Post Office — Statement

– in the House of Lords at 7:06 pm on 27th November 2013.

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Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills 7:06 pm, 27th November 2013

My Lords, with permission, I shall now repeat a Statement made in another place by my honourable friend the Minister for Employment Relations and Consumer Affairs. The Statement is as follows.

“Mr Speaker, I am pleased to announce that the Government are committing a further £640 million in funding to the post office network for three years, 2015-16 up to 2017-18. This enables the Post Office to complete its network transformation programme and to protect and invest in those branches that provide vital services to their communities but which are not commercially viable in their own right.

In 2010, the Government committed £1.34 billion to maintain a national post office network, modernise branches and safeguard the future of post offices which play a vital role in urban deprived and rural areas. Since then, the post office network has been at its most stable level in over 20 years, in stark contrast to 7,000 closures under the previous Government. This Government remain fully committed to maintaining a network of at least 11,500 post offices, fully compliant with our access criteria, and with a sustainable long-term future. To achieve this, the post office network must meet the changing needs of customers through longer opening hours and more modern premises which are easier and faster to use.

Already more than 1,400 communities have benefited from government investment into their post offices, with a total of 34,000 extra opening hours per week across the network. A further 830 post offices are also signed up to change to the new main or local operating models. In total, this represents nearly one in five of our post offices, and most honourable Members have one or more modernised branches in their constituencies. In fact, over 200 honourable Members, including myself, have personally opened a new-look post office in their area.

The Post Office is drawing on experience from the first year of the network transformation programme to introduce changes that will see the programme completed by 2018. These changes, developed by the Post Office in conjunction with the National Federation of SubPostmasters, were endorsed yesterday by sub-postmasters at a special conference. We will deliver the benefits of longer opening hours and more modern premises to customers at a swifter pace, while making more investment available and providing greater clarity and certainty for sub-postmasters.

The Government do not underestimate the challenges facing the network, the Post Office centrally and, in particular, individual sub-postmasters. In recent years, the retail environment on the high street and more widely has been far from easy for sub-postmasters, and this new investment recognises that reality. The network needs to build on its core strengths of unparalleled national reach and the trust and high regard in which it is rightly held by customers. It must focus on meeting customers’ needs and expectations in a rapidly changing, highly competitive retail market. Ease of access, longer opening hours, shorter queues and modern premises are key to winning new clients and attracting and retaining customers.

With more than 1,400 branches modernised to date, independent research is showing customer satisfaction levels with the new models averaging over 95%. Satisfaction levels among sub-postmasters operating the new models are similarly impressive, at around 80%.

In many locations, new operating models are enabling post offices to be re-established after a significant break in service. At Balnamore in North Antrim, a new local branch opened in August, re-establishing post office services some five years after the closure of the previous branch. The new branch opens seven days a week for a total of 92 hours. At Oxenhope in West Yorkshire, with no post office since June 2011, a new local branch opened in the Co-op now offers post office services from 7 am to 10 pm seven days a week. But it is not just about new post office operating models. The post office network is incredibly diverse, and it is just as important to customers in remote rural areas that their post office stays open, as it is for busy town centre branches to be open for longer.

There are around 3,000 post offices for which the new main or local models are not suitable. These branches predominantly serve small, often remote, communities and may be the last shop in the village. They are hugely valuable to their communities. The updated network transformation programme provides, for the first time in Post Office history, a £20 million investment fund allocated specifically to this part of the network. This fund will enable the improvement and modernisation of these branches to strengthen their long-term sustainability.

The investments being made by the Post Office are already creating a strong platform from which it can compete for new work from government and the private sector. Some customers and sub-postmasters have expressed understandable concerns about continued access to Post Office card accounts beyond 2015, when the current contract is due to expire. The Department for Work and Pensions and the Post Office are in discussion about a long-term successor to the Post Office card account, and I can confirm today that all options under consideration conclude that access to pensions and benefits will continue beyond March 2015 across the whole post office network of at least 11,500 branches.

