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House of Commons
Business, Energy and Industrial
Strategy Committee
Future of the Post
Office Network
First Report of Session 2019-20
Report, together with formal minutes relating
to the report
Ordered by the House of Commons
to be printed 22 October 2019
HC 247
Published on 25 October 2019
by authority of the House of Commons
Business, Energy and Industrial Strategy Committee
The Business, Energy and Industrial Strategy Committee is appointed by the
House of Commons to examine the expenditure, administration, and policy of the
Department for Business, Energy and Industrial Strategy.
Current membership
Rachel Reeves MP (Labour, Leeds West) (Chair)
Vernon Coaker MP (Labour, Gedling)
Drew Hendry MP (Scottish National Party, Inverness, Nairn, Badenoch and Strathspey)
Stephen Kerr MP (Conservative, Stirling)
Peter Kyle MP (Labour, Hove)
Mr lan Liddell-Grainger MP (Conservative, Bridgwater and West Somerset)
Sir Patrick McLoughlin MP (Conservative, Derbyshire Dales)
Albert Owen MP (Labour, Ynys M6n)
Mark Pawsey MP (Conservative, Rugby)
Antoinette Sandbach MP (Independent, Eddisbury)
Anna Turley MP (Labour (Co-op), Redcar)
Powers
The Committee is one of the departmental select committees, the powers of which
are set out in House of Commons Standing Orders, principally in SO No 152. These
are available on the internet via www.parliament.uk.
Publication
Committee reports are published on the Committee’s website at
www.parliament.uk/beis and in print by Order of the House.
Evidence relating to this report is published on the inquiry publications page of the
Committee’s website.
Committee staff
The current staff of the Committee are Gary Calder (Media Officer), lan Cruse
Committee Specialist), Rebecca Davies (Clerk), Matthew Eaton (Committee
Assistant), Alison Groves (Second Clerk), James McQuade (Senior Committee
Assistant), Becky Mawhood and Ashleigh Morris (Committee Specialists).
Contacts
All correspondence should be addressed to the Clerk of the Business, Energy
and Industrial Strategy Committee, House of Commons, London SW1A OAA. The
telephone number for general enquiries i } the Committee’s email
address is!
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Future of the Post Office Network 1
Contents
Summary 3
1 Introduction 5
Why do Post Offices and the Post Office Network Matter? 5
The Social Value of the Post Office and the Post Office Network 6
Threats to the Post Office Network 6
The Impact of Post Office Closures. 7
Our Inquiry 7
2 The Structure and Stability of the Post Office Network 8
Current Post Office Numbers
Different Types of Post Office Models 9
The Services that the Post Office Provides 10
The Role of the Government and Post Office Ltd 12
Representation of Sub-postmasters and their Relationship with Post Office Ltd 14
The funding of the Post Office Network 15
3 The Network Transformation Programme 17
The Shift from Subsidy to Retail 17
Modernising the Post Office Network 17
The NTP and the Government's Access Criteria and Accessibility Targets 18
The NTP and the Financial Performance of the Post Office 20
4 Pressures on Post Offices and Sub-Postmasters 24
Income and Working Hours 24
Support from Post Office Ltd 27
5 Consultations on Post Office Closures and Post Office Franchising 28
Consultations on Post Office Closures 28
The Franchising of Crown Post Offices 30
Post Office Ltd Contingencies for a Failing multi-franchise Partnership 36
6 Post Office delivery of Government Services and widening the
Commercial and Community Reach of the Post Office 38
Declining Government Transactions and its Impact on Post Office Ltd Revenue 38
Widening the Commercial Reach of the Post Office 39
The Post Office’s Agreement with the Banks 44
Maintaining and enhancing the PO’s Community Role 49
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Conclusions and recommendations
Formal minutes
Witnesses
Published written evidence
List of Reports from the Committee during the current Parliament
51
57
58
59
61
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Future of the Post Office Network
Summary
Post Offices are an essential public service and a focal point in many of our urban and
rural communities. As well as providing postal services, they help address financial and
social exclusion as they fill the gaps left by retreating banks, struggling high streets and
offer a friendly face to the vulnerable and lonely. If the Post Office network were to falter
the consequences will be wide-ranging and more costly than the present subsidies used
to support them.
The Post Office network has stabilised at just 11,500 branches but is fragile. While 10%
of the network might be closed at any one time many branches do not offer the full
range of services. More worryingly, many sub-postmasters and retailers who run Post
Offices are finding it hard to make them viable. If they leave in large numbers, the
network will collapse.
The network is also facing other threats. Barclays Bank, who for years have closed
branches across the country to maximise their profits, from January 2020 will not
allow their customers to withdraw cash from Post Offices. This undermines their
commitment to the agreement between the Post Office and the major banks which
allowed their customers access to banking services in Post Offices. It also compromises
the comprehensiveness of the Post Office’s everyday banking offer, denies their own
customers easy access to cash and reduces fees for sub-postmasters. Barclays should
reverse this damaging decision straight away.
In addition, the Government has back-tracked from previous commitments to make
the Post Office a front office for its services. This has reduced Post Office and sub-
postmasters’ revenue and income, while effectively excluding those who cannot take
part in a digital-by-default world and who still need face-to-face services.
The Post Office’s response to these problems has been to offset declining revenues and
a determination to reduce Government subsidies. It has done this by modernising
Post Offices to help them raise retail revenue and by offloading some of the remaining
publicly-owned Crown Post Offices to commercial partners. The Post Office has begun
to post profits but at a cost.
Many sub-postmasters and retailers are finding that the retail income generated in
their modernised Post Offices are not filling the gap left by declining subsidies and
fees for delivering Post Office services. In addition, the rush to off-load Crown Post
Offices has led to services being handed over to WH Smith, a retailer poorly rated by
consumers, with a record of paying suppliers late and who are not accredited to the
Living Wage Foundation. We disagree with the strategy of closing down Crown Post
Offices, especially as we question the consultation process that has been used to seek the
views of those local communities that will be affected by such closures.
The Government have belatedly intervened, acknowledging the crisis in sub-postmaster
pay, realising that support is required for some rural Post Offices and that subsidies
may still be needed. However, this appears reactive and piecemeal and questions what
scrutiny the Department of Business, Energy and Industrial Strategy have been giving
Post Office Ltd’s plans and strategy.
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Future of the Post Office Network
A re-think of how the Post Office is being funded for its role in supporting wider social
and community goals is urgently required. This includes valuing the sub-postmasters
and Post Office staff who deliver the services. It means making the Post Office a key
channel for Government to reach customers. It requires ensuring that the Post Office
brand continues to maximise opportunities with commercial partners, such as the
banks and Royal Mail, so fees can be reinvested into the network and sub-postmasters
fairly paid. Finally, it requires creative thinking on how the Post Office can continue
its social purpose and maintain the high regard in which it is held by the communities
it serves.
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1. Introduction
Why do Post Offices and the Post Office Network Matter?
1. The Post Office (PO) is a highly regarded and frequently accessed national network
which provides a range of services across the UK. In 2018, the PO carried out 850 million
customer transactions across its network.' In 2017, Citizens Advice noted the following
breakdown of the services customers use:
Box 1: Services used by Post Office Customers
Postal Government Retail Community Banking —_Bll payment
Source: Citizens Advice, Consumer Use of Post Offices: How consumers use and value post offices and Post Office services
today, (June 2017), p 7.
2. Citizens Advice, which is the statutory watchdog for the PO, carries out regular
surveys on how the public view the service. In 2017, it found that “almost everyone uses
post offices” with the vast majority of consumers (97%) and small businesses (93%) using
a post office at least once a year. Some customer groups are particularly reliant on the PO
for the services they provide:
Vulnerable consumer groups, such as older people, disabled people and
people on low incomes, as well as rural residents ... tend to have a greater
reliance on face-to-face transactions rather than electronic transactions and
less choice in service providers. The Post Office network with its extensive
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1 Post Office (PON0OS1). Citizens Advice note that small businesses are far more likely to use postal services than
any other Post Office service (91% of small businesses use them), while 17% use government services, and 15%
undertake banking transactions See: Citizens Advice, Consumer Use of Post Offices: How consumers use and
value post offices and Post Office services today, (June 2017), p 7.
