Post Office Network

Gill Furniss Excerpts

Thursday 25th April 2019 Westminster Hall

[Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)]

It is a pleasure to serve under your chairpersonship, Mr Davies. I congratulate the hon. Member for Motherwell and Wishaw (Marion Fellows) on securing this important debate. She is an ardent advocate for her community and speaks passionately about the importance of post offices to our local communities. I also thank the CWU, the National Federation of SubPostmasters and all those individuals who work very hard in a cross-party and collegiate way—they know who they are.

The post office is an important bastion in our local communities. It is a long-standing British institution, trusted and loved by the public. It is there for individuals as well as local businesses. Polls by Citizens Advice and others show that the post office is one of the most important services in the local community and, as many have pointed out, it is vital for rural communities. One in five rural residents said in response to a Citizens Advice survey that they would lose contact with friends or neighbours were it not for the post office.

Importantly, post offices are often a lifeline for older people in our communities. Later Life Ambitions, an umbrella group representing more than a quarter of a million pensioners, is clear about the significant importance of the post office to the security, independence, mental health and wellbeing of older people. It stated:

“The Post Office matters to older people both for the services it provides directly to them, but also for the role it plays in supporting the local businesses on which older people often rely.”

Indeed, at a time when our high streets are struggling, the post office is an important economic backbone for our local high streets. It offers small businesses the opportunity to do business locally and provides that important link that ties in the community. More than ever, we need to protect and encourage the growth of post offices. Unfortunately, the Government are overseeing a managed decline of the service.

Since 2010 we have seen cuts to branches and services and a fall in remuneration for sub-postmasters. The hon. Member for Motherwell and Wishaw told us eloquently—and scandalously—of the 1,016 temporary closed post offices throughout the UK, which is a terrible state of affairs for the communities affected. Most notably, we have seen a significant reduction in the Crown post office branches: the high street branches that provide the widest range of services, that are easily accessible for local communities and are inclusive of people with disabilities.

Over the past five years the Post Office has announced the closure of 150 Crown post offices, which is 40% of its 2013 Crown post office network. Most have been transferred to retailers such as WHSmith to install a counter for post office services in other premises. Although that retains a level of provision in the area, it is often done in the face of substantial local opposition and with a significant reduction in services, accessibility and well-paid jobs. The removal of high street branches away from view is contrary to economic sense. My hon. Friend the Member for York Central (Rachael Maskell) was unable to attend today, but she has made important points about her local post office, which was in a prime location in York, but is now being moved into a WHSmith in a more remote area of the town, where shops are closing and where the level of footfall is not as high as it was before. In some cases, post offices have been relocated to retail units close to existing ones. I can speak for a sub-postmaster in my constituency, where another outlet was allowed to open a post office about a mile away from his business, and he is really seeing the hardship of that and wondering whether he will be able to continue.

Furthermore, transferring post offices to retailers such as WHSmith could be perceived as risky in a climate that has seen our struggling high street stores closing at alarming rates. At an all-party group on post offices meeting in October last year, I was surprised when Post Office executives gave me and other Members no reassurances of any contingency planning in the event of difficulties facing WHSmith. I urge the Minister to provide us with an insight into what assessment she has made of the long-term sustainability of that partnership as a matter of urgency?

As the modernisation programme continues, we are also seeing a gradual retreat of Post Office financial services. Instead of growing services, only last month it announced it will close the Post Office Money current account, which serves 21,000 customers. And the end is in sight for the Post Office card account, which will hit many people hard if they are in vulnerable circumstances and do not have the income to open a bank account in a high street bank.

Rural communities in particular rely on the post office to access financial services. Removing those services leaves consumers vulnerable to even further financial exclusion. To have a sustainable future, we have to be bold and brave about what our post office can offer. That is why I am delighted that the Labour party has announced we will set up a post bank to deliver banking services through post office branches, including relationship banking with small businesses. By utilising the extensive network of post office branches, the post bank would have by far the largest branch network of all UK banks. The report that has looked into the matter estimates that more than 3,600 post office branches are suitable to provide banking services, or would be with a small amount of capital investment. With the branches spread evenly across the country, every community would have easy access to face-to-face banking in their local branch of the post bank.

