Written evidence from Consumer Focus Scotland
ABOUT CONSUMER
FOCUS
Consumer Focus is the statutory consumer watchdog
for postal and post office services. We have statutory functions
to investigate the number and location of public post offices[23]
and responsibility mandated from the UK Government to independently
assess post office provision against specified minimum access
criteria. Royal Mail's Licence requires it to provide us with
an extensive amount of information, much of which is not publicly
available, allowing us to monitor its performance in a wide variety
of areas including service standards, complaints handling and
mail integrity. Consumer Focus also has powers[24]
to deal with postal cases on behalf of vulnerable consumers via
our Extra Help Unit. Consumer Focus Scotland is part of Consumer
Focus, and our organisation's structure reflects the devolved
nature of the UK.
1. THE IMPORTANCE
OF, AND
DEMAND FOR,
MAILS SERVICES
IN RURAL
AREAS
1.1 Postal services remain a critical form of
communication for individuals and businesses[25],
especially the most vulnerable[26].
Their importance as a logistics system for fulfilment mail is
increasingly apparent[27].
However, no market remains constant and the postal market faces
huge challenges from e-substitution[28].
1.2 The postal service has an extremely important
role in Scotland, particularly in rural and remote areas, where:
¾ consumers
have to travel long distances to access face to face services
and the Universal Service Obligation (USO) therefore provides
a vital lifeline service;
¾ it plays
an important social role, offering regular and reliable contact
with every household, including with vulnerable people;
¾ broadband
penetration is often less well developed than elsewhere in the
UK, and consequently there is a greater reliance on mails
services[29];
and
¾ the
growth in online retailing offers significant benefits but only
if the post (and telecoms) infrastructure is in place to support
this.
1.3 At present, Scottish consumers receive a
broadly similar level of postal services to elsewhere in the UK.
Royal Mail's licence requires the next day delivery of 93% of
first class mail, and 91.5% in each postcode area. This requirement
applies to 13 of Scotland's 16 postcode areas, the exceptions
being ZE (Shetland) KW (Orkney), and HS (Western Isles).
1.4 The USO means that customers across the UK
pay the same tariff regardless of where they are sending a letter
to, and requires Royal Mail to deliver mail once every working
day to every address in the UK. This clearly has benefits for
consumers in more remote areas. In certain exceptional circumstances,
Postcomm exempts Royal Mail from making daily deliveries to a
property - for example, because the address is difficult to access,
or because of a health and safety risk to Royal Mail staff. Around
half of these exceptions are in Scotland (1,700), but the tight
criteria that determine whether a property is considered too remote
brings significant benefits for many consumers in rural Scotland,
as it ensures these receive deliveries even if this involves a
diversion from the main delivery route.
2. IMPLICATIONS
OF THE
POSTAL SERVICES
BILL ON
THE USO
2.1 Consumer Focus is pleased that the Bill specifies
minimum requirements for the USO, including the delivery and collection
of letters six days a week, and the requirement for uniform pricing
across the UK. However, there is scope to extend the USO to require
delivery and collections of parcels six days per week[30],
which would reflect the increasing economic importance of fulfilment
mail. Whether privatised or not, adequate safeguards needs to
be in place to protect the provision of the USO and, more generally,
the consumer interest.
2.2 We welcome those safeguards that are put
in place by the Bill to protect the minimum requirements of the
USO in future, not least the need for Ofcom to conduct a review
of users' needs in advance of any proposed changes. Consumer Focus
would like to see the Bill require Ofcom to consult with representatives
of residential and SME customers, especially vulnerable customers,
when conducting such a review.
2.3 In undertaking such a review, the needs of
rural users require particular attention: the introduction of
zonal pricing tariffs, reducing the number of days when mail is
delivered or collected, or loosening the criteria through which
Royal Mail could exempt properties from receiving daily deliveries
of mail would each hit rural Scotland disproportionately hard.
2.4 In its current form, the USO appears sustainable
for the immediate future. However, should any future review of
the USO take place, this should be assessed in the context of
the wider communications needs of consumers and businesses, taking
into account the availability and take-up of current and next
generation broadband, and the particular needs of consumers in
rural Scotland.
2.5 Consumer Focus is concerned that the Bill
does not require Ofcom to impose essential conditions on postal
operators, including requirements on mail integrity, or require
operators to provide information to the regulator and Consumer
Focus on mail integrity and delivery and collection exceptions.
Such requirements are currently enshrined as obligations on Royal
Mail in the existing licensing system and allow for effective
scrutiny in areas of potentially serious consumer detriment. The
Bill should be amended to suitably incorporate these necessary
safeguards.
3. DELIVERY OF
PARCELS TO
REMOTE AREAS
3.1 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. However, many parcel
operators apply surcharges to deliveries in certain parts
of Scotland[31],
or consumers there may face other conditions including longer
delivery times compared to consumers elsewhere in the UK. These
restrictions vary depending on which parcel operator is used,
but many online retailers do not always offer a choice of which
parcel operator to use to make a delivery.
