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Post Office Network Subsidy Scheme (Amendment) Order 2010

Volume 723: debated on Wednesday 8 December 2010

Considered in Grand Committee

Moved By

That the Grand Committee do report to the House that it has considered the Post Office Network Subsidy Scheme (Amendment) Order 2010.

My Lords, I remember, as other noble Lords certainly will, a time when what we now call Royal Mail was known as the Post Office, and then, briefly, Consignia. So perhaps I may start by being absolutely clear about what we mean by the Post Office and what we are here to discuss. The Post Office is an unrivalled network of around 11,500 shops where you can post your parcel or collect your pension. Royal Mail is responsible for collecting and delivering our letters. It provides the universal postal service that connects any post box to every address in the country.

The Government are committed to a strong and sustainable Post Office network. That is why on 27 October we announced funding of £1.34 billion for the Post Office network over the spending review period, subject to state aid approval from the European Commission. On 9 November, we published the policy statement, Securing the Post Office Network in the Digital Age, setting out our plans and commitments for the network. On 13 October, we published the Postal Services Bill, which is currently being debated in Committee in the other place. I shall expand on our plans for the Post Office network shortly, but perhaps I may first address the substance of the instrument currently before the Committee—which is all we are really seeking to discuss today.

The previous Administration introduced the Post Office Network Subsidy Scheme Order 2007 under provisions in Section 103 of the Postal Services Act 2000. The Act allows the Secretary of State to make an order permitting payments for the purpose of assisting in the provision of public post offices or assisting in the provision of services to be provided from public post offices.

Under the terms of the subsidy scheme order, the Government can provide funding to keep post offices open or to enable the establishment of post offices in areas of the country where, without funding, it is unlikely that they would be provided. The current scheme allows the Secretary of State to make payments of up to £160 million in any 12-month period beginning on 1 April. As we want to provide more funding than at present, we are seeking to amend the current order to increase the limit to £500 million.

For the next four years, the largest tranche of funding that we have committed in any one year is £415 million. Increasing the cap on the level of payments made under the subsidy scheme order to £500 million allows for some flexibility and contingency; for example, in case of changes to the tax treatment of the funding. We know that this is a large increase but I am sure that noble Lords will agree that the Post Office is a valuable national asset. It is much more than a commercial entity and serves a distinct social purpose. That is why the Postal Services Bill ensures that the Post Office will not be for sale.

The previous Government provided funding for the closure of 5,000 post offices; our approach is different. We will address the real economic challenges that the network faces. Our funding will enable the Post Office to do more than simply maintain the status quo. As well as receiving funding for loss-making branches, the Post Office will be able to invest in the network and introduce new technologies so that branches can be brought up to date. As the previous Government did not fully compensate Post Office Ltd in association with its maintenance of the Post Office network, our funding will give it the opportunity to invest its own resources in developing new revenue streams.

There will be no programme of post office closures on our watch. This funding will ensure that there continues to be a network of around 11,500 post office branches in the UK that continues to meet the post office access criteria. They ensure that 99 per cent of the UK population is within three miles of the nearest post office outlet, while 90 per cent is within one mile. They also contain specific protections for people in rural and deprived urban areas.

Furthermore, the proposed modernisation of the network which we set out in the policy statement will allow for longer opening hours and a faster service. This will make the Post Office more convenient for customers. It will also make it a stronger retail partner for Royal Mail.

However, the number of letters that we send is projected to continue declining over the coming years. Although the growth of online shopping and parcels offers opportunities for the Post Office, it will also need to develop revenues from other sources. These can be divided into two main areas: government services and financial services. We want the Post Office to become a genuine front office for government at both national and local levels. We are exploring the scope for greater local authority involvement in the planning, delivery and level of post office service provision. In terms of financial services, the Royal Bank of Scotland and the Post Office reached agreement last month to allow their customers, including those of NatWest, to access their accounts at post offices. This means that almost 80 per cent of current account customers will be able to withdraw cash free of charge at a Post Office branch.

However, we—and especially me, as I am getting rather over-excited by all this—must remember that today we are here to discuss the Post Office Network Subsidy Scheme (Amendment) Order 2010. New funding will help to ensure that the Post Office network has a secure and sustainable future. I hope that noble Lords will agree that the Post Office network should continue to play an important role throughout this country and will therefore approve the order.

