mentioned two current pilots of such services: a
DWP pilot on processing pensions credit applications and the "print
on demand" of Government forms.[144]
95. During the course of our inquiry, we found near
unanimity amongst our witnesses in identifying the potential for
the Post Office to "significantly extend" its range
of products.[145] The
CWU said that this was "essential to safeguard the network
going forward",[146]
while CFS warned that unless there was more significant expansion
of both government and financial services, the long-term future
for the network was "not secure." The NFSP also supported
these plans, describing the Post Office as a "local and trusted
environment for citizens to interact with the state", while
CFS said that the Post Office was "well placed" to be
the front office of Government at all tiers, not least in bridging
"the digital divide".[147]
A genuine front office for government?
96. However, the NFSP is concerned that previous
trials of government services at Post Offices, such as Your Guide
(in 2002), have delivered strong results but have not been followed
up. They argued that such schemes need to be developed "beyond
trial status and the Government must ensure that funding is earmarked
to allow the nationwide roll-out of these services across the
country on a permanent basis".[148]
97. The CWU stated that the provision of new government
services through the Post Office was "largely dependent upon
Government will". Mr Billy Hayes described the Government
as being as "joined up as spaghetti" in this respect,
with different Government departments each adopting a different
approach.[149] For
example, the CWU expressed serious concern over media reports
which have suggested that Post Office Limited may lose out on
the contract for 'Green Giro' benefit payments to PayPal.[150]
The contract itself is worth around £70million over five
years, involving a potential 400,000 transactions a week and generating
significant footfall for the network. The CWU argued that, "given
the extent of Government subsidy to Post Office Limited and the
professed strategy to turn it into the 'front office for government',
we believe that removing this business from the Post Office would
make little sense and would further weaken the network".[151]
Mr George Thomson believed that the Government could "put
down a significant marker" of its intent and commitment to
the provision of government services through the Post Office,
by "awarding the Green Giro exceptions contract to the Post
Office".[152]
98. The Minister conceded that the Post Office might
not win the contract, which has been put out to tender because
of EU procurement rules.[153]
He said, however, that "part of the strategy in the modernisation
of the network is aimed at putting the Post Office network in
a position that is likelier to win contracts in the future".[154]
99. CFS noted that it was not just UK Government
services that could be provided through the Post Office, but that
it was for "service providers in Scotland [...] to decide
whether and how the Post Office network can help to support the
delivery of services under their respective jurisdiction".[155]
Many services are provided through devolved government or local
authorities. A representative from Argyll and Bute told us that
it was particularly keen to invest in Post Offices in this way.
This should not be used as a means of reducing local authority
service provision.
100. The NFSP "strongly support" proposals
to encourage local authorities to make far greater use of Post
Offices. They outlined their vision as follows:
We believe all relevant council payments, information
and services should be accessible through every local Post Office.
This would allow residents to pay for and access council information
and services in their local area; would free up administration
for local authorities, particularly regarding residents who need
or wish to make very frequent low value payments; and would provide
vital income and custom for post offices. A very wide range of
services could be paid for at Post Offices including council tax,
council house rents, Social Service bills, leisure centre passes,
school meals and music lessons, parking fines and permits, local
travel tickets, court fines. Council information available at
post offices could range from public consultations, planning applications,
the Electoral Roll to tourist information and details of local
events.[156]
101. We
welcome the coalition Government's plans to use the Post Office
network as a "genuine front office for government".
This is an example of a step change of the type that is required
to guarantee the sustainability and viability of the network.
However, we are concerned that there appears to be a lack of joined
up thinking across Government in this respect. In the past it
has often been too tempting for a Government Department to save
money from its budget by awarding a contract to a company which
has submitted a lower bid than the Post Office, but which cannot
deliver as high a quality of service throughout rural Scotland
as the Post Office. In order for the Government's stated policy
to be delivered effectively, the key service delivery departments
in Whitehall and other public bodies need to be committed to the
policyand to implement it through their tendering, procurement
and contracting processes.
102. The provision
of reliable and long term contracts between the Government and
Post Office Limited are essential for the long term planning
required to secure the network, and this policy needs to take
immediate effect. If tangible benefits are not delivered soon,
the risk of closure of many Scottish Post Offices remains. We
were surprised to hear that successful pilots already undertaken
had not been rolled out in a timely and effective way across the
network, if at all. We recommend that the Government take urgent
action to remedy this.