3.2 It is not always straightforward for consumers
to find out about surcharges in the early stages of making a purchase,
thereby enabling them to properly take this into account when
making transactions. Some retailers do not specify which postcodes
are subject to surcharges but instead use looser terminology such
as "northern Scotland" or "some Scottish islands"[32].
3.3 Our research suggests that many consumers
would be willing to pay for delivery of parcels at a specified
time or at weekends[33].
Many consumers may also want to use the PO network to pick
up parcels. It can often be difficult for consumers to receive
a parcel if they are not at home when it is delivered. As this
can involve a trip to a delivery depot for collection, it can
be a lengthy and costly journey for rural consumers.
4. THE IMPORTANCE,
DISTRIBUTION AND
ROLE OF
POST OFFICES
IN SCOTLAND
4.1 The Post Office (PO) network offers unparalleled
access to services of general social and economic interest, including
mails services; access to pensions and benefits; government services;
and bill payment.
4.2 POs have a critical role to play in supporting
sustainable communities in Scotland's remote and rural areas,
and in its deprived urban communities. While POs fulfil this role
in many areas across the UK, the remoteness of many rural locations,
and the nature and concentration of urban deprivation in areas
of the Central Belt and elsewhere, makes the viability of the
PO network of particular importance to consumers in Scotland[34].
4.3 There are 1,441 POs in Scotland, comprising
12% of the network across the UK and making it Scotland's largest
retail chain. Two-thirds of PO branches are located in rural areas
with 171 branches in the 20% most deprived wards in Scotland.
Over the last decade, the PO network in Scotland has been badly
hit by closures: since 2000, the network in Scotland saw an overall
reduction of 28% and the urban network contracted by almost half[35].
4.4 Although competitors such as Paypoint now
have more outlets than the PO network in Scotland, the PO offers
unparalleled coverage in remote and rural areas. It therefore
remains uniquely well-placed to offer universal access to services
of general social and economic interest[36]
in Scotland.
5. NEW SERVICES
THROUGH THE
POST OFFICE
NETWORK
5.1 There is the potential to significantly extend
the range of products that the post office network offers to its
customers, face-to-face, in their local communities. Increasing,
for example, the range of government services and financial products
on offer at the post office would improve access to these important
services for consumers and would help to support a growing, thriving
and sustainable post office network - which would clearly be in
the interests of all its customers.
5.2 It is, however, essential that the devolved
context is properly reflected in this debate. Responsibility
for the delivery of a wide range of government and other public
services in Scotland is devolved to the Scottish Parliament. It
is therefore for service providers in Scotland, in addition to
the UK Government, to decide whether and how the post office network
can help to support the delivery of services under their respective
jurisdiction.
5.3 We welcome the UK Government's recent announcement
that it intends for the PO network to become a "front office"
for its services. With uncertainty over Post Office Ltd's (POL)
contract with Royal Mail, and as other UK Government departments
open contracts for work currently undertaken through the PO (for
example, the DWP is currently tendering the cheque exceptions
service), we are concerned that, unless there is a more significant
expansion of both government and financial services, the long-term
future for the network is not secure.
5.4 PO based banking offers a major opportunity
to reinvigorate the post office network and put banking services,
delivered by a trusted provider, back into communities. A greater
role in financial services for post offices would benefit all
post office users, but could particularly help low-income customers[37],
small businesses, and those in rural and deprived urban areas,
where there are fewer bank branches. Closer partnership between
credit unions and the PO would deliver particular benefits in
Scotland: we would strongly support measures that would allow
consumers to access credit union savings and loan products through
post office branches.
5.5 In January 2010, Consumer Focus published
Opportunity Knocks[38],
which revealed nearly one million of the poorest people in
the UK could be lifted out of financial exclusion if a new, simple-to-use,
bank account was launched by the PO network - this includes many
of the 440,000 consumers in Scotland who currently receive payments
into a Post Office Card Account (POCA). The report calls on the
UK Government to introduce a tailored bank account product as
part of its plans to introduce banking services through the PO.
This would be offered as a successor to the existing POCA and
would offer an expanded range of transactional banking features
including universal ATM access, debit card functionality and a
modified bill payment facility[39].
This facility would enable low income consumers to benefit from
cheaper bill payment options but with greater control and certainty
over payments than conventional Direct Debit facilities allow.
6. IMPLICATIONS
OF THE
POSTAL SERVICES
BILL ON
THE POST
OFFICE NETWORK
6.1 The Bill proposes the formal separation of
Royal Mail and POL. There are considerable advantages for POL
- for example, it would be managed by a Board that was better
aligned against its commercial objectives and would no longer
be a junior partner in group decision-making.
6.2 However, there are also significant potential
risks and challenges for the PO network resulting from separation.
The UK Government has already announced that it will seek a refreshed
Interbusiness Agreement (IBA) between Royal Mail and POL. The
IBA is the contract through which Royal Mail uses the PO network
as the access point to mails services. This contract accounts
for 1/3 of POL's turnover, some £343 million of POL's revenue
last year. However, following privatisation of Royal Mail,
subsequent contracts would require a competitive tender process
with no guarantee that POL would retain this contract.
