Lord Young of Norwood Green
Main Page: Lord Young of Norwood Green (Labour - Life peer)Postal Services Bill
Lord Young of Norwood Green Excerpts“( ) the locations where post office services are, at the time of the report, not being provided but which are identified in the Post Office plan as outlet locations”
Lord Young of Norwood Green
I shall also speak to Amendments 24C and 24D. All the amendments are an attempt to strengthen Clause 11, which relates to an annual report on the postal network being produced.
Clause 11 requires the Secretary of State to lay a report before Parliament and to give copies to Scottish Ministers, Welsh Ministers and the offices of the First Minister and Deputy First Minister in Northern Ireland. Amendment 24A requires the report to contain information on locations where Post Office services are not being provided at the time of the report but which are identified in the post office plan as outlet locations. This form of reporting would be an important development; it would enable stakeholders to distinguish between the Post Office’s intended network and that which they are actually able to achieve.
A major concern has been the number of sub-postmasters leaving the business, as they are unable to make a sufficient living from their post offices. We have heard that more than 900 post offices, which is believed to be an unusually high number, are up for sale. Likewise, we know that more than 160 post offices closed on a long-term temporary basis in 2010. Many more will have closed on a short-term basis. It is important that these changes in the network are clearly reported and that an accurate picture of service levels around the country is reported.
Amendment 24C requires the report to include the number and locations where Post Office services have ceased to be delivered since the last report and the reasons for this service reduction. As things currently stand, post offices close and services are reduced without explanation or justification to the public. Closures as part of a national closure programme went through a form of public consultation, which allowed for some degree of accountability and understanding of the criteria for closure. However, when individual post offices close, no such indication is given.
Not only are post offices continuing to close but the Post Office is preparing to undergo another significant round of change through its new model for the network. Under current proposals, 4,000 main offices will be identified that will continue to provide the full range of services, and 2,000 sub-post offices will be transformed into what is known as “local” or “essential” post offices. These will provide a reduced service; the remainder of the post office network is expected eventually to be developed along this “essentials” model. I would welcome a clarification of that aspect.
It is important that the impact of these changes is properly monitored. The amendment seeks not to change the Post Office’s plans but to ensure that a clear understanding of the shape of the network is achieved. While these changes are not closures, they constitute a major change in service provision. Likewise, the introduction of outreach services as replacements for post offices—often in the form of a van servicing a community a number of set times a week—constitutes a significant reduction in service levels in most areas. It is important that we monitor these changes. At the time of the network change programme between 2007 and 2009, it was envisaged that 500 post offices would be replaced by outreach services. There are now 772 outreach services, which make up 6 per cent of the network.
It is on these grounds—the importance of understanding what is happening to the post office network during closure programmes and understanding programmes where the models are changing—that we seek to strengthen the terms of this Bill. I trust that the House will support the amendment.
Baroness Wilcox
I ask for clarification so that I do not answer a question that has not actually been asked. Is the noble Lord, Lord Young, speaking to Amendment 24EZA as well?
Baroness Wilcox
My ball, I think. An annual report on the post office network laid before Parliament is an important means of achieving transparency around the post office network. The statutory requirement in Clause 11 to lay such a report before Parliament already goes further than the current requirement in the Postal Services Act 2000, which requires only information about the number and location of post offices and their accessibility. This Government have made a commitment that there will be no further programme of post office closures. We are committed to creating a sustainable future for the Post Office, and Post Office Ltd is legally obliged to maintain a network of at least 11,500 branches over the spending period and to ensure that they uphold the access criteria. These commitments should mean that noble Lords have far less reason to worry about post office closures than in previous years. While we agree that there should be an annual report on the post office network, an annual report on its own is only an annual report.
Other means of monitoring the post office network are already in place and have already been put before Parliament. For example, a comprehensive list of all post offices in the country, which is broken down by parliamentary constituency, is placed in parliamentary Libraries each summer. Equally, Schedule 12 ensures that Post Office Ltd’s annual accounts must also be laid before each House of Parliament on an annual basis.
My department monitors Post Office Ltd’s compliance with the access criteria on a monthly basis, and Post Office Ltd also publishes details of the monthly changes in the network currently subject to local consultation on its website. On a quarterly basis, the Post Office sends reports on the number of post offices and their geographical distribution to the parliamentary Libraries. Data is also provided to Consumer Focus on a quarterly basis to enable it to scrutinise the results independently. All these measures ensure that the information that Parliament receives on the post office network is as thorough and as up to date as possible. Finally, should the Secretary of State feel that it is necessary to obtain further information from Post Office Ltd, Clause 11(4) allows this to happen.
