Postal Services Bill

Lord Young of Norwood Green Excerpts

Wednesday 4th May 2011 Lords Chamber

Moved by

[Lord Young of Norwood Green]

37: After Clause 10, insert the following new Clause—
“Closure of post offices
(1) Where any company or any other person proposes to close a post office, it shall at the earliest opportunity begin consulting representatives of the employees affected and community and other groups with an interest in the proposed closure, including consulting on that company or person’s plans for alternative provision of services provided by the post office.
(2) No decision to close may be made within the period of six weeks from the start of the consultation required by subsection (1).
(3) No decision to close a post office in a Crown post office shall be taken within 12 weeks of the start of the consultation required by subsection (1).
(4) No decision to close a post office in a rural or a deprived urban area or an outreach service shall be taken within 16 weeks of the start of the consultation required by subsection (1).”

[Lord Young of Norwood Green]

My Lords, as you are all very aware, post offices continue to provide a lifeline to residents in rural and urban deprived areas, not only through access to postal services but as a shop front for government services, a means of benefit collection and, often, as the only source of cash withdrawal in an area. This amendment aims to ensure that proper consultation procedures are followed when a post office closure is considered. It is not intended to prevent all post office closures; it simply aims to strengthen stakeholders’ opportunity for input into the consultation process. It also provides for a longer consultation process on potential closures in rural and urban deprived areas.

Rural and urban deprived areas clearly suffer disproportionately when a post office closes. Post offices have closed in vast numbers in recent years, both through formal closure programmes and through natural wastage when sub-postmasters close their businesses and post offices are not replaced. At Second Reading, the noble Lord, Lord Dobbs, proposed a 16-week consultation period for rural post offices due to close to give time to find an alternative. Over the past 10 years, the post office network has declined from 17,845 in 2000-01 to 11,905 in 2009-10. This is in large part due to two major closure programmes: the urban reinvention programme from 2003 to 2005 and the network change programme from 2007 to 2009. Approximately 11 per cent of the post office network is in urban deprived areas. Consumer Focus clearly states:

“Urban offices play an even more important role in urban deprived areas, particularly as they provide free access to cash, plus pensions and benefit payments”.

The 2003-04 urban reinvention programme was an attempt by Post Office Ltd to reduce the size of the network with a view to developing a more commercially viable network. It further hoped to manage the so-far unplanned decline in network size that arose from sub-postmasters’ decisions to close their businesses. At the time of the programme there were serious concerns over the fate of post offices in urban deprived areas. The Government stated that they would not close post offices in urban deprived areas unless there was another branch within half a mile, or unless there were exceptional circumstances to justify the closure.

The Post Office’s code of practice for network change programme closure consultations included a six-week consultation process. Many stakeholders felt that the consultation processes were inadequate. This was in large part because of the criteria for closures and the decision to close 2,500 post offices had already been made prior to the consultation process. This meant that opportunities for preventing individual closures were very limited.

Post offices are still closing every week. More than 150 closed on a long-term temporary basis in 2010 alone. There is no guarantee that these will reopen; many are likely to stay closed indefinitely, as Consumer Focus has said. Since the last programme of post office closures finished we have continued to see a dwindling in the overall number of branches. According to the National Federation of Sub-Postmasters, 900 post offices—an unusually high number—are currently up for sale. Many sub-postmasters are retiring or leaving the business because of the low levels of revenue generated by some offices. The Post Office is struggling to find alternative premises and service providers. It is vital that adequate measures are in place to protect rural and urban deprived communities from these closures. I urge support for Amendment 37, which puts current practice into law, allows extra time for rural post office closures and ensures consultation ahead of any closure, planned or unplanned. It also provides additional protection for rural and urban deprived post offices. I beg to move.

[The Deputy Speaker]

I have to inform your Lordships that there is a misprint in proposed new subsection (3) in the Marshalled List. It should read:

“No decision to close a Crown post office shall be taken within 12 weeks of the start of the consultation required by subsection (1)”.

