Skip to main content

Post Offices

Volume 692: debated on Thursday 17 May 2007

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

“Last December I published the Government’s proposals on the future of the post office network. We then consulted and received more than 2,500 responses. I am today publishing the Government’s final proposals and can now set out how we intend to proceed. Copies of the Government’s response to the consultation and our response to the Trade and Industry Select Committee’s report are available from the Vote Office.

“Post Offices play an important social and economic role in the communities they serve and the Government are determined to maintain a national post office network allowing people to have reasonable access across the whole country.

“New technology, changing lifestyles and wider choice of ways of getting services mean that people are using post offices less. The network’s losses are now running at almost £4 million a week—double what it was two years ago. That will increase further unless action is taken to make the network more sustainable. As the National Federation of Sub-Postmasters and others have recognised, the present network is unsustainable, which is why change is needed.

“Mr Speaker, without continuing public support, a purely commercial Post Office would see fewer than 4,000 branches. That cannot be allowed to happen, which is why the Government are providing substantial financial support to maintain a national network.

“Although the proposals I am confirming today will see the closure of about 2,500 branches, the remaining post office network will still be larger than all the UK’s banks and building societies put together. Because we want to maintain a national network, we are putting in place rules that provide for reasonable access across the whole country.

“We will give Post Office Ltd the ability to shape the network for the future with clearly defined access criteria to ensure that the right post offices are in the right place to maximise their business.

“The rules governing access are set out in detail in the response that we are publishing today and will guarantee reasonable access in both urban and rural areas with additional protection for more deprived urban areas and some of the more remote rural areas.

“People were understandably concerned that these changes should be implemented in a sensible way. So, taking into account obvious obstacles such as rivers or motorways, the Post Office, in putting forward its proposals, will also consider the availability of public transport and alternative access to key post office services and the impact on local economies. It will have to demonstrate how these factors have been considered in each local consultation.

“Most respondents welcomed the proposal to extend outreach arrangements to provide postal services to small and remote communities. The Government will, therefore, ensure that 500 new outreach locations will be provided, building on the success of mobile post offices and postal services provided in village halls, community centres or even pubs. In some areas, they will be able to deliver services to people’s homes.

“We also want to encourage community ownership. There are already some 150 thriving community-owned shops, many of which already incorporate post offices. It is clear from the comments received that there is widespread interest and the Post Office will work with interested parties to encourage their expansion. We also want the Post Office to work with credit unions to develop services further. Key to ensuring the success of the Post Office is to encourage their greater use.

“The Post Office will be given every opportunity to pursue government business, and the network changes will put it on a stronger footing to do so. We will encourage the Post Office to look at further scope for co-locating with other community services, including local government services. Councils will be involved in the proposed changes to the network, and that should provide an opportunity to explore ways for them to provide a greater role in future in deciding how best to provide post office services to the public.

“In addition, the Post Office wants to expand its financial services. It is already the leading supplier of foreign currency exchange and has recently increased the availability of its euro-on-demand service to 6,500 branches. It is the third largest provider of travel insurance, it insures one in 50 cars on the road, and last year one in 25 credit cards was issued by the Post Office. The instant saver account, introduced in April 2006, has 175,000 accounts with deposits of £1.8 billion.

“In addition, cash will be available through some 4,000 free-to-use ATMs being introduced at branches across the network. PayStation terminals are also now in 7,500 post offices. All these measures should encourage more use of post offices.

“The current Post Office card account contract ends in March 2010. As the House is aware, the Government have decided that a new account will succeed it after 2010. It will be available nationally and customers will be eligible for the account on the same basis as they are now. I can confirm that the Department for Work and Pensions will today invite tenders for a successor to the Post Office card account to be available nationally, and customers will be eligible for the account on the same basis as they are now. Customers using the successor product should be able to get their cash at ATMs as well as across the counter. It is our aim that the opening of the new accounts will be streamlined and involve a simpler process for customers.

“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 post offices which make that possible, including the Post Office card account.

