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Post Offices

Volume 687: debated on Thursday 14 December 2006

My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:

“I am today publishing the Government’s proposals in a consultation document, copies of which will be available in the Vote Office in the usual way.

“First, let me set out the background to the proposals that we make. There are 14,300 post offices in the UK. Some 480 are Crown post offices owned by the Post Office, while 13,820 post offices are operated by postmasters and mistresses as private businesses.

“Historically, branches have been located where the sub-postmaster has chosen to set up business, rather than as a result of a strategic decision by the Post Office. The result is that, in some places, many branches are competing for the same customers. That is why the Post Office will take a more active role in ensuring that the right post office is in the right place—something the National Federation of Sub-Postmasters supports.

“The big problem is that people are simply not using post offices as they once did. Some 4 million fewer people are using post offices each week compared to just two years ago. The market in which the post office network operates has changed beyond recognition over the past 10 to 15 years. Traditionally, the post office was the place where people went to post a letter, pay their utility bills and collect their benefits. Many still do, but, increasingly, people choose to send an e-mail or text; they pay bills by direct debit or internet banking; they pay for their tax disc online and have pensions or benefits paid into their bank accounts.

“Of the 11 million pensioners in this country, 8.5 million have their pensions paid into a bank account. In fact, most people making a new state pension claim choose to do so in this way. Inevitably, that has taken its toll on the Post Office. Last year, the Post Office lost £2 million a week. This year the figure is £4 million. It is not surprising that both the National Federation of Sub-Postmasters and the Trade and Industry Select Committee have recognised that the present situation is, to use their word, ‘unsustainable’. So change is needed. Of the 14,300 businesses, around 4,000 are commercially viable. Many never can be, nor should we realistically expect them to be.

“The Post Office has a vital social and economic role. That is why we will continue to support a national network of post offices, and we are able to back them with the money that they need. The Government have invested more than £2 billion since 1999 to support the network. That has included £500 million for the Horizon programme, providing computerised banking to all post office branches. I can tell the House that the Government will provide up to £1.7 billion until 2011 to support the Post Office—to support the network and to pay for restructuring to provide a firm basis for the future. The annual subsidy will remain in place.

“Let me now turn to my proposals. We propose to introduce new access criteria for the postal services to ensure a national network. The access criteria will include provisions to protect customers in deprived urban areas and remoter rural areas. Details covering rural and urban areas are set out in the consultation document. I can tell the House that, nationally, 99 per cent of the population will be within three miles of a post office.

“This will mean restructuring of the network of Crown and other post offices. The Post Office will consult widely before taking decisions on its proposals. The Post Office will also provide services in different and more imaginative ways to better serve its customers’ needs. The way in which postal services are provided will also change. Government support will enable the Post Office to open at least 500 new outreach locations to provide access to services for smaller and more remote communities using mobile post offices and post offices within other locations, such as in shops, village halls, community centres or travelling mobile vans. In some cases, these will be able to deliver services directly to people’s homes. The Post Office is also determined to provide more new services for its customers, particularly financial services. It is, for example, the market leader now in foreign exchange provision.

“We expect that, as a result of these changes, about 2,500 post office branches will close. However, the remaining network of around 12,000 will still have more branches than the entire UK banking network.

“After discussion with the National Federation of Sub-Postmasters, the Government have decided to provide compensation to those leaving the Post Office, based on a 28-month remuneration package.

“The Government want to devolve greater responsibility for local decisions and to provide greater flexibility for local funding decisions. We will therefore look at what role local authorities in England and the devolved Administrations in Scotland, Wales and Northern Ireland might play in influencing how the postal services are best delivered in the future.

“The Government intend to consult on these proposals, with the consultation ending in March. It is intended that the restructuring proposals will be implemented over an 18-month period, starting in the summer of next year. The Post Office will ensure that it puts in place procedures to consult on restructuring proposals as widely as possible, providing people, including right honourable and honourable Members, with an opportunity to make representations and suggestions in relation to outreach provision, for example.

“The Government introduced the Post Office card account in 2003 to enable people to get their pensions and other benefits in cash at the post office. The Government remain committed to allowing people to get their pension or benefit in cash at the post office if they choose to do so, and there is a range of accounts available at the post office which make that possible.