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[Baroness Wilcox]

My Lords, Amendment 37 seeks to impose consultation requirements on companies or people that propose to close a post office. As we well know, 97 per cent of post offices are privately owned and operated businesses. As I said in Committee, neither Government nor Post Office Ltd can ensure that there is always time to carry out a consultation before an office closes. A sub-postmaster may retire or move away or the premises may be damaged by fire or flooding. It cannot be appropriate to impose a consultation requirement on a retiring sub-postmaster before he can shut his store, as this amendment would do.

My noble friend Lord Jenkin of Roding spoke warmly of the Government’s commitment to ensure that there will be no further programme of post office closures and that the network of at least 11,500 post offices will be maintained. I confirm that commitment. Therefore, if a post office is to close, there is a strong likelihood that this will have been driven by a choice of the sub-postmaster rather than by Post Office Ltd. In the unfortunate event of a post office closure, other than in very exceptional circumstances, Post Office Ltd will seek to maintain services. If a permanent closure without any replacement is proposed, the Post Office must undertake a local public consultation for a six-week period, in line with its code of practice. In addition, Post Office Ltd will contact local councillors and parish councillors about service changes.

It is worth stressing that the code of practice has been agreed with Consumer Focus. I mentioned in Committee that the code of practice has recently been amended to introduce a telephone helpline providing information on temporary breaks in service and on new notification requirements.

The noble Lord, Lord Young, mentioned that at Second Reading and the noble Lord, Lord Dobbs, in his maiden speech, called for a 16-week consultation. He spoke eloquently about the problems faced by rural communities as a result of the previous Government’s closure programmes. However, this Government have committed that there will be no programme of post office closures and a network of at least 11,500 post offices will be maintained. As I said, if a post office is to close, there is a strong likelihood that this will be driven by the choice of a sub-postmaster rather than by Post Office Ltd.

In considering the appropriate duration of local consultations, it is important to strike a balance between giving communities sufficient opportunity to express their views and allowing the Post Office to get on with providing the services on which those communities so rely. A 16-week period—that is four months—as Amendment 37 envisages in some cases, seems to be disproportionately long. That is especially so when we recall that we are talking predominantly about individual small businesses operated by sub-postmasters. Furthermore, the six-week period currently required by the code of practice was introduced, following a national consultation, as part of the previous Government’s closure programme.

I therefore hope that the noble Lord will be reassured by the arrangements already in place and will consent to withdraw the amendment.

[Lord Young of Norwood Green]

I thank the Minister for her contribution. It goes some way towards providing reassurances and we will reflect on what she said, after carefully reading it in Hansard. In those circumstances, I beg leave to withdraw the amendment.

Amendment 37 withdrawn.

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[Lord Whitty]

My Lords, I shall speak also to the earlier amendments that were previously grouped with this amendment, and the amendment to which my noble friend has just spoken. They deal with the criteria for access to the post office network. I very much welcome the noble Baroness’s reiteration of the commitment to maintain a level of post office network and her comments on the criteria in relation to what the Post Office rather bizarrely calls “business as usual” closures, whereby a sub-postmaster gives up or the post office has to close for another reason. The criteria there are much tighter.

I am a veteran of the last stage of the previous closure programme, which was in many ways unsatisfactory and ended in anomalies. I am familiar with the territory in Vauxhall to which the noble Lord, Lord Jenkin, referred, and the effect of what happened on the other side of the river. That experience has been repeated in rural areas and in deprived suburbs up and down the country. The determination to maintain a minimum network is very welcome.

The jury is still out on the move to Post Office Local. There are significant advantages, particularly in relation to opening hours and the flexibility that that provides. Consumer Focus has heard varying reports on the first batch of Post Office Locals, and that the range of services they provide is differentiated. For example, the USO for the parcel service refers to a 20 kilogram parcel service being available in all post offices, but a lot of locals were not doing that until about this time last year, when the Post Office advised them to do so. It is still not the case that all Post Office Locals, or some other post offices, are providing that service. I am not saying that there should be an absolutely rigid range of services available under Post Office Local, but we need to know that what will happen as a result of normal retirements and closures, new post offices opening, post offices opening in host premises will provide something like the previous minimum access criteria.