“The Post Office is determined to increase its range of products and business. I can tell the House today that the Post Office will be launching a broadband service later this year in partnership with BT. This will enable the Post Office to become a key player in the broadband-based services market, offering Post Office broadband services to the public.

“The Government have invested £2 billion since 1999 to support the network. Subject to state aid approval, we will now provide a further £1.7 billion up to 2011, including support of up to £150 million a year for the social network. Beyond that there will be a continued need for public funding of the social network.

“Where it makes sense, the Post Office will accommodate the wishes of those who want to leave, and the Post Office and the National Federation of Sub-Postmasters have now come to an agreement over how the compensation package will be administered. These measures are complemented by steps that the Post Office is taking to modernise the commercial network, returning the Crown offices to profitability and providing new products.

“As I told the House last year, of the 14,000 post offices in the UK, only the 458 Crown post offices are owned by the Post Office. The Post Office has to address the huge losses in this part of the network—£70 million last year alone.

“The network has always relied on other businesses to complement the postal business. So, in order to keep open as many post offices as possible, the Post Office has entered into an agreement with WH Smith to transfer 70 Crown post offices into their shops. That will ensure that these post offices stay open.

“The changes I am outlining today will be implemented over an 18-month period from the summer. In order to manage the process, there will be around 50 to 60 area proposals based mostly on groupings of parliamentary constituencies. But the Post Office and Postwatch will be able to adopt different approaches where it would be better to do so.

“In developing its proposals for public consultation, the Post Office will develop plans together in consultation with Postwatch, sub-postmasters and local authorities. Right honourable and honourable Members will be given advance notice of area proposals, in line with the arrangements used in the urban programme three years ago.

“That will be followed by each plan being subject to a six-week public consultation providing people with an opportunity to give their views. After the consultation, Postwatch will consider the responses and specific issues raised. There is also provision for further discussions and review by the Post Office and Postwatch before final decisions are reached. Final closure decisions will be made by Post Office Ltd.

“I said last year that we wanted to give local authorities and devolved Administrations a greater say in shaping the network in the future. We will, therefore, work with them to consider how we can best make this happen.

“The majority of people in this country want us to maintain a national network of post offices. I believe that the proposals set out today will do that and I commend them to the House”.

My Lords, that concludes the Statement.

My Lords, I thank the Minister for advance sight of the Statement. In reading it, I was struck by the fact that little had changed from the proposals presented to your Lordships’ House and another place in December. Sadly, the Statement confirms the worst fears of thousands of people in the country that the post office network is rapidly eroding under the stewardship of this Government. I wonder how many of the 2,500 respondents supported these proposals.

This Government have closed post offices more rapidly than any other Government, and today’s announcement accelerates that rapidity. A further 2,500 post office branches will be closed over the next two years. By the time of the next election, the Government will have closed more than one-third of the entire post office network. We know from the Minister in another place that the figure of 2,500 is not even the upper limit of the number of closures; it is the lower limit. Indeed, I understand that 2,500 is the number of compensated closures. Will the Minister confirm that Her Majesty’s Government have offered no guarantee that further closures will be compensated? I should be grateful if he would inform noble Lords of the Government’s estimate of the number of closures by 2010.

It is astonishing that this is a scheme for compulsory closures. As a result, even successful post offices could be closed simply by virtue of their location—simply by geography. As a result of the Government’s scheme, successful sub-postmasters and sub-postmistresses, who have spent years building up their businesses, will now be forced out. That is unacceptable. For some years the Government have provided a subsidy to rural post offices and today they trumpet their continued subsidy, but that subsidy will now go to all post offices. It will be spread more thinly and will cease to prioritise rural Britain. I fear that this Statement signals even more surely the impending extinction of the village post office.

These closures are excused by the Government as meeting their proposed access criteria, but the stark truth is that measuring the number of miles around a post office does not measure its value. Access criteria are, as my honourable friend in another place said, a wolf in sheep’s clothing. We on these Benches of course welcome the Government’s decision to include public transport considerations. However, the access criteria protect roughly only one-third of the network. The Government have announced 500 new outreach locations but, as I noted in December, there is nothing to suggest that these would not amount to just a van touring the countryside, available for just a few hours a week, and falling very far short of the role fulfilled by the traditional village post office. Can the Minister inform us about the structure and function of outreach locations?

