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Community and Sub-Post Offices

Volume 657: debated on Wednesday 27 March 2019

Motion made, and Question proposed, That this House do now adjourn.—(Jeremy Quin.)

It now feels like we are actually in a Friday sitting, as we have been here such a long time already. I rise to raise growing concerns that have been brought to my attention by the National Federation of SubPostmasters and by many sub-postmasters in my constituency. I know that colleagues from across the House will have heard similar calls themselves. Several colleagues have already indicated a desire to intervene, which I am keen to accommodate; all I ask is for brevity when they do so.

The simple and undeniable fact is that many post offices face increasing challenges and huge uncertainty with regard to their long-term financial viability. In the modern digital world, with the likes of Amazon, grocery delivery and online banking, many of our small village and town centres, particularly in rural areas, face systemic degradation and challenges unlike anything they have seen before. This is at a time when big banks continue to up sticks and close their local branches at short notice, often with little consultation with their supposedly valued customers and local representatives. The role of the Post Office as the community banker is therefore becoming increasingly pronounced.

I am here to support the hon. Gentleman, because this issue is very important to me and my constituency. Does he agree that, in rural communities, post offices are the hub of country life? They are more than a link to essential services; they further social interaction. It is so important that elderly people in rural communities can have contact with post offices. For many people, the post office is their life.

I agree with the hon. Gentleman. I will go into detail on some of that. After the shenanigans of the last hour, I feel that his intervening in the Adjournment debate has restored balance to the force.

The post office is a community institution in Scotland, and, as we have heard, the rest of the UK. Over the years, famous firms like Woolies, BHS and Blockbuster, in addition to countless small family retailers in our towns and villages, have closed their doors for good, but the post office continues to be a fixture of our local communities.

Under successive Governments, we have faced decades of aggressive privatisation of nationalised industries that many, particularly in older generations, felt immense pride in contributing to. The Post Office looks very different today from 25, 50, or even 100 years ago, yet it requires still further modernisation. However, to paraphrase a former Tory Prime Minister, it remains one of the only pieces of family silver that has not been flogged for a fraction of its market value for the sake of ideological privatisation. Even as its partner, the Royal Mail, has been privatised—cheaply, I might add—Post Office Ltd remains in public hands.

Post office closures disproportionately affect Scotland, with 40 occurring from 2011 until March last year, compared with England’s 297. Per head of population, those closures are happening at a rate that is one third faster in Scotland than south of the border. Add to that mix Scotland’s geography and size—including 94 inhabited islands—compared with England, and it becomes clear that the continuing viability of the post office is of extreme importance to Scotland, particularly in the light of the number of bank branches being slashed.

I congratulate my hon. Friend on securing this debate, as his commitment to local businesses in his area is very strong. Bank closures have had such an impact on small towns in rural areas like my own. Will he ask the Minister about the charges, given that post offices are increasingly taking the burden of those bank closures in rural areas?

Absolutely. I will go into more detail on that subject in my speech and I will press the Minister on the issue.

The important role that the post office plays in our lives is felt more sharply in small towns and rural communities, which are disproportionately dependent on designated community post offices and sub-postmasters. In this debate, I will emphasise the challenges that the latter face due to unfair deals with big banks for providing basic banking services. Despite the growth of online and phone banking, there is still—and, for the foreseeable future, will remain—an undeniable need for easily accessible face-to-face banking, which is of particular importance to the elderly and those with additional support needs. As banks flee the high street, post offices are fulfilling this vital role.

I commend my hon. Friend for securing this debate and for the way in which he is setting out his case, which is very strong. He mentioned the problem of closures in communities across Scotland. We are very fortunate in my constituency of Airdrie and Shotts, because we have managed to secure a new post office in Plains that has since been very well supported. Does he agree that that support should send a strong message to the Government to open new post offices, not to close them?

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.

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.

I congratulate the hon. Gentleman on bringing this debate to the House. Of course, there are issues in rural areas in Scotland, but we also have an issue in Brentford town centre—a small town centre in the suburbs of London. We have lost our sub-post office, which closed in the new year because the sub-postmaster did not want to keep it on. No one else could be found among any of the other businesses to run the sub-post office because, as he has just outlined, it is just not viable. Does he agree that the Government need to review their tapering down of the network subsidy payment, which was supposed to be what made sub-post offices viable? In Brentford’s case, it is clearly no longer viable.

My hon. Friend made an excellent point about the fact that our post offices are being expected to pick up the slack because the banks have abandoned our high streets. Does he agree that this is putting postmasters in crisis, because the remuneration is so poor that, on average, many earn below the minimum wage?

It is as if my hon. Friend, who is sitting next to me, had read my speech, because I am about to come to that.

There is a fantastic post office in the village of Dunlop in my constituency where people do great work. It has a fine range of whiskies and beers, by the way, so it is well worth a visit. They have the same issue. The sub-postmaster has worked out that on the hours he does, he gets paid less than the minimum wage, yet he hires staff and correctly pays them the money they are due. Is this not an injustice?

