Rural Post Offices

Derek Thomas Excerpts

Thursday 13th December 2018 Commons Chamber

[Derek Thomas (St Ives) (Con)]

Heamoor, Guval, Carbis Bay,  Leedstown, Praa Sands, Newlyn, Crowntown, Lizard, Porthleven, St Keverne: these are communities that have either lost their post office branch in recent history or where the branch is at risk of closure. I stand here today to call on the Government to make it clear that there is no post office closure programme. However, we must do more to secure the future of these rural post offices, and to do that we need to enjoy the confidence of sub-postmasters and the businesses that could consider hosting a post office counter in their outlet. I believe that large numbers of sub-postmasters have lost confidence in Post Office Ltd, and for businesses considering taking on a post office service within their current establishment, the word is out that it is not a viable business and they would do well to leave well alone. This is not something that I have stumbled upon recently. I have been working with post office branches, Post Office Ltd and local communities for over three years now, and despite an extraordinary effort by all concerned, including local Post Office Ltd personnel, we have not yet been able to resolve the difficulties faced by sub-postmasters. 

It is vital that we secure the future of the rural post office network which, as we know, is integral to rural communities, often forming the hub of commerce within their villages and providing banking and post office services to constituents who would otherwise be unable to access them. The problem of post office closures is not a west Cornwall issue alone, although I would argue that if we can resolve some of our particular challenges, such solutions could be applied elsewhere, strengthening the network for all who need it.

The National Federation of SubPostmasters, with which I have been working closely, informs me that in 2018 some 8% of post offices have seen temporary closure, with 66% of those closing due to the resignation of the postmaster. For many postmasters, the business is neither viable nor fair financially. That is particularly the case in rural constituencies like mine, and it has a profoundly adverse effect on customers who rely on the vital services that the post office network provides.

Earlier this year I sought the support of constituents in west Cornwall in calling on the Government and Post Office Ltd to make sure that sub-postmasters have a viable business, to force banks to pay sub-postmasters a fair price for their services, and to increase the services available to rural post office branches. I want to touch on those three areas and explain why they are so important.

During the campaign I contacted 10,000 people and received over 1,700 responses. That is a greater response than to any previous local campaign and shows how important the issue is to my rural constituency. Those who responded agreed with me that it is in everybody’s interest to have a viable post office network, which creates thousands of jobs and sustains communities. I am grateful to the communities right across west Cornwall and the Isles of Scilly who are so passionate about maintaining the post office network, and to the sub-postmasters, who work hard every day to provide a service and to provide access to good provision.

It is vital that the Government intervene to ensure that sub-postmasters have a viable business. Post Office Ltd takes responsibility for the post office network on behalf of the Government and it is falling short. This is despite the Government’s £2.4 billion investment in the network since 2012. People expect to get value for money. Overall remuneration to postmasters fell again last year, by £17 million, and is predicted to fall by a further £10 million. The rural post office network is not in a good place yet Post Office Ltd reported profits of £36 million in the year 2017-18.

I have been working with one particular community on the Lizard. The current arrangement, which ensures that the local community has access to post office services in the summer and also in the quieter winter period, cannot be maintained—and nor should it be—but the Post Office has spectacularly failed to find an alternative arrangement that maintains a service for the community and treats the current sub-postmaster, who has given several decades of his life to his community, with respect. In a meeting with the chief executive of Post Office Ltd on 24 April this year, I was assured of her commitment to find a solution, but there has been no further communication from her or her office. It has been left to the local community and local Post Office representative—whose responsibilities span the entire Duchy of Cornwall—to find a solution. So, three years on, there is no change.

I have now taken the fight to the Government. In a recent meeting with the Minister for Rural Affairs, I proposed a winter payment plan that recognises that the footfall over the winter is considerably reduced. That plan would help the businesses to be sustained through quieter off-peak periods. This would maintain the service for those who live in the area all year round, and ensure that the service is open when the visitors descend. I also stressed the need for a dedicated mobile service so that post office services can be provided quickly following a post office branch closure. Six of the seven post office closures in west Cornwall have left local residents with no easy access to post office services since their branch has closed. In fact, the one post office that enjoys a mobile service has had no service this week because of ill health. Even that post office, which provides temporary services for two hours, two days a week, has not provided those services this week. This is in Newlyn. It has a large community and is the fourth biggest fishing port in the country, yet is has no post office service.

