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URGENT QUESTION ON GOVERNMENT’S ANTICIPATED
FUNDING FOR THE POST OFFICE
Department: Department for Business, Energy and Industrial Strategy
SCS
responsible:
Policy leads:
Contents
Speaking note — initial answer page 2
Speaking note — follow up to likely supplementary page 4
Killer facts page 5
Attacks and rebuttals page 6
Initial Answer:
Mr Speaker, as you know, the Government accepts that
the Post Office network will require funding in the future, to
enable it to continue making important services available
to people in all corners of the United Kingdom. This is why
since 2012, the Government has invested almost £2bn in
the Post Office. In 2012, the Government made an initial
investment of £1.34bn and in 2013, an _ additional
investment of £640m investment was made.
Government recognises the critical role that post offices
play in communities across the United Kingdom and this
investment means that customers and small businesses
can continue to rely on their branches to access important
mails, financial and government services. Around 17
million customers and a third of SMEs visit post offices
every week. Any additional funding provided by the
Government will make sure that those branches that need
additional support receive it so that they can stay open.
Government funding to date has delivered significant
improvements to the Post Office. The Post Office network
has the largest retail network of branches in the UK with
over 11,600 branches. The network is at its most stable for
decades. Government support has enabled the
modernisation of over 7,500 branches with these new
branches offering a million extra opening hours every
month. 99% of personal bank customers and 95% of small
business accounts can withdraw cash, deposit cash and
cheques, and make balance enquiries at a Post Office
counter via its network of branches. There are over 4,400
branches open on Sunday ensuring uninterrupted vital
services to communities.
The investment has also strengthened the financial
position of the Post Office, with the Post Office delivering
its first profit in 16 years.
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The Government is in discussions with regards a new
investment and will make an announcement in due
course.
(299 words)
Follow up to likely supplementary from questioner:
Government’s investment to date in the post office
network has arrested the decline in the number of
branches, and since 2010 the network has been at its
most stable in decades with over 11,600 branches.
Branches are more sustainable today, and they have a
brighter and a more secure future. Any further investment
made by the Government will build upon the significant
strides that have been made by the Post Office.
Once funding discussions have concluded, I look forward
Post Office continuing to go from strength to strength,
improving their services for customers whilst maintaining a
strong presence in their communities. (101 words)
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Killer facts
Network Performance
+ The Post Office is at its most stable for over two decades with over
11,600 post office branches in the UK. Around 17 million
customers and a third of SMEs visit post offices every week.
« Government will have committed over £2 billion during the period
2010 to 2018 to modernise and sustain the network.
+ This investment has modernised over 7,500 branches. These
modernised post offices are offering over 220,000 additional
opening hours per very week across the UK. There are now over
4,400 post offices open on Sundays making Post Office the Uk’s
largest Sunday retailer.
+ During this same period, independent research shows customer
satisfaction with the Post Office has been consistently over 95%.
Access to branches is meeting standards we set - 93% of the
national population (and over 95% in urban areas) live within one
mile of their nearest post office branch.
« Government has also committed to secure the future of over 3,000
rural post offices, and has provided a dedicated £20m fund for the
3,000 Community Branches usually the last shop in a rural
location.
Banking
e Last year the Post Office carried out 110 million banking
transactions across its network — an average of over 200 a
minute.
e Under the new standardised framework with UK banks the
Post Office provides access to 95% of all business banking
customers, with the new simplified service offering easy access to
day-to-day banking for both personal and business customers
offering cash withdrawals, cash and cheque deposits and balance
enquiries.
Funding
e The subsidy needed to sustain the social part of the network has
dropped from a peak of £210m in 2012 to £70m in 2017 and this
should continue to fall, reflecting the benefits of a modernised
network.
e This modernisation has also meant that losses in the business
(excluding any subsidy) have reduced from £120m in 2012/13 to
declaring a profit for the first time in 16 years. In short, the
business is offering more for customers and doing so more
efficiently for the taxpayer.
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Attacks and Rebuttals
Funding and Post Office Policy
Attack: The fact that we are still talking about funding means
the funding you have already provided to Post Office has
been wasted?
Not at all, Government's investment has delivered a wide
range of benefits -a stable network of over 11,600 branches.