However, the Post Office is also doing much more for government. Over the past two years, the Post Office has won every single government contract it has bid for. It is winning this work competitively, and winning it because it is such a strong partner for government. And there is even more that the Post Office can do for government in the future. For example, under the existing contract with the Passport Office, the Post Office is discussing the introduction of new in-branch services which would allow the majority of customers to apply for their passports digitally, without the need for any supporting paper forms. The intention is to introduce these services from the middle of 2014.

Recently, the Department for Energy and Climate Change announced that it will work with the Post Office to signpost elderly and vulnerable people to the 500 volunteers being trained by the Big Energy Saving Network to help people find ways to cut their bills. These innovations demonstrate a forward-thinking Post Office, introducing new services, growing new revenue streams and bringing new customers into post office branches. With the additional funding in place, we have the basis for building a thriving and sustainable Post Office.

I believe that in the next few years, we will see the Post Office continuing to grow its business, and its network flourish and potentially expand in due course. Creating a financially sustainable network will be key to delivering a Post Office that can be mutualised. Significant progress has been made by the Post Office and its stakeholders already and this will be boosted by the funding committed by the Government today.

The Post Office will shortly publish further details of the steps it is taking to build a mutual future. The £640 million investment that I am announcing today funds the completion of a transformation programme. It establishes the platform for a vibrant, commercially sustainable post office network with a mutual future. I commend this Statement to the House”.

Photo of Lord Young of Norwood Green Lord Young of Norwood Green Shadow Spokesperson (Business, Innovation and Skills) 7:14 pm, 27th November 2013

My Lords, I thank the Minister for repeating the Statement. Let me start by paying tribute to our sub-postmasters up and down the country. They are integral to all our local communities and the social fabric of the country. However, the job of a sub-postmaster has become much more difficult in recent years. Research from the National Federation of SubPostmasters shows that incomes are falling and many work very long hours for very little return.

That situation has not been assisted by the Government, who in 2010 announced plans to use post offices as the “front office for government”. The Government have failed to deliver on that pledge. No new major government services have been awarded to post offices since May 2010. Indeed, the National Federation of SubPostmasters has said that the few new services which have been introduced are one-off transactions available only in a small number of post offices and many services do not make the post office any revenues at all. This resulted in the National Federation of SubPostmasters removing its support for the Postal Services Act. The Government promised £466 million of government work, but the post offices are currently gaining only £130 million from government business. That failure has resulted in the post office network being under more pressure than ever before.

On top of this failure is the abject failure of the network transformation programme as planned. Consumer Futures wrote to the BIS Select Committee just last month showing that only 1,100 have converted to the new models, and the Government require 6,000 by 2015. It shows that the programme is not working, and that is why a degree of compulsion has been introduced.

We can firmly say that today's announcement of additional funding of £200 million on top of the £420 million already trailed beyond 2015 is a vote of no confidence in what this Government are doing to the network. In effect, the Government are increasing the compensation for people to leave and offering more money to convert. Of this, £23 million is for completing a retail survey in order to determine who should be compulsorily converted or removed from the network. If they had delivered on their “front office for government” work, as they said they would, then the £200 million would not be required. It is a payment for failure and yet another broken government promise.

It is true that the National Federation of SubPostmasters voted to approve this yesterday, as most operators feel that the traditional post office model under this Government is not working. Sub-postmasters know that they will now have a degree of compulsion, but they will take the package as they are really struggling. That the federation’s members are voting to support this package so wholeheartedly shows that they want to get out. It is the epitome of taking the money and running. Crucially, this money will be used to subsidise exit from the network rather than to go into the network to make it sustainable in the long term.

We welcome the Government’s commitment to the Post Office card account beyond 2015, although I am not sure how absolute that guarantee is. We also welcome the “last shop in the village and community” post office funding, and support the policy that there will be no compulsion. The £20 million will assist in modernisation and help these vital community assets.

