Post Office Network

Albert Owen Excerpts

Tuesday 2nd November 2010 Westminster Hall

[Albert Owen (Ynys Môn) (Lab)]

I did not support my Government’s change in the closure programme, but the hon. Gentleman is right to point out that many post offices closed under both Conservative and Labour Governments. He is a reasonable man and will acknowledge that one reason for the speedy run-down of business in many post offices was the internet and new technology. Does he accept that we now have the opportunity to upgrade the post office network so that it can provide 21st-century services, something that was denied it during the previous two decades?

[Geoffrey Clifton-Brown]

That is precisely the reason for today’s debate. We need a little innovative thinking and a forward-looking vision for the Post Office to ensure that the maximum amount of the network remains profitable and open to serve the communities in which post offices are placed. That is what I hope to hear from the Minister. I shall now make some progress.

The most important thing that the Secretary of State said last Wednesday was that

“the Post Office plays an essential social and economic role in our communities.”—[Official Report, 27 October 2010; Vol. 517, c. 351.]

All Members know that only too well. Probably the first person to hear about a problem in the community is the postmaster or postmistress. This is precisely why I fought so vehemently against the announced closure of 12 post offices in my constituency in 2008. The closure of the local post office can have a huge effect on the community, but none more so than those in rural parts of the country, which often have no public transport and have already witnessed a decline in such services as pubs, schools, local shops and other amenities.

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[Mr Mike Weir (Angus) (SNP)]

I congratulate the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) on securing this important debate.

I have been debating the issue of post offices in all the time I have been in the House, and throughout that time there has been a continual decline in their number. Just before the general election of 2001, there were 1,933 post offices in Scotland. By March of this year, the figure had declined to just 1,446. In many areas of Scotland, the decline has been worse than in others.

In my own constituency of Angus, we have lost a number of post offices despite vigorous opposition to their closure. I am pleased to say that, in the last closure programme, we managed to save three post offices through local campaigns in the constituency. However, there remains a problem with many post offices, as alluded to by the hon. Member for The Cotswolds. Some are now in insufficient premises. Three of the large towns in my constituency—Forfar, Kirriemuir and Montrose—are now down to one post office that serves the entire town. Often, there are large queues at those post offices, which causes great frustration for customers.

I note that the Government have said that there will be no more closure programmes, but as the hon. Gentleman rightly said, that does not necessarily mean that there will be no more closures, because many sub-post offices are still facing financial challenges, particularly in these difficult times. I suspect that there will continue to be closures for other reasons.

I do not want to get involved in a sterile argument about who is to blame for the most post office closures—whether it was the last Government or the Tory Government before that. The truth is that post offices have been closing for a number of years, and we should look at how we move post offices forward and prevent closures in the future.

It should be borne in mind that many of the remaining sub-post offices are not stand-alone post offices but are coupled with a shop, which is often the only shop left in the local community. Indeed, I can think of only two post offices in my constituency that are not part of another business. It seems to me that in the last few years, the Post Office has deliberately gone out of its way to get rid of stand-alone post offices and get postmasters to take post offices on as part of another business, which is an interesting development to note.

The post office business itself does not provide a living for those running the business, but it is an important part of the business—the two elements cross-subsidise each other. The loss of the post office business or any other part of the business could bring the whole business down. In my view, we need to find ways of ensuring that the whole business is more viable.

I point out to the Minister the example of what has happened in Scotland. The Scottish Government have introduced a business bonus scheme that provides relief to businesses with properties in Scotland with a combined rateable value of £18,000 or less. The scheme has now been expanded, and where the cumulative rateable value of the properties of a business falls between £18,000 and £25,000, the scheme will offer some relief—up to 25%—to individual properties. As a result, all properties with a rateable value of up to £10,000 pay no business rates; those properties with a rateable value of between £10,000 and £12,000 get relief of 50%; those properties between £12,000 and £18,000 get relief of 25%; and, as I explained, if the cumulative values of the properties of a business are up to £25,000, the business can also get 25% relief on individual properties.

That scheme has been a huge boost to small businesses in constituencies such as mine, where many were struggling with the rates, which is one of small businesses’ major costs. It has obviously helped small post offices in villages and towns throughout Scotland.

In addition, the Scottish Government have launched a post office diversification fund, which has recently made awards totalling £1 million to help post offices to diversify and launch new business activities, in order to strengthen the vital role that they play in our local communities. The fund opened in July, with 49 post offices in 22 areas bidding successfully and receiving awards of up to £25,000. Examples of the diversification schemes that were approved include setting up an internet café, which the hon. Member for Ynys Môn (Albert Owen) was talking about earlier, and selling local produce. Indeed, I believe that one of the successful schemes involved setting up a post office in a fish and chip shop. That shows that those who run post offices are really thinking about how to meet the challenge of the future. The Welsh Assembly has, I believe, taken similar measures to boost post offices.

