Lord Hain
Main Page: Lord Hain (Labour - Life peer)Local Post Offices
Lord Hain Excerpts
Lord Hain (Lab)
My Lords, I refer to my entry in the register of interests.
The Post Office is under serious threat, with the Crown office network being decimated and sub-post offices closed. Yet, frustratingly, there could be a positive future if only the Government would support the establishment of a post bank.
In the last Parliament, the Tory-Lib Dem Government split the Post Office from the profitable Royal Mail letters business, which today is paying out more £200 million a year in dividends. The split was unprecedented. No other Government have separated the retail arm from the rest of the mail operation. This was done despite the fact that the Post Office was, and always has been, heavily reliant on the Royal Mail letters business for its income; and despite the fact that the Post Office was also dependent on public funding to support the network and would be left exposed to government austerity cuts, as indeed it has been.
At the time of the separation in 2012, concerns were raised both here and in the other place about how the Post Office could survive. The Government’s answer was to transform the Post Office into a,
“genuine front office for government”,
covering everything from benefits and public services to passports and driving licences, and to oversee a significant expansion of its income from financial services. Five years later, neither of these pledges has come even close to being delivered. Indeed, Post Office revenues from government services have fallen by some 40% in six years. The promised expansion of financial services has never materialised. Post Office’s revenues have grown by a paltry 2% in six years, not even keeping up with inflation. Alongside that performance, we have seen a huge reduction in annual government funding. In 2012, the Post Office received a subsidy payment of £210 million to keep open its network of local branches. Next year, this will stand at just a third of that, at £70 million.
The consequence of these three things—the separation of the Post Office from Royal Mail, the failure to grow new revenues and the fall in government subsidy—has all too predictably been a programme of cost-cutting from the board of the Post Office that bears all the hallmarks of a service in a state of managed decline. In the past year alone, the Post Office’s cash handling business, Supply Chain, has ceased all its non-post office work at a loss of 600 jobs. The long-standing defined benefit pension scheme, with 3,000 active members, is due to be closed this very Saturday, 1 April. One hundred-and-thirty customer-facing financial specialist roles, in what was meant to be a growth area, have been made redundant. The Post Office card account is being phased out.
These things are just the tip of the iceberg. The Post Office appears determined to cast off the Crown office network, the largest flagship branches in high street locations. In 2012, there were 373 Crown branches; today, there are around 285 following two closure and franchise programmes in 2014 and 2016. A further 70 are currently earmarked for closure and franchise. But why is this happening? The Crown office network as a whole is in profit; its offices are in prime locations throughout the country—they are the largest branches with the greatest potential to bring in new work, yet they are being closed. The Post Office has only one justification for this: cutting costs. Yet the closure and franchise of Crown offices leave customers worse off on a range of measures including queue times, customer service and disabled access. They mean the loss of good jobs, which are replaced by part-time, minimum wage roles, with a consequent loss of quality. It moves the Post Office from being prominent on the high street into the back of a WHSmith. Is this the stewardship we expect of a valued public service? Is this the sort of business model that the Government are really proud of?
The sub-post office network is also under relentless assault. Postmasters are being pushed on to new lower cost contracts and they face the threat of losing their post office altogether unless they sign up. For too many of them, the sums no longer add up. More than 700 post offices are currently up for sale and more than 700 branches are under what the Post Office terms “temporary closure”, which in many cases is a euphemism for saying that it cannot find anyone to take on a branch, so it has closed. What are the Government doing about the serious concerns being raised by postmasters about the viability of the new business model? Again, when it comes to these new lower cost models, it is post office customers who lose out. As the Federation of Small Businesses has said, the range of services available is more limited in franchised outlets than in traditional branches. In 2015, Citizens Advice called on the Post Office to implement what it called a,
“rigorous and wide-ranging improvement programme”,
to address major failings in the model. Can the Government tell us whether the Post Office has implemented such a programme or that it will now commit to doing so?