Five months ago, we learnt that 2,500 post offices would be closed, but still no list of those affected has been produced. Will the Minister say when the list of closures will be announced and whether the views of local communities will be taken into account or simply dismissed? It is extremely disappointing that Her Majesty’s Government have fixated on managing the decline of the post office service, rather than looking at innovative ways to create new business opportunities, or encouraging post offices to survive on their own businesses and not on government subsidies.

The real outcomes of the Government’s actions mean the following: the closure of one-third of the post office network; the loss to countless villages of their only shop; and to millions of vulnerable people the loss of a service that they have depended on. It represents a total lack of notice being taken of the needs of the elderly, disabled people or the most disadvantaged. There is no appreciation of the dedication of the sub-postmasters and sub-postmistresses—people who have spent years building up their businesses and serving their communities. For those thousands of people who depend on the vital services offered by the Post Office, and for those for whom the post office provides the hub of their community, this Statement is bitterly disappointing, and the outlook from it is bleak. Here is evidence that this Government sadly do not hear the heartbeat of our country. This is a very, very sad day.

My Lords, I, too, thank the Minister for repeating the Statement. I was interested to hear about the consultation process, but what was its purpose? There were 2,500 responses, but I can see no difference between the announcement today and the announcement made before the consultation process. All those people who wrote letters and who campaigned and lobbied obviously had nothing to say. There was nothing among the 2,500 responses of any value or note—even those written from my local area.

Under this Government, 4,000 post offices have already closed, and a further 2,500 post offices are looking at closure. That is an underestimate. The noble Baroness, Lady Wilcox, pointed out that these are compulsory closures. Closures are taking place throughout the country where post offices have become unprofitable—they are disappearing at a great rate—so the number of closures could well exceed 6,000. Of course, that trend has continued for some time. Under the previous Government, there were 3,000 closures, and the nature of the business of the Post Office has changed with new technology. Those people who live in rural areas, and even some people in city areas, find it difficult to reach the added distance of their nearest post office, and there is a real feeling of being under threat.

I live in one of the most rural parts of England—the village of Rochester in Northumberland. I did a quick calculation on a map and realised that at present there is no post office in 100 square miles. With the almost certain closure of Otterburn, the figure will probably be doubled. I have a real question about the bus routes and provision of public transport. There is public transport to the local post office, but there is only one service going and one coming back. Do I want to spend eight and a half hours at the post office? I register that there is some joy in going to the post office, but perhaps not for that long. We have to look closely at the bus routes in some areas because there is an issue about how long it takes to go to and come back from the post office.

The Statement says that the Department for Work and Pensions will today invite tenders for a successor to the Post Office card account to be available nationally, and that customers will be eligible for the account on the same basis as they are now. Does that imply that the tendered process will go to the Post Office? In my understanding, tenders can go to anybody and so may not be linked to the Post Office at all. One of the mainstays of the present system could disappear from the post office network, with the closure of even more post offices around the country. I hope that the Minister can answer that question.

My Lords, I thank noble Lords for those remarks. On the question of consultation mentioned by the noble Baroness, Lady Wilcox, we received more than 2,500 responses, and listened carefully to what people said. Overall, there was a concern that there must be greater utilisation of the network along with recognition of the social role. The key themes are summarised in more detail in the Government’s response document, with individual responses available on the internet. The noble Baroness, Lady Wilcox, also asked about the number of closures; we are talking about around 2,500 closures. There will be a local consultation process on each area plan, which will be grouped around parliamentary constituencies, with local councils and others having input. It will be a rolling programme, with each area plan having a six-week consultation period. We envisage that the whole process will take around 18 months.

We are investing £1.7 billion into the network up to 2011 and guaranteeing the social network with a substantial commitment of £150 million a year. As I said in the Statement, there are only 4,000 commercially viable post offices. The whole network is currently losing £4 million a week. It cannot go on at that rate; it is not sustainable. However, we have taken a great deal of care to ensure that we maintain access criteria for both rural and urban areas, particularly deprived areas. I remain unclear what the party opposite would do to support the post office network. I would be interested to hear further proposals from it at some stage.

