Community and Sub-Post Offices

Philippa Whitford Excerpts

Wednesday 27th March 2019 Commons Chamber

[Gavin Newlands]

I do not need to add to my hon. Friend’s contribution; the Minister has heard him.

[Dr Philippa Whitford (Central Ayrshire) (SNP)]

Is it not bizarre that the Department for Work and Pensions has pushed people to open bank accounts away from the post office in order to receive benefits, when they actually end up back at the post office? Maybe we should make post offices more secure to provide access to cash.

[Gavin Newlands]

I agree 100% with my hon. Friend that the entire exercise is, quite frankly, a piece of nonsense; she makes her point well.

The fees that banks pay to Post Office Ltd, which in turn compensates its sub-postmasters, to carry out this work have been ridiculously low––so much so that the majority of these transactions are actually carried out at a loss to the sub-post office. For example, for every £1,000 of cash accepted over the counter, Post Office Ltd is paid 24p. There is no differential between the commissions paid for coins and for notes, so in effect if the post office had to count 100,000 pennies, it would get to keep 24 of them as payment. To be clear, Post Office Ltd also pays a transaction fee, but the combined fees are insufficient to cover those costs. It is clear that the current deal is deeply unfair and unsustainable.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)]

I congratulate the hon. Member for Paisley and Renfrewshire North (Gavin Newlands) on securing today’s important debate on community and sub-post offices. I am sorry that I do not have much time, but I will try to respond to some of the issues that have been raised. I am aware of his close interest in this subject, as we exchanged correspondence on this very issue last October. For centuries, post offices have been the centre of social life in our communities, towns and villages across the UK. This is why, in our 2017 manifesto, we committed to safeguarding the post office network and supporting community and sub-post offices, recognising the key role that post offices play in their communities.

At this juncture, it is worth setting out the overall context within which the Post Office operates. Although the Post Office is publicly owned, it is a commercial business operating in competitive markets. The Government set the strategic direction for the Post Office—to maintain a national network accessible to all and to do so more sustainably for the taxpayer—and allow the company the commercial freedom to deliver that strategy as an independent business.

Between 2010 and 2018, we provided nearly £2 billion to maintain and invest in a national network of at least 11,500 post offices. That extensive network gives the Post Office a unique reach among service providers. The Post Office currently meets and exceeds all Government accessibility targets at a national level.

The Post Office’s financial performance has improved significantly. Consequently, Government funding required to sustain the network has drastically decreased and is set to decrease even further in future years.

[Dr Whitford]

Will the Minister give way?

[Kelly Tolhurst]

I will not give way—I have only six minutes left.

Government investment has also enabled the modernisation of over 7,500 branches, added more than 200,000 opening hours a week and established the Post Office as the largest network trading on Sunday.

I encourage hon. Members to look objectively at those facts. They clearly show that the network is at its most stable in decades. Maintaining a stable network of community-status branches is at the heart of the Post Office’s social purpose. They are effectively the last shop in the village.

Almost half the 6,000 rural post offices have community status, including some of the post offices in the constituency of the hon. Member for Paisley and Renfrewshire North. In those areas, post offices are regarded as part of the fabric of community life. For example, a report by Citizens Advice on the use of the rural post office network found that seven out of 10 consumers bought essential items at a post office and almost 3 million shoppers visited a post office on a weekly basis.

The Post Office recognises the unique challenge of running a community branch and supports the postmasters who run them differently from the rest of the network. Those postmasters receive fixed remuneration, as well as variable remuneration, to reflect their special circumstances.

In addition, the Post Office delivered almost £10 million of investment via the community fund between 2014 and 2018. That enabled community branches to invest in their associated retail businesses. The Post Office has now launched a smaller community branch development scheme that will benefit an anticipated 700 branches. Let me be clear: the Government and the Post Office will continue to support rural post offices.

The hon. Gentleman will be interested to hear that, as part of the post office network transformation programme, 10 of the 14 branches in his constituency have been modernised. Modernisation makes post office branches simpler to run for retailers and improves services for customers through new modern environments and longer opening hours. Modernisation has led to 200 additional opening hours a week in the hon. Gentleman’s constituency. Five branches are also open on Sundays, delivering greater convenience to consumers.

Looking more widely at the post office network in Scotland, there are around 1,400 post offices, 66% of which are delivering these important services to communities in rural locations. Scottish branches account for around 11% of branches that have been modernised, creating an additional 24,000 opening hours a week as a result of the network transformation programme. There are around 470 post office services in Scotland that have community status, and around £800,000 has been provided to those branches from the Post Office community fund.

When a branch closes unexpectedly, the Post Office works hard to maintain or restore rural services in Scotland. For example, post office services have been restored at Eyemouth, a rural branch in the Scottish borders, which reopened in February after temporary closing last October and is now providing 122 hours of service per week. Muir of Ord post office, which has been closed since December 2016, is set to reopen next month, and that branch will offer double the service hours previously provided.

Hon. Members have raised concerns about the rates of remuneration paid to postmasters, especially for banking services. Although the contractual relationship between Post Office Ltd and postmasters is an operational matter, I care deeply about the issue and I am determined to make sure that running a post office remains an attractive business proposition.

The Post Office has invested significantly in its branch network to enable its branches to operate more effectively in the retail environment. However, the Post Office recognises that there are some locations where that approach is not viable. In those locations, fixed remuneration remains. The Post Office is not complacent and periodically reviews the rate of return on all services for postmasters to reflect the time and effort involved. Post Office Ltd will also use, where possible, the renewals of commercial contracts as opportunities to negotiate improved rates that can be shared with postmasters.

I want to touch on the issue of Crown franchising, in particular the assumption that franchising means closing and downgrading services. Those criticisms are misplaced. Post office branches are not closing; they are being franchised to other sites. In fact, 98% of post offices across the UK are successfully operated by independent businesses and retail partners.

I assure the hon. Gentleman that all post offices across the network are of the utmost importance to this Government and to me as the Minister. We recognise their value and importance to the community, residents, businesses and tourists in both rural and urban parts of the UK. We will continue to honour our manifesto commitment so that the post office can thrive and remain at the heart of our rural and urban communities.

I thank the hon. Gentleman for raising the issue. [Interruption.] I cannot hear him, sadly, because I have a cold, but I am always happy to talk about post offices at any time and happily welcome further debates.