Over 7,500 branches have been modernised with these
branches offering extended opening hours of more 200,000
hours and Sunday openings to over 4,400 communities.
The Post Office is in a better financial position with the
business declaring a profit for the first time in in almost two
decades and reducing the need for taxpayer support.
99% of personal bank customers and 95% of small business
accounts can withdraw cash, deposit cash and cheques from
a Post Office
Attack: Will you be cutting funding for the Post Office?
We are currently in discussions regarding a_ future
investment in the Post Office
Government's previous investment has helped in making the
Post Office is considerably stronger today than it has been in
years
The number of branches in the network has been at its most
stable for more than a generation. The business is in profit
for the first time in 16 years.
Government's past investment has played a central role in
making this progress possible.
And we have made a manifesto commitment to secure the
network — a commitment that we will meet.
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Attack: How much subsidy has Government provided to the
Post Office?
e Since 2012 Government has provided almost £1billion
subsidy to the Post Office. It has also provided a further £1
billion to invest in modernising the network.
e Thanks to Government's investment, the subsidy needed to
sustain the post office network has dropped from a peak of
£210m p.a. in 2012 to £70m this year.
e The Post Office has also declared a profit for the first time in
16 years.
Attack: Why has Government continually reduced the subsidy
it has provided to the Post Office?
e Post Office is stronger than it has been for many years.
e Decreasing subsidy is only possible because Government
has invested in improving the business’s long-term prospects
and in strengthening the network’s commercial sustainability.
e Government investment has supported Post Office’s national
modernisation programme to ensure taxpayers benefit from a
sustainable Post Office network which is less reliant on
Government subsidy, for the benefit of taxpayers.
e In short, Government support has enabled the business to
offer more for customers, doing so more efficiently for the
taxpayer and is ensuring that Post Office services remain on
our high streets throughout the UK.
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Attack: If_a further investment is made, will it mean that the
Post Office will be opening more branches?
e The Government's priority is to secure the future of the post
office network, and a key part of that is making sure there
are branches where customers need them.
e In recent years, Post Office’s network has been stable
numbering more than 11,600 branches.
e However, every year a number of new branches do open
and others relocate, as patterns of customer demand evolve.
e Any new investment means Post Office can continue with
this same approach going forward.
Attack: Is this a ploy to close more branches?
e¢ Governments investment to date has stemmed the decline in
the number of branches. The Post Office has a stable
network of over 11, 600 branches, 93% of the national
population live within one mile of their nearest post office
branch.
e Almost 99% of the rural population lives within 3 miles of a
post office. Around 17 million customers and a third of SMEs
visit post offices every week.
e Because over 97% of post offices are operated by third
parties unplanned closures can and do occur, from
unrenewed leases, as operators retire or as a result of ill
health or bereavement
e In these instances, the Post Office will try to restore services
as soon as practicable by putting in place temporary
arrangements or working hard to find an alternative location
Attack: Will you be closing more Crown branches?
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Government's investment has arrested the decline in branch
numbers. Branches are more sustainable today with a
secure future.
Since 2012, a number of directly managed “Crown” branches
have been franchised.
These franchises benefit from more accessible layouts and
usually longer hours and the changes have been well
received by customers.
The franchise model is also more sustainable, and has
eradicated the £46m p.a. losses incurred by the Crown
network which helps to reduce the taxpayer funding, whilst
maintaining or improving customer service levels.
Attack: Does this mean Post Office will be sacking more
staff?
Post Office has made a number of changes to the way its
organisation is structured, including how it provides support
to its network of branches.
This has delivered benefits to branches and to customers
across the United Kingdom.
These actions have also made Post Office more financially
sustainable, reducing the network’s reliance on taxpayer
support.
While some of these changes have resulted in people
leaving Post Office, the business has always sought to offer
staff other opportunities where these have been available.
Post Office will adopt a similar approach in the future.
Attack: What about subpostmasters. Are they part of your
discussions - How much of this proposed funding will go to
them?
