Post Office Services

John Robertson Excerpts

Thursday 16th January 2014 Commons Chamber

[John Robertson (Glasgow North West) (Lab)]

I thank the speakers in the previous debate for giving me some extra time for this important debate. We have had many debates on post office services, and there will continue to be more unless we manage to solve the problems of the Post Office.

Post offices play a significant role in all our communities—80% of people in Scotland say that post offices play an important role in the local community. They act as a vital service and should be seen as community hubs. Sadly, rather than nurturing those community beacons, the Government have done a lot to undermine the network and decrease the services that it provides.

There are about 11,800 post offices in the UK and customers rely heavily on them, especially the most vulnerable in our society—the elderly, those on low incomes and the disabled. The universal service obligation and other services are so ingrained in our society that I fear the loss of them. For example, 43% of elderly people use a post office to access cash. People take it for granted that they can walk into a post office and deliver items within the UK and across the world. We need to act now to keep the Post Office thriving, otherwise we might be at risk of losing that vital institution.

The announcement by the hon. Member for East Dunbartonshire (Jo Swinson) in November that additional funding had been allocated to complete the network transformation programme was a vote of no confidence. If the Government had delivered on the front office for Government work that had been promised, which I shall speak more about later, that £640 million would not be needed.

[Mr Mike Weir (Angus) (SNP)]

Does the hon. Gentleman share my concern that the transformation programme is working against many small post offices? In particular, the Post Office appears to be targeting some offices and persuading the postmaster to retire so that it can move into a local shop and downgrade the service.

[John Robertson]

The hon. Gentleman is right, and I shall come on to some of those points as we move on. There is no doubt that larger post offices—and even sub-post offices, for that matter—are shutting. When I spoke at a conference for sub-postmasters from Glasgow and Ayrshire, they let me know exactly how they felt about the Government’s position, and, for that matter, that of the previous Government. At least they were there to help and they offered some examples that I will mention later.

Although the Government will have spent around £2 billion on network transformation, we still will not have an attractive model for current or future operators. The money will have been used to subsidise exit from the network, as the hon. Member for Angus (Mr Weir) said, rather than to make the network sustainable in the long term. That is of great concern to the many people who rely on post offices. We should be looking at making the Post Office better, rather than, as I suspect, making it ready for privatisation.

The sale of Royal Mail was of course resisted by the Opposition. Last week’s news that its share price was £5.67—£2.37 above the Government’s offer price, which raised just £3.3 billion—was disappointing. It was an ideological move, not a financially sensible or thought-through one. The separation of the Post Office and Royal Mail has added millions of pounds in costs to the Post Office owing to loss of synergies. No other postal administration in a developed economy has separate letters and retail businesses.

The sale has now been done, but we must still consider Royal Mail in our strategy for the future of the Post Office. Just under 40% of Post Office revenues come from mail, so it is a significant part of the business. I was glad that, in January 2012, the Government caved into pressure and signed the 10-year inter-business agreement between Royal Mail and the Post Office, but there is no guarantee beyond 2022. The position is also not secure for the next 10 years, as the Minister’s own Department has said that the contract allows for changes in commercial circumstances and contains provision for a review of the agreement terms after five years. The 10-year agreement would therefore appear to be for only five years, but hopefully the next Government will be of a different colour and will put right some of these short-term ideological decisions.

It is a real concern that Royal Mail might not continue to support the post office network. The loss of that contract would seriously undermine the Post Office’s integrity as a mail delivery service. Were that to happen, people would lose confidence in the institution and the future of many post offices would be at risk, especially the largely loss-making ones in rural areas, such as the one represented by the hon. Member for Angus. Privatisation is a risk to Post Office services and we need more guarantees for the decades to come.

A post office is a place where people can go to fill in government forms or to pay for government services. It is important for both customers and employees that the Government continue to give the Post Office sufficient work. This Government announced in 2010 that post offices would become the “Front Office for Government”, but actions speak louder than words. They promised to give post offices £466 million of Government work, but post offices are currently gaining only £130 million from Government business.