6.3 There are strong arguments against seeking
to maintain the contractual relationship between POL and Royal
Mail in perpetuity. However, for the foreseeable future, the loss
of the mails contract, even on a partial basis, would significantly
undermine the integrity of the PO network, with a disproportionately
negative impact for consumers in rural and remote Scotland.
6.4 Even if Royal Mail continued to use the PO
in rural areas only, the ability of the network to cross-subsidise
from its profitable urban branches would be lost. The future of
many POs, particularly the 981 largely loss-making post offices
in rural areas, would therefore be in doubt. This would threaten
access to mails services but also the wider range of social and
economic services made available through the PO network.
7. OUTREACH POST
OFFICES IN
SCOTLAND
7.1 As part of the last closure programme 102
PO branches in rural and remote parts of Scotland were closed
and replaced with Outreach POs. Outreach services are provided
by a visiting sub-postmaster, typically on a part-time basis,
in premises such as village shops, community halls or using specially
adapted mobile vans.
7.2 We have recently undertaken research that
suggests that customer satisfaction with Outreach services is
generally positive[40]
and that consumers have adapted well to the new arrangements.
However, the PO has failed to promote Outreaches effectively:
one-third of consumers were unaware that an Outreach post office
actually operated in their village. Improvements are also urgently
needed to the reliability and robustness of Outreach services.
7.3 While Consumer Focus is satisfied that services
can effectively meet consumers' needs, this will only happen if
POL acts in a more responsive way to feedback from its existing
and potential customer base: one-third of people not using the
Outreach do so because the opening hours or location are unsuitable
for them.
7.4 Following the introduction of Outreach services
POL has proved slow, and in many cases unwilling, to respond
to consumer feedback or to provide appropriate support to its
operators who in many cases have been left to sink or swim.
7.5 Consumer Focus is increasingly concerned
that the long-term viability of many Outreach services might be
compromised unless POL supports its Outreach locations and commits
to building their viability.
19 November 2010
23 Consumers, Estate Agents
& Redress Act, 2007; Section 16 Back
24
Ibid; Section 12 Back
25
94% of businesses and 85% of individuals in Scotland say they
will always need to send items by post: Consumer Focus and Postcomm
research into Residential and Business customer needs from a sustainable
universal postal service (2010). 95% of consumers receive mail
each week and 84% send mail at least each month: Consumer Focus
Scotland, Scottish Postal Services Consumer Survey (2010) Back
26
For example, across the UK, 92% of rural residents state they
will always need to send some things by post: Consumer Focus and
Postcomm research into Residential and Business customer needs
from a sustainable universal postal service (2010) Back
27
53% of businesses in Scotland expect customers to order more products
online in the future: Ibid Back
28
Across the UK, 69% of residents and 60% of businesses say their
use of online communications has increased over the last three
years, and 50% of residents believe they will send/receive less
mail from friends/family in the next three years: Ibid Back
29
Ofcom Communications Report (2010) Back
30
The Bill specifies that letters will be collected and delivered
Monday-Saturday, but only requires packets and parcels to be collected
and delivered Monday-Friday. Back
31
For example, Parcelforce operates a uniform pricing system for
the Scottish mainland, the "Intra-Scotland" rate, but
applies higher charges for the Scottish Islands. Back
32
Consumer Focus Scotland, Parcel Deliveries: Current Practice and
Possible Solutions (2010) Back
33
Consumer Focus and Postcomm research into Residential and Business
customer needs from a sustainable universal postal service (2010) Back
34
80% of consumers in Scotland consider the PO to play an important
role in their community, with 82% of consumers using the PO network
at least every month, and 49% use it every week. Usage is highest
among people aged 65 and over (63% of whom use a PO every week);
people who are disabled (63%); and people earning less than £15,000
per annum (61%) : Consumer Focus Scotland, Scottish Postal Services
Consumer Survey (2010) Back
35
Between 2000 and 2010, the urban PO network reduced from 591 to
308 branches, a contraction of 48%. The PO network in urban deprived
areas fell by 19% during this period: Postcomm Annual Report on
the Post Office Network (2010) Back
36
The post office network receives subsidy from the UK Government
for the provision of services including: mails services, vehicle
licensing and identity verification, access to pensions and benefits,
access to cash, bill payment, and access to Government services
Back
37
Research undertaken for Consumer Focus finds that 83% of low-income
consumers in Scotland consider the PO to be a safe place for their
money, and 70% would consider opening an account there. In contrast,
47% of low income consumers do not trust the High Street banks
with their money. ICM research for Consumer Focus on Low-Income
Banking Solutions at the Post Office (2010) Back
38
Consumer Focus, Opportunity Knocks (2010) available at http://www.consumerfocus.org.uk/assets/1/files/2009/06/Opportunity-knocks-web1.pdf
Back
39
Our research suggests that many unbanked consumers in Scotland
would open a transactional bank account if this was offered by
the Post Office, but would not do so if these accounts were offered
by High Street banks - 64% of Scottish consumers interested in
the account want this to be offered by the Post Office: ICM research
for Consumer Focus on Low-Income Banking Solutions at the Post
Office (2010) Back
40
Consumer Focus, Sink or Swim: Post Office Services in the Long-term
(2010) Back
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