POST OFFICE NETWORK
11. The rapid pace of change throughout financial
services presents unavoidable challenges for Post Office Ltd.
It is almost inevitable that Post Office branch incomes will fall
over the coming years as customers become more financially aware
and naturally graduate to bank accounts (including internet banking),
which can offer them greater functionality, such as bill payment.
We regret that Government policy is accelerating this process.
(Paragraph 68)
Customer trends have changed in recent years towards
alternative and more convenient choices for accessing services.
Increasingly people are choosing to send an e-mail or text message;
they pay bills by direct debit, use the telephone and internet
for banking or to access information on Government services.
Many people now find it more convenient to pay car tax on-line
or have benefit paid directly into a bank account. The Government
is simply responding to popular preferences in offering the public
more choice and flexibility in how they access Government services.
But the Post Office remains an important way of accessing services
and the proposals announced by Government will help place it on
a stable long-term financial footing. This will put the network
in a better position to compete for contracts, whether from Government
Departments or other clients.
12. With the reduction in income for Post Office
branches from the termination of the POCA, coupled with a fall
in income from other sources, we are very worried about the future
of the Post Office network as it stands today. We are especially
concerned about the impact on commercially unviable parts of the
network and the implications Post Office branch closures would
have on their wider communities. (Paragraph 69)
13. If the Post Office network were just a commercial
entity, it would not deserve to be supported by Government. However,
it fulfils a wider community need. In many places Post Office
branches serve as the heart of the community. (Paragraph 73)
14. Some Post Office branches, especially those
in rural areas, will always remain unviable. We believe that it
is vital that across the whole of Government there is a clear
recognition of the role that Post Offices play in delivering Government
objectives in the community. Decisions are needed by the Government
now to plan the Post Office network for the future, taking into
account postal services and the wider social functions provided
by Post Offices in local communities. If the Government fails
to act, the network and all the benefits it provides for communities
could be lost forever. (Paragraph 74)
Government acknowledges and accepts the Committee's
concerns about parts of the network that are likely always to
be unviable and fully agrees that the Post Office plays a vital
social and economic role. The proposals outlined to Parliament
on 14 December [2006] demonstrate the Government's commitment
to a national network of post offices providing access throughout
the UK despite the fact that many parts of the network will never
be commercially viable for Post Office Ltd. The proposals, which
are subject to national consultation until 8 March 2007, include
safeguards for most vulnerable customers in remote rural and deprived
urban areas and it is hoped that the Committee will recognize
that the Government has sought to protect these parts of the network.
While recognising the wider community role played
by post offices the Government must balance this with the need
to spend taxpayers' money responsibly. The financial package
proposed of up to £1.7bn seeks to do just that by investing
in the long-term health of the network, tackling both over supply
in densely populated parts of the network (we understand that
there are over 1,000 urban sub-post offices that have 6 or more
other branches within 1 mile) and under-use in other areas and
putting the network on a more stable footing to the benefit of
Post Office Ltd, sub-postmasters and customers.
15. The Government is rightly concerned about
financial exclusion. This is not just a question of encouraging
participation in banking services, it is about access in some
areas to the most basic of banking services: access to cash. The
Post Office is often the only outlet offering free access to cash
for people in deprived areas, be they urban or rural. For many
their Post Office branch provides access to vital services, such
as bill payments. We welcome the Government's agreement to make
social network payments for the next two years. However, we recommend
that the Government should now commit itself in principle to making
social network payments for the period post 2008. This would reduce
the anxiety currently felt by many customers and sub-postmasters.
(Paragraph 78)
The Government understands that there is a degree
of anxiety felt within the network and accepts the Committee's
recommendation to continue to fund the social network payment
beyond March 2008. Government recognizes that Post Offices that
can never be commercially viable, but that play an important social
and economic role, will need continued public funding. Consequently,
the financial package proposed on 14 December includes the extension
of the Social Network Payment at up to its current level until
March 2011. In response to the role that post offices play in
financial inclusion, the Committee will be pleased to note that
Post Office is increasing the number of free ATM's deployed across
the network to 4,000.
16. The Government has agreed to consult with
regards to any decision it takes on the Social Network for the
post 2008 period. We will watch with interest the form and outcome
of such consultation, which must be conducted in the most open
and thorough manner and with a reasonable period for interested
parties to respond. (Paragraph 67)
The Government agrees with the Committee's views
on consultation and is committed to open and transparent consultation
on matters of public interest. Proposals announced on 14 December
are set out in more detail in a national consultation document
on the Post Office Network. This consultation will run for 12
weeks with a closing date of 8 March 2007.