The noble Baroness mentioned compulsory closures. The aim is to get the right service in the right area to meet the access criteria and ensure national coverage. Post Office Ltd needs to be able to make compulsory closures to ensure that these objectives are met. Closure decisions will not be determined by sub-postmasters’ preferences, so there will be cases where there is a strategic fit between a closure proposal and a sub-postmaster’s wish to leave the network. There is, however, a generous compensation package where postmasters decide to leave.

Will rural post offices receive fewer subsidies? Well, Post Office Ltd will be making further significant savings through reductions in central costs and overheads, combined with more cost-effective delivery of services and the strategically planned closure of up to 2,500 offices. That means that the proposed social network payments will be sufficient to underpin the whole of the non-commercial network without adverse impact on support available to the rural part of the network.

The noble Lord, Lord Redesdale, also mentioned access criteria, which are clearly set out. Nationally, 99 per cent of the UK population must be within three miles, and 90 per cent within one mile, of their nearest post office outlet. In deprived urban areas across the UK, 99 per cent of the total population are to be within one mile of their nearest post office outlet. Discussions of the local pattern of support will be a matter for consultation between the concerned parties—Post Office Ltd, local communities and local authorities—which will have to bear the access criteria in mind, ensuring that communities are properly served.

The tender for POCA is open to competition, as it must be under EU regulations, but the Post Office is well placed to bid for the contract. Nevertheless, we must go through an open tendering competition, so that is not a foregone conclusion.

My Lords, ignoring the crocodile tears spilt by the Conservative Opposition today, will my noble friend say something further about the problem confronting the very elderly and the handicapped in the procurement of their pensions and other entitlements? As I understand it, they had previously gone to their local post office or obtained help in that regard. What can my noble friend say about that? Is this not a source of deep concern among elderly and handicapped people?

My Lords, I assure your Lordships that we have borne services to vulnerable people in mind. Most pensioners now receive their pensions through banks. Pensioners will still be able to cash either their benefits or their pensions at post offices. We are ensuring, with the rollout of POCA—which is popular; there is an extensive number of accounts—that pensioners and the vulnerable will have the opportunity to use these services in post offices.

The essential point of the access criteria is that we ensure that vulnerable groups have retained their local post office services. That is the intention, through ensuring that nowhere in the country is not served with a local post office, which is why we are giving a commitment to maintain not merely the commercial post office network, but also the social post office network. Post office branches will increasingly offer a range of services. It has been announced, for example, that the Post Office will be able to offer broadband and internet services. Increasingly, people of all ages use the internet to apply for their driving licences or other services. We will see a rollout of new services in the post office network in the future, which we are keen to support.

My Lords, as a Welshman, I ask roughly how many Welsh post offices the Government envisage being closed under this plan. Was the target figure arrived at after detailed examination of the needs of thousands of communities, balanced against financial considerations, or was it an arbitrary figure picked out of the air to be imposed willy-nilly, irrespective of the sum total of loss and damage?

My Lords, the figure was not plucked out of the air. An assessment was made, and that is the framework on which we have just consulted. It was envisaged that we could reduce the number of post offices by about 2,500 and still meet the access criteria for vulnerable groups, in both urban and rural areas, and ensure that there was an adequate pattern of post offices throughout the country.

There will be a number of local consultations, something like 50 to 60, across the country. They will be based on groupings of parliamentary constituencies. It will be for those consultations—as I said, they will be done on a rolling basis—to decide the patterns of service right across the country. Those local consultations will ensure that services are provided evenly across the country, and that will also apply to Wales.

My Lords, a fortnight ago, on 3 May, we had local government elections in England and Scotland, Assembly elections in Wales and the Scottish parliamentary elections. Why was this announcement not made before 3 May?

