Post Office Services

Mike Weir 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 ---

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jenny Willott)]

Thank you, Madam Deputy Speaker. Having not been allowed to speak in this Chamber for two years as a Government Whip, it is a little surreal to be at the Dispatch Box.

I congratulate the hon. Member for Glasgow North West (John Robertson) on securing this debate on an important subject. Despite the lack of Members present, the issue comes up regularly, and on most occasions a significant number of Members want to discuss the critical role that post offices play in all our local communities. The post office is much more than just a commercial entity. As the hon. Gentleman has said, it is important to hundreds of thousands of small businesses, which rely on it every day, as well as to the millions of customers who use the network for a range of services. I agree with the hon. Gentleman that post offices are particularly crucial to elderly residents, those on low incomes and the disabled, who make particularly good use of them in our communities.

In November 2010, we announced a funding package of the historic amount of £1.34 billion to guarantee the size of the network until 2015 and to end the closure programmes run by the hon. Gentleman’s Government, which led to the closure of 7,000 branches under the previous Administration. In November 2013, we announced our continued support of the network with a further £640 million to secure and continue its modernisation until 2018. That makes clear the Government’s commitment to the post office and its future success. Contrary to what the hon. Gentleman has said, that recent investment is a vote of confidence in the post office network and it is helping to move it to a more sustainable and secure long-term future.

[Mr Weir]

I understand what the Minister is saying and I think we all appreciate the money going into the transformation programme, but many small sub-postmasters in my constituency are concerned because they feel that they are being pressurised by the Post Office to give up their businesses, take extra redundancy or move to a local model that they feel is unsustainable. That does not seem to be a sensible way to pressurise people who have run post offices successfully for many years.

[Jenny Willott]

I cannot comment on the operational procedures of the Post Office, which is a separate entity, but the Government are very clear that we want to maintain 11,500 branches in the post office network across the country. That means ensuring that we maintain a branch in all communities that currently have branches, and the level of knowledge and expertise that exist among many sub-postmasters, who are extremely well embedded in their communities and extremely well known and trusted by members of their local community. That is one of the elements that make the post office so important in many of our communities, especially in rural or more deprived areas, where many people depend heavily on the local sub-postmaster and the post office branch.

[Mr Weir]

I do not want to labour the point, but experienced postmasters are being encouraged to give up and businesses are going to a local shop, on the post office local model, that generally offers fewer services than existing post offices. I appreciate that the Minister has said that the Post Office is independent, but Government money—taxpayers’ money—is being used to achieve the changes.

[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.

--- Later in debate ---

[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.

[Mr Weir]

I thank the Minister for giving way yet again; I do not want to push my luck too far. I remember taking this matter up with the hon. Member for East Dunbartonshire (Jo Swinson) when she announced the fund. The fund is for doing work on the post office to make it better, but that is not the difficulty in many of these very small post offices. The difficulty is that the postmaster’s income is simply insufficient. Postmasters want to keep going, but there is nothing in the fund to give them an uplift in their income to help the post office survive. The fund is for physical changes to the post office, which is not the issue at most of the post offices we are discussing.

[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.