Post Office Network

Owen Thompson Excerpts

Tuesday 10th March 2020 Westminster Hall

[Marion Fellows]

I thank the hon. Lady for her intervention. I totally agree with her. I learnt about the circular flow of income and cash many years ago. If we cannot withdraw money from the post office, we cannot nip next door to the baker’s and buy a bun or a loaf of bread, and the baker cannot use it to pay staff. Things come to a halt. It is basic economics, or economics 101 as it is now referred to.

Communication Workers Union officials have also queried the wisdom of closing Crown post offices—those directly managed by Post Office Ltd—given that the company is profit making. The union notes that franchising causes people to leave the service because jobs advertised by firms such as WH Smith, which holds a very large number of franchises, are lower paid than those at the post office. Last year's decision to turn 74 Crown post offices into franchises in WH Smith stores is also alarming, particularly given reports that franchising is being done without consultation with the existing local post offices, meaning the competition risks destabilising the network further. I believe we heard from the hon. Member for York Central (Rachael Maskell) in a previous debate that that happened in York. The Crown post office was closed, put out to franchise, and opened next to an already franchised smaller post office branch.

There must be more consultation and strategic consideration on franchising. That is a particular concern of the all-party parliamentary group on post offices, whose chair, the hon. Member for Sheffield, Brightside and Hillsborough (Gill Furniss), is in the Chamber. Last year, the Post Office’s director of sales and trade marketing stated that it has no contingency plan in the event that WHSmith, which has experienced 14 consecutive years of sales decline, collapses. If WHSmith collapses, what will happen to the Crown post offices? We must ensure that further franchising happens only in consultation with other businesses.

The UK Government must provide more incentives for new postmasters to open post offices that are independent of major chain shops. Will the Minister look at that and instruct Post Office Ltd accordingly? It is appalling that this year the majority of sub-postmasters earned less than the minimum wage for running a post office. The pay increase announced in November will not take place until next month. It is vital that the Minister acts to ensure that profits are not increased at the cost of a cut to postmasters’ pay, forcing permanent post offices to close. Will the Minister take urgent action to review the sub-postmaster contract introduced in 2012? I think I can safely say that it is no longer fit for purpose.

The National Federation of SubPostmasters has raised sub-post office closures with the UK Government and the Government-owned Post Office Ltd. A spokesman said:

“Our records show around two-thirds of closures are due to the resignation of the sub-postmaster”.

The spokesman pointed to low pay as the prime reason, saying that

“This is a particular problem for rural areas in Scotland, as well as across the UK, where people rely on their local post office for vital postal and banking services.”

Last year, an NFSP survey warned that one in five towns could lose its post office in the next year. Surveying a thousand workers found that 22% are planning to close, pass on the business or downsize staff. Sub-postmasters have been forced to go without holidays and take on extra jobs to make ends meet.

[Owen Thompson (Midlothian) (SNP)]

We often find in situations such as the one in Loanhead in my constituency, where the Bank of Scotland is completely abandoning the community by shutting the bank branch, that the Post Office is expected to step in. We are very fortunate to have an excellent post office in the community that is willing to do so, but those increased pressures surely contribute to stress for postmasters, which adds to the points that my hon. Friend made about the potential for closure. If post offices close, what then for our communities, where the post office has been the final vestige, picking up the pieces after the bank has abandoned them?

[Marion Fellows]

I totally agree. The crux of the matter is that if we allow things to continue as they are, there will be a continual and continuous decline in the post office network until it reaches a tipping point and is no longer viable. We will all lose out, but the most vulnerable in our society will be affected the most.

In 2019, it was announced that from April sub-postmasters will receive better financial remuneration from Post Office Ltd for key banking services that they provide to the public. At the NFSP annual conference, the Post Office Ltd announced that it will raise the rates. That is great—it will be a threefold increase—but we must ask ourselves why the Post Office felt the need to do that and why it was not done earlier. A local sub-postmaster came to me and said that he was getting the grand rate of £1.88 an hour for dealing with cash intake to his branch. He will feel much better that he will get more money, but post offices are taking the place of banks, and that is not always right.

I was part of a group of Scottish National party MPs who tried to ensure that banking service provision is properly remunerated. To be fair, the issue was also raised by Members from other parties. I raised the issue at Prime Minister’s questions, and my hon. Friend the Member for Paisley and Renfrewshire North (Gavin Newlands) raised it during an Adjournment debate that he led last year. If people think that I sound repetitive, it is because I am being repetitive. Since I came to this place, five Ministers have been in place; today’s Minister is the sixth to have responded to a debate on post offices in which I have spoken. That cannot go on.

We welcome the changes that are happening, but it is vital that the details prove sufficient to protect postmasters’ livelihood and the network. Further improvements are needed to help to future-proof sub-postmasters’ business. The announced measures must not be the end of Post Office Ltd’s actions.

--- Later in debate ---

[Richard Thomson (Gordon) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate my hon. Friend the Member for Motherwell and Wishaw (Marion Fellows) on securing the debate and on her earnest plea that post offices matter. They absolutely do. In each and every contribution to the debate, we have heard about many of the different ways in which post offices matter to our various communities and sections of them. My hon. Friend made a clear call for the sub-postmasters’ contract to be reviewed, and she pointed out that we need creative thinking about how the business model develops. It is a call with which I heartily concur.

