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To Norman Lamb
From Katie Wake, Shareholder Executive
Date 3 May 2012
Building a Mutual Post Office: Round-Table Meeting with Stakeholders,
Wednesday 9 May 2012, 3.15-4.45pm
Purpose
To develop the Government's response to the Building a Mutual Post Office consultation
which we intend to publish in the coming months. Invitations have been issued to
organisations to could provide the possible members of a future mutual Post Office,
encompassing subpostmasters and staff as well as consumers and their representatives.
One of the recommendations of the Government's consultation response may be for Post
Office Ltd (POL) to establish a Mutualisation Programme Board, composed of the key
stakeholder groups, to embed the culture of mutualism within the business before
ownership is transferred, and consider the optimal structure and form of a future Post
Office mutual. This meeting is an opportunity to gauge their appetite for mutualisation and
a participatory role as owner. You can also probe what they would hope to gain from and
contribute to a mutual Post Office. However, we recommend that you do not commit to
this at the meeting, if you intend to announce it at the NFSP's conference. The agenda
[overleaf] and has been circulated to attendees in advance.
The NFSP has previously expressed concern that the Government's response to the
consultation has not yet been published (our public line has been that we have expected
to publish the response “in the spring”). This is therefore an opportunity to reinforce the
Government's commitment to mutualisation whilst also emphasising the importance of the
successful implementation of the network modernisation programme and attainment of
commercial sustainability as a pre-requisite to a future transfer of ownership.
Attendees
George Thomson, General Secretary, NFSP
Mervyn Jones, NFSP
Billy Hayes, General Secretary, CWU
Stephen Bell, Head of Policy, CWU
Brian Scott, Assistant National Secretary, Unite the Union
Mike O’Connor, Chief Executive, Consumer Focus
Tom Wright, Chief Executive, Age UK
James Lowman, Chief Executive, Association of Convenience Stores
Paula Vennells, Chief Executive, Post Office Ltd
[John Walker, National Chairman, Federation of Small Businesses — tbc]
[Peter Marks, Group Chief Executive, Co-operative Group — tbc]
[Pauline Holyroyd, HR Director, Post Office Ltd — tbc]
Will Gibson, ShEx
Katie Wake, ShEx
Proposed Agenda
3.15-3.30: Welcome and introductory remarks from Norman Lamb
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Lines to take:
e Thank you for your insightful submissions as part of the consultation.
e We recognise that the path to mutualisation extends over a number of years, and is
subject to the implementation of the commercial strategy and network
modernisation. But we believe that a mutual structure would offer commercial as
well as cultural benefits to the business, some of may be introduced before any
transfer of ownership.
e Weare therefore keen to engage with you now, as potential candidates for a future
mutual’s membership, as we prepare the Government's consultation response for
publication in the coming months. We believe clear progress can be made by the
end of this Parliament.
3.30-4.30: Discussion addressing the following topics (these have been circulated to
attendees in advance as possible areas for exploration):
e Benefits of mutual ownership — Is a mutual ownership structure the most suited
to Post Office Ltd? What are its benefits and pitfalls? How can we best measure
the benefits as the Post Office moves to being a mutual?
e Membership — How should a mixed membership mutual be structured? Should the
representative body of a Post Office mutual include representatives of all members
(e.g. staff, subpostmasters and consumers) on an equal basis or should different
types of stakeholder have different rights and roles?
e Stakeholder engagement — What is the best way for Government and the Post
Office to engage with stakeholders to build a suitable mutual? How could the Post
Office foster a culture of mutualism in advance of a transfer of ownership? Where
might conflicts lie?
e Public benefit purpose and Government’s role — What is the purpose of the Post
Office and how would a mutual model serve it? How should we go about ensuring
that purpose is best defined? Should Government retain a role as owner/arbiter to
preserve it? What is the best way of ensuring an appropriate balance between the
need for an appropriate failure mechanism and maintaining incentives for a mutual
Post Office to succeed commercially?
4.30-4.45: Concluding remarks and next steps
BACKGROUND
The Government published a consultation, Building a Mutual Post Office, in September
2011, asking whether a mutual ownership model would be optimal for Post Office Ltd, with
mixed membership of ‘producers’ and ‘consumers’ to align its diffuse set of stakeholders’
interests for the public benefit. It closed last December and Government is due to respond
shortly. A précis of key stakeholders’ reactions is appended at Annexe A.
