Post Office Network

Paul Sweeney Excerpts

Thursday 25th April 2019 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Dame Cheryl. I congratulate the hon. Member for Motherwell and Wishaw (Marion Fellows) on securing this important debate on a critical issue facing many of our constituencies and the nation as a whole.

If we reflect on the decade since the financial crash, in order to avoid wholesale collapse of the UK’s banking system, there has been increasing reliance on the post office network, but an unsustainable model is being visited upon that network. Earlier this year, I met my local postmasters—who, as my hon. Friend the Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney) pointed out, now represent 98% of post office provision—and they were concerned about the franchising model for the Crown post offices. Of the post offices in my constituency, Possilpark across the road from my constituency office is franchised to a grocery shop; Springburn is still a Crown office but has been actively advertised for franchising; Dennistoun was franchised last year and is now in a grocery store; and Millerston closed and only recently has been advertised for franchising, so that it can reopen.

I first met the chap who took over the Crown office franchise in Dennistoun during the consultation. He was very upbeat and optimistic. He is a young man, an entrepreneur, looking to make a good go of it as a small businessman. I thought that his ideas sounded interesting, and he had some impressive plans for how to lay out the new facility across the road as part of a grocery shop. When he came to see me again earlier this year, I was saddened to hear how he had been “totally conned”—his words—by how the contract was set up.

The main concern was the viability of operations because of the reduction in funding and resource. For example, postmasters now have to rent ATMs at £8,500 per year, with business rates on that. The stores’ income from these machine is only £7,500 per annum, so postmasters pay £1,000 a year to run them. That is madness from their point of view. Why on earth would they do that?

The Government have invested £1.3 billion in the post office network, but I am afraid that that money has not fed down to the franchise holders. The withdrawal of RBS entirely from my constituency was followed by the recent announcement that Santander will close its last branch in the constituency. It has said, “Don’t worry: the post office network will take up the slack,” but that network does not look too resilient, and it certainly does not look like it has a promising prospect of picking up the slack.

Banking contracts with the new post office franchises have changed. Postmasters used to receive 70p per £100 to provide banking services, but they now only receive 31p per £100, which is clearly a massive change and financially unsustainable. That has combined with the huge restrictions that have been imposed on credit unions extending their bonds so that they can bail each other out. In the past few months, my constituency has lost a credit union. Previously, other credit unions could rally around to share capital so as to avoid one union failing, but the big banking lobbies have prevented that with the current restrictions. As a Co-op MP, I see a picture in which changes to commercial banking, restrictions on co-ops and the huge undermining of the post office network have been severely detrimental to local finances. That combination has been a toxic recipe for the provision of banking services across this country.

Earnings for post office franchise holders and sub-postmasters have been eroded to such an extent that they believe that cash starvation will lead to the closure of many post office outlets. They think that post offices should go back to the model in which they were run as Crown offices. Many of them clearly cannot wait for the franchise contract to end, so that they can simply walk away from it. It is so toxic for them that they cannot wait to throw away the key and board up the premises. That is the sad situation. At the start, there was a great deal of hope, with entrepreneurs trying to make a fist of it, but they were undermined by how the contracts have worked out, which is a great tragedy.

Postmasters in my constituency believe that their ability to provide a service and employment in the area has been severely eroded, and that retail operations within the franchises are not enough to avoid closure and to survive. It is a real cliff edge. The worry is that when this phase of contracts expires, we will see a massive collapse in the post office network. This is a ticking time bomb. Unless the Minister recognises the cracks that are appearing in the structure of the system, we will see a massive failure of the post office network within the next five years. The Minister needs to be aware that a crisis is brewing in that network.

If the Minister is interested in dealing with the situation, the contracts should be renegotiated—as the sub-postmasters who saw me believe—to allow not only service provision but the ability to earn a reasonable living. That is not a great ask of Government. They just want to run a business that is genuinely sustainable, and to earn a small profit—a living—so that people are happy. That is not how it works now, because the dice are loaded against them.

The CWU, of which my hon. Friend the Member for Coatbridge, Chryston and Bellshill is a proud member, actively opposed the franchising of the Crown post offices. However, the National Federation of Sub-Postmasters was in essence bought off by Post Office Ltd—sub-postmasters were paid into, but part of the conditions of those payments was that the national federation would not undertake any activity that undermined the reputation of the Post Office and brought it into disrepute. It is a trade union in name only—it is a sham.