103. We also
share the concerns of our witnesses that contracts for services
which could be given to the Post Office are being awarded elsewhere.
We understand the Government's commitment to the modernisation
of the Post Office, and its desire to improve the competitiveness
of the Post Office through this process. However, we recommend
a series of interim measures be put in place to enable the immediate
increase in the number of government services provided through
the network. These include the provision and timely rollout of
essential technology and the removal of any financial, legal or
other obstacles which may prevent the network from providing a
service.
104. We note
that many government services in Scotland are provided by the
Scottish Executive and local government. We urge the UK Government
to work closely with all tiers of government in order both to
facilitate, and remove any practical obstacles to, the provision
of devolved and local government services through the Post Office
network.
Financial Services and Banking
105. The Post Office currently offers a wide range
of financial services including personal loans, credit cards,
insurance and savings products. At present, Post Office financial
services may bring in a considerable proportion of the Post Office
Limited's revenue and are "essential to the company's viability".[157]
However, research shows that these financial services can contribute
relatively little to many SubPostmasters' income. For example
in March 2009, NFSP found that amongst Scottish SubPostmasters:
96% earned nothing at all from Post Office credit cards; 93% earned
nothing from Post Office home insurance; 86% earned nothing from
Post Office vehicle insurance; and 99% earned nothing from Post
Office life assurance.[158]
106. The NFSP therefore supports plans to increase
the banking facilities available at Post Offices, especially given
that Bank branches have "long been in retreat, particularly
in rural and deprived urban communities." The NFSP stated
that the Post Office's unrivalled network provides "enormous
and currently massively underused potential to put local banking
back into the heart of communities", and pointed out that
SubPostmasters and their staff are "already well accustomed
to handling high volumes of cash, undertaking financial transactions,
dealing with confidential matters and helping vulnerable customers".[159]
107. Richard Bates, Head of Community and Public
Services Team, Consumer Focus Scotland, pointed that there is
significant potential for the Post Office to grow in the area
of provision of financial services and "to build on its trusted
brand, its local nature, the opportunity to be a neighbourhood
banking centre and generate a viable revenue stream".[160]
The Association of British Credit Union Limited (ABCUL) claimed
that the provision of such services would be "best achieved
through a partnership with the credit union sector".[161]
We visited Pollok Post Office and Credit Union in Glasgow, the
first joint venture of this kind anywhere in the UK. The venture
was a success, and had led to an increase in custom for both the
Post Office and Credit Union, and an enhanced service for consumers.
It is estimated that for a cost of approximately £15 million,
the Post Office Limited could install the technology required
for Post Office counters to accept deposits to credit union accounts.
It was pointed out to us that such an operation would not work
in all circumstances.[162]
Nevertheless, the experiences in Pollok should be considered as
a case study if further joint operations were to be considered
elsewhere in the country. We
support links between the Post Office and the Credit Unions and
would urge the Post Office to be more proactive in co-operating
with the Credit Unions and other financial service providers to
increase throughput.
108. The coalition Government has also said there
will be increased access to high street bank accounts through
the network. At present, the Royal Bank of Scotland (RBS), including
NatWest, is to allow its customers to access current accounts
at Post Offices. This means that almost 80% of UK current accounts
will allow free cash withdrawals at Post Offices, with only Santander
and HSBC still refusing to allow access. However, the NFSP remains
concerned that the banks do not offer access to all types of transactions
for all types of accounts, and that the types of transactions
available at Post Office counters vary from bank to bank. They
wrote: "currently the banks do not advertise their Post Office
accessibility; and the restrictions on the number of accessible
accounts and the range of transactions make it a difficult message
for POL to promote. The NFSP believes a comprehensive range of
transactions through all high street bank accounts should be available
at Post Offices".[163]
Mutualisation and the future
of the Post Office?