The new access criteria will be a matter for the Secretary of State and for Ofcom, but the amendments would require that there be a reporting mechanism which indicates not only how good the access is, in terms of mileage in rural and urban areas, to the nearest post office but what range of services is available. In other words, there would be a matrix that would indicate the services available as well as the number of outlets. In order to be able to monitor over time the effectiveness of post office services and the accessibility to them for communities who have, over the past two rounds of closures, seen some diminution in the number of outlets and now some diminution in the range of services, we need reporting criteria roughly along the lines that I propose here, which are the criteria which were broadly agreed at the end of the last round of closures.

I shall not press the amendments tonight, but the Government and the regulator will need a clear reporting process which covers not only the number of outlets but the range of services provided. As others have said, that range of services needs to include some enhanced commitment across Whitehall and local government to provide a wider range of government services—and digital access to them—than currently exists. Unfortunately, over the past 15 years, we have seen a diminution of government business going through post offices. Some of that has been due to technological and behavioural change; some of it has simply been due to false economies. Post offices have missed out there. The post offices should in most communities be the front office of government. In rural communities and more deprived outer suburbs, they are the point at which the community has access to the range of state services. We need to retain that, we need to build on it and we need to know under laid-down reporting criteria how well we are doing.

Although I welcome much of what the Government are committed to in enhancing the number of services that go through post offices as well as preserving the number of post offices in the network, we need to be able to monitor that. That is what my two amendments are about, and I will be interested to hear the noble Baroness’s comments. I will not press the amendment tonight, but we may need to return to it. I beg to move.

[Lord Young of Norwood Green]

I shall briefly support my noble friend Lord Whitty. He has made all the key points about the importance of the additional information that the amendments would provide.

I tend to agree with the points made by the noble Lord, Lord Jenkin, in a previous debate about the potential for locals. They have to get the formula right; they have to get the transition payments right as well. The managing director, Paula Vennells, has assured us that they are learning quite a lot from the 60 or so pilots that are currently running. Interestingly, I received an assurance that they have all been instructed to accept parcels of up to 20 kilograms in weight. Clearly, the message has not filtered through to all of them but the intention is clear. Amendments 40 and 41 pose some important questions and I, too, will be listening intently to the Minister’s response.

[Baroness Wilcox]

My Lords, I shall speak to the amendments to Clause 11 in the name of the noble Lord, Lord Whitty. I thank him for telling me in advance that he is not going to press them tonight and I hope that my response will at least reassure him.

Amendment 40 seeks to oblige the Post Office to report against its compliance with the access criteria at a UK level and also in each of England, Wales, Scotland and Northern Ireland. The access criteria are national criteria. Five of the six of them apply across the entire United Kingdom but they recognise the country’s diversity by including individual protections for urban, urban deprived, rural and remote rural locations. The sixth criterion—for 95 per cent of the population in each postcode district, such as BA2 or GU27, to be within six miles of a post office—applies to each and every one of the nearly 2,800 postcode districts in the UK. This provides a very real guarantee that post offices will be broadly spread and accessible to communities in every corner of the United Kingdom. I reassure the noble Lord that the annual network report will include details of the Post Office’s compliance with the criteria. Indeed, such reporting is already done. Your Lordships will recall that last year’s Postcomm network report showed that the Post Office continues comfortably to exceed the access criteria.

It is most upsetting to have the opposition Chief Whip sitting here with me. I want that noted.

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[Lord Lea of Crondall]

My Lords, Clause 11 provides for the annual report on the post office network. The amendment seeks to include information in the report on,

“any major change in contractual terms affecting sub-postmasters as a result of the change to the ‘Post Office Local’ model”.

The document produced by the Department for Business, Innovation and Skills in November 2010, Securing the Post Office Network in the Digital Age, claimed success for the local pilots in the Post Office Local model. Under pilot schemes, Post Office Local branches have offered longer opening hours of up to six hours per day. Services have been restricted to core services, with what are described as more complex and time-consuming transactions being channelled through main post offices. Post Office Ltd reports that Post Office Locals are being trialled in around 60 locations across the UK. Many operate a small counter located within the premises of another business such as a supermarket. Some have replaced sub-post offices that have closed and some have been set up as new branches. The physical layout of the counter-based model has been replaced by more open-plan arrangements alongside the retail till.

