Post Office Network Subsidy Scheme (Amendment) Order 2010

Baroness Wilcox Excerpts

Wednesday 8th December 2010 Grand Committee

Moved By

[Baroness Wilcox]

That the Grand Committee do report to the House that it has considered the Post Office Network Subsidy Scheme (Amendment) Order 2010.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, I remember, as other noble Lords certainly will, a time when what we now call Royal Mail was known as the Post Office, and then, briefly, Consignia. So perhaps I may start by being absolutely clear about what we mean by the Post Office and what we are here to discuss. The Post Office is an unrivalled network of around 11,500 shops where you can post your parcel or collect your pension. Royal Mail is responsible for collecting and delivering our letters. It provides the universal postal service that connects any post box to every address in the country.

The Government are committed to a strong and sustainable Post Office network. That is why on 27 October we announced funding of £1.34 billion for the Post Office network over the spending review period, subject to state aid approval from the European Commission. On 9 November, we published the policy statement, Securing the Post Office Network in the Digital Age, setting out our plans and commitments for the network. On 13 October, we published the Postal Services Bill, which is currently being debated in Committee in the other place. I shall expand on our plans for the Post Office network shortly, but perhaps I may first address the substance of the instrument currently before the Committee—which is all we are really seeking to discuss today.

The previous Administration introduced the Post Office Network Subsidy Scheme Order 2007 under provisions in Section 103 of the Postal Services Act 2000. The Act allows the Secretary of State to make an order permitting payments for the purpose of assisting in the provision of public post offices or assisting in the provision of services to be provided from public post offices.

Under the terms of the subsidy scheme order, the Government can provide funding to keep post offices open or to enable the establishment of post offices in areas of the country where, without funding, it is unlikely that they would be provided. The current scheme allows the Secretary of State to make payments of up to £160 million in any 12-month period beginning on 1 April. As we want to provide more funding than at present, we are seeking to amend the current order to increase the limit to £500 million.

For the next four years, the largest tranche of funding that we have committed in any one year is £415 million. Increasing the cap on the level of payments made under the subsidy scheme order to £500 million allows for some flexibility and contingency; for example, in case of changes to the tax treatment of the funding. We know that this is a large increase but I am sure that noble Lords will agree that the Post Office is a valuable national asset. It is much more than a commercial entity and serves a distinct social purpose. That is why the Postal Services Bill ensures that the Post Office will not be for sale.

The previous Government provided funding for the closure of 5,000 post offices; our approach is different. We will address the real economic challenges that the network faces. Our funding will enable the Post Office to do more than simply maintain the status quo. As well as receiving funding for loss-making branches, the Post Office will be able to invest in the network and introduce new technologies so that branches can be brought up to date. As the previous Government did not fully compensate Post Office Ltd in association with its maintenance of the Post Office network, our funding will give it the opportunity to invest its own resources in developing new revenue streams.

There will be no programme of post office closures on our watch. This funding will ensure that there continues to be a network of around 11,500 post office branches in the UK that continues to meet the post office access criteria. They ensure that 99 per cent of the UK population is within three miles of the nearest post office outlet, while 90 per cent is within one mile. They also contain specific protections for people in rural and deprived urban areas.

Furthermore, the proposed modernisation of the network which we set out in the policy statement will allow for longer opening hours and a faster service. This will make the Post Office more convenient for customers. It will also make it a stronger retail partner for Royal Mail.

However, the number of letters that we send is projected to continue declining over the coming years. Although the growth of online shopping and parcels offers opportunities for the Post Office, it will also need to develop revenues from other sources. These can be divided into two main areas: government services and financial services. We want the Post Office to become a genuine front office for government at both national and local levels. We are exploring the scope for greater local authority involvement in the planning, delivery and level of post office service provision. In terms of financial services, the Royal Bank of Scotland and the Post Office reached agreement last month to allow their customers, including those of NatWest, to access their accounts at post offices. This means that almost 80 per cent of current account customers will be able to withdraw cash free of charge at a Post Office branch.

However, we—and especially me, as I am getting rather over-excited by all this—must remember that today we are here to discuss the Post Office Network Subsidy Scheme (Amendment) Order 2010. New funding will help to ensure that the Post Office network has a secure and sustainable future. I hope that noble Lords will agree that the Post Office network should continue to play an important role throughout this country and will therefore approve the order.