It absolutely is. That sub-postmaster will have even less money once he has paid the commission to my hon. Friend for the advert he has just given.

At this point, it is worth giving some background and context regarding sub-postmasters’ remuneration. Previously, all post offices received a fixed element of pay—a core payment—that also allowed for six weeks’ annual leave. Now, only a small number of offices—about 400—that did not go through the network transformation, plus offices designated as community offices, continue to receive a fixed element of pay. Overall, the total amount paid to sub-postmasters has dropped as a result of the removal of this fixed element of pay from the majority of offices. The total amount paid by Post Office Ltd across the whole network in 2017-18 was 17% lower than in 2013-14, and that is before adjusting for inflation. As a result of the transformation programme, new post office models—main, local, and local-plus offices—are paid on commission only for the transactions they carry out. Main-model offices receive commission rates that are roughly one third higher than local-model offices.

It is with this backdrop that the Post Office is currently engaged in renegotiating the deeply unfair banking contracts with UK Finance, the body that represents the banks. Given that the Government have hidden behind the post office network countless times at the Dispatch Box while defending bank branch closures since 2015, and that, on behalf of the public, they own the Post Office, I hope that they will act as the proper stewards of the Post Office they should be and ensure that the deal ends up being a fair and sustainable one.

I congratulate my hon. Friend on securing this debate, because the point he is making is absolutely correct. More and more people are becoming dependent on post offices precisely because of the bank closures. The whole of Maryhill Road in my constituency, which I know he is familiar with, is going to be left without a single bank due to closures of all kinds of branches, and that is just since we were all elected in 2015. It is absolutely vital that the post offices on that street—a very long street—are supported to continue to maintain support for the people who need face-to-face banking services.

I totally agree with my hon. Friend. I know Maryhill Road well as I used to work there for many years. It is in the heart of Craiglang, where my wife is from.

Does the hon. Gentleman know that not just the banks are shutting post offices but the Government? The Post Office is shutting down Crown post offices, and 73 post offices in Scotland have been put into WHSmith—the worst retailer in the country. This is happening because of the Government. The Scottish Government are different—they are opening up post offices.

I totally agree. The post office network, with the Crown issue and this issue, is being dismantled before our eyes unless the Government get to grips with this.

I am conscious of the time, and the Minister may be a little bit shorter of response time than she would perhaps like to be, but I will give way.

Does the hon. Gentleman share my concern that the income of the small businesses run by many sub-postmasters and postmasters has been driven down by the Post Office and has reduced dramatically, and they are therefore unable to sell on what is maybe a long-established business that nobody will take on? This is leading to the closure of important post offices in communities. The Post Office itself is reducing their number and causing this crisis.

The hon. Gentleman makes an excellent point. I will come on to detail some of that shortly, if I get a minute between interventions.

The recent survey by the National Federation of SubPostmasters makes for stark reading both for Post Office Ltd and the Government. It found that 77% of sub-postmasters believe that their remuneration rates for business banking are unfair, while only 9% thought them fair, and 67% thought the rates for personal banking were unfair. If that is felt in such huge numbers, I am confident that there is a serious problem emerging that must be addressed quickly. If the number of banking transactions were to continue to increase, 76% of sub-postmasters would be concerned that the level of profit from these transactions would be inappropriate, but 50% of them also had concerns about the volume of cash they had to hand, and a further 42% were concerned about the impact on customer queuing time.

I have visited post offices in my constituency, and unfortunately a picture has emerged that matches the one painted by the federation. When I spoke with those at Ferguslie Park post office, they agreed that the fees they received were not adequate, especially for the amount of transactions that they carry out. That post office plays an important role in administering and advising on benefit payments and has had little success in making sales on the likes of life insurance, savings accounts, mortgages and home insurance. It is therefore especially important that the post office has a secure financial future.

The federation is also concerned about post office closure rates. In July 2018, nearly 1,000 post offices in the sub-postmaster network were listed as temporarily closed—8% of the entire network.

I congratulate my hon. Friend on securing this Adjournment debate. In Hardgate in my constituency, the Post Office has been unable to replace the closed post office, which serves Hardgate, Duntocher and Faifley. Does he agree that it is up to the Government to force the Post Office to re-establish Crown post offices, where the Post Office cannot meet that need?

I totally agree. The first thing that has to be done, though, is to increase the rates that make post offices viable in the modern age. I hope the Minister will take that step.

In 2018, sub-postmasters were far more likely to state their intention to close in the coming year than small businesses in general, with 22% intending to close or downsize their operation. Those with such plans overwhelmingly came from deprived areas. Sub-postmasters also face increasingly difficult working conditions, with often 40-plus hours being dedicated just to the post office side of their business and 27% of them working longer hours in 2018 than 2017. They average fewer than 10 days’ holiday each year, and one third took no time off whatsoever. They also face less take-home pay, with 61% taking home less in 2018 than 2017, 76% making less than the national minimum wage for hours worked and 19% of them or their partners taking on extra work to supplement their income.