The BIS report says that over the next four years, 2,000 small sub-post offices will convert to the local model, either on-site or in neighbouring premises, with what is described as a major rollout in 2014 following further piloting. It is unclear whether the rollout will be to reach the figure of 2,000 Post Office Locals—or essentials, as they are called—or whether this marks an intention to roll out beyond 2,000. It could be a precursor to a much wider application of the model.

The paper proposes two key strands of the network. The Government have asked POL by 2014 to have about 4,000 main post offices in towns and city centres and to convert about 2,000 sub-post offices to the local model. The 4,000 main post offices and 2,000 new locals will leave more than 5,500 branches in the current network untouched. However, the BIS paper states that, under POL's commercial strategy, the Post Office Local model will become the mainstay of the smaller post offices over time. This will mean a fundamental change to the current network.

Consumer Focus, which represents post office customers, has said that the conversion of 2,000 sub-post offices into Post Office Locals will be a major change. For millions of people, it will mean a shift from what they know and trust. The problems that people have experienced with pilot Post Office Locals—some of which are known as essentials—include benefit capping, where branches limit the amount of money that people who are collecting benefits such as pensions can withdraw in a single day. This is to prevent the branch running out of money. Other examples of problems which people have experienced with Post Office Essentials include not being able to access counters if in a wheelchair, staff with inadequate knowledge of services and a lack of privacy when carrying out transactions.

A more recent investigation by Consumer Focus, in March 2011, concluded:

“While consumers are likely to welcome the convenience and extended opening hours provided by PO Locals, without clear improvements to the in-branch experience, some consumers will be likely to perceive the shift in provision negatively … In particular, our research has found worrying evidence of examples of cash and benefit withdrawals being capped; temporary breaks in service because there are not always trained staff on hand to serve at the counter; and the inconsistent provision of parcel services, which in many instances seems to vary from one PO Local to the next”.

Just over half of customers—53 per cent—have had to use an alternative post office because their Post Office Local did not offer the product or service they wanted. Some 43 per cent of customers say that the privacy available is poor, especially for banking or financial transactions. Finally, 61 per cent of customers said that their overall experience was good, but a large percentage —38 per cent—said that it was average or poor.

The Post Office Local model clearly has the potential to impact on the terms under which sub-postmasters operate sub-post offices, and the terms and working arrangements of the staff working in them are also significant, not least the significantly increased opening hours. Those issues therefore deserve a word or two.

The changed physical working arrangements in the open-plan post offices envisaged by the pilot carry implications for the terms, safety and well-being of staff members which need to be taken fully into consideration. Some postmasters have expressed concern that they will see a major shift in their contractual terms away from secure payments to income based largely on commission. That is not just a rumour; I think it has been confirmed by the Post Office. While existing sub-postmasters may have their current income protected for a limited time, this would not last. At the same time the range of services on offer under the pilot is restricted to core services, meaning that customers needing to access a more time-consuming or complex transaction will need to go to the main post office. The report does not envisage restrictions being imposed on which services may be regarded as core by a local post office, and which may be dispensed with. Over time this would mean a high percentage of the population having to travel further to access the full range of post office services. I think that I am touching here on some of the points made by my noble friend Lord Whitty.

The problem is likely to be particularly acute in rural areas, where the distance to a main post office is likely to be greater. Although commercial terms between Post Office Ltd and individual sub-postmasters is confidential, it is reported that sub-postmasters converting to the essentials model are seeing a worsening in the terms of their contract and a larger reliance on commission on sales. I shall not cite the many examples from the local newspapers and so on, but Ministers could reassure sub-postmasters by stating that they will not be compelled to move to the Post Office Local model.

The sub-postmasters’ fears are summarised in a survey which was commissioned by the Communication Workers Union and reported in today's newspapers. It says that up to 9,300 post offices could close as a result of the Government’s sell-off. This prediction is worrying for people living in villages whose post office is the only shop that provides a vital service, particularly for those without cars. Perhaps I may read one or two bits of information from this survey; I do not think that anyone doubts the quality of the very well known company which was invited to undertake this research.

