Alloa Crown Post Office (Franchising)
Debate between Jo Swinson and Gordon Banks
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)
Perhaps it is worth starting by pointing out that the previous Labour Government’s regime of ministerial cars is not how things are run these days. I get the bus to the Department and occasionally walk, depending on the weather. My motivation is certainly not as the hon. Gentleman suggests. I am keen to make sure that the post office network is sustainable and am a passionate believer in the importance of post offices as the hubs of many of our communities. They play a vital role in our society. Despite our differences of opinion on this issue, which I will come to, I recognise that the hon. Gentleman is standing up for and championing an issue about which his constituents care deeply and it is right that we discuss such matters in this House. I am very happy to have the opportunity to do so this evening and congratulate the hon. Gentleman on securing this debate.
The hon. Gentleman has eloquently set out his concerns and we have also heard an intervention by my parliamentary neighbour, the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont), who is concerned about a similar issue in Cumbernauld. I fully recognise the concerns that they and all our constituents have about any changes to local post offices, particularly against the background of the two major closure programmes in 2003 and 2008, which were inflicted on our communities by the previous Labour Government.
It is true to say that, as a constituency MP and as a candidate, I campaigned vigorously against those closure programmes under the previous Administration, and it is important to recognise that there is no closure programme under this Government. In fact, we are investing £1.34 billion to ensure that the post office network is sustainable for the future, and that is what we are determined to see.
It is also important to recognise—and as the hon. Gentleman’s constituents will want to know—that in each of the locations that have been outlined as potential areas for franchising, these are still proposals and we are at a very early stage. It is right for him and other MPs to engage in that process of determining how those decisions will ultimately be reached. Until more detail becomes available, and the processes for seeking and assessing prospective retail partners have made further progress, it is not possible to take a proper and fully objective view of all of Post Office Ltd’s franchising proposals in individual locations.
Location is one of the issues that the hon. Gentleman mentioned as being key to the success of his local post office, and the judgment about each franchising proposal will depend on such details. I cannot remember the full list of the streets that he mentioned, but certain streets will obviously be more appropriate locations than others, and that will be one of the factors that will need to be taken into consideration and that will be examined during the consultation.
Gordon Banks
I extend the same offer to the Minister as I made to you, Mr Deputy Speaker. The Government have had an invitation to come to the meeting in Alloa, but I invite the Minister to come so that I can show her the streets and the reasons why Alloa Crown post office must stay where it is.
Jo Swinson
I thank the hon. Gentleman for his kind invitation. I thought I heard you suggest that we could go together, Mr Deputy Speaker, but who knows whether our diaries will permit that to happen.
Decisions on the franchising of individual Crown office services are commercial and operational matters for Post Office management and the Government play no specific role in them. However, I recognise that the hon. Gentleman rightly wishes to use this opportunity to raise these issues in Parliament and I am happy to respond. It is important to remember that before any changes are made to the existing Crown post office service provision, there will be a six-week local public consultation under the terms of a code of practice that has been agreed between the Post Office and Consumer Focus. The public consultation will focus on a specific and detailed proposal to relocate the service, and responses will be carefully considered by the Post Office before a final decision is reached.
Before addressing the specific issues that have been raised about the Post Office’s proposals to franchise 70 Crown post offices and to merge or relocate a small number of other Crown branches, it is essential to set them in their wider context. The 2010 spending review after the last election saw a funding package of £1.34 billion, up to 2015, earmarked for significant investment in the post office network. That funding provides for the network and Crown transformation programmes, and for investment more widely across the post office network, together with ongoing support of the many non-commercial branches that fulfil an important social and economic role in the communities they serve. Clearly, this support is particularly relevant in Scotland in view of its geography and demographic spread.
Our funding package also requires Post Office Ltd to continue to maintain a network of at least 11,500 branches and to comply fully with the access criteria, set by the Government in 2007, with no programme of closures. Significant elements of the Government funding are supporting investment in and improvements to the directly owned and managed Crown office segment of the network, with £70 million being spent on modernising some 300 Crown branches and investing in new technology in town centre and high street locations. We made it clear in the 2010 network strategy statement that we are fully committed to modernising the post office network and safeguarding its future.
We also have to face economic reality. There are substantial losses incurred by the 373 branches that make up the Crown segment of the network. In 2011-12, £46 million was lost just by those 373 branches. Eliminating those losses has to be key element of the Post Office strategy to make the network sustainable in the long term. That is something we all want to see, and the Government, of course, support Post Office Ltd in delivering that strategy.
Gordon Banks
Will the Minister confirm that the driver for this is mutualisation?
Jo Swinson
We are committed to mutualisation and I will come on to that point, but I imagine that the hon. Gentleman also wants to ensure that we have a sustainable post office network. Hundreds of millions of pounds worth of subsidy is not, ultimately, sustainable. In any kind of business case, any business would say that 373 Crown post office branches losing £46 million, often in central locations and doing a huge amount of business, needs to be dealt with.
Gordon Banks
The Minister is talking about subsidy. While she is telling us about the subsidy her Government have put in place, I ask her to pay due respect to the fact that in the past 10 years of the Labour Government, we provided more than £3.3 billion in support of the post office network and introduced an annual £150 million subsidy to support otherwise loss-making post offices in urban and rural areas. Her own Government’s report recognises the social need in communities that is met by post offices, and the people of Alloa and Cumbernauld are not seeing this Government live up to that commitment.
