Post Office Closures

Debate between Chi Onwurah and Clive Betts

Tuesday 19th October 2021 Westminster Hall

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

It is a great pleasure to serve under your chairmanship, Mr Betts. I want to echo your tribute to our friend, Sir David Amess, who was tragically and horrifically murdered. As you said, he could well have been in the Chair for today’s debate. As my hon. Friend the Member for Hammersmith (Andy Slaughter) said, this is the kind of debate that Sir David would have truly appreciated. I am sure that there would have been a reason why post office closures showed that Southend needed to be a city, and I am so glad that that is to be realised. This is also the sort of debate that he would have appreciated because Members on all sides have conducted it with affability, civility and respect. I want also to pay tribute to the hon. Member for Motherwell and Wishaw (Marion Fellows), not only for securing the debate but for the great cross-party work that her APPG does to support post offices.

As we have heard, for 361 years the Post Office has been at the heart of the community, and post offices have established themselves as the backbones of local economies across the United Kingdom. My hon. Friend the Member for Hammersmith, the hon. Members for Keighley (Robbie Moore), for Caithness, Sutherland and Easter Ross (Jamie Stone), for Strangford (Jim Shannon), for East Renfrewshire (Kirsten Oswald) and the SNP spokesperson, the hon. Member for Glasgow East (David Linden), have spoken of the contribution that post offices make to our constituencies. The network provides over 170 essential services to 17 million customers and one third of small businesses each and every week.

More recently, the pandemic has highlighted how vital a reliable postal service is—I am sure that we all appreciated that during the pandemic. A survey by the National Federation of SubPostmasters found that 97% of post offices that remained open during lockdown did so to support their local communities. Sub-postmasters stepped up as key workers, not only keeping us connected but going above and beyond their job descriptions by offering services such as grocery deliveries for vulnerable customers. I thank them for their work during the pandemic, and also pay tribute to the CWU for its support and campaigning on post offices.

As this debate has shown, postal services matter to everyone, but customers and businesses in the most rural and vulnerable communities are paying the biggest price for closures. A 2015 freedom of information request revealed that, out of the 20 north-east branches marked as temporarily closed, 17 were closed for more than a year and seven for more than five years. To put that in context, the north-east has 499 open branches, already the lowest number in any UK region. Hon. Members have spoken of concerns about closures in their constituencies. In my own constituency of Newcastle upon Tyne Central, we have seen a number of closures, often in deprived areas such as Kenton, where I grew up. Other branches have moved into private sector operations, despite opposition from local MPs and residents. For example, the Gosforth high street post office was moved to a convenience store on a secluded residential street, without nearby bus stops or non-permit parking—a decision made with complete disregard for accessibility. We have heard from hon. Members of similar experiences in their constituencies. In 2019, the former Minister, the hon. Member for Rochester and Strood (Kelly Tolhurst), stated to the BEIS Committee that it was a Government commitment to maintain the post office network at 11,500 branches. Does the Minister plan to uphold that commitment in our post-pandemic economy?

With only 1% of branches managed directly by the Post Office, many sub-postmasters are relying on the Government’s subsidy to remain financially viable. However, sub-postmasters are resigning at a faster rate than they can be replaced due to the difficulty in making a decent living. That has been a major driving force in the decline of the network. In 2019, the National Federation of SubPostmasters found that 76% of members were struggling to earn the national minimum hourly wage, resulting in an estimated 22% planning to downsize or close their post office in the coming year. What recent discussions has the Minister had with Post Office Ltd on the incomes of sub-postmasters, and what steps he is taking to minimise the risk of further closures?

During the pandemic, reduced footfall and post offices’ inability to access many coronavirus support packages saw many temporary closures become permanent. Between March and April 2020, the number of open branches fell by 651 from 11,638, and 388 of those closures were of outreach services in the most remote parts of the UK. In August, the BBC reported that 260 temporarily closed branches were still closed as of 30 June 2021. What steps is the Minister taking to ensure that the number of open branches returns to pre-pandemic levels?