I am grateful that Lord Gardiner and his officials agreed to meet the chief executive of Post Office Ltd to explore these demands. A post office branch must be a viable business for the owner, and I have long argued that Post Office Ltd has no vision or plan for rural post office services. It is now for the Minister to intervene and find a bespoke solution that supports post offices during the winter to maintain an essential service all year round. This is true not only for rural west Cornwall but for about 6,000 sub-post offices around the country.

Also, post office banking must pay. We are all acutely aware of the decline in high street banks. Now that most banking transactions can be made in a post office branch, this offers a real opportunity and a great plus for the post office network. In 2016, when it first became possible for banking services to be provided in post offices, it was a great leap forward and offered real hope and opportunity for many post offices. Post office banking has experienced strong growth of £20 million, as reported in the Post Office’s own financial report this year, but the reality is that only £3 million of that £20 million has filtered through to the postmasters. The industry average charge to a business depositing £1,000 in local and community branches of the Post Office is £10, of which the postmaster will receive only 24p for the transaction. In a larger branch, the figure rises to 37p per £1,000 transaction. For at least one of my former post offices, it was the banking that broke the camel’s back. The postmaster was taking the risk and the responsibility of handling tens of thousands of pounds every week but being paid only a few hundred a year for the privilege. That community no longer has a post office branch.

Another part of the campaign, which has received such support in my constituency, is that the Government and Post Office Ltd must maintain and grow post office services. The Government share some responsibility for the services that are available over a post office counter. As we speak today, the Department for Work and Pensions is writing to people who use their post office account to receive their money to encourage them to switch to a bank account. Those people can still do the transaction at the post office for as long as the post office survives, but the DWP is sending a worrying message regarding the Government’s commitment to the post offices by encouraging people to move away from the post office account.

I have met, and received some reassurance from the DWP Minister on this issue. The Government need to be taking steps that help our post offices and our vulnerable constituents, not creating confusion and divorcing our constituents from their source of support. For many, the post office is their only way of accessing the benefits system, and the Post Office relies upon offering this service to customers. Furthermore, sub-postmasters look out for vulnerable customers and often reach out to the lonely and isolated. Opportunities for someone to do that are becoming rarer in rural communities such as mine, so securing the sub-postmaster will secure not only the service, but provide the chance for someone to look out for the vulnerable and isolated in the countryside.

An added dimension and potential threat to the Post Office network that must be considered is that Royal Mail and the Post Office are different businesses facing different challenges. To maintain the Post Office in public ownership and enable private sector investment in Royal Mail’s letters and parcels business, Post Office Ltd was separated from Royal Mail Group Ltd in April 2012. To ensure the continuation of their existing business relationship, the management of Royal Mail and the Post Office put in place a commercial contract between the two parties at the time of separation with the longest possible contract length permitted by law. That commercial agreement is coming to an end, and negotiations on their future relationship have started. They complement each other well and are natural business partners. In fact, the chief executive of Royal Mail said it would be “unthinkable” that there would not always be a strong relationship between Royal Mail and the Post Office.

However, I understand that Royal Mail has already introduced a service whereby people post items directly through the counter at the sorting office, bypassing the post office, and is trialling a local collect service using a national convenience store rather than the post office network. It would not be right for the Minister to intervene in a commercial contract, but I plead with her to press the Post Office to ensure that it is doing everything to be competitive and to tender for vital services.