This provision ensures that the Post Office’s report must include such other information as the Secretary of State requires. I believe that this obviates the need for any separate report from the Secretary of State as would be required under Amendment 24EZA. A further report would be an unnecessary duplication. For all those reasons, I believe that including in the Bill the various requirements set out in Amendments 24A, 24C and 24D would simply add unnecessary bureaucracy.
The Post Office plays a vital social role in communities up and down the country and the reporting procedures in the Bill reflect that, but we should not forget that these are requirements not faced by any of the Post Office’s competitors. There is an importance balance to be struck here, as the greater the reporting requirements imposed on the Post Office, the greater the cost and therefore impact on the Post Office’s competitiveness. I hope that, with those reassurances, the noble Lord will withdraw his amendment.
Lord Young of Norwood Green
I thank the Minister for her detailed response, which I will study carefully. In the light of the comments made, I beg leave to withdraw the amendment.
“( ) the use of the network by the universal service provider, and any changes in the preceding year”
Lord Young of Norwood Green
My Lords, Amendment 24B would strengthen reporting requirements on the Post Office to reflect also on the use of the network by the universal service provider and how this may have changed in the preceding year. Once again, Clause 11 requires the Post Office to send a report to the Secretary of State each year about its network of post offices. As I have previously said, the network must give details of the number and location of post offices in England, Wales and Northern Ireland. It must also give details of the postal services, the services provided under arrangements with a government department and other services provided by the Post Office. It must further give details of the accessibility.
I will not repeat what I said on the previous amendment, but the reporting arrangements in Clause 11 are important and wide ranging. However, they can be helpfully strengthened by Amendment 24B to reflect the challenges that the Post Office will face following separation from Royal Mail. It is vital that due consideration is given as to how the universal service provider—currently Royal Mail but following the successful passage of this Bill potentially one or more alternative postal operators—will use the post office network when it ceases to be part of an integrated company.
Many stakeholders have grave concerns regarding the risk to the post office network from the proposals in the Bill to separate Post Office Ltd from Royal Mail. The Post Office is dependent on Royal Mail business for its survival. One-third of its revenue and one-third of sub-postmasters’ pay is generated from selling Royal Mail products and services. If the two businesses are forced to separate, a privatised Royal Mail will be, or could be, likely to look elsewhere for retail outlets to sell its products. There is no guarantee it will use post offices to the same extent.
The Bill does not safeguard the inter-business agreement through which Royal Mail guarantees use of the Post Office as its retail arm. When it comes to be renegotiated a privatised Royal Mail will look to reduce costs, possibly by using other outlets such as supermarkets or high street chains instead of post offices. The Government will not undertake to extend the current five-year IBA to 10 years. It is on those grounds that we believe that Clause 11 needs strengthening as per the amendment. I beg to move.
Lord Skelmersdale
I am rather surprised that the noble Lord did not seek to group this amendment with the amendments that have just been discussed because, to a great extent, he is covering the same point, although I noticed that he brought the inter-business agreement into his comments towards the end. On that basis, I rather hope that the Minister will to a great extent repeat the answer that she gave to the last group of amendments and in particular her reference to Clause 11(4), which gives the Secretary of State the power to ask the reporters preparing the Post Office report to produce information on any subject relating to the post office network that he believes is necessary at a particular time. This is likely to vary from year to year. I therefore do not think that it is particularly suitable to put this in primary legislation.
Baroness Wilcox
I thank the noble Lord, Lord Young, for moving the amendment and my noble friend for pointing out that it is very similar to the amendments that I spoke to just now. I will see if I can again convince the noble Lord that my response will be a good answer for him to take away and think about.
As we have discussed, the annual report is an important means of achieving transparency around the Post Office network. It is, of course, also right that an annual report on the Post Office network should give details of the postal services that the Post Office provides. That is why we have included this requirement specifically in Clause 11(2)(b). This section requires the annual report to contain details of,
“the postal services … that are provided at … post offices”.
We would expect this to include any postal services that the Post Office provides on behalf of the universal service provider. The income that the Post Office receives from mail and the services that it provides for Royal Mail are, of course, vital and sub-postmasters highly value the footfall generated by mails customers. Indeed, Royal Mail and the Post Office are natural partners and we envisage their relationship continuing for years to come. There is an overwhelming commercial imperative for the two businesses to work together. Indeed, the chief executive of Royal Mail, Moya Greene, commented on the strength of the network and said that it would be “unthinkable” that there would not always be a strong relationship between Royal Mail and the Post Office.