The post office subsidy provides a fixed amount of remuneration to an estimated 5,000 post offices, including 1,600 outreach services operating from mobile vans and village halls on a part-time basis. But the Government have ignored the importance of the subsidy, which has decreased from £210 million in 2012-13 to £50 million in 2020-21. Two years ago, the hon. Member for Rochester and Strood told a Select Committee that the Government would look to continue to support the post office network, sharing this responsibility with Post Office Ltd. Much has changed since this pre-pandemic statement. What assessment has the Minister made of the ongoing impact of covid on post offices, and how does he plan to fulfil that promise in the future?

Last year I welcomed the announcement of a £227 million investment, including a £50 million subsidy to support the rural post office network. However, the CWU rightly stated that it is unlikely that this investment will be sufficient given the amount the post office will have to raise to cover future legal claims associated with the Horizon scandal, which remains the greatest public scandal that our country has suffered, and the implications of which are still being felt by many current and former sub-postmasters who are struggling to gain the compensation the Minister seemed to promise. The more than 900 false prosecutions resulting from the Horizon scandal destroyed lives, families and reputations, and we have yet to see public confidence restored. Indeed, I do not believe that public confidence will be restored without justice for those whose lives were ruined. The Government must ensure that this justice does not come at the expense of our post office network’s survival. What steps is the Minister taking to maintain the financial viability of the Post Office, and will considerations be made for the continuation of the subsidy beyond 2022?

Finally, many Members have spoken about the importance of access to cash. It is worth noting that the subsidy I have spoken about is for the rural networks, but with 55 banks closing every month and up to 8 million people relying on cash daily, the impact of closures on access to cash in both rural communities and urban ones such as my own must be considered. The post office network provides financial services to individuals who are digitally excluded, are ineligible for a bank account, or use cashless services. In 2019, a report by LINK found that 47% of the UK population believes that losing that access to cash would present real challenges. Despite that, 10% of free-to-use ATMs were disconnected during the pandemic, further exacerbating the lack of access. Post offices have been left to pick up the slack, with recent figures suggesting that they will shortly exceed £3 billion a month in cash deposits and withdrawals for the first time in history, so I ask the Minister what assessment he has made of the impact of bank closures on the importance of the post office network, and what plans he has to ensure that banks offer support to post offices that take up their services.

As we have heard, post offices across the country offer more than commercial services: they are a source of social interaction for the vulnerable and lonely, a key touchpoint between people and Government services, and a vital part of local communities. The Post Office is a great British institution that has fulfilled a social purpose for centuries, but it is also an institution that the Government are failing to support. Managed decline is the story of our times under the Conservative Government. Labour is committed to protecting our post office network, and will fight to ensure that postmasters are given the support that is needed to guarantee that network’s survival. I hope the Minister will join us in that mission.

[Mr Clive Betts (in the Chair)]

I ask the Minister to allow two minutes at the end for the mover to wind up.

Local Authority Funding

Debate between Chi Onwurah and Clive Betts

Tuesday 3rd December 2013 Westminster Hall

[Chi Onwurah]

I had the pleasure of visiting Oldham not long ago, and my hon. Friend is absolutely right to highlight the disproportionate cuts that Oldham is suffering under this funding approach. I will speak about the new homes bonus shortly. The Government claim to be giving money to councils such as Oldham and Newcastle, but they are in fact taking away far more than they are giving.

The Audit Commission estimates that one third of councils, many of which are in the most deprived areas, are at risk of financial failure in the medium term under current proposals. An equal percentage cut based on spending power would bring significant benefits to many of those deprived areas across the country, not only in Newcastle and London but in the north-west and the shire counties and districts.

Children’s social care is an area of particular concern as we see growing need and reduced funding. In Newcastle and the north-east, there are real and growing concerns about the pressures on children’s services. Indeed, I recently looked at a website containing anonymous reports from social workers working in children’s services, and it was a frightening insight into the pressures that they face.