“The current Post Office card account contract ends in March 2010. I can tell the House that the Government have decided that they will continue with a new account after 2010. It will be available nationally, and customers will be eligible for the account on the same basis as they are now.

“The EU procurement rule leaves us with no option but to tender competitively for this product, and we must ensure that best value for money for the taxpayer is achieved, but the Post Office is well placed to put in a strong bid given the size of the network and the access criteria that we are now introducing.

“In addition, cash will be available at the post office through some 4,000 free-to-use ATMs, which are being introduced across the network, as well as a range of interest accounts. These will be attractive to the general public as well as those POCA users who choose to build up balances on their card account.

“The proposals we make today will put the post office network on a stable footing and ensure that there is a national network across the country. I commend this Statement to the House”.

My Lords, that concludes the Statement.

My Lords, I thank the Minister for advance sight of the Statement—initially in the weekend’s papers, and formally this morning.

The Statement is both disappointing and wrong. It will bring fear and anxiety to people, often the most vulnerable, in every part of the country. It will destroy many good businesses, simply because the Government do not have a long-term vision for the future of the post office network. Does the Secretary of State not recognise that if the local post office closes, the last shop in the village often closes as well? A van for a couple of hours a week is no replacement for a post office that is open full time, always assuming that the van can get through the snow, ice or rain. Around 4,000 post offices have already closed under this Government. Taken with today’s Statement, that means that we will be losing over one-third of the post office network in 10 years of Labour government.

The Government’s decision on Post Office card accounts is welcome; it is what we have been calling for since the Government announced their intention to scrap them. I am glad that the Government have responded to the arguments put forward by this side of the House and have changed their minds on this issue. It is vital that the new Post Office card account scheme is genuinely available to existing customers, and that the application process is not made unnecessarily complex. The Minister said that the vital contract for the new account may not go to the Post Office. How many more post offices will have to close if the Post Office does not get it?

We all owe a huge debt of gratitude to our sub-postmasters and mistresses, who provide such a fantastic service to their local communities, such as the one in my village, St Mawes, in Cornwall. They tell us that they do not want to depend on subsidy, but want instead the opportunity to do more business and to serve their customers. Yet that is exactly what the Government are denying them today. This Statement is based on how many post offices the Secretary of State thinks he can get away with closing, rather than on a real business case or an understanding of what the consumers—especially the most vulnerable in our society—want and need. Labour’s vision is to have fewer post offices providing fewer services to fewer people; this is not the Labour Party that I knew before it came into office.

The Statement leaves many questions unanswered. When will the Minister publish the full list of branches that will close? Will closures be disproportionately in rural areas? How will the process of selecting branches to close be carried out? Will the Post Office identify the branches, or will it allow sub-postmasters and mistresses to volunteer for closure? How was the number of 2,500 closures reached, and how does this relate to the figures reported in the press that we are facing a potential closure of 7,000 of the 14,000 sub-post offices? Alan Leighton and Adam Crozier are doing a remarkable job in turning around the Royal Mail, but the Government appear determined to make them the fall guys for their own lack of vision in this area.

The Minister said that compensation will be paid where a sub-post office closes. Can he confirm media reports that compensation of up to £70,000 is being considered? Does he anticipate that uncompensated closures will continue? What will a local community have to prove to avert a closure? Will there be local consultation about potential closures—indeed, will the local community have any say at all?

The Minister also said that the annual subsidy will remain in place. Will that be at the same level as now, and for every year until 2011? Does the figure of £1.7 billion that he announced include the compensation to those postmasters and mistresses who close their post offices? If not, how much extra will be made available for those compensation packages?

Government and business must of course deliver their services in the most cost-efficient way. Yet this Government seem committed just to managing the decline of the post office network, when they should be trying to bring new business opportunities to it. The Government should be announcing today that they will allow post offices full access to work with carriers other than the Royal Mail. Her Majesty’s Government should be working with local councils to encourage them to offer more council services through post offices. They should be doing more to give post offices the flexibility to offer a wider range of business services than they are currently envisaging, and they should be acting to prevent the Royal Mail from poaching business away from sub-post offices by undercutting the prices that they can charge for postage.

While the Government fail to come forward with policies to give post offices a better business future, the Prime Minister lays the blame on the consumer. How can he make that claim with a clear conscience when it is his Government who have taken £168 million worth of business away from post offices this year?