More than 90 per cent of sub-postmasters told researchers that they are very unlikely or unlikely to survive without Royal Mail business if it dries up. This clearly overlaps with all the other questions about the interservices agreement and the universal service obligation. Billy Hayes, the general secretary of the CWU, has said that it clearly demonstrates the fears of sub-postmasters about the fate of the network, which faces a greater threat than anyone previously dared believe.

John Denham, the shadow Business Secretary, has said that postal services policy is now in utter disarray. I am sure that the Minister has a brief prepared to read out on all this, and I look forward to hearing it. Then we will have to consider where this question rests before we come to Third Reading.

[Lord Young of Norwood Green]

My Lords, I shall be brief because my noble friend Lord Lea has covered the waterfront, as they say. He raises a key point, which I referred to in my previous contribution. There are some concerns about the quality of the service offered by locals, but we have had some useful assurances from the managing director, Paula Vennells, about the nature of pilots that will genuinely seek to improve the level of service. The concerns about the quality and range of services have been adequately described by my noble friend Lord Lea.

On the transition arrangements in converting those sub-offices to the local model and what the payments are likely to be, I do not know whether the Minister is in a position to reiterate the statement made by Paula Vennells, who said that broadly speaking the fixed and variable income ought to be more or less on a par with the income at the moment.

I wish to pick up on what my noble friend Lord Lea said when he talked about the importance of government business and it being a key part of the future of these offices; and my final point is that it would be useful if the Minister could confirm that remote rural offices that need a fixed income to survive will not be moved to the local model on a compulsory basis.

[Baroness Wilcox]

My Lords, Amendments 46 and 49, tabled by the noble Lord, Lord Lea, require the Post Office to provide details in its annual reports of major changes in its sub-postmaster contracts from the introduction of the Post Office Local model. In Committee, I spoke at length about the Post Office Local model, but I would like briefly to reiterate some of the key points. The Post Office Local model was introduced under the name Post Office Essentials in September 2008, and I know that the noble Lord, Lord Young, is therefore familiar with the format. The Post Office Local does away with the impersonal, screened-off, fortress post office counter that requires separate staff. Instead, it provides open-plan access to post office services alongside the retail till for the hours the shop is open. This will involve a significant increase in opening hours for the customer while also providing a much more flexible and lower cost operating model for the retailer. The Post Office Local model currently provides 97 per cent of post office transactions by volume and there are over 50 Post Office Local pilots operating across the country right now. Customer satisfaction with these pilots has been excellent with 94 per cent of customers being very or extremely satisfied with the local model. Some noble Lords will have been unable to hear Paula Vennells, the managing director of the Post Office, speak last week, although I know that the noble Lord, Lord Lea, was there when she spoke. Paula explained very eloquently that it is plainly not in the Post Office’s interest to introduce a model of contract that is not viable for sub-postmasters.

The model will involve pay being rebalanced from fixed to variable pay in those outlets affected. But this cannot be accomplished simply by eliminating fixed pay without evaluating rates of variable pay to ensure the model works for sub-postmasters and Post Office Ltd alike. Over the next two years, there will be continued and widespread piloting to develop understanding of the locations in which a Post Office Local may be viable and the services that may be offered from one.

In 2014, we expect a larger scale rollout so that by 2015 around 2,000 of the network of at least 11,500 will have converted to the local model. To give some perspective over the same period, the Government’s £1.34 billion funding package will enable the Post Office to invest in around 4,000 main post offices in towns and city centres across the country. These will more closely follow the traditional post office model. Of course, that will leave almost 6,000 post offices whose operating model will remain unchanged. I understand that any change in sub-postmaster contracts is of great significance for the many independent businessmen and women who operate post offices up and down the country. But I do not think that a public annual report is the appropriate place for a business to detail its contractual terms with its agents. That is certainly not something that one would see any competitors of the Post Office doing.

I hope that I have provided sufficient explanation and reassurance to the noble Lord to encourage him to withdraw his amendment.

