Conclusions and recommendations
The Comprehensive Spending Review
and Post Office Funding
1. We
welcome the coalition Government's commitment to the continued
provision of postal services and the future of the Post Office
network as signified in the Postal Services Bill 2010-11 and in
the Comprehensive Spending Review 2010. We particularly welcome
the financial commitment to the Post Office of £1.34 billion
over the four years of the Comprehensive Spending Review period,
and the fact that this package of funding is designed to secure
the network of Post Offices across the UK at its current level
(11,500). Nevertheless, the network in Scotland is in a precarious
position financially, with rural branches typically being less
well remunerated and less economically viable - thereby many Post
Offices in Scotland remain vulnerable to closure and customers
face the threat of a demise in the provision of postal services.
We recommend that the Government take note of the position of
large parts of the network in Scotland, as highlighted in this
Report, and take the appropriate measures required to secure a
viable and sustainable network, equipped to deliver a range of
postal services in Scotland. (Paragraph 20)
Universal Service Obligation
2.
The Universal Service Obligation (USO) is the cornerstone of mail
and postal services in the UK. The six day a week delivery and
collection service, and the universal tariff are fundamental to
the future of postal services and the Post Office network in Scotland,
and consequently, to ensuring the financial sustainability and
viability of many remote and rural communities throughout Scotland.
We therefore strongly resist any potential diminution of the USO.
(Paragraph 40)
3. We were particularly
concerned with two clauses in the Bill. First, clause 32 (2)(b),
which allows Ofcom to waive the USO if there are "geographical
or other" conditions which it deemed to be "exceptional".
Given its unique geography and the financial position of much
of the existing network, we fear this has the potential to allow
the regulator to categorise large areas of Scotland as "exceptional".
We note that this wording is the same as the current legislation
and welcome the Minister's assurances and his explanation that
this, and other similar clauses in the Bill, do not mean that
the USO is no longer applicable to parts of Scotland—either
on the grounds of geography or economics. We recommend that this
clarification be included on the face of the Bill and that this
clause should only ever be applied to a very small number of addresses,
similar in order to the current number. (Paragraph 41)
4. Clause 34 allows
Ofcom to designate more than one universal service provider. If
this clause were used to allow the cherry picking of the most
profitable parts of the network, this would impact the USO and
be detrimental for Scotland. We welcome the Minister's assurance
that this is not the Government's intention. We welcome the safeguards
in the Bill which protect the USO, and which provide for more
than one USO provider only in the most extreme circumstances,
e.g. the bankruptcy of the existing USO provider. We recommend
that the Government provide further clarity to that effect during
the passage of the Bill. (Paragraph 42)
5. We note the importance
of Ofcom in providing safeguards to the USO, but are concerned
about the Bill's requirement for Ofcom to review the minimum requirements
for the USO within 18 months. We fear this may be seen as an opportunity
to decrease the requirements of the USO. While we appreciate the
need to review the service, as customer needs may change, we recommend
that further safeguards be put in place to guarantee that the
needs of customers and small businesses who live and work in remote,
rural or island communities, are met. Any change to the USO would
have a disproportionate impact on these communities. We recommend
that Ofcom not merely consult with stakeholders, but to undertake
assessments of the social and economic impact of proposed changes
before making recommendations. We therefore recommend that the
Bill include a requirement for Ofcom to consult with representatives
of key groups in these communities, including residential, small
business and vulnerable users, before they make any recommendations
to change the existing USO. (Paragraph 46)
6. Private firms are
making profit off the work of Royal Mail and the Post Office network
in parts of the county that are unprofitable. If Royal Mail is
going to provide this service at a loss in the unprofitable and
difficult parts of Scotland, they should be able to charge the
private companies a higher price. Royal Mail need to be able to
negotiate sustainable terms for last mile delivery of private
mail and parcels. (Paragraph 48)
Separation of Royal Mail and
the Post Office
7. The
separation of Royal Mail Group and Post Office Limited, and the
future ownership of both organisations has been the subject of
much political debate. Regardless of the ownership of Royal Mail,
we see considerable advantages to a long, stable and robust relationship
between RMG and POL, not least to facilitate proper business and
financial planning. We recognise that the Inter Business Agreement
(IBA) is a commercial agreement and we welcome the Minister's
commitment not to put anything in the way of such an agreement.
However, we recommend the Government take a more proactive approach
to facilitating a long and robust IBA, through removing any obstacles:
practical, legal or otherwise that may exist. Ideally, a ten year
agreement should be reached prior to any sale of Royal Mail. We
understand that this may affect the marketability of Royal Mail,
but it is essential to the sustainability of Postal Services in
Scotland. It is in everyone's interest, not least that of the
consumers, that such an agreement is reached as soon as possible.
(Paragraph 56)
The Network in Scotland
8. 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. (Paragraph 68)
9. 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. (Paragraph 69)
10. 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 makes 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. (Paragraph 75)
11. We are also concerned
about reports that the drop in the number of services provided
by Outreach services led to a drop in the number of Post Office
customers, as consumers were 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. (Paragraph 76)
12. 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 is the
Governments preferred option, may also represent a diminution
in service, as while they meet 95% of customer 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. (Paragraph
81)
Post Office and Postal Services
13. 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. (Paragraph 86)
14. 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. (Paragraph 91)
15. 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. (Paragraph 92)
New Services
16. 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. (Paragraph 101)
17. The provision
of reliable and long term contracts between the Government and
Post Office Limited is 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. (Paragraph 102)
18. 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. (Paragraph 103)
19. 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. (Paragraph
104)
20. 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.
(Paragraph 107)
Mutualisation and the future
of the Post Office
21. 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.
(Paragraph 115)
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