The number of looked-after children is growing at 11% nationally, with higher pressures in the north-east. Councils have seen a 4% cash increase in costs, but DCLG and the Department for Education have cut children’s social care funding by 30%. Children’s social care assessment was cut by 30% between 2010 and 2013-14, which is about four times the assumed cut, while the number of looked-after children has increased by 31% in the north-east since 2009. Budgeted spending on children’s social care rose by 4% nationally, but by just 1% in the north-east.

When ANEC raised concerns, the response by Ministers at the Department for Education was that councils would have to find the cuts “somewhere else.” It is difficult to see how a further 25% cut in core funding in the north-east can in any way be justified. How can it be taken out of children’s services over the next two years? Will the Minister explain why spending on children’s social care has been cut so much when the levels of need are increasing?

Ministers like to come up with complex formulas for giving money to councils that tend to benefit wealthier authorities, but when it comes to cutting money, Ministers are increasingly turning to crude holdbacks and top-slicing from the central revenue budget. It is possible that not everyone here is familiar with holdbacks. Indeed, I confess that, prior to entering Parliament, I did not follow the intricacies of local government financing with as much attention as I possibly should have. I dread to think how much excitement I have missed as a result.

A holdback is when Ministers or civil servants decide that money allocated to councils will literally be held back by Whitehall for a specific purpose or on a certain condition, which, again, disproportionally affects the most deprived councils. Money is being cut from the central pot, the revenue support grant, which automatically means that councils with the highest need lose out the most. If the Minister decides that he wants to hold back £500 million, for example, it comes from the central budget, which means that all councils lose a slice. The councils that would have received a bigger slice, because they have greater need, lose out more. A holdback of £500 million would mean that Newcastle loses £4 million, whereas Wokingham loses only £400,000. That is a £32 cut per household in Newcastle and a £6 cut per household in Wokingham. Authorities such as Hackney and Birmingham are even worse off, at £50 and £37 per household respectively. All authorities would then get some money back, but if the funding is skewed to favour wealthy authorities, as it so often is under this Government, the effect is a budget transfer from poor to rich, which is Robin Hood, disguised as a Whitehall accountant, in reverse. That is not a pleasant sight.

Parliament has decided that the money should be used to fund councils for services that they have a legal duty to provide. SIGOMA, ANEC, the Audit Commission and the Joseph Rowntree Foundation have all highlighted the problem, so will the Minister explain whether he agrees with their analysis? With what does he disagree? Why are the Government increasingly using holdbacks to fund projects?

This week, we have been reading in the papers that on Thursday the Chancellor plans to cap business rate rises. With small business Saturday this weekend, it would surely have been more appropriate and beneficial to local economies if he had stolen another Labour policy by cutting and then freezing business rates. The Chancellor should not feel shy.

When councils were told that business rate takings were to be localised, thereby shifting the risk on to the councils, I do not think they expected that any potential reward would be offset by equal cuts to their revenue funding. The business rate safety net is yet another example of how unfair holdbacks can be for poorer areas. Will the Minister tell us whether the business rate safety net is flawed? Was it designed on purpose so that councils such as Newcastle end up funding shortfalls in business rate takings in Westminster by a staggering amount?

The safety net—again, this a technical description of a complex area—provides funding for any council for which business rate receipts fall more than 7.5% below its baseline funding level. The safety net is funded by a levy on councils for which the increase in revenue from business rates outstrips the increase in its funding level and holdbacks.

A holdback of £25 million was originally created to fund the difference between levy funds and safety net payments so that all authorities would fund the safety net. The history is quite complex, but what is crucial is that, because the estimated levy amount has proved inadequate, the top-slice holdback has been increased to £120 million next year. That is a staggering increase, and SIGOMA says that, because of the system’s design, Westminster city council will claim more than two thirds of the national £79 million safety net pot next year. That is two thirds for one of the richest councils in the country. Again, funding is disproportionately going from poorer areas to richer areas.

[Mr Clive Betts (Sheffield South East) (Lab)]

I congratulate my hon. Friend on securing this important debate. I am sorry that I cannot stay until the end.