However, we know that the projected decline in letter volumes means that postal services will not be a growth area for the Post Office, despite potential opportunities in parcels. That is why the Post Office is developing new revenue streams, as detailed in our policy statement. We should all be clear that the majority of the Post Office’s income already comes from other sources, in particular financial services, government services and telephony.
The latest Postcomm report on the network of post offices in the UK contains a breakdown of the percentage of Post Office Ltd’s revenue derived from mails, including postal services, as well as financial services, government services and telephony. This information is shown on an annual basis from 2003-04, which allows you to see the change not only since the preceding year but over several years. This information, currently included in the Postcomm report, is exactly the type of information that we would wish to be included when the responsibility for the report transfers to a Post Office company. However, I understand that the continuing relationship between the Post Office and Royal Mail is an important issue for noble Lords and, as such, I would be happy to take this suggestion away to consider. For the time being, therefore, I ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
I thank the Minister for her reply and her willingness to take the issue away. This is clearly a charm offensive—she supplies the charm and I will endeavour not to be offensive! In light of her comments, I beg leave to withdraw the amendment.
Lord Young of Norwood Green
In response to the noble Lord, Lord Skelmersdale, there was no intention on our part to have these amendments dealt with separately. We did not have a request to group them, but I must admit that although they cover different areas, they are associated with one another. I shall keep this contribution brief.
Amendment 24E aims to strengthen reporting requirements for the Post Office to ensure that the level of access to post offices and post office services for both small and medium-sized businesses is monitored. Given the importance of that relationship, which has been recognised by all sides of the Committee, we are focusing on this particular aspect. The amendment seeks to strengthen Clause 11 by recognising that medium-sized businesses as well as small ones are highly dependent on post office services and therefore should be included. Small and medium-sized enterprises account for 99 per cent of all businesses in the UK. They provide 59.8 per cent of private sector employment and 49 per cent of private sector turnover. SMEs are indeed the backbone of the UK economy, and hence it is our view that this amendment would make an important contribution towards strengthening Clause 11. I await with interest the Minister’s response. I beg to move.
Lord Skelmersdale
The noble Lord is of course absolutely right. As the director of an SME myself, I sympathise exactly with the words he has just enunciated. It therefore occurs to me to ask my noble friend why Clause 11(3)(c) only refers to small businesses. It seems illogical.
Lord Young of Norwood Green
I suspect that the noble Lord is right. I shall need to check it, but I tend to agree with him at the moment. However, I do not want to delay the Committee.
Baroness Wilcox
My Lords, I agree with the aim of the noble Lord, Lord Young, that the annual report on the post office network should provide information about the accessibility of the company’s post offices to small and medium-sized businesses. I do not know that I can answer the question put by my noble friend Lord Skelmersdale; I surely will, but not immediately.
Baroness Wilcox
Yes.
We know that businesses value the post office network. According to research by the Federation of Small Businesses, almost 20 per cent of small businesses visit the post office every day and nearly half visit twice a week. So I share the concern and I agree with the intention of the amendment. But, as was pointed out by my colleague the Minister for Postal Affairs in the other place, Clause 11 already encompasses what I think noble Lords want it to cover.
First, we should be clear that there is no universally recognised definition of what constitutes a small or medium-sized business. In the United States, the term “small businesses” generally refers to businesses with fewer than 100 employees, while “medium businesses” refers to those with fewer than 500 employees. In the United Kingdom, SME statistics define a small business as one with 10 to 49 employees and a medium business as one with 50 to 250. If we are going to be very technical here, and one can often be very technical when it comes to legislation, it could even be argued that since the UK SME statistics define a “small business” as a business with between 10 and 49 employees and a “micro business” as one with between one and nine employees, both micro businesses and sole traders could be excluded from the definition in Clause 11(3), but that is not the Government’s intention. After all, 95 per cent of SMEs have fewer than 10 employees and we know that post offices play a particularly valuable role for this group.
We therefore intend the term “small business” here to include all businesses with fewer than 250 employees in line with the broader UK statistical definition of an SME. I am quite happy to make that commitment to your Lordships, and of course if the Secretary of State was not satisfied that the Post Office was providing broad enough information to meet this requirement, he could direct the Post Office under the powers of Clause 11(4) to provide any additional information he felt necessary. I do hope that this clarification will reassure the noble Lords, and I would ask the noble Lord, Lord Young, to withdraw his amendment.