We have to recognise that we must invest and encourage our trusted institutions and not let them down. Does the Minister agree that a post bank could form a creative and bold answer to the long-term sustainability of the post office network and to the receding presence of banks on our high streets?

Beyond the closures and the fall in services, we also see the Post Office squeezing hard-working sub-postmasters’ remuneration. Sub-postmasters play a significant role in the running of the post office network. My hon. Friend the Member for Glasgow North East (Mr Sweeney) told us about his postmaster who felt conned into setting up the business and could now face financial ruin and also hardship to the community that he set up to serve. It simply does not make sense. Some 98% of the post office network is run by sub-postmasters—mostly individual, independent business people—but remuneration for sub-postmasters has fallen in recent years.

In its 2017-18 annual report, the Post Office reported that the amount paid to sub-postmasters had fallen by £17 million since 2016-17, a reduction of 4.4%.The fall in remuneration is pushing them out of business, and many have to endure months of below minimum wage pay, all under the party that claims it is the party of business. What assessment has the Minister made of the remuneration for sub-postmasters? Can she share any insights with Members of the House? Does she not agree that the Government should carry out an urgent review to prevent more closures and more hardship, and the terrible tragedies of people who have set up a business in all good faith then facing financial ruin?

In this debate, there is an elephant in the room. I thank the Minister for meeting me to discuss the matter privately, where I was able to raise my concerns. As we know, a group of sub-postmasters has launched a legal case against the Post Office on an issue surrounding its IT system. I do not want to go into details as the case is ongoing and will probably last until 2020. As I highlighted earlier, there is a relationship of trust between the public and the Post Office. It appears that some light has been shed into some of the practices and behaviour that appear to run deep into the psyche of the organisation. I hope the Minister will consider that a broader review into the management and governance structure of the Post Office, and whether the Government have fully exercised their oversight functions, or whether those powers need to be significantly strengthened, might be required to assure the public and to commit to the long-term sustainability of the network.

I have outlined only some of the matters that bring into question the long-term sustainability of the post office network. Many Members have made their views known in this and previous debates about how those matters exercise the communities that they represent. To secure a hopeful future for it, we must address the issues. We have to address the closures by ending them and the declining financial services by being bold and creative. We have to address the retention of a network of experienced staff by ensuring that they are properly remunerated and looked after. Finally, we have to address the issues raised in the justices’ findings by reviewing the overall governance of the Post Office.

--- Later in debate ---

[Kelly Tolhurst]

I thank the hon. Gentleman for that, because that is exactly what I hope to do.

[Gill Furniss]

I want to continue on the point about contingency planning. At an APPG meeting some months ago, when we questioned the management who had turned up to talk to us about various things, it was clear that they had no contingency plan whatsoever should WHSmith fail. It is okay to say they have been doing it since 2006, but so have NatWest, HSBC and TSB, and now we see them disappearing from the high street. It is crucial that the Minister takes that seriously. If she did not know that the Post Office had no contingency plans in place, its keeping her in the dark is a serious omission on its part.

More generally, at that APPG meeting the management told us that the consultation was not worth the paper it was written on and that they would not take notice of any views from individuals or communities. Indeed, the only reason they were asking was to see whether there were any comments on disabled access. I asked them why that was the case, because they have a duty of care to look at disabled access and to listen to communities.

[Kelly Tolhurst]

I understand where the hon. Lady is coming from, but the reality is that 98% of the post office network is franchised. That is the fundamental business model within the Post Office and its distribution of services. The hon. Lady makes a presumption that WHSmith will fail, and its franchises will therefore be under threat. That does not take into account the potential future development of the Post Office and how we are challenging it. However, as I have outlined today, and in any conversation I have had with any colleague, when hon. Members highlight something to me, I will, as the responsible Minister, always raise that with the Post Office.