Anticipating what might come on Thursday, and assuming the Chancellor is minded to go some way towards assisting small businesses by freezing business rate increases next year, does my hon. Friend agree that it is essential that the Chancellor makes it transparent that any costs should be borne by the Exchequer, not by local authorities? Given the sleight of hand that she has just described, we want that spelled out in crystal clear terms to assure us that it is being done.

[Chi Onwurah]

My hon. Friend makes an excellent point, as always, and he is absolutely right. I have lost count of the number of occasions that I have heard Ministers announce funding for my local authority—I will give the example of the new homes bonus in a minute—that is actually a cut in funding more generally. If the autumn statement on Thursday is used to announce any further support for business rates or for local authorities, I am sure that the Chancellor will set out transparently exactly where the funding will come from. If he does not, I am sure that parliamentary questions will follow.

I could consider the approach to be an error, mistake or one-off, but several holdbacks have had a similar effect, and the new homes bonus is one of the most important. Money is top-sliced from the revenue budget—everyone’s budget—but then finds it way predominantly to the wealthier parts of the country. I always thought that a bonus was something extra on top of a payment.

[Chi Onwurah]

Exactly. I thought that that was inherent in the term. Ministers in this Government, however, fund their bonuses not only from existing money, but from existing money that some might argue is not theirs.

The new homes bonus increases cumulatively for six years and is estimated to peak at some £2 billion. The increases are funded by deducting the increase from the revenue support grant, so it favours authorities in wealthier parts of the country, owing to their higher house prices and relatively low reduction in needs-based funding. Although Newcastle loses £5.3 million through top-slicing to fund the new homes bonus, it is given back only £2.2 million. The Minister gets to put out a press release saying that he is generously rewarding the council with £2.2 million, but nobody notices the reality that Newcastle has actually lost out by £3 million. Wiltshire, for example, will have seen a net gain of over £4 million. At the same time, my surgeries and mailbox are testament to the fact that the lack of affordable housing is a critical issue for my constituents.

The new homes bonus is unfair and does not work, which has been confirmed by the National Audit Office and the Public Accounts Committee. Does the Minister intend to press ahead with it? Newcastle city council and the Association of North East Councils have called for it to be frozen at 2013-14 levels. What is the Minister’s view? It would allow him to return some of the planned holdbacks to core funding and to relieve some of the pressures that Newcastle and other councils are facing.

[Mr Betts]

My hon. Friend is making a good point about the new homes bonus, which is one of the original and probably largest holdbacks, and she is right to draw attention to the Public Accounts Committee report. As she says, the key is in the title—new homes bonus. It is not a bonus, and the Public Accounts Committee decided that there was no evidence that it had led to the building of any new homes.

[Chi Onwurah]

My hon. Friend makes an excellent point. I was in the Chamber when it was revealed that the new homes bonus’s purpose was not to build new homes, which reveals a subtlety of language that I confess is beyond me. It is clearly of concern, and I am sure that the Minister will explain not only what the bonus is achieving, but how we can ensure that it is more fairly distributed, so that Newcastle and other authorities are not disadvantaged.

Will the Minister also explain why the figure in the settlement paper for 2015-16 is £210 million higher than that quoted in the new homes bonus consultation, which was based on an estimate from the National Audit Office? Would he consider using the National Audit Office figure? The Local Government Association estimates that £210 million would cover the cost of filling 4 million potholes or 30% of the country’s street-cleaning bill for a year. It would be good to know what has happened to and what is being done with that money.

Finally, I want to discuss the stability and transparency implications of the Government’s use of holdbacks. It is essential that councils get consistent figures when planning budgets. Newcastle city council has identified several other holdbacks, amounting to over £550 million next year and a massive £1.5 billion the year after, that would be better either returned to core funding or funded through other means. The holdbacks include capitalisation, the collaboration and efficiency fund, the fire transformation fund, the independent living fund, the troubled families fund and the money for the new social care burdens. I would welcome the opportunity to discuss them in more detail with the Minister if he feels that he does not have the time to speak to each today.