House of Commons - Postal Services in Scotland

Postal Services in Scotland - Scottish Affairs Committee Contents

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 users—54% 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 area—an 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 reason—97% 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 services—a 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 off—a slimmed down and limited service—could 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 local—the 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 policy—and 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 service—particularly 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 profit—they'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