In my day-to-day role, I will always challenge the decisions and workings of the Post Office. However, while we are the Post Office’s shareholder, it is commercially run, so it is within its rights to manage operational delivery, but it is for me to challenge, oversee and raise questions where I believe work is needed to resolve matters.

--- Later in debate ---

[Kelly Tolhurst]

The hon. Lady is right to raise those concerns. She is also right that we are concerned about any particular closures that may happen, as is Post Office Ltd. That is why Post Office Ltd works hard—it always works hard—where there are unforeseen closures to make sure that those branches reopen. Since I have been in post there have been a number of examples where I and local MPs have worked with the post office network and local communities to make sure that new facilities are opened.

Where there have been closures, I would always encourage people to raise them with Ministers and to work with Post Office Ltd to make sure that we can sustain the network. The hon. Lady is right to have concerns, but she is wrong to say that the intention is not to renew those branches and not make sure that the network is stable in Scotland. There is a commitment and a desire to achieve that.

Government investment has also enabled the modernisation of over 7,500 branches, added more than 200,000 opening hours per week and established the Post Office as the largest network trading on Sundays. In terms of services provided, the Post Office’s agreement with the high street banks enables personal and business banking in all branches, ensuring that every community has appropriate access to cash and supporting consumers, businesses and local economies in the face of bank branch closures, particularly in rural and urban deprived areas. I encourage the House to look closely and objectively at these facts; they show unequivocally that the network is at its most stable and is much more sustainable today than in 2010.

We are not complacent. Post Office Ltd has to keep exploring new business opportunities to ensure a thriving national network for the benefit of communities, businesses and postmasters up and down the country. One of the most important and visible aspects of the Post Office strategy is its franchising programme. I accept that some communities have a strong emotional attachment to Crown post offices and naturally there will be concerns when proposals come forward to franchise their local branches, but our high streets are facing unprecedented challenges and the Post Office is not immune to them. Just like any other high street business, it needs to respond to these pressures and adapt to changing customer needs.

Franchising has reduced the taxpayer funding that the Post Office requires from Government, while maintaining—and, in some instances, improving—customer service levels. In fact, the report by Citizens Advice in 2017 indicated that franchised branches are performing in line with or better than traditional branches. I reassure hon. Members that, as part of its ongoing monitoring role, Citizens Advice will continue to track the impact of post office changes on consumers and on customer satisfaction in respect of post offices. Citizens Advice also has a formal advisory role in reviewing changes to Crown post offices across Great Britain that are relocated and franchised.

Serving rural communities is at the very heart of the Post Office’s social purpose. There are over 6,100 post offices in rural areas and virtually everyone living in such areas is within 3 miles of one of those branches. Last year, a study by Citizens Advice found that seven out of 10 rural consumers buy essential items at post offices and almost 3 million rural shoppers—that is, 31% of rural residents—visit a post office on a weekly basis, compared to 21% of people living in urban areas. The importance of post offices to rural areas is illustrated by the fact that almost half have community status. They are the last shops in the village, as hon. Members have outlined. Rural post office branches, whether main, local or traditional, can offer the same products and services as urban ones of the same category.

The Post Office recognises the unique challenge of running a community branch and supports those postmasters differently from those in 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. That enabled community branches to invest in their associated retail business. The Post Office has now launched a smaller community branch development scheme that will benefit an anticipated 700 branches. Let me be clear: this Government and the Post Office will continue to support rural post offices.

Some hon. Members raised concerns about the rates of remuneration paid to postmasters, especially for banking services; I, too, have been and continue to be concerned about that issue. While the contractual relationship between Post Office Ltd and postmasters is an operational responsibility for the company, I care deeply about the issue and I am determined to make sure that running a post office remains an attractive business proposition.

We offer post offices several ways of doing that, including the development of services for the future. My challenge to people thinking of taking on a franchise or a post office is to make sure that they deliver the services demanded by consumers and therefore enable post offices to continue to be relevant in today’s market, given the way consumers use services now compared to the past.