There is no time to waste. Thousands of post offices are at risk. This is an opportunity for the Government to reaffirm their commitment to local businesses and their recognition of the essential and valuable work of the rural post office network. For the sake of rural post offices and the many sub-postmasters both in my constituency and around the country and for all those who value and depend on post office services, my plea to the Minister is to ensure that sub-postmasters have a viable business, to work with the banks to ensure that they pay sub-postmasters a fair price for their services, and to ensure that every Department demonstrates a commitment, where they can, to increase the services available in rural post offices.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I congratulate my hon. Friend the Member for St Ives (Derek Thomas) on securing this important debate. He has been a passionate advocate for post office services in his constituency. We have spoken at great length about the post office network and have another meeting booked in for the new year. As he outlined, he has also met Lord Gardiner to discuss this topic. One of the best things about my role is being responsible for postal services—I know how important the post office is to all our communities, not just rural areas, so this is an important part of my responsibilities. For centuries, post offices have been the centre of social life in our communities, towns and villages. That is especially true in rural areas, which is why our 2017 manifesto committed to safeguarding the post office network and supporting rural services.

Between 2010 and 2018, this Government provided nearly £2 billion to maintain and invest in a national network of at least 11,500 post offices. The Post Office currently meets and exceeds all the Government accessibility targets at national level. Government investment has enabled the modernisation of more than 7,500 branches, added more than 200,000 opening hours a week and established the Post Office as the largest network trading on Sunday.

The Post Office’s agreement with the high street banks has enabled personal and business banking in all branches, supporting consumers, businesses and local economies facing bank branch closures, particularly in rural areas. The Post Office’s financial performance has improved significantly and, consequently, the Government funding required to sustain the network has drastically decreased and is set to decrease even further in coming years.

I encourage the House to look objectively at those facts, which clearly show that the network is as stable today as it has been in decades. We must remember that the post office network declined by 38% under the last Labour Government, with more than 7,000 branch closures.

Serving rural communities is at the heart of the Post Office’s social purpose. There are more than 6,100 post offices in rural areas, with nearly all the population in such areas living within three miles of a branch. Last year, Citizens Advice found that seven out of 10 rural consumers buy essential items at post offices and that almost 3 million rural shoppers visit a post office on a weekly basis. That is 31%, compared with 21% of people living in cities. Illustrating how important the post office is to such areas is the fact that almost half of rural post offices have community status. The post office is the last shop in some villages.

Rural branches, whether main branches, local branches or traditional branches, can offer the same products and services as urban branches of the same category. The Post Office recognises the unique challenge of running a community branch and supports such postmasters differently from the rest of the network. They receive fixed remuneration, as well as variable remuneration to reflect their special situation.

In addition, the Post Office delivered almost £10 million of investment via the community fund between 2014 and 2018, which enabled community branches to invest in their associated retail business. The Post Office has now launched a smaller community branch development scheme, which will benefit an anticipated 700 branches. Let me be clear that this Government and Post Office Ltd will continue to support rural post offices.

My hon. Friend will be interested to hear that network modernisation has led to the creation of 450 additional opening hours in his constituency, delivering greater convenience to consumers. However, I am aware that there have been a number of service issues in St Ives, and it is fair to say those issues have not been sorted as quickly as the Post Office would have liked. I fully appreciate how frustrating it is for a local community when post office services are interrupted.

In rural areas such as the St Ives constituency, when the shop in which the post office is based closes, there may be few other commercial premises from which services can be offered to consumers. In such instances, the Post Office explores how an outreach service run by a nearby postmaster can ensure the continuity of services for the community, such as via a mobile van.

For example, in my hon. Friend’s constituency the St Keverne postmaster will be extending the mobile visit timetable to provide services at—excuse my pronunciations if they are not correct—Heamoor, Gulval, Carbis Bay, Leedstown, Praa Sands and Crowntown over the coming months. Outreach and mobile services are highly valued by the communities they serve, as they offer all the same services as a bricks-and-mortar branch.

[Derek Thomas]

I thank the Minister for listing those places—she was not far off. Does she accept that it was the work that we have been doing as a local community to put pressure on the Post Office, and to bring this issue to the Minister and other Ministers, that finally got the Post Office even to consider that mobile service, which at the moment is not in place? Some of those villages have not had post office services for more than a year.