[Lord Cotter]

I support the Minister on this measure. It is extremely encouraging that the coalition’s approach is a determination to keep our sub-post offices open. I do not wish to have a go at the Opposition but that is extremely welcome in contrast with the previous Government, under whom there were a lot of closures.

When it comes to regulations and Bills, I am always very keen to see whether there is an impact assessment. On this occasion, there is apparently no impact, but I simply raise it as a point that I always tend to raise because, if there is an impact, we must be sure that the matter is addressed when a regulation is brought forward. However, in this case, it does not apply.

I congratulate the Minister on taking the wind out of my sails. I was going to ask for details of what the subsidy would be used towards and so on, but she came forward with some very tangible points which, as I said, took the wind out of my sails. I was going to ask what measures there might be, particularly with, as the Minister said, the decline in the number of letters and in the sale of stamps and so on. Therefore, it is very good to talk about new revenue schemes, longer opening hours and the network being a very strong part of Royal Mail. The Minister also talked about central and local government services being directed, wherever possible, to the Post Office, and of course we have learnt that the banks are going to be engaged in the new arrangements.

Therefore, I shall not waste Members’ time and shall say no more, other than that I very much applaud what has been discussed and I thank the Minister very much for explaining it so clearly. Tangible measures and initiatives will be brought forward to implement what is proposed.

--- Later in debate ---

As I said, we do not want to see the privatisation of the Royal Mail service but if the Government persist and it is going to happen, we cannot see what is wrong with including in that legislation a mechanism by which to protect the Post Office network. That is clearly what the overwhelming majority of the public want to see. Most people cannot imagine that it would ever be any different. The Government specify all sorts of regulations that private providers have to comply with: look at the various schemes that the energy companies are expected to participate in. To conclude, we welcome the increase in subsidy and in the range of services that the Minister has outlined. Nevertheless, I hope that the Minister will deal with our concerns in her reply.

[Baroness Wilcox]

My Lords, I am grateful to those of your Lordships who have participated. The Post Office network is an important national asset and it is important that we ensure it has a secure and sustainable future. My noble friend Lord Cotter paid me the compliment of saying that I had taken the wind out of his sails. As I am a sailing woman, I hope very much that I can reverse that. I hope that I raised the wind in his sails rather than taking it out of them.

My noble friend went on to talk about an impact assessment and I have a little note here on why we do not have one. It says that, as stated in the Explanatory Memorandum to the Post Office Network Subsidy Scheme (Amendment) Order, we do not believe that this order requires an impact assessment. The Government’s core policy is to ensure a Post Office network of at least 11,500 branches, which continues to meet the access criteria that were implemented in 2007 after national public consultation. This is a continuation of existing government policy and therefore does not constitute change for which the impact should be assessed. Moreover, the Government’s guidance on impact assessments states that spending proposals do not generally require them, as they are developed through a business case process. Well, there we are. However, I was delighted to have his support and I hope to continue to have it when the Bill comes to this House, fairly soon.

I also thank the noble Lord, Lord Jones, for his support. I was listening to his experience in another place and heard of the Flintshire village in the Welsh hillside, whose name I could not pronounce.

[Lord Jones]

Llanfynydd.

[Baroness Wilcox]

Of course. I am not even going to try it.

[Lord Jones]

Which, being translated, means the little church on the hillside.

[Baroness Wilcox]

Well, how lovely indeed. Of the post offices, the rural ones are obviously those which we are all most concerned to do everything that we can to try and keep open.

In the last two outings that we have had facing each other, I have managed each time to call the noble Lord, Lord Young, “the Minister”. I shall try this time not to do it and to remember that I am the Minister. I also forgot the noble Lord’s background in the industry, when he reminded us of the GPO. I am not going to be tempted by him—I have been warned about this—to wander into the Bill, which will of course be with us some time at the beginning of next year. I look forward very much indeed to debating with him when the Bill comes, because of all his experience when he was a Minister. I am sure that he will have some pretty splendid arguments to put up.

I think that I have covered most of the points made. People have been very good. Your Lordships have seemed to be in support so all I need say at this stage, Deputy Chairman, is that I commend the order to the Committee.

Motion agreed.