I very much enjoyed the contribution from the hon. Member for Brentford and Isleworth (Ruth Cadbury), who spoke eloquently about the difficulty of maintaining the visibility of the service, about some of the problems with security and about the locations of people who are willing to take on the service, which are not always the locations where, in an ideal world, we would wish the service to be transacted. She made those points very well.

The hon. Member for Strangford (Jim Shannon) spoke eloquently about the issues in his constituency, but he got right to the nub of it when he spoke of the post office as a core part of village and rural life. He hit the nail firmly on the head. My hon. Friend the Member for Paisley and Renfrewshire North (Gavin Newlands) spoke of the importance of a good and effective public transport network in ensuring continued access to the network, and he said that the service is beyond the diktats of market forces. Again, I heartily concur.

Let us look at some of the positive aspects of our post offices. A survey conducted in 2017 showed that 81% of respondents described the post office as important to them; 49% described it as very or extremely important and 97% described it as trustworthy—an unprecedented high figure. That shows the tremendous standing of the institution of the post office, which is not something that has been created in a marketer’s sketchbook. It is a reputation that has been built up over generations of much-valued service to individuals and communities, with a high-quality service at its very heart. The post office is at the heart of both urban and rural communities, and it has provided a universal service and common experience that we have come to value, wherever we are from.

We all understand that changes in the ways that people wish to access the services offered at post offices are inevitable. There is always a temptation to try to take everyone down the route of digital by default, regardless of whether we have the technological capability and sufficiency of broadband access, or the willingness or personal ability, to do that. We have to recognise that digital is not the default for many people, nor will it ever be. It should not be the default for accessing post office services, and we must not overlook the vital role that post offices provide not just to individuals, but to local businesses.

My hon. Friend the Member for Motherwell and Wishaw referred to economics 101 and the importance of the circular flow of cash. That is of particular importance as many banks retreat from our communities and, in many cases, the availability of ATMs in our communities is dramatically reduced. That retreat affects not only rural communities, but urban communities. Lack of access to cash is particularly felt in some of the less affluent urban communities, where the post office’s presence as a provider of cash is vital.

In addition to ensuring the flow of cash, enabling it to be spent locally is important. Many post offices are located within retail businesses in the area, and they also provide direct support to other businesses on the high street. More than 2 million small businesses, or 62%, use the post office at least once a month. In rural areas, 36% of rural businesses use the post office at least once a week to receive deliveries, send products, pay bills and, with the banks retreating from the high street, to deposit cash, as the post office increasingly—willingly or otherwise—takes on the role of cash handler of last resort in many locations.

The network could certainly fulfil that task, but we have to proceed with caution. We must recognise that many post offices simply do not have the physical security to handle large amounts of cash, and that many sub-postmasters are perhaps unwilling to take on a task that carries an increased risk of crime. Although my SNP colleagues and I would very much like to stem the banks’ retreat from the high street, it is important that if and when they do retreat, they are held financially to their responsibility to support the transition and ensure that the post office network is suitably equipped to take on that role, should that be what we want to happen.

[Owen Thompson]

On the point about the need for banks to have long-term contact with the post offices that step in where a bank has abandoned the community, does my hon. Friend agree that the postmasters in those post offices will have to pick up the pieces if that long-term connection does not happen? Months or even years down the line, when customers find themselves in a situation and the banks are long gone, the postmasters will have to pick up the pieces.

[Richard Thomson]

My hon. Friend makes an excellent point. When a service of that kind is withdrawn, the transition is rarely seamless, as I have seen in my constituency where banks have withdrawn and even post offices have reluctantly had to close. There is always a hiatus and an interruption in service, and it is difficult to quantify the degradation in that function that people experience as behaviour changes.

It is not difficult to map out a socially useful and sustainable future for the Post Office. Each of us has spoken at length about the socially useful role that it serves. The challenge is to make that role sustainable for those who provide and operate those services. It should not come as any surprise that as the level of direct financial support to post offices has declined in recent years, there has been a similar decline in the number of post office businesses.

The foundation of a sustainable post office business has to lie in making the everyday transactions sustainable and worthwhile for postmasters to carry out. That aspect of the business is potentially profitable; in 2016, it made a £35 million trading profit. Post offices must continue to be the access point—or the front counter, as has been said—to Government and other public services for people for whom digital is not and will never be the default option.

Postmasters should be properly compensated for the role that we expect them to perform. My hon. Friend the Member for Motherwell and Wishaw made the excellent point that a review of the current contract is absolutely essential. I very much look forward to hearing what the Minister has to say about that.

Although we need at least to maintain the network subsidy payment at its current level, we should also allow a new business model to develop. As I said, the Post Office has a trusted reputation, which it has used to leverage, grow and expand the business into areas such as telecoms and financial services. It should be allowed to expand its retail offering.

We have spoken about the Post Office’s importance as a distributor, collector and mover of cash; it should be able to develop the Post Office Money side of the business. We have heard about the constraints put on the Post Office card account and about the access that the Post Office allows to business banking for eight banks and to personal banking for twenty banks. The Post Office must be allowed to develop and build revenue from its own offerings in current accounts, business accounts, credit cards, saving products and domestic and international cash transfers. That will make the business sustainable.

The Post Office is a much-valued institution and service, but it runs increasingly on goodwill, which is not enough. I look forward to hearing the Minister set out her vision of the future of the service and how it can be made sustainable, not just in goodwill, but in the finances behind it.