Lord Young of Norwood Green
I thank the Minister for that. Was it edification, clarification or education? I will study carefully the comments that she has made and in the circumstances I beg leave to withdraw the amendment.
Lord Young of Norwood Green
My Lords, while the main focus of the Bill is to sell off Royal Mail, the plans for the Post Office in terms of separation, mutualisation and reorganisation over the next four years to get it into a position to be mutualised are significant for postal services and people throughout the UK.
Separation and mutualisation are provided for in the Bill, as has been discussed. While there is markedly little detail provided on how mutualisation is to take place or the form of mutual the Post Office may become, the transformation of the network—this is just as significant as the closure programmes which have been seen in recent years—to prepare for this is not covered at all in the Bill. There are no safeguards or parliamentary scrutiny of the proposals which will fundamentally alter the post office network, and it is unclear how Post Office Ltd plans to proceed. Furthermore, Consumer Focus, which has previously monitored closure programmes, is now to be abolished and it is highly uncertain that Citizens Advice, which is to take over its responsibilities, will have the expertise or resources properly to monitor the wide range of changes being planned for the Post Office.
Alongside this, the Bill also means that annual reports on the post office network will be compiled no longer by Postcomm, or Ofcom under the new regulatory regime, but by Post Office Ltd. It is not clear what impact this will have on the extent or quality of information produced. It should also be noted—other amendments deal with this point—that there is no requirement for this annual report actually to be published. In light of these changes, there is clearly cause for concern that the transformation will take place under the radar and without proper scrutiny. Yet it is clear that a fundamental programme of change is planned.
In the Department for Business, Innovation and Skills paper Securing the Post Office Network in the Digital Age, published in November last year, the Government outlined that, in the spring, Co-operatives UK would be tasked with reporting on the options for mutualisation, covering who the members of the mutual should be and their relationship to it. The paper comments on the transformation of the network. The reduction in the number of main post offices gives the greatest cause for concern, with about 2,000 sub-post offices being converted to the local model. That latter commitment worries us. The local model is also referred to as Post Office essentials. As we have said, “essentials” is used because it offers a slimmed down provision of services. These are likely to be offered on the counter of other shops, not through dedicated post offices.
For those reasons, we support the amendment. I will listen with interest to the Minister’s response.
Baroness Wilcox
My Lords, this is the final and possibly the most emotional and serious amendment that I have spoken to tonight, because I too come from a small village—St Mawes in Cornwall. We too have a post office, and local people are worried. The fact that the Bill is called the Postal Services Bill is, in a way, distracting, because it is very good news for post offices. The very good news is that, unlike in the past few years, during which there have been post office closures all over the country, this Government have made an absolute commitment that there will be no programme of closures for post offices, that 11,500 post offices will stay open and that £1.34 billion of investment will be made in them. We should say that loud and clear. Royal Mail is one thing, but the post offices around our country are completely different.
The amendment seeks to restrict Post Office Ltd’s ability to make changes to post office branches. It is an attempt to protect sub-postmasters or sub-postmistresses from having change imposed upon them by Post Office Ltd—the parent company that contracts with sub-postmasters. In particular, the amendment reflects concerns held by some noble Lords regarding the post office local model. The noble and gallant Lord who originally tabled the amendment has been to see me and my team at least three times to obtain clarification and understand what is actually going on here. That is what this is about. In order to ensure that I address these concerns and communicate the position fully, I apologise to your Lordships in advance for the length of my answer at this late hour.
For those noble Lords who are not familiar with this local model, let me explain. It is a new sub-post office model which Post Office Ltd has been testing over the past two years in more than 50 locations across the country. The model involves the establishment, at little cost, of a post office counter in an existing and viable outlet. It differs from what we might consider to be a typical sub-post office, because it does away with the impersonal, screened-off—in our case—“fortress” counter at the back of the post office, which requires separate staff and always has a long queue. Instead, it provides open-plan access to post office services alongside the retail till. That will mean that instead of staff having to close the shop for the few hours that the post office opens, the model that we are considering means that the hours when the shop is open are those during which you will be able to use the post office counter.
These changes provide a much more flexible lower-cost operating model for the retailer. The cost of setting up the office is limited to the inclusion of a new counter that is not required to be manned by separate staff. We envisage that this model is particularly suitable for the many smaller post offices across the country where sub-postmasters are struggling to make a living. We do not deny that this process will involve changes, but moving to more flexible models that focus on the customer is the only way to enable the post office network to thrive across the country.