109. The Postal Services Bill signals the Government's
intention to privatise up to 90% of Royal Mail, with the Post
Office kept in public ownership.[164]
However, the Government has proposed that the ownership of the
Post Office could be converted to a mutualised structure by the
end of the current Parliament. In such a structure, the ownership
and running of the Post Office would be handed over to employees,
SubPostmasters and local communities. Ministers have hinted mutualisation
could work in a similar way to the John Lewis Partnership or the
Co-operative Group.[165]
110. Peter Hunt, Chief Executive, Mutuo, told the
Committee that the proposal could help to secure the future of
the Post Office for the public benefit, is a valid way of maintaining
public interest in public services, and that the type of business
Post Office Limited is "is ideally suited to a mutual structure".[166]
Mervyn Jones, Commercial Director of the National Federation of
SubPostmasters, agreed that a restructured, profitable Post Office
is "something SubPostmasters will want to buy into".[167]
Mutualisation would have the potential to alleviate the conflict
of interest that currently exists between the profit targets of
Post Office Limited and the commission levels of SubPostmasters.
111. However, the CWU expressed concern that the
Bill lacks specific detail as to what form a mutualised Post Office
would take, making it difficult to assess the impact a mutualised
Post Office may have. Paula Vennells said: "the work is currently
under way, and we haven't got close enough to the detail of that
at the moment to say what it would be [...] The work has just
kicked off. The plan is, I believe, that roughly by Easter next
year, there will be various options available for us to look at,
which will then go to public consultation in early summer".[168]
112. Mr Hunt admitted that a mutual structure would
not guarantee that all Post Offices would remain open.[169]
However, he argued that a mutual would be better placed to meet
the universal requirement than alternatives, for example if the
Post Office were turned it into a private company, an issue particularly
resonant in the rural communities of Scotland. A mutual structure
would be "better placed to hear the argument for different
types of service provision in different areas, and to make sure
that the business overall reflects that need, rather than simply
having a one-size-fits-all approach". He cited the example
of the Co-op as a "business that operates and maintains outlets
that other retailers would simply not bother to keep open".
He said:
These outlets are not as financially viable; they're
much more difficult to serviceparticularly in the islands.
Yet they choose, because of their structure, to keep them open,
and they choose to continue to keep this broader service available.
They can do that because they're not focused solely on one line
of profitthey're focused on a whole range of different
issues. Ultimately this comes back to the original purpose of
the business [...] to provide a service. It's not to serve the
individuals within it, but to provide a service to the people
it is for. The experience of remote communities is that often,
the only outlet left is the co-operative or mutual business.[170]
113. Similarly, George Thomson, General Secretary
of the National Federation of SubPostmasters, offered reassurance
that mutualisation would not have a negative impact on rural communities:
I think that, by going along the mutualisation path
but with the Government still being involved, we can make sure
that local communities still have their post offices. As you are
aware, 97% of all outlets throughout the UK are owned by self-employed
SubPostmasters. That will continue. What we are talking about
is mutualisation of the central company, because really, all Post
Office Limited is a central body that owns contracts and is responsible
for discipline and ensuring that cash and stock come to you. The
people who really are the business are SubPostmasters. So, in
our opinion, as long as the Government is in for the long term,
mutualisation will present no difficulties or threats to small
and rural Post Offices.[171]
114. However, Mr Hunt also made clear that that before
Post Office Limited can be transferred to any different corporate
body, it must first pass the test as a sustainable business: making
an operational profit without Government subsidy.[172]
Still, he noted restructuring plans are in place, with the additional
subsidy and investment announced following the Comprehensive Spending
Review, to have a viable Post Office business within the next
three years.
115. The proposals for the mutualisation
of the Post Office have appeal, because this would enable the
public to have an element of ownership in the Post Office network.
However, the proposals are vague at present. At the very least,
the Post Office needs to be a sustainable business before any
such plans could proceed. We will therefore return to a detailed
consideration of this issue at a later stage.