I am sure that the Minister will say that the Post Office has won all the government contracts it has bid for, but those were contracts it already had, not new ones. No new major services have been awarded to post offices, and the National Federation of SubPostmasters has stated that the few that have been introduced are for one-off transactions that are available in only a small number of post offices. Dangerous precedents have been set by not awarding government contracts, and the future of the Post Office is in jeopardy as a result.

Linked to that, we need to ensure that post offices are not disadvantaged compared with other methods of using government services. For example, if I wanted to pay my road tax online, I could bring up all the details—whether my car had its MOT and insurance, for example—via an online portal. I would not need to go looking for documents, as the information would already be on the system. However, until very recently, post offices could check only a car’s MOT, so people would have to bring in their insurance documents. It is clear that those who could choose to use the internet over having that inconvenience would do so. After all, who wants to have to carry around their documentation to ensure that they get their road tax? Thankfully, in this case, somebody has seen sense, so post offices can now check insurance as well, but the internet was well ahead on that, and that should be a lesson for future online services. Post offices do not need to have an advantage—in fact, sub-postmasters tell me that they do not want it—but they should have at least a level playing field. People should be able to use the post office to access Government services with the same ease as on the internet. The decision not to award the green giro contract to the Post Office was another example of how the future of the institution—

--- Later in debate ---

[Madam Deputy Speaker]

I am sorry to have interrupted you mid-flow, Mr Robertson.

[John Robertson]

That is quite all right, Madam Deputy Speaker; you are in charge, after all.

The decision not to award the green giro contract to the Post Office was another key example of how the importance and value to people of the institution’s future were not even considered. The move was widely condemned by charities, which highlighted the fact that it would affect the elderly and vulnerable the hardest. Andy Burrows of Consumer Focus said:

“research suggests that people, particularly those on a low income, value the security and privacy that post offices provide.”

There is a real necessity for post offices that cannot be measured by numbers. When we think about the use of post offices, such matters should be considered, but it seems that in this case they were not.

Such a thing is also relevant when we talk about the Post Office’s announcement last year that it is to franchise several Crown post offices. There is a lot of concern, particularly among the vulnerable people I have mentioned, that certain services will no longer be easily available to local people, leading to an inferior service for our constituents and the loss of one-to-one help from specially trained and committed post office staff. We must also bear in mind the livelihoods of hard-working staff in Crown post offices. Post Office Ltd appears to have handled this very badly through a lack of consultation with staff, unions and key stakeholders, which resulted in a strike. About 800 jobs are at risk owing to franchising, but that does not seem to have been considered during the decision-making process. Have the Government learned from this and how will the Minister proceed with franchising? Can she explain why the Crown branch section of the network should receive no public funding at all and yet hit break-even by April 2015 when other sections of the network will continue to receive public funding after this date? Many Crown branches are in the poorest and most disadvantaged parts of the country. A more realistic timetable would balance the need to protect services and jobs with financial sustainability.

We should be thinking about how we could increase the number of government services available in post offices. Many people prefer to carry out transactions with the UK Government, devolved Administrations and local authorities online. Crucially, however, those who do not have the internet are the most vulnerable. Some 53% of people who have never used the internet have a disability. Around 37,000 people on low incomes in Scotland have never used the internet, while only 33% of adults over 65 have the internet in their home. These people need another option, and post offices are a clear choice: 43% of over-65s use a post office at least once a week, as well as 37% of people with disabilities and 31% of those in the D and E socio-economic groups.

It is also much more difficult for such people to move on to other ways of accessing services. The post office could act as a one-stop shop for people to sort out all these services in one go. Post offices are the natural home for local government services, and that approach could save money, improve public services and increase post offices’ footfall, although it would require co-ordinated work between local authorities and devolved Administrations. If the Government are so committed to making the Post Office the front line of Government, what is the Minister going to do to encourage councils and devolved Administrations to transfer their contracts over?

We should also look at widening the range of services provided by post offices. We were hugely disappointed that our plans for a people’s bank were abandoned in 2010. Post offices provide local access to cash and banking services, and that is particularly important in rural areas and areas such as those in my constituency with high numbers of elderly people. The potential of such services is not being realised. Post offices should have full access to all high street bank accounts, but some banks have not been forthcoming.