I have committed to meeting interested parties, including the Post Office Ltd and the National Federation of SubPostmasters, more regularly so we can ensure that particular issues, case studies and direct concerns are discussed and challenged on a more frequent basis, and we can all work together. Everybody in this room and all our stakeholders want to see the Post Office thrive and develop in the future. Some Members may regard me as having a different ideological view: there may be different ways of getting there, but the outcomes should remain the same.

[Gill Furniss]

The Minister talks about her passion for post offices and how everyone will work together. Would it not make more sense to have a review of how things are working at the moment? As I and others have mentioned, having a friendly little chat probably will not work. We urgently need a proper review of the governance and management and of the remuneration of sub-postmasters.

[Kelly Tolhurst]

I appreciate that the hon. Lady would like me to announce that we will hold a review, but fundamentally, as I have outlined, the Post Office is a commercial entity operating in a competitive market. It is owned by the taxpayer, and it is right that we are challenged and that it is run efficiently.

I point out that the Post Office has been making a surplus. We now have a sustainable network and a surplus. We have moved on from a time when there were more than 7,000 post office closures and the Post Office was over £1 billion in debt. We are not in that place today. That has been achieved by maintaining the network and investing correctly. However, I have tried to show that I understand hon. Members’ concerns about the viability of postmasters and their pay. I hope I have already outlined and expressed my determination to get to the bottom of some of these challenges and to ensure that they are addressed by the Post Office.

[Kelly Tolhurst]

I thank the hon. Gentleman for that invitation. I do speak to postmasters and, if time allows, I will be happy to go and visit post offices in any part of the country, if possible. However, we really need to look at the network and understand the operation. Post Office Ltd operates more than 11,547 stores—a sustainable network. In many of those circumstances, there will be particular differences. Of those stores, 98% are franchises, which in effect are businesses in themselves. It is acceptable to expect that there will be some churn and there will be particular issues that need to be dealt with.

[Gill Furniss]

indicated dissent.

[Kelly Tolhurst]

The hon. Lady shakes her head, but that is the reality. I apologise to her, because she is always very courteous to me in the many debates we have. At some stage or another there will be issues with a number within the network, and it is right that those are raised and that we deal with them. This is not something I like to accept, but sometimes there will be cases that cause problems, and the right course of action is to have debates such as this, to challenge me or whichever Minister is responsible and to ensure that we work to ensure that those particular branch or constituency issues are dealt with.

Part of the changes to the network involved moving from fixed and variable remuneration to a fully variable basis, based on transaction fees. That means that it is now important that a post office service is combined with a good retail offer to be successful. At the same time, fixed remuneration remains in those rural and remote locations where that approach is just not viable.

Post Office Ltd is not complacent and periodically reviews the rate of return on all services for postmasters to reflect the time and effort involved. For example, last year the Post Office increased remuneration on banking deposits twice to reflect the increased demand for services. I thank hon. Members for their positive comments about the increase announced last week to remuneration for postmasters for banking transactions; as hon. Members have outlined, that has doubled or in some cases tripled the fee payable to postmasters. Where possible, Post Office Ltd will continue to use the renewals of commercial contracts as opportunities to negotiate improved rates that can be shared with the postmaster.

I will answer a direct question put to me about why the Post Office is bringing forward the increase in charges only in October and why it is not happening before that time. The Post Office has taken the decision to implement the new banking framework payments to postmasters one quarter before the new negotiated banking framework comes into play. I understand that postmasters may be concerned, but the Post Office has acted to bring that in early and to enable the uplift to postmasters as soon as practically possible.

I want to pick up on one point raised by the hon. Member for Glasgow North East (Mr Sweeney), and give him some more information on cashpoints. He raised a concern about a post office having to pay the Post Office for that machine. Under its agreement with the Bank of Ireland, the Post Office pays post offices for the provision of the machines; they are remunerated for that. I would not be able to comment on any private agreement between an individual post office and another provider for the cashpoints. I would very much welcome further information after the debate, and I am happy to look into the issue for him.