If the Minister is serious about proper scrutiny, sub-postmasters need to be given proper independent recognition as workers, and to be allowed to organise in proper trade union fashion. That would be a helpful measure to improve scrutiny of the system. Employees of the post office network believe that they are 39% underpaid for their efforts. Clearly, where there is under-representation of workers and organised labour, there is underpayment and exploitation, and as my local sub-postmasters illustrated to me, that is exactly what has happened.

The situation reflects the wider issues of investment in banking in this country. In 2016, public and private investment levels in the UK stood at 17% of GDP. We are ranked 24th out of the 28 EU countries, and a pathetic 118th in the world rankings. That is a shabby record for the UK, and it speaks to the wider crisis in our economic potential as a country. We need to get a grip of that urgently.

That is why I welcomed the post bank proposal released at the beginning of April, which gained great press attention and traction as a credible and costed idea that would not only ensure the sustainability of the post office network, but create a reliable high street banking facility owned and run for the public interest. It is a plan to revolutionise the banking ecosystem, and to address the serious issues that we face, by, for example, ending the failing partnership between the Post Office and the Bank of Ireland. That partnership was forged after a massive public bail-out of the bank, and a condition of it was an exit from business banking activity. As a result, the Post Office is not able to grow its market share in small and medium-sized enterprise lending, and to help the growth of local businesses, which is stifled by a lack of lending. If we combine that with the restrictions on the credit union network, we see a recipe for constraining the growth of our economy and business activity in the UK.

That issue would be a priority for the new post bank, which would be welcome news for the sub-postmasters in my constituency and many others around the country. The post bank, which would be seeded with £2.5 billion in capital, is not controversial at all. Indeed, 65% of the public support the reintegration and renationalisation of the Royal Mail and the post office network as a unified whole. The UK’s own version, Girobank, was privatised as part of the great fire sale of assets by the Tories in the 1990s, even though a fifth of people worldwide have banking services through post office networks in their respective countries.

The new model for the post office network would be larger by far than any of the existing bank and building society networks. There would be 300 branches in Scotland alone. A post bank would be embedded in local communities, and would be given a decentralised decision-making structure, and a specific mandate to support small and medium-sized enterprises and social enterprise, tackle financial exclusion and promote inclusive economic development. It would be a lending arm of the proposed new national investment bank that Labour also plans to launch, and therefore would lead to a wholesale restructuring and repositioning of the UK economy, enabling patient finance to be seeded in our communities, and enabling greater vitality in communities that have seen significant industrial and economic decline over the last 40 years.

A solution is clearly at hand that would save our post office network and provide banking services where high street banks have disappeared. It would use a new banking model that is far more sustainable and will lead to far greater stability, growth and prosperity across the United Kingdom. I urge the Minister to take those proposals seriously, if she has any serious interest in addressing the crisis facing our post office network and those who work in it.

--- Later in debate ---

[Mr Sweeney]

The additional concern is that the ATM footprint is subject to business rates, which is obviously a cost borne by the franchise holder. That is money over and above that received from Post Office Ltd, and it therefore represents a financial detriment to the franchise holder. The Minister needs to come up with a mechanism to offset that cost to the business, because otherwise it is unsustainable.

[Kelly Tolhurst]

As the hon. Gentleman knows, the Government have been working to make business rates more equitable for small businesses, and we are looking at the impact of that. Post offices will have benefited from that work. He mentions costs that he has been made aware of; if he lets me know that particular constituency issue, I am more than happy to take that forward. As I have outlined, under the Bank of Ireland agreement with the Post Office, postmasters are remunerated for, rather than being expected to pay for the privilege of, delivering that service for our communities.

On the question of cashpoints, as we are faced with bank closures, which is a problem that we all very much agree on—they have deserted our high streets—it is for the post offices to pick up the slack in some cases. That is why this Government, with the Post Office, have been negotiating strongly on the new banking framework—to get a better deal for the postmasters who are delivering services that we all rely on in our high streets and communities.

The question of accessibility in the franchise branches has been raised. Franchising means that a post office presence can be maintained in town and city centres in a way that not only makes financial sense, but ensures that services are more accessible to customers, for example through the provision of extended hours and Sunday opening. Post Office Ltd is wholeheartedly committed to ensuring that the needs of the community and its customers are met in any relocation. That is why the Post Office consultation encourages the community to share its views on all matters, including issues related to accessibility under the Disability Discrimination Act 1995.

Post Office Ltd and its franchise partners have stringent rules regarding access to post office branches, which meet all relevant legal requirements, to ensure that all customers, including those with disability or mobility issues, can access their branches. The Post Office also runs local consultations in order to engage local communities, so that they help to shape its plans. The Post Office does not seek a mandate for the franchising, but consults on practical aspects of a proposed relocation, such as service provision and accessibility.