Those are concrete examples of how relatively small sums of money can be utilised—

[Albert Owen]

The hon. Gentleman is making a very strong argument about rural post offices and indeed about some post offices in urban areas, including small towns. As he said, the diversification programme gives grants, but one of the drawbacks is that if a business suffers and has to close or change, it loses that grant. Is there not an issue with mutualisation? I hope that the Minister will refer to it in his winding-up speech. Businesses are uncertain about which part will be mutual and what assets actually belong to the postmaster and can be held on to by them.

[Mr Weir]

The hon. Gentleman makes a good point and I was going to come on to the question of mutualisation in a moment.

As I was saying, the examples I have just given are concrete examples of how relatively small sums of money can be utilised to help to strengthen the post office network and hopefully put it on a more secure financial footing, thus helping to boost economic growth in many rural communities where there is often little other economic activity.

Indeed, Mervyn Jones, the commercial director of the National Federation of SubPostmasters, commented on the Scottish scheme:

“This announcement of successful applicants by the Scottish Government is most welcome. It means that many sub-postmasters can now invest in their businesses which will help them make their post offices more viable. The success of this scheme demonstrates the commitment that both the Scottish Government and our sub-postmasters have in maintaining this vital community service.”

I also note that, in a briefing for this debate, the National Federation of SubPostmasters says:

“Local and devolved government should offer full, automatic small business rates relief to support post offices; and provide grant funding to enable improvements in post offices and their retail businesses.”

That is what the Scottish Government and the Welsh Assembly are already doing, so perhaps the Minister should consider doing it in the parts of England that could also benefit from such schemes.

However much help is given to sub-post offices, it will not assist them if the basic business is allowed to atrophy. We had a lively debate on the Postal Services Bill last week. The Minister will not be surprised to learn that I still oppose the privatisation of Royal Mail, but I am interested in some of the possibilities for the post office network that are contained in the Bill, and I would like to explore his intentions with regard to those possibilities.

In that debate on the Postal Services Bill, I asked if there was any international equivalent of what is being proposed in the Bill, whereby there would be a division between the mail carrier and the post offices. I did not get a response to that question; indeed, it is a question that the National Federation of SubPostmasters has also asked. I wonder whether the Minister can let us know today if such an example exists that we can look at, to see how the proposed system might operate.

Clearly, that matter is of some importance because much of the work of the existing network comes through the inter-business agreement between the two companies in the network. Once again, the National Federation of SubPostmasters has raised concerns that that agreement might not be continued after privatisation. I know that the Minister’s view is that the brand identities of Royal Mail and Post Office are so interlinked that it would be in their interests to continue, but I am not so sure, once commercial profit becomes the overriding motive of the privatised delivery service, that it will necessarily continue with that link rather than considering other links as ways of delivering services. The future of post offices, particularly those outside major urban centres, remains in danger.

I turn to the point raised by the hon. Member for Ynys Môn about the mutualisation of the Post Office. I am a huge supporter of mutuals, and the idea is interesting. I would genuinely like to know more from the Minister and the coalition Government about how they propose to take it forward and how it would work. As I said earlier, all but two of the post offices in my constituency form part of another business. In other areas, many are situated in branches of WH Smith, for example, or a local supermarket. The structure is diverse, and it is difficult to see how it might work as a mutual organisation. I am not saying that that is impossible, but I wish that he would give us more detail so we can consider it, especially before the Bill is debated in Committee. I think that many Members would be interested in supporting the concept of a mutual structure, but we need to know the detail of how it will work. There is a great reluctance simply to accept the concept without knowing exactly what is being proposed.

Many post offices are integrated with other parts of a business, so individual sub-postmasters are concerned to know how that will work in a mutual structure. As the hon. Member for Ynys Môn asked, will the post office or the whole business be part of the mutual? How will the mutual interrelate with the rest of the business? If the Minister can convince many of us that there is a way forward, I think he will be able to gain support for the mutualisation rather than the privatisation of Royal Mail.

The post office network continues to play a vital part in the life of local communities, even in its slimmed-down state, and I hope that it will continue to do so for many years to come. I also hope that the Minister is right in saying that the days of mass closures are behind us, but it seems to me that a great deal of uncertainty remains about the future of the post office network, given the privatisation of the mail carrier and the woolly nature of the privatisation proposals. He needs urgently to flesh out Government policy on mutualisation.