This Statement is a missed opportunity for the post office network. Worse than that, it is a tragedy for those who depend on the network and for the communities that will lose a vital piece of their economic and social structure. This Statement brings us no closer to a sustainable post office network and, as a result, we are destined for more years of uncertainty, decline and dissatisfaction.

My Lords, from these Benches we thank the Minister for repeating the Statement. I am standing in for my noble friend Lord Razzall, our DTI spokesman, whose duties keep him away. Given the impact on our rural communities, I am glad that I am able to do so.

In a Statement made in the other place on 28 June 2000, the ill fated Stephen Byers told the House of the vital role that the Post Office was playing in communities, be they rural or urban. He spoke of how more than nine out of 10 people lived within a mile of a post office. Now the government target is that people should live within three miles of a post office. This entails a six-mile round trip for the elderly and those who have small children. The three miles are, I believe, calculated as the crow flies, so the distance might be considerably more than that. The situation is completely unsatisfactory.

Stephen Byers went on to say of the post office network:

“Now is the time to harness its full potential and to develop it in totally new areas”.—[Official Report, Commons, 28/06/00; col. 907.]

He spoke of three developments to do this: first, establishing the universal bank; secondly, providing internet access and exploiting e-commerce; and, thirdly, having an enhanced role in government services. We know what has happened in the six years since then: the Post Office has had a declining role in government services, mainly brought about by the fact that not nearly sufficient energy was put into the development of the Horizon programme. It was not thought that the Post Office could reasonably tender for the passport service or vehicle excise duty, although it could have done, had Horizon been rolled out properly and fast enough.

A New Economics Foundation study suggested that each post office saves businesses in the area some £27,000 a year. Do the Government agree with that estimation? What will they do about the businesses in the areas where post offices are closing?

The Statement said that the way in which postal services are provided will change and that the Government will support the provision of at least 500 new outreach locations. How will these locations be decided, and by what route will they be funded? Will they have to bid for funding, or will they be provided with funding on the basis of access for communities?

The Statement also speaks fairly glibly of providing services in travelling mobile vans, village halls and community centres. A lot of the time, these will have to be staffed by volunteers, whom the Minister will have heard on the radio this morning saying how hard the Government’s attitude is going to make life for them. They are volunteers; they are not even being paid. The impact on urban communities, too, is not to be underestimated; for those deprived urban communities already lacking many facilities, the blow will be equally great.

When we compare the Statement made in 2000 to the one made today, we see that the failure is astonishing. Yet, before the Conservative Benches claim too much credit for having been guardians of the Post Office, the statistics provided by the Library show that 3,500 post offices were lost in the years of their Administrations—perhaps lost more by careless neglect than anything else.

Liberal Democrats have a strong set of suggestions, which we will bring forward as the consultation rolls out, to strengthen the Royal Mail, separate it from the Post Office and give the Post Office freedom to develop the new business that is undoubtedly out there with the internet and other mail companies. The post office network needs investment in order to realise that potential so that communities can continue to count on having a post office at their heart.

My Lords, the noble Baroness, Lady Wilcox, made a number of points that bear a remarkable similarity to the points made by Charles Hendry MP in another place. That shows a remarkable consistency of position, but I do not wish to be discourteous to the noble Baroness. My right honourable friend the Secretary of State has therefore responded to the key points and questions raised by the noble Baroness, Lady Wilcox, but I will go over some of them and will then turn to the points raised by the noble Baroness, Lady Miller of Chilthorne Domer.

We have no choice but to tender on POCA and I would not like to speculate on choices beyond 2010. As I indicated, the Post Office will be well placed to put in a strong bid. The replacement of POCA will include features similar to those of the existing Post Office card account and will provide people with a simple and convenient method of accessing benefits in cash. POCA will run until 2010, and post-2010, a similar scheme will match it.

The noble Baroness, Lady Wilcox, asked about the impact on sub-postmasters and raised the question of compensation. The DTI proposition provides a dignified exit for sub-postmasters and sub-postmistresses who are faced with closure, and there will be increased opportunities for those who remain. Although detailed negotiations have to take place with the National Federation of Sub-Postmasters, we expect the level of compensation to be similar to that offered under the urban reinvention programme, which was based on 28 months’ remuneration. If I recall correctly, the figures can vary from a few thousand pounds up to almost £100,000, depending on the level of activity. I think noble Lords will appreciate that that is fairly generous.