2 Citizens Advice, Consumer Use of Post Offices: How consumers use and value post offices and Post Office
services today, (June 2017), p 7. Post Office Ltd note that they introduced new services in 2018/19 such as: over
700 branches now offering a Passport Digital Check and Send service; a new ‘Labels to Go' service for online
shoppers to print a returns label; a new Post Office travel app used by over 300,000 customers; and the Post
Office's acquisition of Payzone Bill Payments Limited to allow customers can pay their household bills quickly
and conveniently. See: Post Office Ltd, Post Office reports third consecutive year of trading profit for 12 months
online ending 31 March 2019, (15 October 2019).
3 Citizens Advice, Consumer Use of Post Offices: How consumers use and value post offices and Post Office
services today, (June 2017), p 5. 7 a -
6 Future of the Post Office Network
geographical coverage is key in providing services to these groups.*
Furthermore, the PO is also a highly regarded brand, with 97% of customers regarding
the Post Office as ‘trustworthy’ and 92% view it as ‘professional’.
The Social Value of the Post Office and the Post Office Network
3. The PO also plays an important community role.° Citizens Advice found that
vulnerable groups and remote rural residents make most use of a PO for informal
community services like support and information, or as a place to meet other local
residents and friends.’ In 2019, the Association of Convenience Stores Annual Barometer
poll of local services found that consumers rated the PO as the top “essential” service
for making a positive impact in the local community.*. The Government acknowledge
that “the Post Office should be a valuable social and economic asset for communities and
businesses for years to come”.”
Threats to the Post Office Network
4, For some time, however, there has been a sense that the PO network is under threat.
Between 2000 and 2010, 6,500 branches were closed,'° and while in recent years the size of
the network has remained stable, concerns remain that this stability could be threatened,
not least because of the financial pressures on sub-postmasters, who run the network. In
April 2019, a survey of sub-postmasters suggested that up to one in five POs could close
because sub-postmasters were struggling to make a living out of running a Post Office."
4 Asabove, p 4. For example, 29% of disabled people said that they used a Post Office at least once a week and
that 91% of disabled people describe the Post Office as “essential”. Older customers tend to use the Post Office
for stamps, cash and banking and payments to central and local government. Lower income groups tend to use
ash and the Post Office for banking, payments to central and local government and bill payments (p 18). Citizens
Advice also found that the more rural a community the more important its post office - 6 in 10 remote rural
residents describe the Post Office as ‘very’ or ‘ extremely’ important to them, with nearly 70% saying that they
use the Post Office at least once month. See: Citizens Advice, Rural Post Office Use: How Rural Consumers and
Small Businesses use Post Office, (October 2017), pp 4-6. See also: Citizens Advice (PON0031).
5 As above, p 5. See also: The Consumer Council (PON0028).
6 See: Post Office (PON0051). See also: Business, Innovation and Skills Committee, Post Office Network
Transformation, (HC 84; July 2012). The report noted that the “Post Office ‘brand’ is cherished by many and
post offices play a vital role both as the social hub of communities and as the provider of essential and useful
services”,
7 Asabove, p 2. See also Citizens Advice, Rural Post Office Use: How Rural Consumers and Small Businesses use
Post Office, (October 2017), p 11-12. This found that while 33% of urban customers used a Post Office for at
least one community service (e.g. information about local events, place to meet friends and local residents and
help and advice), the figure was 44% for rural customers.
8 Association of Convenience Stores, Community Barometer 2019, (August 2019), p 3. The PO has achieved this for
the last three years. See also: Association of Convenience Stores, Community Barometer 2017, (2017), p 4. See
also: YouGov, The Social Value of the Post Office Network, (2016).
9 BEIS (PONO048).
10 BEIS, 2016 Post Office Network Consultation, (2016), p 1
11 Guardian, One in five post offices could close in five years, survey finds, (15 April 2019). See also: Daily Mail, Post
Office network ‘is close to collapse’ with 2,500 branches set to close or downsize in next 12 months as swingeing
Government cuts bite, (20 May 2019). There have also been debates in the House of Commons on the future
of the Post Office network. See: HC Hansard, Post Office Network, (25 April 2019; cols 362WH to 400WH); HC
Hansard, Rural Post offices, (12 February 2019; cols 722 to 724); HC Hansard, Crown Post Offices: franchising, (10
January 2019, cols 206WH to 253WH); HC Hansard, Rural Post Offices, (13 December 2018; cols 499 to 505).
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Future of the Post Office Network 7
The Impact of Post Office Closures
5. Post Office closures in both urban and rural areas have a real impact on customers,
with 60% saying it would cost them more (both in time and money) to access services,
rising to 70% for those in rural areas,'* thereby disproportionately impacting on lower
income groups. In addition, some groups, especially disabled people, say that they would
become more dependent on others if their local post office was not available.'* Closures
would also affect local businesses, with 80% of businesses surveyed saying they would
spend more time accessing services, and a majority also reporting that there would be a
cost impact."*
Our Inquiry
6. Given the importance of the PO network to consumers and communities, and the
reported threats to its sustainability, we launched our inquiry on the PO network on the
5 April 2019. The purpose of the inquiry was to examine the future of PO branches, the
moving of PO branches into retailers, the PO’s modernisation programme and the tie-up
with WHSmith, and the operation of Crown POs.'* We also considered sub-postmaster
remuneration and the PO’s partnership with the Bank of Ireland and Royal Mail and its
agreement with the UK’s major banks.
7. We did not address PO’s Horizon IT system as this is currently the subject of legal
proceedings in the High Court.
8. We received 59 pieces of written evidence.'® We held oral evidence sessions on 21
May 2019 and 25 June 2019. We heard from representatives for sub-postmasters, PO
staff and retailers, Citizens Advice, WH Smith, the PO and the Minister and officials. A
full list is included at the back of this report. We are grateful to all those who
contributed to the inquiry.
12 See: Citizens Advice, Rural Post Office Use: How Rural Consumers and Small Businesses use Post Office, (October
2017), p 4. This found that closures of Post Offices in rural areas would adversely affect many customers because
there are fewer alternative services. The House of Lords Rural Economy Committee noted that important role
that Post Offices play in allowing customers access to cash, with the closure of banks and lack of access to free
ATMs. See: House of Lords Rural Economy Committee, Time for a strategy for the rural economy, (HL Paper 330;
April 2019), pp 134 to 136.
13 See: Citizens Advice, Rural Post Office Use: How Rural Consumers and Small Businesses use Post Office, (October
2017), p 19.
14 As above, p 19. Businesses in rural areas are particularly likely to say there would be a cost impact for their
businesses (76% in rural and 80% in remote rural areas, compared with 55% in urban areas).
15 _BEIS Select Committee, Post Office Network Inquiry, (5 April 2019).
16 _BEIS Select Committee, Post Office Network: Written Evidence, (accessed 10 September 2019).
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2 The Structure and Stability of the Post
Office Network
Current Post Office Numbers
9. The Government estimate that 11,500 Post Office (PO) branches are the minimum
number required to sustain a national postal network.’” As of March 2019, there were
11,638 PO branches open across the UK.'* The PO has more branches than any other
retail network in the UK. The number of PO branches has remained fairly stable over the
last ten years, though their numbers have nearly halved since the early 1980s:'”
Box 2: Total Number of Post Offices in the UK 1982 to 2017 (Thousands)
Total number of post offices in the UK
Thousands
25
20
o+
1982 1987 1992 1997 2002 2007 2012 2017
Source: House of Commons Library, Post Office Numbers, (August 2018), p 4
10. However, beneath that headline figure Post Office Ltd (POL) note that individual
POs open, re-open and close.”° Both the National Federation of Sub-postmasters (NFSP)
and the Communication Workers Union (CWU) maintain that nearly one in eleven POs
might be closed for long periods of time.” For instance, the CWU told us that 50% of
‘temporary’ closed rural post offices have been closed for more than 2 years and that the
figure is 42% in urban areas.”* The NFSP notes that such levels of closure are ‘unhealthy’
and that while “headline figures have given the impression of a stable network that is
(virtually) meeting its government access criteria ... under the surface, branch closure
levels are high”.?*
17 Q167, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy. See also BEIS (PON0048).
The number of Post Office branches had increased since March 2018, when the total was 11,547. See House of
Commons Library, The Post Office, (April 2019), p 4.
18 — Q167, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy. See also BEIS (PONO048).
The number of Post Office branches had increased since March 2018, when the total was 11,547. See House of
Commons Library, The Post Office, (April 2019), p 4.
