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The Rt Hon Stephen Byers MP 4
-tetary of State for Trade and Industry
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Simon Virley Department of
Private Secretary to the Prime Minister Trade and Industry
10 Downing Street 1 Victoria Street
London London SW1H 0ET
SWIA 0AA Direct line
7 February 2001 bm Enquiries
It is probably now inevitable that the number of post office closures in this
financial year will reach a record high. This note sets out the causes and what
action we are taking to address the problem.
The main reason behind the recent increase in closures is the decision, announced
by DSS in May 1999, to move to payment of benefits by ACT from April 2003
before we had in place a clear strategy to deal with the impact on the post office
network. This has led to uncertainty, disruption and an erosion of confidence in
the future of the network among both incumbent subpostmasters and prospective
purchasers of sub post offices who have been influenced by a stream of negative
media coverage and the National Federation of Subpostmasters’ campaign last
Spring focusing on threats to the future of the network.
434 post offices (92 urban and 342 rural) have closed in the nine months April to
December 2000. This exceeds the full year total of 383 closures in 1999-2000.
Whilst closures in urban locations are up dramatically on previous years, the rate
of closures of rural post offices is lower so far than in 1999-2000. Under the
previous administration, post office closures typically ran at an average of 200 a
year, but there were peak years, for example in 1984-85 when 395 offices closed
and 1991-92, the current record year, when 478 offices closed.
Net closures in the October-December quarter were 135, of which 20 were urban
and 115 were rural offices. The rate of closures has fallen slightly this quarter
from 50 per month to 48. Rural closures account for 79% of the total and are, of
course, the most sensitive in social and political terms.
Following on from the PIU report and acceptance of all of its recommendations,
we have placed a formal requirement on the Post Office to maintain the rural
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network and to prevent any avoidable closures of rural offices. It is still too early
for this to have had a substantial impact but we shall be looking closely at the
figures for the final quarter of the year.
Horizon automation is now installed in some 16,000 offices (over 90% of the
network) with the programme on schedule for completion by Easter. Although the
transition increases the immediate pressures on individual subpostmasters,
modernisation is essential for the longer-term future. Taking forward the PIU
report recommendation on Universal Banking services, we now have an outline
agreement with the banks that will allow benefit recipients to collect their benefits
in cash across the Post Office counter and we hope to sign a memorandum of
understanding towards the end of the month. A further major recommendation of
the PIU report was that postmasters should be able to act as Government General
Practitioners. The pilot contract has been signed and a pre pilot trial will begin in
March.
Ringfenced funding was allocated in the Spending Review 2000 for a number of
other measures to provide transitional support for vulnerable parts of the network,
including investment for restructuring the urban network leading to fewer but more
viable and attractive post offices in areas where there is currently over provision.
In addition, the Postal Services Commission has recently commissioned a research
study, to be completed in the Summer, to inform their reports on the post office
network and their advice on the best way to channel assistance to post offices. We
are also working closely with the Post Office on ways of strengthening the
management of the network and work is in hand to appoint a new Non-Executive
Director to champion the interests and development of the network.
From recent research conducted by the Post Office into the reasons for
subpostmasters’ resignations it is clear that most close their offices because of
personal circumstances and less than 10% cite financial viability as the reason.
Analysis of the reasons given for resignation over the last 6 months have been:
Retirement/Ill health 43%
Other 19%
Change of career/business 18%
Financial viability of the outlet 9%
Horizon computerisation 6%
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Given the age profile of subpostmasters (two thirds aged over 50 and one third
over 60) the proportion of resignations attributable to retirement and ill health is
not surprising.
Post Office analysis of their data also shows that the recent increase in post office
closures does not in fact reflect a change in the historic level of resignations but
rather a much greater hesitancy in new candidates coming forward to take over
small retail businesses. This mirrors a wider trend in this retail sector and sub post
offices are not currently seen as an attractive business proposition.
In order to try to encourage possible candidates to buy into the post office network
the Post Office has mounted a programme of roadshows designed to restore
confidence by explaining the modernisation plans as outlined in the PIU report. In
addition it has been agreed with the NFSP that from I April 2001, the traditional
requirement for an introductory payment by a new subpostmaster, amounting to
25% of the first year’s remuneration, will be discontinued for all offices. Until
now, only offices with remuneration of less than £14,000 a year have been exempt
and therefore the change is unlikely to have a significant impact on the closure rate
for small offices, but it should have a beneficial effect on larger offices and those
in urban areas.
My Department will continue to work closely with the Post Office and to
encourage them to maximise the real value of their extensive network and to
develop new initiatives to improve and strengthen the attractiveness of sub post
offices as a business investment for prospective applicants.
Private Secretary
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