As the Statement said, it is proposed that there will be 2,500 closures gross, spilt broadly evenly between rural and urban branches. About 500 of the rural closures will be mitigated by the opening of outreach, resulting in about 2,000 closures net. That partly deals with the point raised by the noble Baroness, Lady Miller.

Both noble Baronesses mentioned the consultation process, the timing and how it will work in practice. The Government are currently committed to a national 12-week public consultation about our proposition, which is in line with Cabinet Office guidance. That means that the consultation will run from the announcement until early March, with a final announcement by the end of the month. On top of that, Post Office Limited will be required to consult over local implementation plans on an area plan basis based on groupings of parliamentary constituencies. That will mean that there will be about 120 local consultations across the country, so all that is being proposed here will be thoroughly consulted on at national and local levels.

The outreach services are being funded from the £1.7 billion subsidy that I announced. Outreach services will be managed by local sub-postmasters, who will enter into local arrangements with local businesses. We do not anticipate any reliance on unpaid volunteers and the outreach work will provide opportunities for existing postmasters and postmistresses.

Access criteria were mentioned by both noble Baronesses. It is anticipated that nationally about 90 per cent of the population will be within one mile of these services and 99 per cent will be within three miles. In urban areas, 95 per cent of the population will be within one mile, and in urban deprived areas, 99 per cent of the population will be within one mile. In rural areas, 95 per cent of the total rural population will be within three miles, and 95 per cent of the population of a postcode district will be within six miles.

I do not recognise some of the points made by the noble Baroness, Lady Wilcox. The Government have been extremely generous in funding the social networks. We are committed to spending £1.7 billion until 2011 to support the Post Office. I am not sure whether the Benches opposite are suggesting that we should renationalise the sub-post office structure or that we should be more generous in our support. I would be interested to hear comments along those lines. We have been generous, and we must bear in mind that, although they provide a vital social service, which is recognised by the Government, some post offices are serving 20 people a day, some are competing against each other and some are not economically viable. The level of subsidy is rising dramatically and will continue to rise unless we take action to make post offices more viable in rural areas and in some urban areas as well.

My Lords, before I start asking the Minister questions, I should say that there is no suggestion that he is personally responsible to the British people for the betrayal of the wonderful Post Office that we once had. I bear him and his predecessor no ill will.

Is the Minister aware of what our Government—the Government I worked hard for—said when they brought in the White Paper? I shall quote from it in case he has not had a chance to read it. As one of the opposition speakers mentioned, the White Paper stated that reform would provide,

“a world class service for the 21st century”.

Stephen Byers said:

“We will maintain your existing postal services ... We will improve postal services for all customers through greater choice, better quality and falling real prices ... We will support a Post Office network which ensures you have access to public and private sector services ... We aim to ensure the UK Post Office can compete in the fast-moving domestic and international postal market”.

My noble friend may not be aware of what my Government, the Labour Government, said at the time. Does he not think that today’s announcement is a clear act of betrayal of the vulnerable people who have already been mentioned by the opposition spokespeople, such as the elderly and young mothers? Does he not agree that if we had not acted with such indecent haste to accept European directives on the Post Office, we might today have been in a position where we were able to use some of the money that has accumulated from the long-awaited change in the pricing structure of the core product of the Post Office—the stamp—which is bringing in more money? If we had not been so silly and had, perhaps, adopted the attitude of France, which will not even think about it until 2009, we would not be in this position today. Will my noble friend now say how sorry he is to the people in those areas, both urban and rural, who are now going to suffer the indignity of going through card shops and chemist shops to find a counter, to those who are going to be given a van that might come round, if it does not break down, every so many hours? Does my noble friend really think that this is a world-class service for the 21st century? If he does, then I hope that he will take time to reflect on what he says today.

My Lords, I appreciate that my noble friend Lord Clarke has a great deal of experience in this area. He has been a distinguished worker for the rights of Post Office employees. The Government recognise that there are many vulnerable people who require these services, both in urban and rural areas. I have outlined how we are trying to structure the services so that those people are not unfairly impacted upon. However, the way that people use post offices and increasingly use the internet and the way that technology is moving on the patterns of people’s consumption mean that the world is changing. We have to recognise that. At the end of the day, post offices, which are also businesses, have to recognise that. We have to restructure them in a way that both provides a social network but also makes the businesses more viable. That is what we are trying to do.