19 House of Commons Library, Post Office Numbers, (August 2018), p 4. See also: Post Office (PON0051).
20 Post Office Ltd (PON0051).
21 National Federation of Sub Postmasters (PON0025). Correspondence with CWU. The NFSP state that PO figures
indicate that up to 1,000 PO branches might be closed at any one time.
22 They also noted that the average closure in urban Britain is 2 years and 7 months, while in rural Britain it’s 3
years 5 months.
23 National Federation of sub Postmasters (PON0025).
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Future of the Post Office Network 9
11. Though the PO network appears relatively stable at just over 11,500 branches, this
figure masks the fact that up to one in eleven branches may be closed at any one time
and that ‘temporarily’ closed can mean they are closed for over two years. Post Office
Ltd should publish regular figures to show how much of the existing Post Office network
is currently closed, for how long each Post Office is closed before it is re-opened, and
provide full details as to the reasons for closure.
Different Types of Post Office Models
12. The PO Network is made up of different PO models. The three main types are Crown,
Agency and Outreach, though there are further differences between types of Agency and
Outreach models. Crown branches are directly managed by POL and are usually found
in town centres and offer the full range of PO services. They make up only 2% of the
PO network. The other 98% are Agency PO branches, owned and managed by either an
independent sub-postmaster or a larger franchise partner (for example WH Smith or the
Co-operative).** The different types of Agency POs are set out below:”*
Box 3: Different Types of Agency Post Offices
A branch where the post office is fully integrated in a retail outlet, such as a
convenience store, petrol station or pharmacy. They have longer opening hours than
other types of post office branch but do not provide the full range of post office
services.
Local
A branch, like a Local, that is integrated into a retail outlet. These branches are larger
Main and have dedicated post office counters. Main branches are therefore able to offer a
wider range of services than post office Locals
Modernisation plans are seeing franchise partners such as WHSmith take over the
Tuning of some Crown Post Office branches. Most franchised branches have relocated
to premises nearby.
Franchised
former Crowns
A branch where a sub-postmaster runs a post office as an independent business. Some
sub-postmasters run small retail businesses alongside their post office business. Many
traditional branches are being converted (or were converted) to newer style branches
models as part of the network transformation programme.
Traditional
Source: House of Commons Library, The Post Office, (April 2019), p 7
13. Outreach POs tend to be smaller part-time branches that may use a village hall or
mobile van to provide PO services. The range of such POs are set out below.”°
24 House of Commons Library, Post office numbers, (August 2018).
25 House of Commons Library, The Post Office, (April 2019), p 7.
26 Asabove.
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Box 4: Different Types of Outreach Post Offices
‘A neighbouring sub-postmaster will visit the village and provide service for a set
Hosted number of hours a week and will offer the service from village hall or public house or
local shop.
The Mobile Post Mobile vans visit over 250 villages the UK at set times and on certain days of the week.
Office These Mobile Post Offices offer almost all of the Post Office services.
Post Office offers services through a partner — for example a local shop. It means that
Partner service customers can access over 80% of Post Office services, usually whenever the partner's
business is open. This is distinct from the ‘Local’ models.
This is a service for very small communities and enables customers to order a reduced
: range of Post Office products and services over the telephone. The products may either
Home delivery be delivered to a customer's home by the core sub-postmaster or are available for
service collection by the customer at a local Drop-in Session.
Source: House of Commons Library, The Post Office, (April 2019), p 7
The Services that the Post Office Provides
14. The PO offers a wide variety of products and services that fall into four broad
categories: mails”’ and retail; financial services;** Government Services;”° and Telecoms.*”
Financial Services include the Post Office’s own banking services offered through its PO
Money trade mark, which is provided through the Bank of Ireland and currently includes:
current accounts; personal loans; credit cards; mortgages; savings accounts; money
transfers, and international payments.” In addition, in 2017, the POL signed the Banking
Framework Agreement which means that customers of 26 banks can access ‘everyday’
banking services, such as cash withdrawals, balance enquiries, cash deposits and in many
cases cheque deposits.** This is largely, as is discussed below, because many banks have
closed their branches and the PO offers an alternative access point in their absence.
15. The PO is required by Government to provide ‘Services of General Economic
Interest’ (GEI) in its branches.** These include: processing social benefit and tax credit
payments to the public; processing national identity and licensing scheme applications;
universal payment facilities for public utility services; access to postal services as well as
universal access to basic cash and banking facilities, especially for rural customers and
those on social benefits.** Over and above these GEI services, there is a variation in the
full range of services that are available across the PO network, based on the size and
27 Mails include a range of Royal Mail Group Limited and Parcelforce Worldwide services which are available from
Post Office branches nationwide. A full list of these services can be found at: Post Office Ltd, The Post Office
Network Report 2018, (2018), p 15.
28 Financial Services in addition to personal banking include: 2,700 cash machines; Bureau de Change; Travel
insurance; Travel Money Card; Bill payments. See: Post Office Ltd, The Post Office Network Report 2018, (2018),
p 12-13.
29 Government services include those for customers on behalf of Government Departments and Councils including
applications, payments, identity verification, data capture and information services. Specific items include
driving licence renewal technology and ‘Passport Check and Send’ services. For a full list see: Post Office Ltd,
Post Office Network Report 2018, (2018), p 10.
30 Telecoms include Home phone products and Broadband services. For a full list see: Post Office Ltd, Post Office
Network Report 2018, (2018), p 12.
31 See: https://www.postoffice.co.uk/money. In September 2015, the Post Office acquired the Bank of Ireland's
insurance business and now manages its own insurance products.
32 Fora full list of the banks and the services that the Post Office can offer see: Post Office Ltd, Post office Network
Report 2018, (2018), p 14.
33 Post Office (PONOO51).
34 BEIS (PON0048).
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Future of the Post Office Network 11
location of individual PO branches.** In its recent review of the PO network, Citizens
Advice concluded that only “a minority” of PO branches offered the full range of PO
services and products.*°
16. This variability has led some critics to argue that the use of outreach services has cut
costs at the expense of undermining the universality of the service. The CWU has, for
instance, pointed to an increase in outreach branches at the expense of bigger branches.
They note that while the total number of PO branches fell by 2.3% from 11,818 to 11,547
between 2012 and 2018, outreach services rose by 49% from 1,017 in 2012 to 1,517 over
the same period, with outreach services now making up 13% of all Post Office branches
in 2018, compared with only 8.6% in 2012.°” Citizens Advice has also raised concerns
about the number of outreach and mobile branches and what it sees as “uncertainty”
over 3,000 community POs.** A number of witnesses agreed that a metric to measure the
percentage of services across the whole PO network would be a useful tool to gauge how
truly comprehensive it was.*”
17. Conversely, both POL and the Department for Business, Energy and Industrial
Strategy (BEIS), argue that the use of mobile branches is a necessary compromise to ensure
the overall sustainability of the Post Office network, where footfall suggests that a bricks
and mortar Post Office was not justified, but where a mobile PO can fill the gap with more
limited services and products.*° Ann Pardoe, Principal Policy Manager, Citizens Advice,
concurred, noting that without them some communities “might have no access to Post
Office services at all without travelling”.**
18. We accept that there is a balance to be achieved between the coverage of the PO
network and the depth of the services it provides at any one branch. However, we are
concerned that after cutting back the network to 11,500 branches, too many of these
branches are outreach or mobile PO branches which do not provide the full level of
services over and above Services of General Economic Interest. We question how
national and comprehensive the PO network truly is. We recommend that Post Office
35 See: Post Office Ltd, Post Office Network Report 2018, (2018), pp 10 to 15. For instance, certain products such as
current accounts, travel insurance and identity checking services are listed as only available in selected branches.
36 Citizens Advice, Post offices transformed A review of the post office restructuring programme 2012-2018, (June
2019), p 11. It noted for example that passport checking remained unavailable at many PO Locals. Similarly, it
noted that there was £2,000 banking deposit limit at post offices without a security screen, which included most
PO Locals.
37 CWU (PONO050). See also: National Federation of Sub Postmasters (PON0025); Q7, Calum Greenhow, Chief.
Executive Officer, National Federation of Sub-Postmasters. The Minister updated the Committee and said
that the number of outreach services had actually reached 1,633 out of 11,638 branches (Q167 to Q168, Kelly
Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and Corporate
Responsibility, Department for Business, Energy and Industrial Strategy). Citizens Advice Scotland note that
outreach POs account for 16% of POs across Scotland, Citizens Advice Scotland (PON0042).