In the long term, the possibility of a state-backed bank at the post office should be explored. There is evidence that that could be of great benefit to the Post Office, as New Zealand Post has seen its profits surge by nearly 70% thanks to its financial services arm, Kiwibank. Such a bank could also be massively beneficial in combating payday loan companies and high-cost doorstep lending by being linked to credit unions and providing affordable credit directly to the communities that our post offices serve.

The post offices of our communities need to be saved. They provide vital services, the reduction of which is of great concern to workers and the vulnerable people who rely on their post office. Action on the idea of a front office for Government is lacking when we need it most, and there has been no initiative from this Government to widen the impact of post offices. We need action, and we need it fast if we want to save this national institution, rather than let it be sold off for a quick buck like Royal Mail.

[Madam Deputy Speaker (Dawn Primarolo)]

In calling Minister Jenny Willott to reply, may I put on record my congratulations to her, because I believe that this is the first time that she has spoken from the Dispatch Box? I welcome her.

--- Later in debate ---

[Jenny Willott]

We are trying to ensure that the post office network is sustainable into the future. We cannot subsidise at historical levels. The previous Government’s way to tackle the problem was just to close post office branches, with significant losses. There were many losses in my constituency, as I am sure there were in those of other hon. Members in the Chamber.

This Government have taken a different decision, which is to look at different models to ensure that we can maintain post office services in all communities across the country. Services delivered in particular communities may have to change to ensure that they are viable, but it is incredibly important that we have post office outreach in communities across the country, and that we do not see any repetition of the previous Labour Government’s closure programme.

[John Robertson]

The point that the hon. Member for Angus (Mr Weir) and I are trying to make to the Government is that post offices supply a service to people who need that service. We do not need a downgrading of the existing service, but it appears likely that the Government’s project will downgrade post offices to such an extent that people will wonder what the point is of having them in the first place.

[Jenny Willott]

I could not disagree more with the hon. Gentleman. The vast majority of services available in post office branches across our communities will still be available. I cannot remember the exact figures—I hope that he will forgive me—but well over 90%, perhaps even 95%, of the services that people can currently access in their branches will still be available under the new models. There will still be every reason for people to carry on using their post offices, which will serve their communities in exactly the same way: the model will be slightly different, but they will provide just as vital a service to members of our communities as they currently do.

The £2 billion of funding that has now been approved by the Government will allow post offices to invest in transforming and modernising the network and helping to ensure the long-term sustainability that we all agree is absolutely critical. Despite what the hon. Gentleman said in his speech, the new models are attractive. I understand that he and the hon. Member for Angus (Mr Weir) both have concerns, but the models are attractive to those running post office branches. Some 2,500 sub-postmasters have already converted, or have signed contracts to convert, their branches to one of the new operating models. They have received investment to modernise and improve their branches, which will bring benefits not just to them in running their businesses, but to the consumers they serve and the communities in which they are based, including much longer operating hours, shorter queues and more attractive branch layouts.

[John Robertson]

I am sorry to interrupt the Minister again, but perhaps we can solve the whole problem. Why does she not come up to Glasgow and meet the same sub-postmasters that I have spoken to? Let me assure her that what she says is not what they are telling me. She can come and see for herself.

[Jenny Willott]

I have met the National Federation of SubPostmasters. I represent Cardiff Central, and I have spoken to my local sub-postmasters. I appreciate that this is clearly a period of change that will be very unnerving for many sub-postmasters, particularly for those who have to change how they operate their business, but a significant amount of investment is available for those who want to carry on and to sign contracts to change to a new form of business. They are getting a lot of support from the Government. Others might want to leave the network or to retire, including those who have run businesses for a long time, and there is support for them as well, but it is important to recognise that many sub-postmasters are happy to alter their properties and to change to the new model.

Customers are getting significant benefits from the new models. Across the network, there are an additional 34,000 opening hours a week, which is equivalent to 700 more traditional post offices. The programme of investment will see the modernisation and protection of all branches by 2018, ensuring that every community and customer that relies on access to a post office today will continue to have access to post office services in the future.