My noble friend is perhaps being slightly unfair to the Government on how they have tackled social deprivation in rural and urban areas. For example, since 1997-98 unemployment has fallen by 40 per cent in rural areas. Fifty per cent rate relief has been extended to village shops. The rural bus subsidy grant has been introduced to support more than 29 million passenger journeys a year. Ninety-nine per cent of rural households have access to broadband services. My noble friend knows very well what we have done in terms of increasing the basic state pension, pension credits, maternity leave, and a whole raft of social policies, which have benefited many who previously suffered great social deprivation in this country. That is a credit to this Government.

My Lords, I declare an interest as a member of the Post Office Superannuation Scheme. The Minister referred to the new account going out to competition. In the criteria on which the judgment will be made, will he assure us that the competitor needs to provide equal access in the locality to that which the Post Office provides? Would he think it right to do the total sum when deciding where the public interest lies? If the account goes elsewhere, the Government will have to find another large sum to sustain the network thereafter—£2 billion has been spent and another £1.7 billion is going to be spent. How much more? Should that not be part of a rational decision?

My second point is about the possibility that these places, particularly in rural areas, might become centres through which members of the public could get first-class information about public services. Old people and poor people often do not have a computer at home. They find it very difficult to get such information. A government agency, Learn Direct, through its own operations, has 6,000 outposted installations. With a postmaster to help, these could be a very valuable source of information to old, dependent people on what they are entitled to. We all know that they are getting less than their entitlement. I hope the Minister will consider that this is a real opportunity to bring in new business and to provide a valuable service.

My last point is a touch unkind. One month before the end of the previous Session, I put down a Written Question, which, among other things, asked the Government what estimate they had made of the level of subsidy they would need to offer as a result of their decisions to change the basis of social security payments. I had an answer on the last day of the Session. It did not answer that part of the Question. I spoke to the Minister concerned and had a letter from him—it did not answer the question. In the interests of open information, I wonder what estimate the Government made some years ago. Did they come up with an estimate of £3.7 billion and still rising?

My Lords, on the noble Lord’s final point, I am not aware of the figures to which he refers but I can certainly write to him.

The POCA has to go out to tender because of European Union rules. I can reassure the noble Lord that the replacement POCA will include similar features to the existing Post Office card account, providing people with a simple and convenient method of accessing benefits in cash. That is our intention. At this stage we cannot speculate as to exactly what product will be offered, although we are aware that it will have similar features. When it comes to the bidding, the Post Office will be in a strong position, because it already meets the general criteria. I cannot go into further details because of the commercial nature of the matter.

There is a range of ways of enabling access to benefits. There is already a range of ways in which people do that. I can assure the noble Lord that part of the purpose of the consultation is to ensure that we get it right nationally and locally so that vulnerable groups have what they require and that they have free access to their benefits—through a bank account, POCA or some other mechanism.

My Lords, talking about the Post Office is one of the most thankless tasks in either House of Parliament because at the end of the day no one is satisfied. The only thing that can be said about the Statement is that it removes a degree of uncertainty. For example, I know that the Royal Mail was anxious to find out what was happening.

We would like some clarity on one or two points. For example, how many of the Crown post offices, of which there are 480, are deemed viable and how many will remain open? Once in the private sector, will the franchising operations be subject to greater prescription than they have been hitherto, particularly on hours? From my own experience as a constituency Member of Parliament, I had very small village facilities—barely post offices—which opened only for a short time. There is nothing more frustrating than arriving at a post office at 5.15, after being at work all day, to discover that it is closed or that it does not open on Saturday afternoons. The rest of the retailing revolution in Britain seems to have passed by many of our postmasters and postmistresses. That is why a lot of them do not get the business that they should be getting.

Lastly, will the Government and whoever issues the franchises be more discriminating? If somebody wishes to give up their post office and take the money, will that be allowed only in those instances where the businesses are not viable? If a person wishes to retire, he should be required to take his chances and sell his business on, as any other entrepreneur would try to do. In the recent past we have lost people who have taken the money and run, regardless of the needs of local communities, whether rural or urban.