[Kelly Tolhurst]

I thank my hon. Friend for his point. He is right in what he says and I recognise that. I was going to come on to this later, but I will respond directly to his point now. The Government are the sole shareholder in the Post Office. It is right that we work with the Post Office, challenging it where necessary, and with constituency MPs and the community to make sure that we can deliver the right services for the community. As I always do when speaking about post offices at the Dispatch Box, let me say that we are committed to working with MPs and their communities, and we will continue to do so in order to maintain the branch network we have and to try to serve communities as best we can.

Outreach and mobile services are highly valued by the communities they serve, as they offer all the same services as bricks-and-mortar branches. They have been successful in taking key services such as everyday banking to customers, giving them vital access to cash in areas where there are no bank branches nearby. The Post Office directly contributes towards the costs of those outreach services, in conjunction with the postmaster running them, whose parent branch benefits from the transactional income accrued from the visits to outlying communities.

My hon. Friend raised important points about the specific challenge of running a post office in communities where seasonal trade and variation plays a significant role. I know that the Post Office listens to the community and the postmasters in St Ives by taking a more flexible approach to opening hours requirements across the year. That will allow branches to be more sustainable through the leaner, off-peak seasons, when their post office and associated shop has fewer customers. As he said, the issue was taken up by Lord Gardiner in his meeting with Paula Vennells, the Post Office’s chief executive officer, on 4 December. I understand that there will be a follow-up meeting with her in the constituency in the New Year to discuss this and other matters further. I am confident that this ongoing, frank and sustained engagement is the right way to proceed, so that the issues can be understood and a solution be provided for the benefit of postmasters, businesses and residents of St Ives.

Finally, I would like to take this opportunity to clarify some misconceptions about the Post Office’s franchising programme, particularly the assumption that franchising means closures and the downgrading of services. Those criticisms are misplaced. Post Office branches are not closing, but are being franchised, either on-site or by relocating to other high street locations. Franchising is nothing new; almost 98% of post offices across the UK are successfully operated by independent businesses and retail partners. Moving the directly managed Crown offices to retail partners has been instrumental in reducing losses in that part of the network.

My hon. Friend raised an important point on postmasters’ remuneration, especially for everyday banking services. As these services have developed and increased, I know the Post Office is looking at ways to better recognise the effort required of its postmasters for banking transactions. In fact, the Post Office has recently notified postmasters that their rates for banking deposits have been increased this year. I understand that the Post Office has now entered negotiations with banks on the next banking service agreement. The Post Office has reassured me that it will do all it can to ensure that postmasters are better remunerated for the vital services that they offer. I should add that the Post Office is picking up vital services in areas that banks have left. It is right that the Post Office does its best to make sure the banks accept the responsibilities involved and the work that post offices are doing on behalf of those communities and, we hope, properly remunerate them.

My hon. Friend also raised an important point about postmasters who cannot exit the business because of the absence of alternative operators to take over their branch. Although that is an operational matter, I assure him that the Post Office is taking it very seriously. As of November 2017, there were more than 450 branches of that type across the network. To help the remaining postmasters, the Post Office has extended the network transformation resignation timeframe to March 2020. That means that all parties can continue to work together to ensure that no communities are left without the invaluable post office services that they rely on. The postmasters affected will continue to receive both fixed and variable remuneration throughout that period. Where solutions are found, the postmasters concerned can leave while still qualifying for their leaver’s compensation.

My hon. Friend raised some particular issues relating to his constituents. I am not aware of some of the detail of those cases, but we are meeting in the new year, so I look forward to discussing those points and seeing how we can move forward.

I reassure my hon. Friend that all post offices across the network, including rural branches, are of the utmost importance to the Government. We recognise their value and importance, and we will continue to honour our manifesto commitments so that post offices can thrive and remain at the heart of our rural and urban communities. I thank my hon. Friend again for making his points, and for his hard work in support of access to post office services for his constituents. I assure him that I will continue to work with him and the Post Office to make sure that the constituents of St Ives receive the post office service that they deserve.