My Lords, first, there is a period of purdah when the Government are unable to make announcements that may affect the result of an election. There are strict rules governing these matters, and we were restricted. The Government are also unable to announce anything that can be construed as mildly positive. Secondly, once a consultation has been announced, it must run its course. The consultation had its timeframe, and this is the appropriate time to make this announcement.

My Lords, once again a Minister has come to this Chamber to announce the further mutilation of a once great public service. It is a sad occasion, as the noble Baroness, Lady Wilcox, said; it is always sad. On these occasions, I have to declare an interest as a former postman and an official of the union. In fact, there are three noble Lords in the Chamber to whom I used to deliver post. I claim no credit for asking the same questions that I asked six years ago; I am very sorry that my forecast has proved correct. Having stripped the Post Office of many of its counter services, the Government took away work and are now seeing their scorched-earth policy working against the public interest. That is not an inflammatory comment; it is happening. I shall finish my questions with a forecast about the universal service obligation of our once great Post Office.

Does my noble friend remember when we had an integrated Post Office that provided a world-renowned service? I used to travel the world for the Labour Party and for my union, and I was proud of a Post Office that delivered a good public service. People copied it; even behind the Iron Curtain, the British Post Office was looked to.

Does my noble friend remember what I said about the regulator? This is about financing the Post Office. The regulator put in place by the Government has destroyed the financial base of the Post Office. I would like my noble friend to go away and look at what is happening, which will be a threat to the universal service. Will he look at what Postcomm does? It is supposed to regulate the Post Office but is giving away its work to competitors at a cheap rate. They then dump their work into the Post Office, and every item from our competitors delivered by the Post Office costs it money. Whose fault is that? I do not want to make too much of a political attack on my own party, because the National Girobank under the previous Government would have met half of these things.

My mind boggles when I think of pensioners, the most vulnerable people in this issue, scrambling up to the counter to get a broadband connection. They will be thrilled when somebody says, “You can have broadband from the post office”. Will my noble friend look at how an integrated Post Office could finance itself and save putting the public purse at risk all the time? It could be done; all it needs is the political will.

My Lords, I thank my noble friend for his intervention. I must respect his views on the development of the Post Office, although I do not always agree with them. I shall make two points. The first is about our commitment to a universal service. The Government want to maintain a universal postal service and retain a social network. We are putting considerable resources into doing that. However, my noble friend must bear in mind that patterns of usage change. The Post Office is a venerable institution that served the country very well and will continue to do so. However, people increasingly use the internet and bank accounts. They do not always pop down to their local post office to purchase stamps and, if they do so, they do not necessarily do it in the numbers that make that post office commercially viable. Some post offices have a very small turnover.

My second point is that all parts of government and the economy try to ensure that they get services at the most competitive price. The decision on TV licences was made not by the Government but by the BBC in the interests of its licence fee payers. There are pressures on the Post Office, and rather than returning to the 1960s or 1970s and unlimited government subsidy, the Post Office must reform and adapt. However, at the same time, we will retain the core of the Post Office and maintain the all-important social network to support rural areas and deprived people in villages or urban centres.

My Lords, I accept the Minister’s words that the Post Office needs to reform, but it also needs more products to service/sell at its post offices. Reformation is not helped by the current demand of the post office unions, which, I understand, is something like a 27 per cent rise this year. In this climate of suspicion between management and unions, what positive steps are the Government taking to ensure that the Post Office sells more products?

My Lords, the noble Lord is correct that the Post Office needs to look at more commercial opportunities. Even now, any business that wants to supply new products to the Post Office can do so. There is a process that they can go through to develop the sale of new products or franchises. As we were debating earlier, the Post Office is concerned that it retains its core business because it does not want to undercut the principle of a universal service. There are opportunities to develop new products—I gave the example of broadband—and that is happening. Relations between the unions and the management are a matter for Post Office Limited and Royal Mail. The management and the trade unions need to work together to ensure that the Post Office becomes even more competitive because, in the modern world, it has to stay competitive to survive.

My Lords, I suspect that I am not alone here today in renewing my television licence, driving licence and so on online rather than through the Post Office in the way that most of us used to do. That said, when I do go to a post office, whether in London or Edinburgh, it tends to be busy, and it is unusual not to have to queue. However, that is clearly not typical.