The Government have ensured that all sub-postmasters can benefit from the investment. For the first time, a dedicated fund has been set up for post office branches that are important to the communities they serve, but where one of the new models would not be viable. That is an issue in large, remote rural areas, such as those in Scotland, where the post office is often the last shop in the village, as it were. The community fund to ensure that those post offices are kept open is a real departure. It will protect those branches well into the future and ensure that people have access to post office services. That is particularly important in areas where the post office provides an important service to more vulnerable consumers.

[Jenny Willott]

I will come on to talk about income and the services that we are supporting in post offices to ensure that they are viable.

The hon. Member for Glasgow North West spoke about Crown post offices. As he mentioned, the funding package that was set out in 2010 required the Post Office to eliminate its substantial losses. In 2012-13, £37 million of losses were incurred by the 373 branches that made up the Crown segment of the network. It is a key part of the Post Office’s strategy to make the network sustainable in the long term. The Government support the business in delivering that strategy. The current losses of the Crown network contribute a third of the losses incurred by the network as a whole. That is clearly unsustainable. No business, including the Post Office, can maintain a situation in which its high street branches cost substantially more to run than they bring in.

As part of its strategy to eliminate the unsustainable losses, the Post Office identified about 70 branches where there is no prospect of eliminating the losses at a local level under the current structure. In those locations, it is seeking a suitable retail partner to take on the operation of the branch under a franchise arrangement. The Post Office has made it clear that under each franchise proposal, the full range of current post office services, including the more complex transactions such as passport applications and identity services, will continue to be available in close proximity to the existing Crown branch. In the event that a suitable retail partner cannot be found, Post Office Ltd has given a commitment that a post office service will be retained in the area. I hope that what I have said reassures the hon. Gentleman that communities will not lose these vital local services.

[John Robertson]

The hon. Lady has not reassured me at all, I am afraid. Some of the Crown post offices that are closing are in areas where people simply cannot get about. There is no transport to get to where the new post office is because the bus services have been cut. How are those people supposed to get to the facilities that they need? They cannot go online because they do not have a computer and they cannot afford one.

[Jenny Willott]

The Post Office operates to the strict criteria that 90% of the population must live within a mile of a post office and 95% within three miles. Although there may be some changes to the exact buildings in which branches are provided, as I said, services including the more complex ones available at Crown branches will still be available in the area. We are maintaining the access criteria so that more than nine out of 10 people will live within a mile of a post office. We recognise that more vulnerable members of the community in particular will find it hard to travel longer distances to access services, so we are ensuring that they are maintained locally.

The investment that is being made is helping to ensure that an independent Post Office will remain a strong and long-term partner for Royal Mail—that is another issue that the hon. Gentleman raised. A transformed network will offer Royal Mail and the many companies, Government Departments and agencies with which the Post Office works better access to customers than ever before, which is crucial to winning new contracts and retaining existing ones.

The hon. Gentleman referred to the decision to separate the Post Office from Royal Mail. Far from being a mistake, it has allowed the Post Office to focus on its own priorities and needs. It is important to recognise that the two companies are very different. Royal Mail is a logistics company whose business is collecting, sorting and delivering mail. Although we can access Royal Mail services at post offices, the Post Office is different. In addition to mail services, it provides access to a wide range of government services, from pension and benefit payments to passport check and send services and Driver and Vehicle Licensing Agency motoring services, all the way down to fishing rod licences. It also provides access to a wide range of financial services products, from savings accounts to mortgages, insurance and foreign exchange. It is now piloting a range of current accounts. Separation is allowing the Post Office to focus on its business and make the right decisions in the long-term interests of its staff, sub-postmasters and customers.

I recognise, as I think we all do, the importance of the Post Office’s relationship with Royal Mail. As the hon. Gentleman mentioned, prior to separation the two companies negotiated and signed a long-term commercial agreement. It was a 10-year agreement, the longest permissible at the time, and ensured that Royal Mail services would continue to be offered at post offices until 2020. That cemented the long-term relationship between the two businesses. As the post office network modernises and the parcels market continues to grow, the relationship will only get stronger. Indeed, Royal Mail’s chief executive has said that it is “unthinkable” that the two companies will not always have a close relationship. I am reassured that the relationship will be maintained long into the future.