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[Lord Kennedy of Southwark]

My Lords, the link-up with the Post Office is one of the most exciting innovations for the credit union movement and my amendment places a requirement on the Government to report back on the progress to achieving this until such time as it has been delivered. Getting people on the lowest incomes into the habit of saving and giving them access through the Post Office network to affordable credit is something that we can all support. Would this not be the big society in action?

What we do have is some of our poorest and most vulnerable people who are unable to get affordable credit. They are either put into the hands of illegal loan sharks or into the payday loan shops with their exorbitant interest rates. The Government need to take action, and take action quickly. The noble Baroness is fully aware that I have pursued this issue with questions to her and other Ministers, as well as in debates such as this one. It is something that I feel very strongly about. It is an area for which I think there is considerable support around the House in all political groups and on the Cross Benches, but it does require the Government to take action to move it forward.

I look forward to the noble Earl’s response. If he is not able to accept the amendment, can I refer him to page 11 of the House of Lords’ Proceedings covering the Questions for Short Debate and my Motion on a similar subject? Any help he can give me with the Government Whips’ Office in getting that Motion brought forward for debate will be much appreciated. We could then spend a little bit longer discussing these important issues and the progress being made by the Government on them. I beg to move.

[Lord Young of Norwood Green]

My Lords, I rise briefly to support the amendment. Each week something like 6.5 million visits are made to the Post Office network with a view to withdrawing funds from the Post Office card account. It has been calculated that those aged under 65 who hold such an account are 28 times more likely to be unbanked. These same people, those in receipt of state benefits and tax credits, are the most likely to use high-cost credit. That is evidence of the justification of the point being made by my noble friend Lord Kennedy about the valuable contribution that credit unions can make. The Post Office product range is such that it will not make personal loans of less than £2,000, yet evidence shows that sums of between £300 and £600 are the primary amounts sought by those using high-cost credit.

In short, the Post Office has the facilities and credit unions have the ability. Would it not be good if we could bring these two groups together to serve the public?

[Earl Attlee]

My Lords, since he arrived in your Lordships’ House the noble Lord, Lord Kennedy, has spoken passionately about the role of credit unions, and with good reason. We all know about the activities of loan sharks. As my noble friend the Minister said in Committee, the Government place a high importance on access to affordable credit and believe that the use of credit unions should be encouraged as a means of saving and obtaining access to short-term loans.

Co-operation between Post Office Ltd and credit unions is already very strong and we support an even closer link-up between the Post Office and credit unions. We have demonstrated clear progress against this aim. The noble Lord’s amendment seeks details on that progress and I hope that I can give him some reassurance today. The Department for Work and Pensions recently announced a significant package of support for the credit union sector, including funding set aside for a shared credit union banking platform, which will be subject to a feasibility study, in which the Post Office will participate fully.

The Post Office also continues to develop individual services and assistance to facilitate close working with credit unions, including a new pay-out service which allows people to collect their credit union loans at their local post office branch, and guidance to facilitate local arrangements between post offices and credit unions where both parties wish to participate. These developments build upon existing arrangements whereby many credit union current account holders can access their accounts at post offices through arrangements with the Co-operative Bank. Post Office Ltd expects that around 170,000 credit union transactions will be carried out in post office branches in this way in the coming year. Facilities are also available at post offices whereby credit unions issue customers with a payment card, which they can use to pay off the loans they have received via the electronic bill payment facilities that are available at every post office. More than 60 credit unions have established this facility.

The noble Lord, Lord Kennedy, referred to the possibility of a debate. As he will understand, I can give no assurances on that because it is a matter for the usual channels.

As my noble friend the Minister said in Committee, we recognise the worthy intention behind the amendment and I hope the noble Lord will be reassured by the good work that is already under way in these areas. We will continue to encourage co-operation between the credit unions and Post Office Ltd and to support the Post Office in its provision of wider financial services. However, placing this reporting requirement—and, indeed, others tabled by noble Lords—in legislation would simply increase bureaucracy, and the greater the reporting requirement imposed on the Post Office the greater the cost and, therefore, the impact on its competitiveness.

With the reassurance that I have given today, I hope the noble Lord will withdraw his amendment.