I am more concerned about the situation with the sort of rural post office that the noble Lord, Lord Redesdale, referred to earlier. That fits in with what my noble friend Lord Clinton-Davis said about people less able to make their own way to a post office. How will they be accounted for in the consultation? It will be difficult for the Minister to reconcile his comment about post offices having a valuable economic and social role in the community with the announcement that has just been made if maximising business is to be the main criterion. How will he put that into effect in the consultation?

There is a practical aspect of the consultation process. I know from experience as an elected Member in another place and in the Scottish Parliament that in previous post office closure announcements, when consultation took place it was little more than a sham. There were rarely any changes to the original plans, which made local people cynical, particularly if, as I have seen, the six-week period straddled a holiday month—July in Scotland or August in England and Wales—or even the Christmas and New Year period, without being extended. Can I have an assurance that that will not happen in this case?

My Lords, I agree with my noble friend that the consultation process must be real, people must be given an opportunity to have an input into it, and we should be wary that it does not take place when it is difficult for people to have their say. I will certainly take on board what my noble friend says in that context to ensure that people have their say in local consultations.

We have done an awful lot of work on deprivation. We proposed that protection should apply to the 10 per cent most deprived urban areas. That was our initial thought—and this is how consultation can make a difference. In the light of responses to the consultation we decided to extend this provision to ensure that the 15 per cent most deprived urban areas are protected. So, as a result of consultation, the number of deprived urban areas to be covered has gone up from 10 per cent to 15 per cent. That means that the 15 per cent most deprived urban areas across the UK will be covered.

A blanket 15 per cent application across each nation would not be equitable or reflect the relative needs of each country. However, we have built on the approach we developed for the application of stamp duty relief and have sought to apply the same protection to each nation as that experienced by its most comparable English region.

The main point is that, as a result of our consultation, 15 per cent of urban areas in England and Scotland will be defined as urban deprived as will 30 per cent in Wales and Northern Ireland. If I gave the impression that we would be looking only at commercial aspects of the future structure of the Post Office, I did not intend to do so. We will be looking closely at deprivation and ensuring that vulnerable groups are properly served by the Post Office network.

My Lords, perhaps I may press the Minister further. I am equally disappointed with the Statement. It says that public transport will be taken into consideration. Who will make that decision? Will the local community have the overriding say or will it be the Post Office system? That is not clear in the Statement.

The Statement talks about outreach. I would like the Churches—or at least those with the greatest presence in villages—to be considered for inclusion. The Minister talks about free use of an additional 4,000 ATMs. How many will be situated in rural communities and how many in urban communities? If they are all situated in urban communities it will not help the rural communities.

Finally, perhaps I may push the Minister on compulsory closures. He referred to the involvement of local communities. If the Post Office decides to close an office compulsorily but the local community wants one still to exist, is there any reason why that community could not reinstate one itself? Again that is not clear from the Statement.

My Lords, I do not have the information on the division of ATMs between rural and urban areas, but I will write to the noble Baroness on it.

My understanding is that there will be 50 to 60 local consultations, after which Post Office Ltd will announce the result. Clearly, that will have to be done in line with the established criteria.

We are working with different groups on outreach outlets, and in many areas we will encourage churches to work with post offices to deliver outreach services. Those 500 outreach outlets will be chosen on the basis of local need; there is not a list of 500 outreach outlets at the moment.

My Lords, as so many noble Lords have taken part in this debate on the Statement, perhaps the Government will consider giving proper time for a debate to explore this in much more detail.

The noble Lord said that 2,500 replied to the consultation. How many thought that this was a great idea?

My Lords, I do not have to hand the breakdown of percentages. I am not sure that we have them. People often give qualitative rather than quantitative responses, so sometimes it is difficult to break down answers in terms of “yes” and “no”. Some people are in favour of some aspects and not others. I will do my best to look into the matter and write to the noble Baroness.

We are out of time. I will write to noble Lords whose issues I have not had time to cover.