The devolved Administrations are doing much to help keep existing post offices open, but we need a clear path for the future of the whole network and the confidence for sub-postmasters to continue investing in their businesses. If mutualisation is to work, they need a much stronger say in how those businesses are run, but there must still be a link to the main carrier, Royal Mail.

--- Later in debate ---

[Albert Owen (Ynys Môn) (Lab)]

I apologise for having to leave during the previous speaker’s contribution, Mr Caton—it was probably the excitement of the previous debate. I congratulate the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) on securing this important and timely debate, which follows the Government’s announcement last week.

I want to start by saying that I support the post office network, and I do so as a customer; I ensure that I pay all my bills across the counter at my local town post office. In doing so, I hope to set an example. As a Member, I ensure that all my office transactions are done in local post offices. As has been mentioned, it is wrong for Members to drive past post offices that are closing down and say, “Isn’t it a crying shame?”, before going to other outlets. We must lead by example in our communities if we are to keep our post offices.

The important business for post offices is not only from individuals, but from Government Departments and local government. The hon. Member for The Cotswolds rightly said that we need innovative business. One simple business transaction that local government could encourage council tax payers to undertake would be to pay their bills in local post offices. During the network change programme, I suggested that to my local council, because it was outraged that central Government were closing post offices. I challenged it simply to state on the notice that it sent to each household in my constituency that that service was available in post offices, but it refused to do so. Worse still, the chief executive said categorically that the council could save a lot of money by having people pay the bills electronically or in one-off payments.

I think that we are all in this together. We talk about the big society, and my Anglesey community has a big heart, but we do not need lectures on that from anyone. There needs to be interdependency and help from the public, private and third sectors, a point I will come to later. I opposed the network change programme’s closures because it was too rigid and came from the centre. I wish that the Conservative Opposition at the time had said that they would put money into that, but they did not commit themselves in the last Parliament to put in the subsidy, which is why I did not support the Conservative motion. I abstained, and people who know me know that I do not do that very often; if I think something is right I will vote for it, and if I think something is wrong I will vote against it. It was wrong of the Conservatives not to commit themselves to the subsidy, but the new Government have said that they will commit additional money to help the post office network, and I support that. It would be churlish not to do so. I think that that is important and must be sustained.

Echoing the comments of the hon. Member for Angus (Mr Weir), I am confused about the mutualisation programme. I support mutualisation. Indeed, I told the previous Secretary of State and the Minister responsible for the Post Office at the time that Royal Mail should be mutualised, because I believe that it is so special in the fabric of British society that it must be treated differently. It should be neither left to the laissez-faire approach and the free-for-all of the market, nor cushioned as it had been under previous management and Governments. I was told that mutualisation was the wrong model, but I do not think that Hooper looked at that model carefully enough. Welsh Water, for example, which operates in my constituency, is a not-for-profit organisation. It provides a universal, quality service in Wales, and all its profits are reinvested in the company for the benefit of the customers. That is the kind of model we need for Royal Mail. I hope that the Minister will give some details on the mutualisation for the post office network.

Ultimately, post offices are private businesses in the main. They are run by individuals who have invested their own hard cash, time and effort to provide a public service. They are private means. There are also the private subsidies from Government and, in the case of Wales and Scotland, a special diversification programme to help keep the businesses open, so there are three streams of investment to the post office business.

I wonder how the mutualisation will work and, if there is difficulty, how post offices will get help. There will be difficulty, because business is dropping as the pattern continues of people using mechanisation and electronic mail, which is taking over. There are big concerns, which I am sure the Minister will try to address, because it is important that people know now what will happen. I have friends who are postmen, sub-postmasters and in management, whom I work with, and they are all confused about that. We need clarity on that matter

[Gregg McClymont]

I want to add to something my hon. Friend has said. Our understanding from Post Office Ltd is that only about 4,000 of the 11,500 post offices now open are profitable. In addition to the public subsidy, Post Office Ltd cross-subsidises the loss-making post offices to the tune of £400 million. The Government subsidy is welcome, but we have to be clear that it really is an uphill task. Mutualisation will have to be tremendously successful to make up the shortfall for those 7,500 post offices.

[Albert Owen]

My hon. Friend is absolutely right, although it is not for me to answer on the Government’s proposals. I would like to see something developed along the lines of the people’s bank. I would like to see credit union activities in local communities, in which people will have a real say on what goes on.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I thank my hon. Friend for mentioning credit unions. Does he agree with me that one of the useful things that the Government could do with the subsidy they propose to put into post offices is support the back office integration that needs to happen and the technology that would allow post offices and credit unions to work together?

[Albert Owen]

I absolutely agree, and I think that a mutual, with its ethics, could do that. There is a way forward, but I am unsure of the detail at present, so I will not commit that that can be done in the proposals we have seen and in the form they have been given.

