Crown Post Offices: Franchising

Martyn Day Excerpts

Thursday 10th January 2019 Westminster Hall

[Martyn Day (Linlithgow and East Falkirk) (SNP)]

It is a pleasure to serve under your chairmanship, Sir Graham. I thank the hon. Member for Wigan (Lisa Nandy) for securing the debate and for her very informative introduction, and all those who have contributed for the very consensual nature of the debate. Some 15 Members have spoken so far, which says something about the strength of feeling in the House.

As we have heard, Crown post offices are large post offices that are directly managed by Post Office Ltd and account for about 2% of post offices. I am grateful for the Communication Workers Union briefing, which is very informative. It highlights how, despite that small share of the overall network, Crown post offices have historically brought in between 10% and 20% of the Post Office’s overall revenue—a point that several Members have made, and which is well worth emphasising.

There are no Crown post offices in my constituency—unsurprisingly, given how few are left across the country as a whole. Having said that, it is fair to point out that Linlithgow and East Falkirk gained two post offices between 2011 and 2018, increasing their number from 18 to 20. However, that figure includes hosted outreach venues. As we have heard, a variety of services are offered at different ones, which adds to the confusion of the public when such events happen.

On 11 October last year, the Post Office announced an agreement with WHSmith that would see up to 41 further Crown branches relocated within WHSmith stores this year, and WHSmith take over the running of 33 Crown post offices already hosted in its stores. The decision to turn 74 Crown post offices into franchises in those stores is alarming for a number of reasons; Members have rehearsed them well, and I do not need to go into all the technicolour detail again. However, reports that the franchising is being done without consultation with existing local post offices are particularly alarming. That means that competition risks destabilising the existing network even further. There must be more consultation and strategic consideration on franchising. It is alarming to hear that in some cases franchised WHSmith outlets are opening within five minutes of existing post offices, and without any advance notice having been given to existing postmasters.

We know that the Post Office’s director of sales and trade marketing has stated that there is no contingency plan in the event of WHSmith collapsing, even though it has, as has been pointed out, experienced 14 consecutive years of sales decline. Although we would not wish that to happen to any business, the reality of our modern high streets is that businesses are folding on a regular basis, so a contingency is, in my opinion, required. That is before we consider the fact that WHSmith was voted the worst high street retailer by Which? consumers in 2018, having been ranked in the bottom two over the previous eight years. That raises a serious question about the quality of service on offer from that franchisee.

We must ensure that further franchising happens only after consultation with local businesses. It is essential that our post office network remains robust for communities and businesses across the entire country. Given the mismanagement, the UK Government cannot have that as a priority. Post offices play an important role for our rural businesses and are part of the fabric of our communities. I will not pretend that my constituency is particularly rural, but it has many rural aspects; it is a mixture of small towns and villages between the major cities. Increasingly, as banks have gradually withdrawn from many of our local high streets, post offices have become a last-stop banking facility for many people.

Post offices provide an important part of national infrastructure, particularly as parcel delivery has been growing with the rise of e-commerce, which allows us to have many more businesses throughout our communities. Small businesses, especially rural ones, contribute more than £200 billion to the UK economy. They rely on post offices, with an estimated 80% likely to lose money if rural post offices close. More than 2 million small businesses—62% of all small businesses—use post offices at least once a month, and in rural areas, they are vital, with 36% of rural businesses using post offices at least weekly.

Due to issues including the new postmasters’ contract, Crown post offices are closing more and more regularly. The UK Government must ensure that the post office network remains able to cover all areas of the country, especially rural ones. More than 1,500 of the 11,547 post offices in the UK were temporary as of March 2018. That is 426 more than in 2014, according to post office data collected by the House of Commons Library.

[Marion Fellows]

The question of post offices temporarily closing is really down to the fact that Post Office Ltd cannot contract new sub-postmasters to run them. That is not to the benefit of my constituents in Wishaw, who lost their post office for almost four weeks last summer.

[Martyn Day]

I thank my hon. Friend for making an excellent point. I hope that the Minister is listening.

The Scottish National party supports a strong network of post office branches, which are the backbone of local communities and businesses. Many post offices are offering a greater range of services, including paying in money, after many local bank branches have closed. Some 537,000 businesses are registered in rural areas, accounting for one in four of all companies. They are very creative—almost half are considered to be innovators—and they contribute, as I pointed out, more than £200 billion to our economy. Small rural businesses are more likely to use post offices for deliveries and paying bills, and twice as likely to use them for withdrawing or depositing cash. Citizens Advice found that eight in 10 small businesses in remote rural areas would lose money if local post offices were closed. That should be a salutary economic warning to us.

The UK Government’s disastrous privatisation of Royal Mail and recent mishandling of post office management show that they cannot be trusted with our public services. The current contracts make it harder for sub-postmasters to afford to keep going, as my hon. Friend the Member for Motherwell and Wishaw (Marion Fellows) pointed out. At the same time, Post Office Ltd recorded net profits of £35 million in 2017-18, up from £13 million in 2016-17. As hon. Members have pointed out, its chief executive Paula Vennells got a 7% pay rise last year, while postmasters took an average pay cut of 4.5% and 11,500 Post Office workers received a combined £17 million pay cut. I ask the Minister to take urgent action to review the contract for sub-postmasters that was introduced in 2012.

My final point is about the effect on footfall on the high street. Closing a post office and moving its services to a franchisee will not increase the franchisee’s footfall, since many of the customers were already using the high street; it simply reduces the footfall travelling across the high street and has a detrimental impact on other businesses. What we actually need is to ensure throughput on the high street. If a post office closes and is moved out of a town centre location, that can be even more detrimental to the local community.

There are many concerns about the proposal and its effect on customers, staff and local communities. At the end of the day, we must remember that the Post Office is wholly owned by the Government. I implore the Minister to step in and halt the process.