38 Citizens Advice, Post offices transformed A review of the post office restructuring programme 2012-2018, (June
2019), p 2. Community POs are POs that have not converted to being Locals or Mains and are usually the ‘last
shop in the village’; half are outreach and mobile POs. Which? also raised concerns about consumers perceptions
of mobile and outreach POs not being suitable for places to conduct banking transactions, (Which (PON0030)).
39 See: Q10, Andy Furey, National Officer, Communication Workers Union; Q10, Anne Pardoe, Principal Policy
Manager, Postal Services and Telecoms, Citizens Advice; Q10 Calum Greenhow, Chief Executive Officer, National
Federation of Sub-Postmasters; Association of Convenience Stores (PONO026).
40 See: Post Office (PON0051); BEIS (PON0048); Q168, Kelly Tolhurst MP, Parliamentary Under-Secretary of State
and Minister for Small Business, Consumers and Corporate Responsibility, Department for Business, Energy and
Industrial Strategy. See also Plunkett Foundation (PON0034). They accepted that outreach and mobile services
offered flexibility across the PO network though they thought that such services were not right for every
circumstance.
41 Q6, Anne Pardoe, Principal Policy Manager, Postal Services and Telecoms, Citizens Advice.
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12 Future of the Post Office Network
Ltd publish regular metrics to measure the percentage of services provided across the
whole Post Office network, to identify whether service provision is truly national and
comprehensive.
The Role of the Government and Post Office Ltd
19. Following the Postal Services Act 2011, Royal Mail was privatised and POL turned
into a separate business, which remains entirely owned by the Government. Postal
services are a reserved function of the UK Government, and are not devolved. The 2011
Actalso transferred regulatory powers for postal services from Postcomm to Ofcom. Since
2014, Citizens Advice, Citizens Advice Scotland and the General Consumer Council for
Northern Ireland have assumed statutory responsibility to protect consumer interests for
postal services.
20. The overall strategic direction of POL is the responsibility of BEIS, while POL and its
Chief Executive and Board of Directors, are responsible for the day-to-day running of POL
and for providing strategic oversight, respectively. The Board of Directors is accountable
to BEIS for the overall performance of the business. UK Government Investments (UKGI)
acts as the Shareholder’s Representative.’ The role of BEIS in relation to POL'’s decisions
on the PO network, and on specific issues, such as the franchising of POs, were set out by
the Minister for Small Business, Consumers and Corporate Responsibility, Kelly Tolhurst
MP, in June 2019:
While the Post Office is publicly owned, it is a commercial business
operating in competitive markets. The Government sets the strategic
direction for the Post Office—to maintain a national network accessible to
all and to do so more sustainably for the taxpayer—and allows the company
the commercial freedom to deliver this strategy as an independent business.
Therefore, issues relating to the Post Office network, including Crown Post
Offices and franchising agreements with WHSmith, are all operational
matters for Post Office Limited.**
She assured us that BEIS Ministers and officials engage regularly with representatives of
POL on a range of strategic issues of mutual interest.**
21. Recently, MPs have questioned whether BEIS has been adequately scrutinising POL
decisions. For example, Gill Furniss MP, asked the Minister to consider a review into
whether the Government had fully exercised their oversight functions and if it needed
strengthened powers to hold POL to account.** Others have been critical that BEIS often
appears to be a cipher for POL decisions rather than a critical overseer of them.*° Several
witnesses to our inquiry had concerns.*” For example, the Communication Workers
Union (CWU) argued that the Government had not properly scrutinised POL’ decisions
42 BEIS (PONOO48).
43 HC Written Question, 258994.
44 Asabove.
45 HC Hansard, (25 April, col. 389WH.
46 — Marion Fellows MP for example has accused the Minister of hiding behind the commercial independence of POL
in not sufficiently holding POL to account (HC Hansard, 25 April, col. 399WH).
47 See: Mr Paul Dawkins (PON0002); Mr Tim McCormack (PON0004); Citizens Advice Scotland (PON0042); Mr Jim
Gordon (PON0040); Name Withheld (PON0032).
Future of the Post Office Network 13
regarding the franchising of Crown Post Offices,** and its retail strategy.*” Andy Furey,
CWU Assistant Secretary, told us:
The Government need to take more ownership and more leadership, and
give greater direction on where the Post Office is going. After all, it is part
of the fabric of society; it is an integral part of UK life.*°
In contrast, the National Federation of Sub-postmasters (NFSP) argued that an arms-
length approach to the POL was not problematic, as long as the Government “was
furnished with the full picture”.**
22. Kelly Tolhurst, maintained that she “always” challenged POL when asked by an
MP or member of the public to request more information from them.* She said that
she had questioned POL on sub-postmaster remuneration levels,°* and had initiated a
review of their pay.°* However, when questioned, the Minister appeared unclear about
the distinctions between ‘operational’ and ‘strategic’ decisions. For example, she told us
that she would not directly intervene over the franchising of PO branches, which were
‘operational’, but would intervene over sub-postmaster pay because the latter in her
opinion was ‘strategic’ as it could have a direct impact on the PO network.**
23, It is important that POL is held properly accountable by the Government for its
decisions, whether strategic or operational, and there needs to be consistency in the
criteria applied by Government in its decision of whether or not to intervene. While
we welcome the Minister’s intervention on sub-paymasters’ pay, we are not entirely
sure why this is a strategic issue and other issues such as decisions on the franchising
of POs and its retail strategy are not, when they too have implications for the viability
of the PO network. All these decisions have the potential to have a direct impact on the
health of the PO Network and should be subject to transparent and robust challenge.
We recommend that the Government undertake an urgent review of its mechanisms
for holding Post Office Ltd to account and produces a clear statement of how it will do
so in the future. This should examine how all Post Office Ltd’s decisions, operational
or strategic, are supporting the comprehensiveness and sustainability of the Post Office
network,
48 CWU (PONO050).
49 Q36, Andy Furey, Assistant Secretary, Communication Workers Union.
50 Q72, Andy Furey, Assistant Secretary, Communication Workers Union.
51 National Federation of Sub-Postmasters (NFSP) (PONO059).
52 Q204, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
53 Q188, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
54 Q191, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
55 Q202 to Q204, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business,
Consumers and Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
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14 Future of the Post Office Network
Representation of Sub-postmasters and their Relationship with Post
Office Ltd
24. Sub-postmasters are represented by both the National Federation of Sub-postmasters
(NFSP)°*° and the Communication Workers Union (CWU),” though POL only liaise with
NFSP.** The NFSP notes that the vast majority of its funding comes from POL and since
2015 it has not been affiliated to the TUC. The NFSP maintains that it is still independent
from POL stating that the source of an “organisations funding does not by default mean
a lack of independence”.*” Over the summer of 2019, the NESP was involved in a working
group bringing together government, POL and the NFSP; the CWU was excluded.®° The
Minister confirmed that she currently has no plans to meet with the CWU or to include
them in the working group that she chairs based on her view that the sub-postmasters
are self-employed and not directly employed staff, such as those who work in Crown Post
Offices.°' She noted that BEIS officials did, however, liaise with the CWU.”
25. TheCWUhave been critical of the POL’s ongoing refusal to recognise it as representing
those sub-postmasters who are CWU members.®* It has also been critical of POL and
BEIS for not ensuring that staff transferred from Crown Post Offices to franchised WH
Smith Post Office branches under TUPE regulations can be continue to be represented
by the CWU.** In addition, a number of sub-postmasters questioned their status as being
self-employed due to their relationship with POL. For instance, several noted that they
had to agree opening hours with POL, were restricted in what services and products they
could sell (e.g. parcels because of the deal between Royal Mail and the Post Office) and
were subject to regular testing and mandatory training by POL.®* They also pointed out
that in return they received no sick or holiday pay, pensions or other benefits from POL.°°
A number argued that they should be represented by the CWU, who should be able to act
on their behalf.”
56 The NFSP states that it has 8,000 members; See: National Federation of Sub Postmasters (PON0025)
57. The CWUstates that it is the largest union in the communications sector in the UK, representing approximately
192,000 members in the postal, telecoms, financial services and related industries See: CWU (PONO0S0) A
number of submission to the Inquiry from sub-postmasters noted that they were being represented by the
CWU.