By the end of this process £2 billion will have been spent on network transformation and there is concern that we still do not have a model that is sufficiently attractive to current or future operators. It is true that in the past 7,000 offices were closed, but that was a necessary programme to ensure stability of the network. Is the Minister confident that there are sufficient retailers willing to take on the local model?

The Prime Minister said in PMQs in the other place, in answer to a question from the honourable Member for Argyll and Bute, that,

“we have committed that no post office will close in this Parliament”.—[ Official Report , Commons, 23/10/2013; col. 296.]

However, if you stay and convert and have your salary subsidised until 2015, the question is: what will happen beyond 2015? I would also welcome answers from the Minister to the following questions. Will the current criteria be used for compulsion or will they be updated? Will this require a new state aid application? Where does all this current activity leave the Government’s plan for mutualisation? Finally, if other outlets are not prepared to take on a post office when a sub-postmaster leaves the network, what will happen?

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills 7:20 pm, 27th November 2013

First, I thank the noble Lord, Lord Young of Norwood Green, for his response and agree with his tribute to the sub-postmasters. As he alluded to, they do a sterling job around the country, often in quite difficult environments, and I pay tribute to them for all the work that they do and all the hours that they put in. I also agree with the noble Lord when he said, I think, that sub-postmasters have had quite a difficult few years. The past two or three years have been pretty tricky for everyone, particularly in the retail sector, and sub-postmasters have been no exception in terms of the post offices that they run.

However, it is not true to say that no new government services have been won. I can provide evidence that many contracts have been won, including some government contracts, and am very happy to furnish him with that information. The past two years, since 2010, have been, in effect, a success story in terms of the number of new government contracts won, which is a great testament to the work that the Post Office has done.

The noble Lord also raised the issue of the new model. The £1.34 billion that was announced back in 2010 was of course designed to see the Post Office through the next few years, up to 2015, with the objective of renovating 6,000 branches. The noble

Lord, I think, agreed that more than 2,000 branches—it is in fact 2,250—have pledged to go forward with renovation. Already, 1,400 have been renovated and those post offices have proved their worth in terms of customer satisfaction. He made the point that the money to cover all 6,000 had not been spent, but it is a rolling programme—the extra £640 million is designed to take us further forward, for the period from 2015 to 2018, and to extend the 6,000 to 8,000. It is an extremely good success story and testament to the fact that the money that we spent in 2010 has been used to such good effect in improving the 6,000.

The noble Lord said that more than 7,000 branches were closed by the previous Government, which is true. He said that it was because of the need to create stability, but there was a huge cost to doing it. We are now at the stage where we can say that we have created much more stability for the Post Office. It has never been more stable, and it is certainly more stable than during the previous Government.

Where branches have already been converted, customers are benefiting from much longer opening hours and fewer queues—more than double under the local model and up by 35% in the main branches. We also pledged, back in 2010, that there would be no office closures, a point I will address directly with the noble Lord. We are often challenged on that pledge but I say again, for clarity, that we seek, and have pledged, to keep open 11,500 branches.

The noble Lord raised the issue of state aid. He is quite correct that we need to apply for state aid, as we did for the initial £1.34 billion. We are looking ahead and making sure that we do that in good time. We have every confidence that the state aid application will be accepted. We do not see a problem with it but it is right to clarify that that is indeed the case.

The noble Lord also focused on the issue of mutualisation. I will just add a word of caution here: although seeking mutualisation is a nice long-term aim, there is a long way to go and some settling-down is needed. What is certain is that we are looking ahead, ideally to see how sub-postmasters, and maybe communities, might become more directly involved in investing in the post office network, which we see as vital for the future of this country.

Photo of Lord Stoneham of Droxford Lord Stoneham of Droxford Liberal Democrat 7:25 pm, 27th November 2013

My Lords, in contrast to the gloom and pessimism on the opposition Benches, I welcome the additional funding to speed up and complete the modernisation of the post office network, plus the new funding for the smaller post offices that are not suitable for the principal modernisation programme.