Since network transformation, many post offices designated as local post offices, such as Kirklandneuk in my constituency, have had some services removed, such as Parcelforce services and passport services, which may otherwise cross-subsidise the lack of remuneration for banking services. Clearly that would be less of an issue were they simply paid a fair rate from the banks.

I will give way if the hon. Gentleman promises to be brief, and I congratulate him on the birth of his child.

I am very grateful to the hon. Gentleman for that. I have done my bit for the Post Office recently, with the number of cards I have been receiving since the birth of my child—although perhaps 35 cards did not have a stamp put on them, because I have not had any from SNP Members so far, but I have had many congratulations, which I am grateful for.

I have raised this issue a number of times. We are fortunate that the director for Scotland for the National Federation of SubPostmasters, Paul McBain, owns post offices in Moray. An issue that comes up time and again is that the public are not aware of the wide range of services that are available in post offices. They know what was historically available, but much more is now available, and we need to promote that message, to encourage more of our constituents to use post offices rather than online services.

I thank the hon. Gentleman for his intervention. That is certainly the case, and the survey bears that out; that is the belief of sub-postmasters. But at the end of the day, more customers going into a post office to use the services will just swamp it and perhaps make it an even bigger loss-making venture than it currently is. We need to sort the rates out as well.

Bridge of Weir post office, which I have raised in this place in the past, has serious concerns about its long-term financial viability. After making a small loss last year, it anticipates that the losses will continue to rise. All told, if this continues, it expects its accumulative losses over 10 years to reach £70,000, despite the centre being run almost entirely by volunteers, with just one paid member of staff in the post office.

When I previously raised the Bridge community centre post office, in asking the Leader of the House for a debate on this issue, I pointed out that despite being the textbook definition of a community institution—run by the community for the community, because no retailer would take up the franchise—it receives no community subsidy from the UK Government, and this is regrettable. Owing to the Government’s rules on distance to other retailers and to other post offices, it does not qualify for any support, but with a dose of common sense, this would be entirely avoidable.

Let us remember that no other Bridge of Weir retailer wanted to take this on. In addition, the Bridge’s other retail offerings—tea and coffee, cards, second-hand books—do not operate in competition with any other Bridge of Weir retailer. There is another post office within the three-mile limit, which also rules out community status. However, the community designation ignores local public transport links, which Bridge of Weir had gei few to start with, and recent cuts have eviscerated the village’s bus service. In addition, the next closest post office is a 10-minute walk from the nearest bus stop, meaning that access, even with an adequate bus service, is a huge issue.

This all said, I understand the need for community status criteria to be in place, but it is clear to me that we need to look again at these criteria, or to allow for common sense exceptions in places such as Bridge of Weir. The community subsidy is still vital as it supports many branches that might not otherwise be commercially viable. Under current plans, the Government subsidy to the post office is due to be cut in the coming year and to end entirely in 2021, but I would strongly urge the Minister to reconsider this.

The National Federation of SubPostmasters’ latest study found that, last July, 17% of community model branches were actually closed. This is alarming as they are potentially the very last store in a local area. The community subsidy is therefore letting many post offices fall through the net at the current rate, let alone with a further reduction or indeed its removal. This is not a promising outlook for the future of the post office network.

In too many of our small and rural towns, the local post office is often the last place where a face-to-face, human service is available. With such a wide array of duties—handling mail, banking, benefit administration and so on—it is understandable why the post office has continued to be such a vital lifeline to so many of our communities. I therefore urge this Government to listen to sub-postmasters to see what more they can do to support them in the short, medium and long term. They should not be afraid to stand behind the Post Office—let us not forget that we own it—and use their influence to ensure that it gets a fair and equitable deal with the banks that now rely on post offices to provide their services.

I urge the Minister to rethink the Government’s community designation to take into account local geography and factors such as public transport links in our communities. After speaking to my constituents, and I am sure that others in this place will have found the same, the current community designation leaves many community post offices—in practice, if not designation—out to dry. Indeed, the Minister must ensure that the community subsidy does not end in 2021. If indeed it were to end, I dread to think of the number of towns and villages left without a bank or a post office at all.

Given that the vast majority of the post office network is made up of sub-postmasters, we should be concerned when they tell us that they are overworked and underpaid, and most of all when they tell us that their financial futures are perilous. I hope the Minister will commit to meeting me to discuss this further.

The local post office has a revered position in our public life, standing through centuries of change, turmoil and political drama. It is important to note that times have changed, and the modern digital age has not been to the advantage of the post office. I only hope that we can maintain and protect a sustainable post office network for all our communities. The Government have a pivotal role in securing this vision, and I urge the Minister to listen to and to heed all the points raised by many Members in this short debate to ensure a secure future for our post offices.

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.

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.

House adjourned without Question put (Standing Order No. 9(7)).