58 National Federation of Sub-Postmasters (NFSP) (PONO0S9).
59 As above. The NFSP argues that an “organisation's funding source does not by default mean a lack of
independence”. In addition to representing sub-postmasters with POL and BEIS, it points to a number of
benefits that it offers its members: a national network of volunteer representatives at Branch and Regional
levels; two nationwide teams respectively providing post office and retail support to sub-postmasters to help
improve efficiencies and increase our members’ profits; a head office team to assist sub-postmasters; a charity
specifically for sub-postmasters, or the families of sub-postmasters - the NFSP Benevolent Fund.
60 See also: National Federation of Sub-Postmasters (NFSP) (PON0059); Q185 and Q188, Kelly Tolhurst
MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and Corporate
Responsibility, Department for Business, Energy and Industrial Strategy.
61 Letter from Minister to Chair of BEIS Committee, dated 9 August 2019.
62 Asabove. The Minister noted that BEOS officials engaged with the CWU and other stakeholders the Post Office
Advisory Group.
63 CWU (PONO050).
64 See Chapter 4.
65 See for example: Mark Close (PON0036); Mr Timothy Bates (PON0014); Mr Louis Holden (PONOO11); Mrs Sally
Bourton (PON0003). For mandatory training see: Post Office Ltd, Mandatory Training, (accessed 21 September
2019).
66 See for example: Mark Close (PON0036); Mr Timothy Bates (PONO014); Mr Louis Holden (PONOO11); Mrs Sally
Bourton (PON0003).
67 See for example: Sub Postmaster Edward Rigg (PON0047); Mr Geoffrey Crouch (PON0007); m Mrs Sally Bourton
(PON0003); Mr Paul Dawkins (PON0002); Mr Imran Khan (PONO001).
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Future of the Post Office Network 15
26. We regret the Minister has decided not to meet with the Communication Workers
Union (CWU), who represent a number of sub-postmasters. We see no reason why
the Minister and POL cannot involve the CWU in discussions on behalf of those sub-
postmasters they represent. We recommend that the Minister invite the Communication
Workers Union to participate in the working group on sub-postmaster pay with
immediate effect.
The funding of the Post Office Network
PO Revenue and the Network Subsidy Payment
27. There are several funding streams for the PO. One source is the revenues generated
by the PO’s services and products.°* In 2018/19, the POL recorded revenues of £986
million®, rising from £961 million in 2017/18”, though still down from £1,024 million in
2012/13.” Despite the rise, the latest PO Annual Report for 2018/19 identified a decline
in traditional income streams as a key strategic risk,” reflecting the more general decline
of some revenue since 2012/13.”* This also includes money paid by banks to the PO for
providing everyday banking services as banks have increasingly closed branches.”
28. Another major stream is the Network Subsidy Payment designed to cover the
operating costs of the PO Network and is separate to government capital grants that cover
the costs of modernisation.” This has slowly been reduced as shown below and will reduce
further from £60 million in 2018/19 to £50 million in 2019/2020 and 2020/2021, beyond
which funding has not been agreed:”°
Box 5: Network Subsidy Payment (£millions)
250
200
150 4
>I a I Tit
& & &
RY av m3
x Re s
“Os © © Pe +s
‘Source: Royal Mail Group Annual Report and Financial Statements 2010/
Annual Report and Financial Statements 2011/12- 2016/17
. Post Office Limited
68 In 2017/18 these included: mails, retail and lottery (£379m); financial services (£320m); Government services
(£99m); telecoms (£147m); other (£16mn). See: House of Commons Library, The Post Office, (April 2019), p 11.
69 Asnoted in Box 9 on page 20, we have used the figure of £986 million to be consistent with other years.
70 As above. We have used £961 million to be consistent with previous years.
val Revenues have fallen from £1,234 million in 2012/13. See summary in next Chapter.
72 POL, Post Office ited Annual Report & Consolidated Financial Statements 2018/19, (October 2019), p 30.
73 See Box 9, p 35 for more detail of the Post Office's financial performance since 2012/13.
74 This refers to the Banking Framework Agreement introduced in 2017, which is covered in a subsequent chapter.
75 See: House of Commons Library, The Post Office, (April 2019), p 10.
76 — House of Commons Library, The Post Office, (April 2019), p 10. The latest POL Annual Report for 2018/19,
published on 15 October 2019, noted that the Network Subsidy had dropped from £70 million in 2018 to £60
million in 2019; see POL, Post Office Limited Annual Report & Consolidated Financial Statements 2018/19,
(October 2019), p 6.
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16 Future of the Post Office Network
29. The subsidy has been reduced as the PO has shifted to increase revenue from retail
and reduce reliance on state funding,” which is Government policy.”* The Coalition
Government previously stated that such subsidies would “reduce substantially over time”
but also maintained that there would “almost certainly remain a need for a residual level
of subsidy in the future to maintain those branches which could never be profitable, such
as those in remote rural areas, but which provide a valuable social purpose”. It should
be noted that while the network subsidy has reduced, the 2017/18 PO Annual Report
identified the “financial resilience of our postmasters” as a key strategic risk,’”” while the
2018/19 PO Annual Report noted that POL’ ability to continue to “attract, motivate,
develop and retain people with the right expertise” was also a key strategic risk.*°
30. A number of witnesses were concerned about the reduction in the Network Subsidy
Payment and in particular whether it will continue after 2020/21.*' Callum Greenhow,
Chief Executive Officer of the NFSP, told us that the Government urgently needed to
indicate whether it would extend the subsidy beyond 2021 because if it stopped “post offices
are going to have to find that £50 million”, which would come amid growing concerns over
falls in revenue from other streams, such as Government services (see Chapter 6), and
sub-postmaster income levels (see Chapter 4). Edward Woodall, Head of Policy and Public
Affairs, Association of Convenience Stores, also told us that retailers and retail chains
who ran POs also needed reassurance about the subsidy, as they too would be required
to fill the gap left if such subsidies were withdrawn.” Alisdair Cameron, Interim Chief
Executive, POL, told us that POL was having conversations about the Network Subsidy
Payment post-2021.** The Minister told us that BEIS were making a bid as part of the next
spending review to ensure the continuation of the subsidy beyond 2021.**
31. A national Post Office network provides an essential public service. It needs
Government subsidy to do this. If the Network Subsidy Payment, which supports the
operating costs of the PO network, is withdrawn after 2021, we are concerned that
the PO and many sub-postmasters and retailers who run POs will not be able to fill
the gap in funding with other revenues. Many sub-postmasters are already struggling
and thinking of leaving their POs and the removal of £50 million in subsidies could
tip many over the edge. It could also convince some retailers and retail chains who
host POs that it is no longer viable. This would have a damaging effect on the PO
network. It should be avoided at all costs. We welcome the fact that the Minister is
making the case for the subsidy as part of the next Spending Review. With the date for
the Spending Review being put back until 2020, we recommend that the Government
urgently indicates that it will extend the Network Subsidy Payment beyond 2021 to give
long term certainty for sub-postmasters and retailers.
77 See: Post Office Ltd, Modernising the Post Office, (accessed 12 September 2019).
78 BEIS (PONOO48).
79 Post Office Ltd, Annual Report & Financial Statements 2017/18, (2018), p 25.
80 Post Office Ltd, Annual Report & Financial Statements 2018/19, (2019), p 31.
81 See: Plunkett Foundation (PONO034).
82 Q106, Edward Woodall, Head of Policy and Public Affairs, Association of Convenience Stores. See also:
Association of Convenience Stores (PON0026).
83 Q156, Alisdair Cameron, Interim Chief Executive, Post Office Ltd
84 — Q172 to Q174, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business,
Consumers and Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
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Future of the Post Office Network 17
3 The Network Transformation
Programme
The Shift from Subsidy to Retail
32. Post Office Ltd (POL) notes that there has been a “fundamental shift” based on the
“recognition that Post Offices, in today’s world, rarely make enough money to sustain
a stand-alone Post Office only’ operation”.** This is reflected by a decrease in the fees
sub-postmasters have received for providing PO services, which fell from £478 million in
2012/13,°° to £365 million in 2018/19.*’ In order to reduce reliance on state funding and to
fill the gap as money for Post Office services has declined, POLintroduced a modernisation
programme—the Network Transformation Programme—which seeks to facilitate greater
opportunities for Post Office branches to increase retail revenue based on PO footfall. In
addition, POL has sold 171 directly managed Crown PO to new franchises, so further
reducing state funding.** However, the Government has recognised that PO branches in
rural locations need additional support and in 2017 it earmarked £160 million to protect
those POs that were often the last shop in the community.”