I congratulate the Government on the stability they have achieved and the commitment they have given to the post office network, against a background of a very difficult retail environment and after a decline of one-third in the number of post offices in the previous 13 years. This initiative recognises the importance of a local post office to the social fabric of our communities. It is important now that we work hard to ensure the commercial sustainability of the current network. That will need vital new business.

I have two questions for the Minister. What prospects does my noble friend see for the development of the Post Office current account business given the damage the commercial banks—along with, sadly, the Co-operative Bank in recent weeks—have done to their brand? With the growth of internet shopping, are our modernised post offices equipped with secure storage space and the technology to notify customers when their deliveries arrive?

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I thank my noble friend Lord Stoneham for his very strong and broad support for what the Government are doing. He makes the very important point that the post office network, and individual post offices, whether local or main branches, will now be in a much better position to compete and to offer much better, streamlined services for the customer. The whole point is that we want to create a more stable environment so that the customer can come in and have a greater offering of retail opportunities, including the financial options.

The Post Office is making good progress towards meeting its commitment to provide affordable and accessible financial services, including current accounts. In May 2013, as the noble Lord will know, it launched a current account pilot, with a national rollout expected in 2014. Alongside that, the Post Office continues to offer an extensive range of savings, credit card and mortgage products. I have no doubt that this offering will be extended as confidence is brought in again and increases in the network around the UK.

Photo of Lord Skelmersdale Lord Skelmersdale Deputy Chairman of Committees, Deputy Speaker (Lords)

My Lords, I should probably declare an interest as a director of a mail order firm. I know this debate is nothing to do with Royal Mail whatever but the firm that I am director of uses the local sub-postmaster branches somewhat extensively.

More than 20 years ago, I was in the Minister’s position speaking for the Post Office in your Lordships’ House. At the time, I wondered why sub-postmasters, in particular, were not allowed to hold passport forms, so I welcome this half-change that the Government have made in considering allowing the Post Office to digitise the passport application forms for customers. However, of course, in this day and age, many of us think too much in terms of computers. A vast number of people in this country would not dream of either owning a computer or using somebody else’s computer—for example, the post office’s. Therefore I maintain my plea from all that time ago that the post office, sub-postmasters particularly, be allowed to both issue and receive completed paper passport forms. In my view, that is long overdue.

The other thing I would like to say is that of course it is not only for the Government to produce services for the Post Office to offer. For example, you can go into my local post office in a village on the outskirts of Taunton and ask for either dollars or euros. That is not a government service; that is an arrangement with the banks. If I wanted some Argentinean pesos, they would probably take only three days to arrive. There are all sorts of other non-government services that the Post Office should or could be able to provide. I hope that it is thinking along the lines of extra activities that it could offer; for example, booking airline seats. I congratulate the Government on a small step in what I regard as the right direction.

Photo of Viscount Younger of Leckie Viscount Younger of Leckie The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I thank my noble friend Lord Skelmersdale for his support for what we are doing. I am glad that he has made it clear that we are not talking about Royal Mail today and that the focus is indeed on the Post Office for once—a very important part of our life in the UK. I am also glad to hear that he frequents his local post office.

I agree entirely that as the post office system looks towards becoming more confident and settling into offering different types of services, the range of services will entirely depend on the remit of the contracts between the independent post office sub-postmasters and the Post Office. But I am sure that most of them will be thinking about how they can best make their post offices pay and offer the best possible range of services to customers. These extra activities could include the opportunity to get online and go on to a computer, and even perhaps introducing some coffee shops into post offices—who knows?

With regard to his point about passports, the situation is going to remain that those who wish to renew passports will be able to do so, primarily at the main post offices. We do not want to create lengthening queues at local post offices when people want simply to buy a bar of chocolate or some stamps. These issues have been well thought out. Bearing in mind that we want to stick to our pledge of having 93% of the population living within a mile of a post office, being able to renew driving licences and passports is very important, and that is all very much part of the future.