My Lords, I thank my noble friend for his sympathy with me today in delivering this Statement. The Crown offices are obviously not part of this announcement, but discussions are proceeding on their future, particularly with Post Office Limited on the level of investment that is required, how services can be improved—my noble friend mentioned opening hours and so on—premises, new technology and the whole scope of services offered by approximately 500 Crown offices. The Government intend that Crown offices should act as flagships, setting standards for customer services across the network and pioneering the use of new technology. We hope that the result will be a smaller, profitable, national chain of Crown offices operating to modern retail standards.

On his question about some postmasters and postmistresses taking compensation and leaving certain areas without a proper service, the point of the consultation is to ensure that the structure left in place will provide a proper service for local people, both nationally and locally. There is no intention to close offices and sub-post offices as people take compensation. The idea is to retain a viable structure of sub-post offices across the country. The Statement stated that around only 4,000 sub-post offices out of around 14,000 are commercially viable. No one is talking about reducing the number to 4,000. We want to ensure that the remaining post offices provide the social services and social network that noble Lords have mentioned is so vital.

My Lords, the Statement says clearly that people will have a choice. Although it is not his department, and he is far too young, when it comes to getting your pension, there is no choice. Everything that people do to try to get their pension paid through a post office account is blocked by the DWP, which encourages people to have it paid into their bank account. No wonder people give up, because five or six communications are involved. “Choice” is misleading in this Statement.

The Statement refers to the closure of post offices and, obviously, my interest today is primarily post offices. If the Government are to maintain post offices within a three-mile radius for people to be able to access them, surely, logically, it will be the very remote ones that will be closed. Therefore, the percentage that the Government claim will be within a three-mile area will be the most vulnerable. I seek clarification on that.

The Minister threw down the observation, but I hope that when our party returns to government we will free up post offices and allow them to have new business choices, which this Government, with their withdrawing of various schemes from post offices, have denied the general public.

My Lords, the noble Baroness mentioned the difficulties that some pensioners have in accessing their benefits. The Post Office card account is very popular and the majority of pensioners now access their pensions through bank accounts. Again, this is the changing nature of consumer behaviour. I agree that people who wish to go to the post office should have one within a reasonable distance. The access criteria that I mentioned should cover that.

Which offices will close is a matter for the consultation process to surface. It will be a detailed consultation, with up to 120 local consultations. It would be wrong for me or the Government to lay down any general rule on which offices should stay open or should close. Four million people use the POCA and applications run at around 15,000 per month. Anyone who wants to use the card, which is quite simple, is free to go to the post office to take out their pension in cash. That is making access easier, which is why it is so popular and why we are extending it.

My Lords, my noble friend said that 2,500 post offices will close. Is that figure set in stone or will there be a liberalisation of that figure when the consultation has taken place? Otherwise, the consultation is meaningless.

My Lords, that figure is not set in stone. We wanted to give some estimate of our view of the sort of numbers that would be involved. Otherwise, it might be said that we were not giving adequate information or that we were trying not to disclose the scale of the issue. The figure of 2,500 closures gives an idea of that scale, but it is difficult to say in advance of the consultation which offices will close and the exact numbers in each region.

My Lords, is my noble friend aware that, like my noble friends Lord Clarke and Lord O’Neill, even I cannot give a warm welcome to this Statement by the Government. Also, astonishingly, I agree with one of the points made by the noble Baroness, Lady Miller. A statement made by the noble Baroness, Lady Wilcox, really took our breath away. When I represented a large, rural constituency of 800 square miles for 26 years, in the 18 years of Conservative Government, post office after post office closed, year after year. In the eight years when I represented that constituency under a Labour Government, no post offices closed, because of the subsidies that were given by the Government. The Conservatives would be better placed keeping a little quiet on this issue.

What is the reaction of the National Federation of Sub-Postmasters to this announcement? My noble friend said that local councils will be encouraged to participate and perhaps subsidise and support the continuation of local post offices. Will he consult the Scottish Executive and the Welsh Assembly to see what they can do to support rural post offices in Scotland and Wales?

My Lords, my time is up, but I will write to my noble friend Lord Foulkes on the points that he has raised.