Sub-postmasters and Sub-postmistresses: Remuneration

(Limited Text - Ministerial Extracts only)

Tuesday 23rd May 2023 Westminster Hall

[The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)]

It is a pleasure to speak with you in the Chair, Mr Twigg.

I congratulate the right hon. Member for Orkney and Shetland (Mr Carmichael) on securing this very important debate. I agree with many of the sentiments that he expressed in his speech.

When I was growing up as a young boy in my local town of Easingwold, we had Mr Taylor, the bank manager —he managed the Barclays bank—and Mr Clark, the baker; Mr Thornton, our butcher; Mr Hollinrake, who was our milkman; and Mr Hodgson, our postmaster. The only equivalent personality who I would be able to identify now in our community of Easingwold would be Pritpal, who is our postmaster. Sadly, all those other pillars of the community have gone, so we absolutely know that our postmasters are the pillars and beating hearts of our communities. It is therefore paramount that we secure the right future for our post office network, which is one of the largest retail networks in the country, with 11,500 branches. We know from the recent report by London Economics that post offices bring a huge amount to our whole economy—£4.7 billion in 2021-22.

I spoke in glowing terms about the network being the pillars of our communities at the annual conference of the National Federation of SubPostmasters only last week. It is good to see Calum Greenhow, who represents that organisation, here in the Public Gallery today; indeed, he is on his annual holiday, but has still turned up to this debate. Quite simply, there is no Post Office without postmasters.

The subject of this debate is crucial, because if we are to run a sustainable network of post offices, we clearly need to ensure that those businesses are sustainable too. Post Office is a commercial business; it operates at arm’s length from the Government. Postmaster remuneration will ultimately be an operational matter for the Post Office, but I totally agree that we need to get the situation on a sustainable footing.

There were some improvements to remuneration in April, as I think has been acknowledged, including increasing payments for outreach services by 9.5% and payments for banking deposit transactions by 20%, although I know that their cash impact is very limited; that point was raised at the conference last week.

I understand the issue that the right hon. Member for Orkney and Shetland raised about deposits. The money is counted and, because of unknown deposit limits, that money sometimes has to be counted back, which is unfair. I am working closely with the Financial Conduct Authority and various banks on those deposit limits, which seem to be arbitrary and have damaging effects on the business community as a whole in our towns and villages, not just on the post offices themselves. I am determined to find a solution to that problem, alongside my colleague, the Economic Secretary to the Treasury.

The improvements made in April 2023 were made following previous improvements in August 2022, and postmasters benefiting from Royal Mail tariff increases was announced in March 2023. However, I appreciate that the measures have not gone as far as postmasters would have liked. We have the issue under review and we discuss it often at our meetings with the Post Office.

My hon. Friend the Member for North Norfolk (Duncan Baker) raised an important point about the amount of revenue that is passed on to sub-postmasters. Something that results from that, which I have discussed with the Post Office at our meetings, is the need to control and reduce central costs to ensure that there is more money to go around the network, rather than held in the centre. Postmasters are the most important part of the post office network, and I agree that they need to be able to make a decent living for that network to be sustainable for the future.

Clearly, we need the Post Office to look for opportunities to drive footfall into branches. A point was raised about the DVLA. I am aware of those negotiations. Again, those matters are between the Post Office and postmasters, but we are keen to see a resolution and we hope that one will be obtained. The hon. Member for Motherwell and Wishaw (Marion Fellows) does fine work as chair of the all-party parliamentary group on post offices. As she said, we see the Post Office very much as the front office of Government. Having said that, we cannot dictate to people how they decide to access services. We all benefit from access to the internet and the digital world, and applying for different things on our phones and computers.

[Marion Fellows]

Digital applications should not exclude cash for people who are digitally excluded, and there are many of those people in our communities. As the Minister said, post offices are at the heart of our communities. Everyone needs to be able to use them and access Government services.

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[Kevin Hollinrake]

I agree. I hope the hon. Lady will forgive me if I gave her the wrong impression. I am not saying that it should be either/or, but we should leave it to customers to decide how they want to access services.

[Mr Carmichael]

The Minister is absolutely right. We cannot dictate to people how they do things. But surely with the example of the cash limits on bank deposits, that is exactly what we are doing. If we say, “You’ve had your limit; you can’t pay in any more money here,” then we have taken away the option for them to use the post office. Let us not forget that they are probably using that option as a sop to the Government here, because they were making all sorts of promises about it being the last bank in town.

[Kevin Hollinrake]

I understand that cash deposit limits are a crucial issue, and we are determined to find a resolution. It is not about something imposed by the Government or even the Post Office; it is about money laundering concerns. The FCA was concerned about the post network being used for money laundering purposes. The right hon. Gentleman and I have both spoken about the need to tackle economic crime, so that is the reason behind it. My concern is whether those measures are proportionate and appropriate. I think there should be ways round that. Some banks are interpreting the advice differently.

I will turn to some other issues that the post office network is facing. One is the disruption to business caused by the dispute between Royal Mail and the Communication Workers Union. Hopefully, that has nearly come to its end. Letter volumes are on a long-term decline, with a 50% reduction in the last 10 years. Foreign currency exchange is another important revenue stream, which was obviously challenged between 2020 and 2022. Again, that should be returning to normal.

There is no silver bullet to solve those problems, but, nevertheless, there are some opportunities for the future. We see that the Post Office needs to adapt to today’s economic environment. There are initiatives under way, such as post offices becoming parcel hubs—not only for Royal Mail; there are now new partnerships with Amazon, DPD UK, Evri and DHL, and that is a benefit to consumers and potentially postmasters.

Positive steps to diversify the business are critical. The right hon. Member for Orkney and Shetland highlighted what a tremendous job his post office is doing in terms of fresh produce and fish. Diversification is very important for any business; when a part of a business is struggling to make ends meet, it should add further businesses to that outlet. There has been significant investment in the replacement for the Horizon system. The new system should make transactions easier and more efficient, which should help sub-postmasters with the amount of time it takes to do their work.

The Government have stepped in for the short term, with things such as business rates support worth £13.6 billion, and the £23 billion over an 18-month period to help with energy costs. We are keen to help all businesses through a difficult time, not least the post office network, which has received £2.5 billion of central Government funding over the last 10 years, and will receive £335 million over the next three, including the £50 million a year subsidy to safeguard services in uncommercial parts of the network.

I take the right hon. Member for Orkney and Shetland’s point on the Post Office’s senior management bonus situation—a matter that we took very seriously. The Post Office itself is doing its own inquiry into the circumstances around that and we have committed to undertaking an independent review of the issue. It is important that we wait for the outcome of the review before we make a judgment on that situation, but it is something that we are taking seriously.

I thank Members for their contributions to the debate. It is encouraging that we are all on the same page on this issue; we all want to ensure we have a sustainable network, and we need to have a grown-up conversation about how we do that.

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On resuming—

[Kevin Hollinrake]

To conclude, we will continue to work with the Post Office to deal with the challenges that the network faces and lay the foundations for a sustainable network in the future.

Question put and agreed to.