Modernising the Post Office Network
33. The Network Transformation Programme (NTP) was announced in 2010, and
the then Coalition Government committed £1.34 billion until March 2015.°° An
additional£640 million was committed in November 2013 which extended the NTP until
2018." In April 2018, an additional £210 million was invested in the continued
modernisation of the PO network.” As noted above, the NTP was intended to increase
the opportunities for PO branches to increase retail revenue based on the POLs
premise that “by adding a PO an independent retailer will generate value by bringing
more footfall into their business”.°* BEIS told us that the Government’s approach was
to “ensure the network is widespread, stable and secure, while asking the PO to take steps
to reduce the requirement for Government support by becoming increasingly
commercially sustainable”.**
85 Post Office (PON0051). This view is also reflected in the PO's 2018/19 Annual Report: “ This year saw us complete
our Network Transformation Programme, by far the biggest change we have ever made, recognising that
standalone Post Offices are rarely commercially viable”, (Post Office, Annual Report & Financial Statements
2018/19, (October 2019), p 4).
86 Post Office, Annual Report & Financial Statements 2014/15, (2015), p 75.
87 Post Office, Annual Report & Financial Statements 2018/19, (October 2019), p 57.
88 As above. POL note that the selling of directly managed Crown Post Office has been going on since 1970.
89 _BEIS, Government pledges to secure the future of the Post Office, (December 2017). This was part of a package
of £370 million and included £210 million to carry on the modernisation of the Post Office network. See also:
The Times, Post Office gets £370m delivery, (December 2017).
90 HM Treasury, Comprehensive Spending Review 2010, (2010), p 51. See also: Post Office Ltd, Modernising the Post
Office, (accessed 12 September 2019).
1 HC Hansard, (27 November 2017, col. 281). POL confirmed in the PO‘s 2018/19 Annual Report that the NTP has
now been delivered, (Post Office, Annual Report & Financial Statements 2018/19, (October 2019), p 4).
92 EIS, Government pledges to secure the future of the Post Office, (December 2017). This was part of a package
of £370 million and included £160 million to support rural Post Offices.
93 Post Office (PON0051). POL pointed to research which found that 36% of customers asked said they had visited
a store primarily to use a Post Office service and 52% had made a retail purchase. This POL argues equates to
between £922 and £2,636 of additional retail sales a week, depending on the size of the branch.
94 BEIS (PONO048).
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18 Future of the Post Office Network
34, The NTP introduced new modernised PO models—‘Local’ and ‘Main’ models, which
are described above.** POL state that around 8,000 branches will transform to either one
of these models “with longer hours designed to make it easier for customers to do business
with us”.’° By March 2018, 7,700 sub-postmasters had signed up to the new models and
7,500 branches have been built or modernised, with 6,600 branches now offering longer
opening hours with 3,900 branches now open on Sundays.” POL state that these changes
have added over 200,000 opening hours a week across the PO network.**
The NTP and the Government's Access Criteria and Accessi
Targets
35. To ensure that the Post Office network offers a truly national service, the Government
introduced six ‘Access Criteria’ for the Post Office to meet so that customers across the UK
would experience similar levels of access:””
Box 6: The Post Office’s Six Access Criteria
1. 99% of the UK population to be within three miles of their
nearest post office outlet;
2: 90% of the UK population to be within one mile of their
Nearest post office outlet;
= 99% of the total population in deprived urban areas across
the UK to be within one mile of their nearest post office
outlet;
4. 95% of the total urban population across the UK to be
within one mile of their nearest post office outlet;
5: 95% of the total rural population across the UK to be
within three miles of their nearest post office outlet.
6. 95% of the population of every postcode district to be
within six miles of their nearest post office outlet.*
Source: House of Commons Library, Post Office Numbers, (August 2018), p 5
36. The Government told us that the Post Office network meets all the access criteria on a
national level,'°° though in 2017/18 there were seven post code instances (Criteria 6) where
less than 95% of the local population were not within six miles of their Post Office outlet.‘
95 Locals have been advocated as a preferential for smaller sub-Post offices in suburban and rural areas. Mains
are larger franchised Post Offices and include refurbished branches providing a wider range of products and
services than Locals. See: Post Office Ltd, Modernising the Post Office, (accessed 12 September 2019).
96 Post Office Ltd, Modernising the Post Office, (accessed 12 September 2019).
97 House of Commons Library, The Post Office, (April 2019), p 15.
98 Post Office (PONO0S1).
99 Post Office, The Post Office Network Report 2018, (2018), p 8.
100 BEIS (PON0048).
101 House of Commons Library, Post Office Numbers, (August 2018), p 6. See also: Post Office Ltd, The Post Office
Network Report 2018, (2018), pp 8-9.
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Future of the Post Office Network 19
Box 7: Accessibility Performance
Total population within 3 miles
99% 99.7% 99.7% 99.7% 99.7%
Tost papain ict me 90% 93.0% 93.0% 929% 92.8%
Deprived Urban population
within 1 mile 99% 99.8% 99.7% 996% 99.6%
Uetian popidaton switin Te 95% 99.1% 98.5% 98.4% 98.3%
Fane poplar wii 2 ey 95% 99.1% 98.7% 987% 987%
Postcode areas with < 95% of
population within 6 miles o 1 2 0 2
‘Source: Post Office Ltd: The Post Office Network Reports,
Source: House of Commons Library, Post Office Numbers, (August 2018), p 6
37. However, Citizens Advice, in a review of the success of the NTP, noted that the
network’s ability to meet the access criteria was “also reliant on the 3,000 unconverted
Community branches” many of which “are often only available for a few hours a week”.°”
38. The PO is also required to report on accessibility for certain groups, including: small
businesses; disadvantaged individuals, individuals on low incomes; individuals with
disabilities; and individuals over the age of 65.'°° The PO reported that in 2017/18 it hit the
key access criteria for these groups:
Box 8: Access Performance for Certain Groups
Small businesses 93.0% 99.7%
Disadvantaged individuals 99.0% 999%
Individuals with
incomes (<10k) 97.5% 99.9%
individuals with
incomes (<20k) 977% 99.9%
individuals with disabilities 95.3% 99.8%
Individuals over
the age of 65 8% 99.6%
Post Office, The Post Office Network Report 2018, (2018), p 9.
102 Citizens Advice, Post offices transformed: A review of the post office restructuring programme 2012-2018, (June
2019), p 6.
103 Post Office Ltd, The Post Office Network Report 2018, (2018), p 9.
104 Asabove, p 9.
20 ‘Future of the Post Office Network
However, in a recent review of the success of the NTP, Citizens Advice concluded that on
disability access progress “ is still patchy”.’°*
39. While POL have met the access targets that the Government have set them, we
have reservations about what is actually being delivered. Being close to a PO that is
only open for a few hours a week and that does not offer the full level of services may
not actually benefit customers very much. We also note that progress on disabled
access is ‘patchy’, which also calls into question whether geographic proximity is on
its own a good measure of the accessibility robustness and comprehensiveness of the
PO network. We recommend that the Government produce additional criteria which
captures the level of services and level of disabled access available across the Post Office
network,
The NTP and the Financial Performance of the Post Office
40. In 2016/17, the PO posted a trading profit of £13 million, which was the first profit it
had posted in 16 years, In 2017/18, it reported a trading profit of £35 million, rising to £60
million in 2018/19.'°° POL has set a target of recording a £100 million profit within the
next 3 years.'°” A summary of the PO’s financial performance since 2012/13 is provided
below:'*
105 Citizens Advice, Post offices transformed A review of the post office restructuring programme 2012-2018, (June
2019), p 2 and pp 7-8. It noted that its research had found that: 7% of branch doors were not wide enough for
wheelchairs; 21% of aisles were not wide enough for wheel chairs and motor scooters; 44% of shopper who
needed to use a hearing loop were not able to. Citizens Advice Scotland also raised concerns over disabled
access across the PO network. It pointed to evidence that “like blocked or restricted aisles, lack of disabled
parking, and a lack of privacy may be making it more difficult for disabled consumers to use the post office”,
Citizens Advice Scotland (PON0042).Citizens Advice also found that POL’s website did not provide information
for consumers on the accessibility of POs and is continuing to meet with POL to ensure this is addressed (Citizens
Advice (PON0031)).