I support the Minister on this measure. It is extremely encouraging that the coalition’s approach is a determination to keep our sub-post offices open. I do not wish to have a go at the Opposition but that is extremely welcome in contrast with the previous Government, under whom there were a lot of closures.

When it comes to regulations and Bills, I am always very keen to see whether there is an impact assessment. On this occasion, there is apparently no impact, but I simply raise it as a point that I always tend to raise because, if there is an impact, we must be sure that the matter is addressed when a regulation is brought forward. However, in this case, it does not apply.

I congratulate the Minister on taking the wind out of my sails. I was going to ask for details of what the subsidy would be used towards and so on, but she came forward with some very tangible points which, as I said, took the wind out of my sails. I was going to ask what measures there might be, particularly with, as the Minister said, the decline in the number of letters and in the sale of stamps and so on. Therefore, it is very good to talk about new revenue schemes, longer opening hours and the network being a very strong part of Royal Mail. The Minister also talked about central and local government services being directed, wherever possible, to the Post Office, and of course we have learnt that the banks are going to be engaged in the new arrangements.

Therefore, I shall not waste Members’ time and shall say no more, other than that I very much applaud what has been discussed and I thank the Minister very much for explaining it so clearly. Tangible measures and initiatives will be brought forward to implement what is proposed.

My Lords, I thank the noble Baroness for her introduction, which was helpful. I support the order and think that those who originated the network subsidy scheme deserve high praise. It is heartening to hear of a continued determination to keep what is left of the Post Office network. Support for the network of 11,500 branches is good news and I think that it will be acclaimed across the nation.

From my work in another place over many years, it quickly became obvious that any community worthy of the name needed a post office and a school, and this order may well hold the line in terms of our communities. These are big amounts of money and they must be welcomed.

One always speaks from experience, so I instance the sub-post office of Llanfynydd in Flintshire. It is tiny, it is valued and it is the village centre. Nothing is too much trouble for the family who run it. Situated on a Welsh hillside at 800 feet, adjacent to a church and a school, it is the centre of a far-flung, Welsh-speaking community. I do not think that any praise is too high for this particular sub-post office, and I make that statement in the knowledge that there are many hundreds of such sub-post offices across the nation. Long may they remain open, giving our communities the service that they need.

I hope that this order will guarantee the survival of post offices such as the one in Llanfynydd in Flintshire. I think that Wales will benefit from what is being proposed and I welcome the order very much.

My Lords, I could not help smiling when the Minister defined the Royal Mail and the Post Office because I remember when it was called the GPO, which dates me slightly. I was also an employee and, as I recall, the postmaster-general at the time was Anthony Wedgwood Benn. How time passes when you are enjoying yourself.

We welcome the increased subsidy. However, as the Merits Committee helpfully issued a health warning and said that the Order should be considered in conjunction with the Postal Services Bill, it is only appropriate that we register our concern about the impact of the Postal Services Bill. Of course we welcome the increased subsidy, but we would like to see enshrined in legislation the principle that the Post Office network should be used as the access points for Royal Mail.

We believe that the Secretary of State should have the power to specify exactly how many access points there should be. The reason for that is that it has been suggested that a privatised Royal Mail company might think that its needs could be served by a network of some 4,000 outlets. Currently, we have 11,900 post offices. I certainly endorse the comments of my noble friend Lord Jones about the vital importance of these post offices to the local community. Of that number, some 7,000 or so could be adequate to meet the access criteria that were introduced by the last Labour Government and have been accepted by this Government and spelt out again in their recent document on the future of the Post Office network in the digital age.

The criteria spell out that the access criteria introduced by Labour meant that, as the Minister said, 99 per cent are to be within three miles of their nearest outlet and 90 per cent should be within one mile. The access criteria continue with a more detailed definition in relation to urban and rural areas. The purpose of the criteria is to ensure reasonable access to post offices in both urban and rural areas. Without them, there would be no control of the overall shape of the Post Office network. We believe that a viable sustainable Post Office network is a critical part of the social infrastructure for many communities, which I was pleased to hear the Minister seemed to endorse. That is why we introduced the access criteria: to ensure that communities would continue to be fairly served by a national Post Office network. As I said, these access criteria could be met with something like 7,000 post offices, but we put in an additional investment so that we could keep the number at 11,900.