Noble Lords on the opposite Benches may remember that this model was in fact first piloted under the previous Government in September 2008 under the name Post Office essentials. This amendment seeks to hamper the introduction of post office locals by placing an obligation on Post Office Ltd to consult employees, sub-postmasters, sub-postmistresses and consumer groups, and then report to the Secretary of State before any changes, including relatively minor ones, are made to private businesses. The amendment would result in Post Office Ltd having to consult and report before changes were made to increase opening hours, take on new services, or even change a post office till—let alone change the model. The amendment would also limit the Post Office’s ability to react quickly to developments in its highly competitive markets, and would subject even minor decision-making to government scrutiny.
We cannot just shut our eyes and hope for the best when it comes to the Post Office network. Instead, we must and will enable the Post Office to compete so that it can put its customers first and do well. Additional bureaucracy will damage our shared objective of ensuring that the network is maintained at its current size.
The local model is right for consumers and for sub-postmasters and sub-postmistresses. Customer satisfaction with the Post Office local pilots has been excellent.
Lord Young of Norwood Green
I hesitate to intervene at this late hour, but there is an area that I would like the Minister to address. She said that this was right for sub-postmasters, but is there not a price to be paid? At the moment, they have a guaranteed income. Changing to the local model would mean that they would work on a commission-only basis. That is a significant factor, which is why a great deal of concern has been expressed by sub-postmasters. Because of the lateness of the hour, I will not go into the argument about the quality and types of service. With due respect to the Minister, who always addresses things fairly, she gave the worst-case scenario for a sub-post office. I would welcome some acknowledgement of the change in income stream for sub-post offices, and of the fact that we are talking about a commission-only basis for the essential/local model.
Baroness Wilcox
I will come to that. We are talking about a pilot scheme over a fairly long period, during which we will all learn.
Some noble Lords may be concerned that the model will not create real post offices or offer enough services. However, the model is not designed to replicate a main post office, or a Crown post office, where the entire suite of Post Office products is available. Just as a local or express supermarket offers only the essentials that you use on a day-to-day basis, so a local post office will offer a range of services that one frequently needs.
The local model that is being tested through pilot branches offers the vast majority of existing post office services, and 97 per cent of transactions by volume. One can post letters, pick up one’s pension and deposit and withdraw cash. Post Office Ltd is studying the results of the pilots to see how the model can be improved further and to determine on the locations where it will be most viable before it is introduced more widely. The noble Lord, Lord Rowe-Beddoe, expressed concern that changes in future would not be appropriately thought through. I reassure him that piloting will continue for the next two years, with the major rollout not starting until 2014. We expect that by 2015 around 2,000 out of the network of around 11,500 branches will have converted to the Post Office local model. This change will not be rushed through, but I believe that it is the best way of securing the future of the network.
I recently visited a Post Office local pilot and was very impressed. Mr and Mrs Patel in Dagenham told me that, although the inclusion of a post office counter in their convenience store had taken a bit of getting used to, they were now delighted with it. As a result of the post office services they now offer, they receive an extra 30 to 50 customers a day, who often purchase other items from their shop. Mr and Mrs Patel pointed out that one of the best features of the local model is that the opening hours are vastly extended compared with a typical post office. Their post office is open seven days a week, for 10.5 hours a day, except on Sundays, when it is open for three and a half hours. Many customers come in on their way to or from work, when a typical sub-post office would not be open. In all that time, the increased footfall boosts the sales of the other items they offer.
It is envisaged that the local model will play an important role primarily in urban areas. However, there is nothing to prevent a local model being established in an existing and viable rural retail outlet, should Post Office Ltd decide that this is the best way of serving its customers. Remote rural areas will continue to be served by traditional post offices or by outreach services, which will ensure that communities will still be able to access post office products and services where a traditional post office is not viable.
I hope that noble Lords will understand this Government's commitment to a vibrant future for the Post Office network, and will appreciate that subjecting to consultation even the most minor decisions that the Post Office has to make will simply prevent post offices from being free to operate on a competitive and commercial basis. I fear that the added bureaucracy of consultation and reporting obligations may achieve little except to distract Post Office Ltd and the sub-postmasters and sub-mistresses from the work that they need to do.
I therefore thank the noble and gallant Lord, Lord Bramall, and now the noble Lord, Lord Lea, for tabling and moving the amendment and giving me the opportunity to try to assuage some of the concerns around Post Office local. I ask the noble Lord, Lord Lea, to reflect on what I have said today and withdraw the amendment.