106 Post Office, Post Office Annual Report 2018/19, (October 2019), p 6.
107 Post Office, Post Office Annual Report 2017/18, (2018)
108 Sources: House of Commons Library, The Post Office, (April 2019), p 12; Post Office, Post Office Annual Report
2018/19, (October 2019); Post Office, Post Office Annual Report 2017/18, (2018). For earlier annual reports see:
bitpuscorporate posotriesico.Ukannualreporcl6t7;
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Selected Financial Indicators for Post Office Ltd, 2012/13 to 2018/19
2012/13 2013/14 2014/15 2015/16 + 2016/17 2017/18" 2018/19
Revenue 1,024 979 976 964 957 961" 986"
Trading Profit -116 -93 57 -17 13 35 60
Network Subsidy Payment 210 200 160 130 80 70 60
Postmasters Fees 478 448 435 413 388 371 365
Segmented Revenues
Mails, Retail and Lottery 409 390 388 380 382 379 392
Financial Services 281 279 290 304 314 320 No Data”
Government Services 164 146 141 128 114 99 No Data”
Telecoms 129 124 120 130 130 147 153
Other 41 40 37 22 17 16 13
Notes: 1. For comparative purposes, for 2017/18 and 2018/19 we have added “commission income relating to Government services” to
“revenue”. Post Office Ltd reclassified this in the 2018/19 accounts because it did not fall within the scope of IFRS 15 Revenue from
Contracts with Customers. See; Post Office Ltd, Post Office Annual Report 2018/19, {October 2019), p 9.
2. The grouping of products has altered in Post Office Ltq's 2018/19 Annual Report as a result of changes to internal reporting, with
Post Office Card Account (“POCA”) revenue moving from “Government Services” to “Cash & Banking Services”, which prevents a
comparison with previous years. See; Post Office Ltd, Post Office Annual Report 2018/19, (October 2019), p 9
3. The groupings of products were altered in 2017/18, with gift voucher turnover moving from Payment Services to Mails and Retail and
mobile E Top Up turnover removed from Telecoms. Turnover from Post Office Management Services Ltd is no longer included within
Financial Services.
Sources: House of Commons Library, The Post Office, (April 2019), p 12; Post Office Annual Reports 2012/13 to 2018/19.
61/8107 03 EL/ZL0z - Arewiuins 221440 350d +6 XOg
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22 ‘Future of the Post Office Network
41. POL told us that the NTP had delivered on a number of objectives:
+ Transformed a trading loss of £115 million in 2012-13 to a trading profit of £35
million in 2017-18 (£60 million in 2018-19);
+ Reduced Government support from a peak of £415 million in 2013-14 to £50
million in 2020-21, saving £365 million of taxpayers’ money a year’?
+ Stabilised the PO network at about 11,500 branches;
+ Increased PO opening hours;
+ Met the Government's access criteria.'*°
POL pointed out that it had achieved all these objectives in tough high street trading
conditions.""*
42. Callum Greenhow, Chief Executive Officer, National Federation of Sub-Postmasters
(NESP) told us that at one level the Network Transformation Programme (NTP) had been
a success by reducing the cost of the network to the taxpayer, maintaining a network of
11,500 branches and delivering a profit.'' However, he was concerned that too many POs
were being replaced by outreach and mobile POs,'** and pointed to the plight of the many
sub-postmasters who were struggling.''*
43. Anne Pardoe, Principal Policy Manager, Citizens Advice, suggested that the impact
of the NTP had been uneven across the PO Network. She noted that “where previously a
community may have had a full-time post office with a full range of services, now perhaps
they have a post office from a neighbouring community coming in for a couple of hours
a week”."!
44, The Communication Workers Union (CWU) was more critical of the NTP. Andy
Furey, Assistant Secretary, thought that it had been an “unmitigated disaster” which
had led to the PO network being at the “most unstable and vulnerable” that it had ever
been.''® He contended that achieving a profit by paying sub-postmasters less and reducing
subsidies should not be viewed as a success if it threatened to undermine the PO network
and was not fair on the sub-postmasters delivering the service.''” The CWU argued that
it had also led to a decline in service standards as traditional sub-Post offices were being
closed and “moved into the back of convenience stores, where they offer a more restricted
range of services and poorer service standards”."’* Similarly, it argued that it had led to an
109 Post Office Ltd (PON0051).
110 House of Commons Library, The Post Office, (April 2019) p 12. POL 2012/13 to 2017/18 Annual Reports can be
found at: http://corporate.postoffice.co.uk/annualreport1516 and http://corporate.postof fice.co.uk/post-office-
annual-report-201718. The POL 2018/19 Annual Report can be found here.
111 As above. a
112 Q1, Callum Greenhow, Chief Executive Officer, National Federation of Sub-Postmasters.
113. Q7, Callum Greenhow, Chief Executive Officer, National Federation of Sub-Postmasters.
114 Q22, Callum Greenhow, Chief Executive Officer, National Federation of Sub-Postmasters.
115 Q4, Anne Pardoe, Principal Policy Manager, Postal Services and Telecoms, Citizens Advice. See also: Citizens
Advice, Accessibility at Post Offices, (2018) The latter concluded that while the PO had good disability guidelines
they often slipped in practice. See also: Citizens Advice, Post offices transformed: A review of the post office
restructuring programme 2012-2018, (June 2019).
116 Q2, Andy Furey, National Officer, Communication Workers Union; Anne Pardoe, Principal Policy Manager, Postal
Services and Telecoms.
117 Q35, Andy Furey, Assistant Secretary, CWU.
118 CWU (PON0050).
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Future of the Post Office Network 23
increase in outreach and mobile POs, while the franchising of Crown POs had resulted in
well trained Post Office staff with a wealth of experience leaving the business and being
replaced by low paid, inexperienced staff at WH Smith."!?
45. The Minister told us that the NTP strategy was working and had put the PO ona
stable footing. She said that it had helped reduce subsides from over £200 million in 2012
to £50 million in 2017-18, as the £2 billion invested 2010 to 2018 to modernise POs sought
to increase retail revenues.'?*However, she also acknowledged that there was a need to
address sub-postmaster remuneration,’ as some were struggling.'”” She confirmed that
she had made the case in the spending review for the continuance of the Network Subsidy
Payment.”
46. The Network Transformation Programme (NTP) has simultaneously reduced.
Government subsidies for running the PO, while also resulting in the PO posting
profits for the last three years. The POL has met basic Government access criteria and
the PO network has stabilised at just over 11,500 branches. However, this has been
delivered at a cost. First, 10% of the 11,500 branches are outreach and mobile POs
which offer a reduced level of service to permanent branches, while disabled access
is ‘patchy’. Second, the theory of modernising POs to provide retail white space to
generate income to fill the gap left behind by declining Government subsidies and
fees for Government transactions, does not appear to be delivering for many sub-
postmasters. If sub-postmasters begin to leave their POs in large numbers because
they feel they cannot make a living there is a danger that the overall PO profits being
currently delivered will either not be sustainable or will be delivered on the back of a
hollowed-out PO network. It is questionable whether profits delivered while reducing
access to a vital public service can be viewed as a success.
119 As above.
120 Q172, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
121 Q199, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
122 Q186, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
123 Q173 to Q174, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business,
Consumers and Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
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24 Future of the Post Office Network
4 Pressures on Post Offices and Sub-
Postmasters
47. Inevidence, many sub-postmasters told us that they face pressures which are leading
them to consider selling their businesses or scaling back their activities. These pressures
include a fall in income from providing Post Office (PO) services, which, as noted, has
fallen from £478 million in 2012/13 to £365 million in 2018/19,'** accompanied by an
inability for many sub-postmasters to generate enough income from other sources to
compensate. It also includes a deterioration in their working conditions and a lack of
support from the PO.