Jo Swinson
I absolutely recognise that need, and I also think that there will always be some need for Government subsidy for those types of offices where they cannot become commercially viable, but where the service provided is of such benefit to those particular locations that it makes sense for the Government to pay for it. However, I question whether that type of argument should be made for city centre busy post offices. I think any reasonable person would recognise that they ought to at least be able to break even, rather than incur the kind of losses that are currently happening. That is why we have, in the post office strategy, a determination to ensure that we can get the Crown office network on to a much more sustainable footing.
A third of the losses of the post office network as a whole come from those 373 Crown branches. There are 11,818 post offices, and a third of the losses in the whole network are from just those 373 branches. I put it to the House that no business can continue with that kind of situation, where some branches cost significantly more to run than they bring in.
Within the broader strategy for eliminating unsustainable losses and achieving break-even for the Crown network by 2015, the Post Office has identified 70 branches where it sees no prospect of eliminating the losses at local level under the current operating cost structure. The precise reasons vary from location to location, but commonly include factors such as high property costs and sub-optimal location, which means that they are not able to attract increased custom and business. As the hon. Gentleman mentioned, in the Alloa branch it costs £1.43 to earn £1 of income. That creates an annual loss, just for that branch, of £50,000.
Gordon Banks
I have to correct the Minister. I said that Post Office Ltd said that it cost £1.43. That figure is disputed.
Jo Swinson
The hon. Gentleman has put his dispute on the record, but I note that he has not offered an alternative figure that he believes to be right. Post Office Ltd clearly has the information at its disposal to know exactly what its branches are making. I hope he is now going to give a figure that he believes is evidence-based.
Gordon Banks
If the Minister had been at the public meeting in Alloa, she would have heard that the figure was nowhere near £1.43—it was nearer £1.19.
Jo Swinson
For the record, I did not receive an invitation to the public meeting on 3 April, but Post Office Ltd obviously did attend, as the hon. Gentleman mentioned. He also accused me of not replying to a letter. I received a letter from a local Member of the Scottish Parliament, to which I replied at the end of last week.
Jo Swinson
I will be generous and allow the hon. Gentleman to intervene once again, although I have some further remarks to get to.
Gordon Banks
I never accused the Minister of not replying to any letter. I do not know where she got that from. It is purely a figment of her imagination. I have no knowledge of a letter from an MSP that either was or was not replied to. I repeat, however, that the Government were invited to attend the meeting in Alloa, and I am still waiting for a yes or no.
Jo Swinson
I do not know who in the Government the hon. Gentleman invited, but I never received an invitation. It would be ironic if the invitation got lost in the post.
The £50,000 being lost every year is currently being met by taxpayers, and that is absorbing funds that could otherwise be spent elsewhere. I know—because Post Office Ltd sent representatives—that members of the public expressed concerns at the meeting about whether there could be a suitably sited potential franchise partner in Alloa with premises that could accommodate the addition of post office services. As I mentioned, it is important to recognise that no decisions have been made on a franchise partner for any of the branches, but in assessing the 70 post offices proposed for franchising, Post Office Ltd considered a range of factors, and it believes that there are a number of opportunities and potential retail partners in those locations that could accommodate the post office services currently provided by the Crown office. The hon. Gentleman has considerable local knowledge, and although I recognise that he opposes the move in general, if he has views about where might be more appropriate, if the move goes ahead, POL would certainly welcome that information and I would encourage him to engage with the consultation.
The hon. Gentleman mentioned that he thought that services would automatically be worse under a franchise system, but his point about queues is not borne out by the facts. In Crown offices, queues lasted longer than five minutes in 36% of visits, whereas in the franchises, of which there are about 420, that figure is just 25%, so the figure for the franchises tends to be lower. The average queue length in Crown offices in 2011 was three minutes 51 seconds, whereas in franchise offices it was two minutes 54 seconds. The suggestion, therefore, that automatically a franchise system would lead to longer queues is not borne out by the facts.
The hon. Gentleman remarked on the issues in Kirkintilloch in 2007. In particular, he asked about when I previously expressed concern about the threat of mass closures if franchises were given to large chains. He asked what changed my mind. In 2007, the previous Labour Government went on a closure rampage that resulted in more than 7,000 post offices closing across the United Kingdom. That was Labour’s record. In my constituency, Auchinairn, Killermont, Courthill, Westerton and Kessington lost their post offices, and Alloa was not exempt from the closure programme either, because Fairyburn post office closed down in his constituency, with eight further post offices placed on mobile outreach, some of them losing a post office only to gain an outreach service for two hours a week.
That was Labour’s shameful record on post office closures and why I had no confidence that, if chains suddenly decided they no longer wanted to offer post office services, it would not necessarily mean that a post office would continue in an area. Under this Government, we are investing £1.34 billion in the post office network and have committed to putting the Post Office on to a sustainable footing. And yes, that means working towards mutualisation so that the businesses can be owned by those involved, the key stakeholders. That is the kind of sustainable future for the Post Office that the previous Labour Government never achieved. That is the key reason I changed my mind about whether this makes sense.
Our approach will eliminate losses from the Crown post office network, which is an essential part of ensuring that we can have a post office network fit for the 21st century.
Gordon Banks
The Minister recognised earlier Labour’s £3.3 billion of support to the Post Office over its last 10 years in office and the £150 million annual subsidy. I am intrigued by the reasons for her change of mind, so—