Draft Post Office Network Subsidy Scheme (Amendment) Order 2024

Lloyd Russell-Moyle Excerpts

Wednesday 17th April 2024 General Committees

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

I rise to support, as everyone has, the increase in the cap. I believe that the Government need to do more to support our post office network, particularly in communities that are harder to reach, be they rural communities or poorer communities, which of course rely on their post offices.

We have seen the destruction of the banking network, and the post office network has picked up the pieces. It would be interesting to know what the Minister is doing to pursue banks for the additional costs that the Post Office has had to pick up. The reality is that every single post office—not just the banking hubs, which there is an arrangement for banks to contribute to—now effectively operates as a bank. People go in to pay in or take out cash, pay in cheques and so on, but apart from the meagre amount that can be charged for each transaction, there is not a huge contribution to this subsidy from the banks. I believe it is time for the Minister to go to all our public banks and ask them what they are contributing to this subsidy, whether it is £750 million or we can leverage more. That is what the best of public-private partnerships is about: the state putting in money and leveraging money from the private sector when it expects us to pick up the pieces. I think we could be doing a lot more on that.

I am also deeply worried that when post offices shut but there are other people willing to come forward to run them, there can often be barriers in the way. Very often, the post office will not be eligible for subsidy any more. The subsidy will be reallocated to another service—an outreach service, for example. Ovingdean village post office in my constituency was in that situation. It shut and a new buyer came along and wanted to reopen it, but they were ineligible for further subsidies because the subsidy line on that post office had ended and been rediverted to other post offices. That has left the village with no post office at all. That is an example of where the subsidy could be better spent; we should ensure that it is not just a one-way track where post offices get subsidy or do not.

I would also be interested in the Minister’s comments on the direction in which he sees the £50 million subsidy going—clearly, it needs to increase—and how is it allocated. I believe that everyone should be able to access a post office within a 10-minute walk or drive, depending on whether the setting is urban or rural, at least once a week—there are mobile post offices. What conditions does the Minister look at when subsidy is allocated? Does he look at the journey to the nearest post office? Does he look at the number of people using the post office? In a number of towns in my area, all the branch post offices have shut and there is only one post office left, often in WH Smith, and the queue runs out the door and around the corner. People have to wait hours —well, perhaps “hours” is an exaggeration, but it is not unheard of for people to have to wait 45 minutes in a queue during peak times to get the parcel service that they need, particularly at Christmas time. Where is the subsidy being spent to relieve that congestion? We used to have Crown post office services, but Crown post offices have been completely abolished in most of those areas.

Hon. Members have spoken extremely well about how we ensure that the costs of Horizon are paid partly by Fujitsu, but the Minister said that some compensation schemes are covered by the uplift, although others are not. Will he give us more detail about that, and explain why any are being covered? Should we not have a direct line from the Treasury to such schemes because, as he said, we have seen the biggest miscarriage of justice, and we need to ensure that the schemes do not eat away at the subsidies that should be paying for our Post Office, rather than our having a separate Treasury-funded scheme through which we go after the culprits. Recent responses from some managers and Fujitsu people show that we need to go after them individually and corporately.

[Kevin Hollinrake]

I thank Members for their important contributions, all of which I shall cover, if I think I can.

The hon. Member for Bethnal Green and Bow asked how the money is being allocated. As I said, this is a cautionary raising of the cap, rather than money specifically going out today. She also asked how the 2025 funding package is being spent. There is the £50 million annual subsidy for uncommercial parts of the network and £190 million to meet the costs of participating in the Post Office Horizon IT inquiry and delivering redress to postmasters. Some £103 million helps the development of a replacement for the Horizon IT system, but she might be reassured to hear that there are zero pounds for bonuses.

On our engagement with the Post Office, I meet monthly with the chief exec and other members of the board. I met today with the National Federation of SubPostmasters in one of its meetings to constructively challenge the Post Office management, which I attend on a monthly basis. I also meet the board itself—I did so recently—including the non-executive postmasters on it. I meet postmaster victims, as I did today. I was delighted to host Lee Castleton and others in Parliament today, where they met the Prime Minister and the Leader of the Opposition. It is important that those meetings are held, such as the one I did last week at Fenny Compton for a BBC programme.

The engagement is about not only righting the wrongs of the past, but the future. The post office network has a bright future, with revenue opportunities that are very much around access to cash and how the banking framework can bring more revenue into post offices. It is crucial not only to increase revenue, but to reduce costs at the centre. It is important that the Post Office itself reduces central costs so that more of the money that flows into the organisation as a whole goes to the postmasters themselves to create more profitable businesses.

The shadow Minister referred to governance. We decided to part company with Henry Staunton and the Secretary of State was absolutely right to do what she did. We hope to see improved governance with a new chair, whom we hope to appoint shortly.

We have been clear, certainly for the past 14 or 15 months in which I have been in this post, that Fujitsu has not only a moral responsibility—it accepts that, as it said before the Select Committee—to own up to how it contributed to what happened, but a financial responsibility. It will contribute significantly to the compensation bill, and we have already had conversations about when that will happen. The right approach is for the inquiry to hear all the evidence, after which we can decide how blame is apportioned and who is culpable.