Other Members wish to speak, so I will conclude my remarks by referring to another issue that the National Federation of SubPostmasters has raised: the separation of the Post Office from Royal Mail, and the inter-business agreement. The hon. Member for Angus asked whether there is an international model that the Minister has in mind that is successful, and I would be grateful if the Minister responded. If we do away with a third of the business or privatise it, there is a risk that it will look at its shareholders as its main priority, rather than the post office network. Those are my concerns, and I am sure that the Minister will look to address them.

[Mr Philip Hollobone in the Chair]

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[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)]

The debate has been extremely good; I counted at least 26 Members present during our discussion. We heard passionate defences of the services that many of our constituents enjoy up and down our country, and I want to reply to as much of the debate as possible, although I will be making a statement in the very near future—but not tomorrow; I apologise to my hon. Friend the Member for Solihull (Lorely Burt). We will publish our policy statement soon, and I hope that hon. Members will enjoy reading it and questioning me and other Ministers as we go through the Postal Services Bill over the next few weeks and, possibly, months.

I congratulate the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) on his exemplary speech. He started by praising the Government, which is always a good beginning. It would have been even better if, with a Norfolk accent, he had burst into song like the postman; nevertheless, he talked cogently about the issues in his constituency and showed what a fine constituency MP he is. He has campaigned for his constituents, particularly for the local post offices in Stratton and the Beeches, and, although they were closed, he is still campaigning and working with local sub-postmasters and councils on putting forward a report to Post Office Ltd. His remarks about the importance of outreach services and their potential were well made.

Even before the debate, the hon. Gentleman scored a major victory because he got a review for those post offices and the potential for reopening them. He is meeting Post Office Ltd management shortly, and I wish him luck. He will understand that through legislation and Government practice over time, Post Office Ltd and Royal Mail operate at arm’s length, so it would be wrong for a Minister to instruct Post Office Ltd to meet his demands in detail, but he has already made a powerful case. I am sure that he will be listened to closely.

The hon. Members for Angus (Mr Weir) and for Ynys Môn (Albert Owen), among others, raised our plans for mutualisation. There is a little confusion, so I am grateful for the opportunity to put it right. The proposals in the Bill focus on Post Office Ltd—the national organisation that holds everything from the intellectual property, to the brand, the contracts, the discipline codes and so on. We are proposing that it could become a mutualised organisation in due course, if the network became more financially viable through our other plans. Let us be clear: that would mean an organisation that could be owned and run by sub-postmasters, post office employees and communities.

How are we approaching that? Because we need a number of years for our policies to take effect, it will be some time before we can be sure that the post office network is completely viable, but I hope that in the lifetime of this Parliament we can move towards mutualisation. We want a real debate, so I welcome the contributions that we have had. We have already had a pamphlet from Mutuo discussing the possibilities of mutualisation. The Government have asked Co-operatives UK to consult widely, not only within post offices, but in the co-operative movement and other mutualised organisations with expertise in the area. We asked it to do that because Government do not run co-operative and mutual organisations. This is not about Government imposing a structure; if the process is to be successful, it must be organic, which is why we are keen for the first big consultation on it to be led from outside Government.

Of course, Government must take responsibility, and once we have had the response to the Co-operatives UK-led consultation, we will hold a national consultation, which I expect to start some time after the Postal Services Bill receives Royal Assent. Members of the wider public can then be involved in the consultation. That will prepare the ground and the details, so when we have a financially viable post office network, or a network that is on train to becoming financially viable, the mutualisation option will become real. That is not to say that individual post offices cannot be mutualised.

As hon. Members know, individual post offices are often single, sub-postmaster-run, privately owned businesses. Some are chains run by different agents—such as WH Smith —and some already operate on a mutual basis, either as community mutuals, and we have heard examples of those, or through mutual organisations such as Co-operatives UK. Mutualisation already exists locally, and I think that more than 1,000 post offices are already run in that way. We are talking about mutualising the national organisation, which will improve the incentive structure by aligning the incentives for local sub-postmasters at community level with the incentives of the national organisation.

I hope that is a full answer. I am grateful for the opportunity to put it on record.

[Albert Owen]

There is a social enterprise in my constituency. That would be straightforward—a mutual could work with a mutual—but how would a private business that is investing retain its assets? Would that company have to go mutual to have a relationship with Post Office Ltd in its new form?

[Mr Davey]

No, it would remain a private organisation, but it would have a share in the mutual organisation, which would give it contracts and so on. In no way would we take assets from individual private entrepreneurs who have set up post offices and run them for years. That would be wrong.