100 Written evidence from Consumer Focus Scotland Back
101
Department for Communities and Local Government, Understanding
Digital Exclusion, October 2008 Back
102
Age Concern, Stamped Out? - Let's make rural post offices work
for older people, September 2006 Back
103
Postcomm, The Social Value of the Post Office Network,
August 2009 Back
104
Age Concern, Stamped Out? - Let's make rural post offices work
for older people, September 2006 Back
105
Business and Enterprise Committee, Eighth Report, Session 2008-09,
Post Offices - securing their future, June 2009, HC 371-II,
Ev 111 [Essex County Council] Back
106
National Federation of SubPostmasters, Subpostmaster Income
Survey 2009, July 2009 Back
107
Written evidence from the National Federation of SubPostmasters Back
108
Postcomm, Serving the Community, 2001 Back
109
Help the Aged, Financial Exclusion Among Older People,
February 2007 Back
110
Written evidence from the National Federation of SubPostmasters Back
111
Business and Enterprise Committee, Eighth Report, Session 2008-09,
Post Offices - securing their future, June 2009, HC 371-II,
Ev 104 [Cornwall County Council] Back
112
Department for Business Innovation & Skills, Securing the
Post Office Network in the Digital Age, November 2010 Back
113
Q 353 Back
114
Q 358 Back
115
Oral evidence before the Postal Services Public Bill Committee,
11 November 2010, Q 266 [Davey] Back
116
Q 351 Back
117
Written evidence from the NFSP Back
118
Written evidence from the National Federation of SubPostmasters
{PS 04) Back
119 Written
evidence from Consumer Focus Scotland Back
120
Written evidence from Graham Neal, Aberdeenshire (PS 02) Back
121
Written evidence from Consumer Focus Scotland Back
122
Q 376 Back
123
Q 374 Back
124
Q 380 Back
125
Post Office Local, sometimes referred to as 'Post Office Essentials',
are where services are typically operated in retail premises offering
post office services over the counter of the shop that hosts them
rather than at a dedicated post office counter. Back
126
Written evidence from the Royal Mail Back
127
Written evidence from the Royal Mail Back
128
Q 241 Back
129
Department for Business, Innovation & Skills, Letter to the
Chair of the Scottish Affairs Committee, 23 November, 2010. Back
130
Department for Business Innovation & Skills, Securing the
Post Office Network in the Digital Age, November 2010 Back
131
Q 217 Back
132
Written evidence from the National Federation of SubPostmasters Back
133
Postcomm, Business Customer Needs from a Universal Postal Service
in the UK, November 2010. Back
134
Written evidence from the Federation of Small Businesses Back
135
Written evidence from International Flower Essence Repertoire Back
136
Written evidence from Royal Mail Back
137
Scottish Corporate Sector Statistics 2010 Back
138
Written evidence from the Federation of Small Businesses Back
139
Qq 40 and 41 Back
140
Department for Business Innovation & Skills, Delivering
for the Future: A Universal Mail Service and Community Post offices
in the Digital Age, October 2010. Back
141
Department for Business Innovation & Skills, Securing the
Post Office Network in the Digital Age, November 2010 Back
142
Ibid. Back
143
Q 382 Back
144
Ibid. Back
145
Written evidence from Consumer Focus Scotland Back
146
Written evidence from the Communication Workers Union Back
147
Q 9 Back
148
Written evidence from the National Federation of SubPostmasters Back
149
Q 112 Back
150
"Post Office Close to Losing Benefits Contract,"
The Guardian, 5th November 2010 Back
151
Written evidence from the Communication Workers Union Back
152
Q 69 Back
153
Q 384 Back
154
Q 384 Back
155
Written evidence from Consumer Focus Scotland Back
156
Written evidence from the National Federation of SubPostmasters Back
157
Written evidence from the National federation of SubPostmasters Back
158
Ibid. Back
159
Ibid. Back
160
Q 13 Back
161
Written evidence from the Association of British Credit Unions
Limited (ABCUL). Back
162
The previous Scottish Affairs Committee's Report, Credit Unions
in Scotland, Second report of Session 2008-09, HC 218, was
published on 6 May 2009. Back
163
Written Evidence from the National Federation of SubPostmasters
Back
164
The Government has asked Ed Mayo, Secretary General of Co-operatives
UK, to explore options on the mututalisation of the Post Office. Back
165
Department for Business, Innovation & Skills, Press notice
- Post Office could be mutualised, 13 October 2010 Back
166
Q 71 Back
167
Q 53 Back
168
Q 244 Back
169
Q 77 Back
170
Q 72 Back
171
Q 54 Back
172
Q 75 Back
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