The inquiry’s evidence sessions are due to be concluded by the end of this year, with the report published early next year. By that point, we will know the full extent of the compensation bill, and that is the right time for final conversations with Fujitsu about how much it should contribute. I appreciate the cross-party support for those conversations. We will have ample opportunities in debates such as this, as well as those on the Floor of the House as we debate the convictions legislation, to press the case publicly with Fujitsu that we expect a significant contribution to be made. I thank the hon. Member for Bethnal Green and Bow for her support and kind words.

The SNP spokesman, the hon. Member for Gordon, talked about the reduction in services at post offices. He was right: there is no doubt that there has been a significant reduction in the amount of money generated at the post office level compared with 10 or 15 years ago. Letter volumes are a part of that, as are Government services, driving licences and passports, but what has happened is largely due to consumer behaviour, not our interventions. We do not think it is right for us to dictate to our citizens how they should access Government services.

I am sure the hon. Member for Gordon and other members of the Committee do not go to a post office when they renew their passport or driving licence; they probably renew online. It is far more convenient for people to do that, so we should not dictate to our citizens how they access vital public services. It is very important, of course, that we find other sources of revenue for the Post Office, which I will talk about again in a second.

The hon. Member asked whether the cap would impede delivery if there was a flood of new applications for redress. No, absolutely not. This is just one of the mechanisms by which we deliver compensation. The other mechanisms are through the Horizon convictions redress scheme, which is separate, and the GLO scheme. We do not feel that the cap, as a separate means of delivering compensation, will in any way prevent the right money going to the right people.

I thank my right hon. Friend the Member for Suffolk Coastal for her engagement on the matters important to her. She is right to point out that the subsidy for the uncommercial parts of the network is £50 million. We are trying to make sure that the uncommercial parts become more commercial, to deliver more services—particularly around parcels. The Post Office is moving to parcel hubs. I think 8,000 post offices up and down the country offer their customers at least three different options for sending parcels—Royal Mail, Evri or DPD —and that number is increasing. A range of different parcel carriers can provide services, and those are all revenue opportunities for post offices.

Banking is a lucrative source of revenue for the Post Office and is getting more lucrative. As my right hon. Friend said, bank closures have saved banks around £2.5 billion a year, and that number is increasing, so it is only right that a significant proportion of that saving should go into the Post Office network and improve remuneration through the banking framework. The hon. Member for Brighton, Kemptown said that the banks should be more generous in their negotiations with the Post Office. Those conversations are progressing reasonably well, but we are keen to make sure there is a better deal for the Post Office and that significant amounts of revenue flow into post offices through that source.

Additionally, Government legislation on access to cash means that banks are forced to leave behind in the communities they abandon banking facilities that include post offices and banking hubs. There will be between 500 and 1,000 banking hubs rolled out over the next few years. There are 40 already, but another 60-odd are in the pipeline, so there will be significant numbers of banking hubs around the country, which represent opportunities for postmasters, who tend to get the first bite of the cherry to operate those hubs.

[Lloyd Russell-Moyle]

The banking hubs are particularly good where banks are leaving, but communities already bereft of their bank have not had the opportunity for the post office to come in, so there is still work to be done. Does the Minister agree?

[Kevin Hollinrake]

Yes, I do. There can be timing differences, and we urge the banks to put those facilities in place before they leave those communities. Banks are separate commercial entities, and we have legislated to say that they must provide services such as access to cash in those communities. We have made those steps, and they are resulting in significant numbers of banking hubs being rolled out across the country, which are opportunities for our communities and our postmasters.

My right hon. Friend the Member for Suffolk Coastal mentioned the Kelsale outreach branch, which we have met about. We are keen to support her campaign to ensure those communities are still well served. She is right to point out that there should be transparency around where that money goes. A £50 million annual subsidy is going into the Post Office every year, some of which, potentially, will be provided through the raising of this cap. It is also about the Horizon IT inquiry and redress, and the IT system. The key message we have for Post Office Ltd is that it should be reducing costs at the centre to ensure that more of that subsidy, and more of the income resulting from the services provided by post offices, is going to the postmasters to make those post offices more financially viable, so that we see fewer closures.

The hon. Member for Brighton, Kemptown asked about what criteria we apply when talking about which post offices to put where. There are clear criteria. There are around 11,700 post offices across the country, and 99% of the population should be within three miles of a post office. The hon. Member mentioned a 10-minute drive; three miles in 10 minutes is probably on the same page, depending on where we are talking about—sometimes in north Yorkshire it takes longer than that. Those access criteria were set in 2007-08, during a previous Administration.

The hon. Member for Brighton, Kemptown wants to increase the subsidy. I hear what he says, but I do not know where he is going to find the money—perhaps he could talk to the shadow Chancellor about that. As far as the Government are concerned, we are providing a significant amount of money to the Post Office to ensure that it is sustainable. However, we want it to be independently viable, and that is about driving revenue while reducing costs at the centre. That is our clear strategy. The hon. Member also asked whether all the money for all the schemes is coming through the raising of the cap. No, it is not. There are other schemes and methods of getting money into payments of redress: the GLO scheme and the Horizon convictions redress schemes.

In conclusion, the Government are committed to ensuring the long-term sustainability of the Post Office, and are working closely with it to ensure that the company receives the funding it needs. The Post Office needs to continue righting the wrongs of the past from the Horizon scandal, to go on providing essential services across the UK, and to invest in the future through programmes such as the replacement for the Horizon IT system.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Post Office Network Subsidy Scheme (Amendment) Order 2024.