All of this points to a service in trouble. In January, a group litigation order hearing in the High Court gave the green light to a group claim against the Post Office for postmasters claiming losses arising from the Horizon computer system. This could see the Post Office facing compensation claims worth tens of millions of pounds, and in court the Post Office conceded something that it has long denied—namely, that the records on the Horizon computer system could be changed by a third party. Given that the Criminal Cases Review Commission is reviewing some 20 convictions that have relied solely on Horizon records under prosecutions brought by the Post Office, that is deeply concerning. Will the Government now finally recognise the need for a full, independent inquiry into this issue? Do the Government stand by the way the Post Office board has handled these cases?
If the Post Office is to survive and remain relevant to people today, it must surely innovate and deliver new services. Cost-cutting can take it only so far. It is neither new nor novel, yet the obvious answer is the establishment of a post bank. In 2006, the French Government set up La Banque Postale through its post office network, which in 2015 made a profit of €1 billion. Italy and New Zealand provide further examples of countries establishing post banks in recent years, which have quickly become the linchpin of their postal operators. There is no reason why the UK should not do this rather than set out to make our Post Office a world leader in decline. Part of the key to La Banque Postale’s success seems to be the size of its network, with almost 12,000 outlets. That gives it a presence in communities across the country. Moreover, there is a level of trust in a bank based in the post office, which customers already have a relationship with, along with its reputation for socially beneficial activities, such as tackling financial exclusion, providing micro credit loans and lending to social housing projects. With its own 11,000 outlets, this is exactly the sort of model that a post bank in the United Kingdom should adopt.
Villages have long lost their banks along with their pubs, their shops and now their post offices. Local council front offices have closed under the pressure of government cuts. Public service access directly with the public is disappearing. Thousands of bank branches in towns throughout the United Kingdom are being remorselessly closed. Glastonbury in Somerset, with its population of 9,000 and many more in nearby villages, now has no high street banks at all. The worst hit are elderly customers who do not drive or go online. The massive decline in high street banks surely is an opportunity for the Post Office to step in and provide a local banking presence in communities throughout the United Kingdom, if only the Government would back the proposal. The Post Office’s current offering in this area is frankly abysmal. The partnership with the Bank of Ireland is not driving the revenue growth we were promised. It does not even provide core products like a business bank account or a children’s account. Some four and a half years into a pilot scheme, it still has no nationally available current account. These are surely core products that any serious challenger bank should be offering as a minimum.
Last year, the Government launched a public consultation on the future of the Post Office; it received tens of thousands of postcards collected by the Communication Workers Union calling for it to set up a post bank through its network. If France can do that successfully, why not Britain? Despite huge technology and lifestyle changes in our society, the need for a high street outlet remains, and only the Post Office can still fill that need for both local residents and small businesses. Local post offices could be the new-age front offices for a whole range of national and local government services and financial services across the country. Why are the Government not supporting this exciting new vision, instead of putting the very survival of the Post Office at risk?
Baroness Buscombe
I accept what the noble Lord is saying. In fact, I was going to go on to say that there may be a balance to strike between the banks and post offices, but our focus is on the strength of the post offices and on meeting customer requirements. The report makes a number of recommendations, including around whether the Post Office can better publicise what it offers. The Post Office, in response to this, will be working with its partners to explore what it can do to implement the recommendations. That is the point I was going to come on to; we are not just taking the report, sitting down and saying, “Well, that’s a problem. Leave them to work it out”. Awareness of what the Post Office can do and can deliver—and it is growing in that sense—is really important. I add that the Post Office card account contract has been extended to at least 2021.
In conclusion, a more efficient Post Office is better able—
Lord Hain
My Lords, before the Minister finishes, could the Government study La Banque Postale’s success in France, and would the Minister—or Margot James, the Minister primarily responsible—write to me explaining in what way the British situation could match that? Do the Government really think it is doing so with their current policy? I do not think it is.
Baroness Buscombe
I spend quite a lot of time in France and I have to say that my experience of post offices in France does not match those that I enjoy in my local village. However, I will of course talk to my colleague in the other place, Margot James, about this, and see if we have been looking at the French model as the noble Lord suggests.
Baroness Buscombe
And then of course we will write to the noble Lord, Lord Hain, and copy all other noble Lords.