It is important to remember that the relationship is equally important for both businesses. The Post Office benefits from a continuing commercial relationship with the largest postal operator in the UK, and Royal Mail benefits from exclusive access to the largest retail network in the UK and the millions of customers who use post offices every week.

Alongside its work for the Royal Mail, the Post Office is making good progress on its ambition to become a front office for government. As the hon. Gentleman pointed out—slightly dismissively, if I may say so—the Post Office has won every Government contract that it has bid for in the past two and a half years. That is a notable achievement that should not be underestimated. The contracts have been secured in highly competitive markets against fierce competition, and the Post Office’s success represents a vote of confidence in the business, in the Government’s funding and, more importantly, in the thousands of highly skilled postmasters and post office staff who deliver the services every day. That shows the regard in which they are held.

The contracts that have been won include the vital cross-government front office framework contract, which was led by the DVLA and won by the Post Office in 2012. It has extended the Post Office’s contract with the DVLA and broadened it into new areas. Because it is a framework contract, it also means that other Government agencies can contract more easily with the Post Office and deliver value for money to the taxpayer. The contract is already in use by Her Majesty’s Passport Office, which sees in it an opportunity to modernise the passport check and send service. With a stable and modernising network, the Post Office is well placed to build on those successes.

I hope that the hon. Gentleman and all other Members who are in the Chamber will support me in encouraging Government Departments and agencies, local government bodies and, as he said, the devolved Administrations to seek out new opportunities to work with the Post Office. That includes new and emerging digital and identity markets, but also counter services. As he has said, branch security is important to so many Post Office and Government customers.

The Post Office has shown time and again the benefits it can bring to the Government in driving value for money for the taxpayer and in improving the accessibility of Government services, including to vulnerable and disadvantaged groups across the UK. That has brought many benefits to the Post Office. Additional new work will be crucial in helping to ensure the network’s long-term future.

However, I want to be clear that, in accordance with EU procurement regulations, the Government cannot simply award contracts to the Post Office or, for that matter, to any other company. We must secure suppliers through an open and competitive tender process. That ensures fairness, drives innovation and delivers value for money for taxpayers, which is important in these times. That the Post Office is winning contracts in such circumstances shows that it meets those competitive criteria and does an excellent job.

There is more to the Post Office than mail and Government services—the hon. Gentleman highlighted that. The company has been growing well in new areas in recent years and is now one of the leading providers of financial and telephony services in the UK. Growth in the Post Office’s award-winning financial services business under this Government has made it one of the leading challengers to the high street banks. Post Office’s 3 million customers have deposited more than £17 billion in a variety of savings products. Customers rely on the Post Office for insuring their homes and holidays. It also helps them to get on or move up the property ladder with the range of mortgages it has available. Recently, the Post Office’s current account pilot was extended and is now available in more than 100 branches.

The Post Office acknowledges the important role its network plays in local communities. The business is already in conversation with the Association of British Credit Unions and the credit union sector to explore how they can work together to reach more families and give access to credit union services in more communities. I am sure hon. Members welcome that.

The Post Office remains committed to ensuring that communities continue to be able to access cash and banking services—the hon. Gentleman highlighted that important issue. Ninety-five per cent. of UK current accounts are available over the post office counter. With the support of the Government, the Post Office is continuing to work with the one remaining high street bank—Santander—that does not offer this service. Those services are important in ensuring local convenient access to cash, particularly, as he said, for the communities that have been left with no high street branch. Unfortunately, that is many of our communities in the UK.

In conclusion, I am confident that the hon. Gentleman can see that the Government believe strongly in the future of the Post Office and that we are working hard to ensure its future success. We are investing in modernising the network. Under this Government, the Post Office is flourishing. Customers are benefiting from longer opening hours at improved branches. The company is winning new contracts and providing its customers with an increased range of services. The Government are laying the foundations for the long-term, sustainable and successful future of the Post Office. Hon. Members agree that it is essential for our communities that the Post Office continues to thrive in the years to come.

Question put and agreed to.