If the Government are serious about wanting to keep that number of post offices open and keep the network as we know it now, there should be a mechanism that the Government can use. The Secretary of State should have the power to specify the number of post offices to be used as access points for the services of the provider of the universal postal service. I am talking about that in the context of a privatised Royal Mail.

The Minister might argue that it is up to the privatised business what it decides to do, how many access points it uses and where those access point are located. That is precisely our concern. The nature of the relationship between Royal Mail and the Post Office in a privatised environment would be different. Will there be the current inter-business agreement that safeguards that relationship? We are talking about a national network and a universal service that we all agree we want to be easily accessible to everyone in the UK. Given that all parties on both sides of the House now agree on the access criteria of post offices, we cannot see any good argument for the Secretary of State not having the power to specify not only that the provider of the universal service should use post offices as access points but how many post offices that should be. If the Government are serious about protecting the Post Office network, the straightforward solution would be to enshrine in the Postal Services Bill that the Secretary of State should have that power.

We are talking about using large amounts of taxpayers’ money to subsidise the Post Office network. Therefore we want to make sure that that money is used to preserve that as part of the universal postal service. It seems that other countries have no problem about not letting the Government have a say in this. Elsewhere, where there has been privatisation of the mail service—we make it clear that we are opposed to complete privatisation—there has also been legislation to protect the post office network and specify its use as access points for the universal postal service.

As I said, we do not want to see the privatisation of the Royal Mail service but if the Government persist and it is going to happen, we cannot see what is wrong with including in that legislation a mechanism by which to protect the Post Office network. That is clearly what the overwhelming majority of the public want to see. Most people cannot imagine that it would ever be any different. The Government specify all sorts of regulations that private providers have to comply with: look at the various schemes that the energy companies are expected to participate in. To conclude, we welcome the increase in subsidy and in the range of services that the Minister has outlined. Nevertheless, I hope that the Minister will deal with our concerns in her reply.

My Lords, I am grateful to those of your Lordships who have participated. The Post Office network is an important national asset and it is important that we ensure it has a secure and sustainable future. My noble friend Lord Cotter paid me the compliment of saying that I had taken the wind out of his sails. As I am a sailing woman, I hope very much that I can reverse that. I hope that I raised the wind in his sails rather than taking it out of them.

My noble friend went on to talk about an impact assessment and I have a little note here on why we do not have one. It says that, as stated in the Explanatory Memorandum to the Post Office Network Subsidy Scheme (Amendment) Order, we do not believe that this order requires an impact assessment. The Government’s core policy is to ensure a Post Office network of at least 11,500 branches, which continues to meet the access criteria that were implemented in 2007 after national public consultation. This is a continuation of existing government policy and therefore does not constitute change for which the impact should be assessed. Moreover, the Government’s guidance on impact assessments states that spending proposals do not generally require them, as they are developed through a business case process. Well, there we are. However, I was delighted to have his support and I hope to continue to have it when the Bill comes to this House, fairly soon.

I also thank the noble Lord, Lord Jones, for his support. I was listening to his experience in another place and heard of the Flintshire village in the Welsh hillside, whose name I could not pronounce.

Well, how lovely indeed. Of the post offices, the rural ones are obviously those which we are all most concerned to do everything that we can to try and keep open.

In the last two outings that we have had facing each other, I have managed each time to call the noble Lord, Lord Young, “the Minister”. I shall try this time not to do it and to remember that I am the Minister. I also forgot the noble Lord’s background in the industry, when he reminded us of the GPO. I am not going to be tempted by him—I have been warned about this—to wander into the Bill, which will of course be with us some time at the beginning of next year. I look forward very much indeed to debating with him when the Bill comes, because of all his experience when he was a Minister. I am sure that he will have some pretty splendid arguments to put up.

I think that I have covered most of the points made. People have been very good. Your Lordships have seemed to be in support so all I need say at this stage, Deputy Chairman, is that I commend the order to the Committee.

Motion agreed.