Following the Government response to consultation,
Post Office Ltd will develop area proposals for network change
based around groupings of Parliamentary constituencies on which
they will consult.
17. Historically the UK has enjoyed the benefits
of a comprehensive network of sub-Post Offices, often in very
remote, rural locations, because of the wide range of services
the Government chose to deliver through those Post Offices. On
top of unavoidable technological and social change, which have
reduced client footfall, the Government is now withdrawing services
from the Post Offices. If the country wants a comprehensive network
of Post Offices to continue, a more explicit funding mechanism
must be put in place, together with product diversification and
a replacement for the Post Office Card Account. (Paragraph 97)
The Government agrees with the Committee on the need
for a comprehensive national network. The proposed access criteria,
the continuation of the Social Network Payment and the new Post
Office Ltd business plan, will ensure that a national network
remains sustainable. In addition, the Government has announced
that after 2010, it will continue with a new account that will
include similar features to the POCA. This will be available
nationally and customers will be eligible for the account on the
same basis as they are now. The detailed design of the new account,
including the precise functionality, will be decided as part of
DWP's tendering and contractual process.
18. There has been a lack of joined-up thinking
between Government departments, perhaps to be addressed, at last,
by the Cabinet sub-committee. The DWP is undermining the Post
Office network by removing the Post Office Card Account, although
the Government now appears to be considering the need for a substitute.
The end of the Post Office Card Account has been the most serious
but not the only cause of the present difficulties, as decisions
by the BBC and the DVLA (with respect to licensing) have also
removed income from Post Offices. Given that the DTI then have
to put money in to keep the network going, taxpayers' money is
going round in a circle, while there is a climate of uncertainty
for sub-postmasters. This makes no sense to us. (Paragraph 98)
The Committee will understand that Government Departments
have a responsibility to ensure value for money for the taxpayer
and choice and convenience for their customers. DVLA licences
can still be obtained at the Post Office—the on-line service
simply offers customers an alternative and, for some, a more convenient
choice and makes it as easy as possible for drivers to tax and
therefore insure vehicles. The BBC's decision to offer TV licences
through a new supplier was taken solely by the Corporation and
on the basis of a competitive tender. Government had no basis
for interfering in that decision. The Government's proposals
provide a transparent subsidy for the non-commercial part of the
network that needs continued public support because of its vital
social role whilst putting the overall network in a better position
to compete for specific contracts, such as the replacement for
POCA. These proposals have been put together following cross-Government
discussion and agreement at MISC33.[5]
19. We are seriously concerned about the apparent
lack of urgency in the remit given to the Cabinet sub-committee
examining the future of the Post Office network. Sub-Post Offices
have already lost sources of income, and postmasters will be making
decisions now on whether they can sustain their business. There
is a danger of seeing considerable closures before the Social
Network Payment ends, unless postmasters are given a much better
indication of future sources of income after 2008. (Paragraph
99)
The Government does not accept the Committee's concerns
that the Cabinet sub-committee displayed a lack of urgency in
addressing these issues. The Committee discussed and agreed the
proposals set out in the consultation document published on 14
December.
20. There appears to be widespread, if reluctant,
acceptance among our witnesses that a network of 14,500 branches
is unsustainable. Postcomm has said that a network of 4,000 Post
Offices could breach the universal service obligation. We expect
the Government to work with Royal Mail Group and the regulator
to determine the size and shape of a network that would meet the
universal service obligation. Once this is done, if some individual
Post Offices which are judged to provide a valuable social service
are still incapable of making a profit, then the Government should
be prepared to continue a subsidy to parts of the network post
2008. It should make this commitment as a matter of urgency.
(Paragraph 100)
The Government recognises the Committee's views and
has made the commitment they recommended. The proposals for the
network are based on the need to maintain a national network that
is reasonably accessible throughout the country. The Government's
proposals include a maximum number of 2,500 compensated closures
which will go some way to providing the certainty that sub-postmasters
need. The access criteria proposed in the consultation document
substantially strengthens the existing Universal Service Obligation
and reflects the Government's belief that Post Offices play a
valuable social role.
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