KATIE WAKE
Cc: SoS; David Willetts; Perm Sec; SpAds; Will Gibson; Mike Whitehead; Peter Batten;
Roger Lowe; Richard Callard; Josh Coe
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Annexe A: PRECIS OF KEY STAKEHOLDERS’ RESPONSES
National Federation of Sub-Postmasters
Welcomes mutualisation. Recommends mixed membership through a trust model with a
‘proportionally greater producer influence on the representative body with a government
presence within the trust. Access criteria and a minimum number of post offices should be
retained to protect the public benefit alongside the consumer presence. Before ownership
can be transferred, ‘a commitment to additional government funding will be required to
transform the remainder of the network and access to working capital assured. Profit
distributions a long way off and should only be made to producer members once operating
costs and investment needs are met. Membership organisations prosper with reasonable
homogeneity of interest among their members; proposes an 11-member representative
body comprising one POL staff member (elected through the union); 2/3 POL Board
members; 4/5 sub-postmasters (including multiples but elected through the NFSP); 2
consumer/special interest bodies; 1 local authority; 1 government representative.
CWU
Post Office should remain in government ownership as transferring ownership ‘risks
removing the onus on government to meet its responsibility to maintain the network’. In
the instance of mutualisation ‘safeguards’ and a ‘robust failure mechanism’ would be
needed. Any mutual Post Office should be ‘purely producer-owned’ by employees and
subpostmasters or, at worst, dominated by producers to deliver culture change and ensure
better alignment of interests. If consumers are included it should be through
representative organisations e.g. Citizens Advice to reduce election costs. Unions should
have a formal and substantial role. Multiples should be excluded as they are also
competitors of POL. The question of profit distributions cast as ‘premature’ and not
endorsed.
Unite
Supports the principle of mutualisation but deeply sceptical of its plausibility for the Post
Office. Continued Government ownership is Unite’s preference; mutualisation is ‘an
unnecessary distraction from the primary objective of securing the network’. Needs to be
clear benefit to the organisation; this isn’t apparent from consultation. Government should
remain a presence in a mutual — possibly as a sleeping partner. Would support mixed
membership with a three-tiered structure and proposes multiples and subpostmasters
having strategic involvement through a consultative forum with customers involved through
representative councils and a transaction-based dividend. Dividends only suitable once
the Post Office is profitable. Frontline staff should receive payment based on a proportion
of year-end surplus once other costs and investment charges were deducted; and
multiples recognised through a performance bonus e.g. for achieving sales targets.
Presses for a Post Bank.
Consumer Focus
Supports mutualisation but only once ‘necessary financial and non-financial indicators
have been achieved. Ambivalent about the withdrawal of Government ownership: ‘a
phased shift ... is preferable (with the retention of a minority share in the first instance)’.
Recommends setting criteria for mutualisation with a working group to embed change in
the organisational culture. Distributions would only be suitable once POL is profitable.
Consumers should have a 51% majority in a powerful representative body that could
agree executive remuneration and board appointments. Public benefit should be
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constitutionally codified with Government as a recognised and mandatory consultee over
any changes.
Association of Convenience Stores
Represents 33,500 local shops, including 4,000 Post Offices so acts both for POL’s agents
and competitors. Seeks the representation of large and small post office retailers in a
mixed membership mutual which should be detached from Government (though
challenges the level of independence that would be possible given continued
parliamentary and political interest). Envisages a role for profit distributions but believes
reinvestment in the network should be a primary focus; raises concerns about raising
capital needed to meet network requirements, given state aid uncertainty and currently
small asset base. Wants a balanced representative body of producer and consumer
members. Agrees that network restructuring and a return to commercial viability are
essential if mutualisation is to be possible.
Age UK
Ambivalent about mutualisation: likes consumers having a more direct link to the services
they use but concerned about weakened government influence to protect the public
benefit. Would support mixed membership with a representative body but concerned by
producer dominance and believes consumers should be represented by specific
representative groups (e.g. of the elderly). Seeks greater clarity over timetable,
milestones and safeguards.
Citizens Advice
‘A mutual Post Office is preferable to a commercial Post Office’ but caution is urged given
the danger of misalignment of interests within a mutual. Supports a mixed membership
mutual, with composition kept under review, and a balanced representative body.
Government ownership should only be withdrawn if contractual arrangements can be
confidently assured to protect the public benefit. Profits should be used to improve
services including through grants to subpostmasters to improve their post offices or
expand their services.
Co-operative Group
Supportive of mutualisation and the withdrawal of governments shareholding albeit whilst
retaining an important role as contractor. Envisages a varied, mixed and balanced
membership with a representative body with ‘real teeth’. Distributions should be made
available in the long-term both to consumer and producer members. Identifies a ‘tension
between the mutualised Post Office’s provision of key services within the community ...
and the need to maintain the Post Office on a sustainable commercial basis’ that requires
further clarification of how the public benefit objective will be enshrined.