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e Subpostmasters are responsible for running over 97% of the
post offices in the United Kingdom - they are critical to the
day-to-day operation of the post office network.
e¢ The income they receive is based on the volume of
transactions they process, in some circumstances some
branches also receive a fixed fee.
e These are often the smallest branches, based in remote rural
or urban deprived areas, and without this additional support
they would not be viable.
e Some of this proposed investment when agreed will allow
Post Office to provide support to these branches, where it is
required.
Attack: How can you justify high pay for management, when
you still need to support Post Office?
e Since 2012, with Government’s support, Post Office
management have led the business through one of the most
challenging periods in the company’s history.
e At the same time driving forward a_ network-wide
modernisation programme and eradicating losses which at
their peak were more than £120 million a year.
e The Post Office is now profitable, which is a significant
achievement.
e This performance needs to be recognised and it is important
that the Post Office is able to retain the right talent to
maintain this progress towards a secure and sustainable
future.
Post Bank
Attack: Do these ongoing discussions allow Post Office to set
up a Post Bank?
e Post Office runs a successful financial services business,
under its Post Office Money brand, and it also provides
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extensive access to accounts of other banks for basic
banking services.
e In the last financial year, this generated income of more than
£300 million across a wide range of products including
mortgages, insurance and foreign exchange.
e It is not clear what a Post Bank would offer beyond what
Post Office already offers or provides access to today.
¢ Setting up a Post Bank would bring significant risk and cost.
The recent Cass Business School Report estimated it would
cost at least £2 billion.
Attack: The Government says it has spent £2bn on investing
the Post Office, but it’s in crisis. They should have spent it on
establishing a bank
e The Post Office is not in crisis.
e The number of branches is at its most stable for decades,
losses are being eradicated with a first profit declared and
subsidy requirements have been reduced by two thirds.
e This proves Government's investment in the Post Office has
been a success.
e There is no guarantee that spending £2bn on a Post Bank
instead would have yielded such benefits.
Horizon IT System
Attack: Will this investment be used to fix Post Office’s faulty
IT systems?
e Post Office operates one of the most complex retail IT
systems in the United Kingdom.
e This funding will make sure that Post Office has access to
investment to keep this infrastructure working smoothly,
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updating both the equipment in branches and the systems
that it uses.
If needed: Post Office commissioned a detailed independent
review of its Horizon IT systems from a firm of forensic accountant
which identified no systemic issues. For further information on this
particular matter, including on the group litigation action that is
underway at the High Court, we would advise you to contact Post
Office directly.
Network Consultation
Attack: When will you respond to the 2016 Post Office
Network Consultation?
e This will be published in due course
e The 2016 Post Office Consultation was launched to inform
Government's approach to new post office funding.
e Ongoing discussions about the Post Office will incorporate
the findings of the 2016 Post Office Consultation.
Migration of POL Staff to a Monthly Payroll System
Attack: The business has failed to meet its revenue growth
targets so can only meet its targets by cutting salaries under
the quise of moving staff to a different pay roll system.
e No. The Post Office is not cutting salaries, it is simply moving
staff to a simpler to run administrative payroll system.
e This change is a requirement for pension auto enrolment for
all its staff.
e The majority of Post Office staff around 6,000 are already on
a monthly payroll.
Attack: The CWU are suggesting the Post office was allowed
to mislead/bully employees?
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e Absolutely not. The employees affected were fully informed
and updated.
e The Post Office undertook a 90-day consultation with all of
the 843 employees. The Post office explained that the
weekly payroll system was outdated and needed to be
replaced by a more robust system, as part of the changes
taking place across the business to make it simpler to run.
e These changes to the payroll systems was also required to
meet the Pensions Automatic Enrolment obligations.
The CWU say this shows how little the Government and the
Post Office care about its employees and their welfare?
e The Post Office undertook a 90-day consultation with its staff
and made sure that there was no adverse financial impact on
the employees.
e As part of the consultation, the Post Office listened to the
feedback from the employees affected to ensure the right
support was put in place.
e The Post Office offered face to face briefings, financial
planning tools and interest free loans. Most of the staff
involved accepted the changes.
e The decision of the Employment tribunal is currently being
reviewed by the Post office. This is a legal process, the Post
Office is considering its implications as this is a technical
issue, and they are considering their options.
e It is not clear whether the decision will apply to the 2
claimants or all the 843 employees.
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