Crown Post Offices: Franchising

Paul Sweeney Excerpts

Thursday 10th January 2019 Westminster Hall

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Evans. I commend my hon. Friend the Member for Wigan (Lisa Nandy) for initiating this debate and speaking so powerfully in introducing it. As many hon. Members have said, she laid out comprehensively the matters that we have concerns about.

I recently met a number of postmasters in my constituency to discuss their concerns, so the issue is not just the collapse of the Crown office network—the 60% decline that we have seen in that network. Last year saw the sale of the Dennistoun Crown office in my constituency; it was franchised off. I remember going along to the consultation that the new franchisee was holding, and he seemed upbeat about the opportunity that he had to make a difference. I was looking at the plans that he had. On the face of it, it was all quite impressive—the layouts and accessibility and the opportunity.

Obviously, at that time I expressed the concerns about TUPE-ing. We have seen that the general trend is that the majority of Crown office staff will leave. As my hon. Friend the Member for Edinburgh South (Ian Murray) said, staff will have a very generous settlement scheme, but that is because the business model of the franchising is set up so that it is sustainable only if those people take the settlements. TUPE-ing people across on the same terms and conditions is not a sustainable business model for the franchise. It is almost rigged, in a way, to create that perverse incentive to leave. There is a draining out of skills and knowledge and a diluting of employment protections and the standards of employment that people would generally have working in this sector.

The postmasters came to see me because they were concerned. The same guy I was talking about came six months later, and his mood could not have been more depressed. It was just awful to see the change from his initial upbeat enthusiasm. That small business owner had been looking to make an entrepreneurial fist of it, but he felt that he had been conned in the way he had signed up to the deal.

The main concern of the postmasters was the viability of the operations because of the reduction in funding and resource. For example, postmasters now have to rent ATMs at a cost of £8,500 per annum, but they get an income of only £7,500 per annum from those machines, so that is a net loss of £1,000 to the franchisee, just from the obligation to have an ATM on-site. There are associated business rates as well.

The Government have invested £1.3 billion in the post office network. However, that money does not appear to filter down to the franchisees. Banking contracts with new franchisees have changed. Postmasters used to receive 70p per £100 for providing banking services; they now receive only 31p per £100. That creates another problematic and precarious situation for many franchise owners.

As hon. Members have said, there has been a widespread programme of commercial bank branch closures, which has hit my constituency. Near the Dennistoun Crown post office, we have seen the closure of the Royal Bank of Scotland branch in Dennistoun in the last 18 months or so. Before that we saw the closure of RBS in Possilpark. My constituency has increasingly become a banking desert. It increasingly relies on post office services, which in turn are becoming increasingly precarious because all the Crown offices are being franchised. One has already been franchised, and indeed one franchise cannot be shifted because it is so unattractive to any prospective franchisee.

The situation is not working at all and is not sustainable. Potential earnings have been eroded to the point at which people believe that cash starvation will lead to the closure of many post office outlets. The view is that post offices should go back to being run as they were. My fear is that offloading the Crown office network on to franchisees stores up a time bomb. There could be a wholesale collapse in the provision of postal services across the UK within the next five years because those people literally want to drop the keys and walk away because it is costing them money to run these businesses. It is a drain on their resources. Why on earth would they be paying money to run them? I fear that the Post Office is sort of saying, “Let’s offload this. We’ll create a superficial holding pattern for a couple of years and lock the people into these contracts,” and in two years’ time things are going to drop off a cliff and we are going to see a massive collapse in the overall post office footprint across the UK. That is my real concern.

I hope the Minister takes on board and addresses my points, and that she offers to meet postmasters who have those concerns. Postmasters in my constituency believe that their ability to provide a service, which they want to provide, and employment in the constituency is being severely eroded and that retail operations within the franchises are not sufficient to allow their survival. They believe that contracts should be renegotiated to allow both the service provision and the ability to earn a reasonable living. Of course, the Communication Workers Union actively opposes the franchising of the post office network for that very reason. Employees in those branches believe that they are 39% underpaid.

The model is totally unsustainable and risks further collapse in the post office network across the UK. I hope you will take on board the direct feedback from postmasters in my constituency. Sorry, I hope the Minister takes on board that feedback—perhaps you will as well, Mr Evans, and perhaps your constituents are also affected. I hope the Minister addresses those points with urgency because this is an urgent issue affecting postal services across the UK.