Income and Working Hours
48. It is clear that a sizeable number of sub-postmasters are struggling to make a living
and/or face long hours to do so. The National Federation of Sub-postmasters (NFSP)
conducted a survey in January 2019 which found that of those who responded:'*°
+ 61% were taking home less now than in the past;
+ 76% earned less than the National Minimum Wage per hour for working in their
post office;
+ 19% of sub-postmasters (or their spouse or partner) have taken on work elsewhere
in the last year just to make ends meet; and
+ Many struggle to take time off (one third did not take a single day off in 2018)
because they cannot afford to employ other staff and are forced to work longer
hours themselves.
Asa result, 22% of sub-postmasters planned on closing/downsizing/handing-on their post
office in the coming 12 months. Without sub-postmasters there would not be a sustainable
and comprehensive PO network.
49. The NFSP told us that their members were increasingly seeing the operation of a
Post Office as a “cost to them rather than an income generator”.'”° The Communication
Workers Union (CWU) concurred and told us that if the concerns of sub-postmasters
were not addressed because they were not paid enough money “they will voluntarily
give up the post office”. The CWU also told us that sub-postmaster incomes were further
undermined because they were expected to be open longer, take on more staff to cover
additional hours at the same time that income from providing Post Office services has
declined.'?’ For instance, one sub-postmaster stated:
Iam contracted by POL to open 9am to 5.30pm Monday to Friday, and 9am
to 12.30pm Saturday, i.e. 46 hours per week.
124 Post Office, Annual Report & Financial Statements 2014/15, (2015), p 75; Post Office, Annual Report & Financial
Statements 2018/19, (October 2019), p 57. See Box 9, page 35 of this Report.
125 National Federation of Sub Postmasters (PON0025).
126 Q22 Callum Greenhow, Chief Executive Officer, National Federation of Sub-Postmasters.
127 Q3 Andy Furey, National Officer, Communication Workers Union.
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Future of the Post Office Network 25
My latest payslip (31st March 2019) shows that POL paid me £1,508.03 per
month gross, which works out at £7.62 per hour.
Asat that time, the National Living Wage (NLW) for a 25 year old and over
is £7.83 per hour (to rise to £8.21 per hour from April 2019). As you can see,
Iam ‘paid’ less than the NLW.'?*
50. Another said that sub-postmasters were being “squeezed” between falling income—
due to both reductions in customer transactions and the payments made for such
transactions—and increasing costs for everything from staff pay and workplace pensions
to rent, heat and insurance.'?” Sub-postmasters also drew attention to the long hours
they were working,’*° and their inability to take holidays and breaks away from the Post
Office as they could not afford to pay staff to cover their absence.'*! The Association of
Conveniences Stores also stated that many retailers who hosted POs were struggling to
pay National Minimum Wage increases and rises in property costs as revenues from PO
transactions had slightly dipped. ‘**
51. Andy Furey, Assistant Secretary, CWU, told us that many sub-postmasters were
struggling because of flaws in POL’s operating model:
The Post Office has incrementally increased its profits year on year, but it
has only done so by taking that money directly away from postmasters. It
is easy to do that. You pay the postmasters less money; you do not grow
the top line in any material way; and then you declare a profit. The profit is
coming about because postmasters are getting less and less; they are getting
a raw deal.'**
128 Mr Louis Holden (PONO011). A number of submissions said that sub-postmasters were receiving less than
the minimum wage. See also: Mr Peter Dulieu (PON0005); Mr Louis Holden (PONO011); Mrs Julie Allen
(PON0037); Edward Rigg (PON0047); Rajen Shah (PON0041); Mr Jonathan Follenfant (PON0035); Orleton PO.
Stores (PON0024); Mr Samuel Houston (PON0021); Mr Jaiprakash Patel (PON0020); Mr Sunil Patel (PONO018);
Ridgewood Post Office (PON0015); Mr Timothy Bates (PON0014); Name Withheld (PON0012); Mr Geoffrey
Crouch (PONO007); Mr Peter Dulieu (PONO005); Mr Tim McCormack (PON0004); Mrs Sally Bourton (PON0003);
Mr Paul Dawkins (PON0002); Mrs Barbara Oakes (PON0056); Mark Close (PON0036); The Consumer Council
(PONO028).
129 Mrs Julie Allen (PON0037). Sub Postmaster Edward Rigg (PON0047) stated that Pay rates had been reduced
by approximately 15.5% as a result of 2 remuneration decreases since Sept 2017, whilst there had been two
minimum wage increases. He estimated that if he calculated his own hourly rate of pay in terms of hours worked
against take home pay, his hourly rate was £2.12. Another sub-postmaster Rajen Shah (PON0041) stated that
cover 5 years he had seen a decline of his remuneration by a third making his branch uneconomic to run which
had resulted in him thinking of subletting the post office area to another trade to earn rather lose money. See
also: Mrs Barbara Oakes (PON0056); Dorchester Post Office (PON0038); The Consumer Council (PON0028).
130 Kennedy Centre PO Ltd (PON0046).
131 Mr Samuel Houston (PON0021). One submission - (PON0012) noted that they had not had a holiday in six years.
132 Association of Convenience Stores (PON0026). See also: Plunkett Foundation (PON0034). They noted that
increases in the National Minimum Wage might lead to some POs having to reduce hours. Citizens Advice
similarly also noted those running particular sized post offices were finding it hard to staff their branch in an
economically feasible way to provide consumers with a good quality service, with increases in business rates and
staff wages in the context of the National Living Wage are key concern, (Citizens Advice (PON0031)).
133 Q35, Andy Furey, Assistant Secretary, CWU.
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26 ‘Future of the Post Office Network
52. The CWU also noted as a result of the Network Transformation Programme fixed
payment, the Core Tier Payment (CTP), had stopped being paid to the majority of sub-
postmasters. '** This reduced the annual income of those sub-postmasters running the
new models by £10,000 to £15,000. The expectation was that retail and variable PO fees
would make up for this shortfall, but in many cases it did not because the variable fees
were too low.'**
53. Alisdair Cameron, Interim Chief Executive, POL, accepted that sub-postmaster
remuneration had fallen and that “the balance of all the people we have to keep engaged
with post offices has tilted too far away from postmasters”.'*° He added that it was “getting
too hard for postmasters”.'*” He announced that the POL was embarking on a full review
of post-master remuneration. He said:
Iam confident that we will be presenting something that is more attractive
for postmasters and it is not just the amount they earn. If we can reduce the
need for separate tills, the effort of running a post office, the hours you have
to employ staff, and we are doing a lot in that space at the moment, you also
reduce the cost of running a post office. Therefore, it is easier for them to
make a profit and that is, strategically, absolutely what we have to do.'**
54, While the Minister recognised that some sub-postmasters were struggling, she
argued that this depended on different locations, the business and its footfall,’*? and that
business propositions across the PO Network were diverse."“° She did, however, accept
more generally that sub-postmaster pay was not fair and confirmed that she had called for
the review of sub-postmaster remuneration. '**
55. Itis clear to us that too many sub-postmasters are struggling to earn a living. It is
also unacceptable that many sub-postmasters feel unable to take holidays because they
cannot afford to employ staff to cover them. If large numbers of sub-postmasters decide
to give up their POs this will damage the PO network and stress customers around the
country who may lose access not just to PO services, but to everyday banking services
or even, in some communities, any retail facilities. In many cases the theory that
increased footfall and retail would replace Government subsidies and declining fees
for providing Government services was overly optimistic. This approach for many sub-
postmasters is not offering them a viable livelihood. We suggest that the Government
134 See CWU (PON0057). The CWU note that for opting out of the CTP sub-postmasters were compensated: 26
months remuneration if the branch could be replaced by a new entrant willing to work for the fees only pay
system; 12 months remuneration if a sub-postmaster chose to convert their existing branch onsite to a new
model.
135 See above. They note for instance that transaction payments are just 3 pence per stamp and 17 pence each time
a customer withdraws cash. In addition, they note that Payments to sub-postmasters in ‘Local’ branches are
lower than those for ‘Mains’ branches for performing exactly the same transaction. See also: Mrs Barbara Oakes
(PONO0S6); Mark Close (PON0036).
136 Q85, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
137 Q164, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
138 88, Alisdair Cameron, Interim Chief Executive, Post Office Ltd,
139 Q183 to Q188, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business,
Consumers and Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
140 Q194 to Q195, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business,
Consumers and Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
141 Q197 to Q199, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business,
Consumers and Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
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Future of the Post Office Network 27
need to consider the wider social goals, such as social and economic inclusion, that
sub-postmasters are providing in different locations across the country. The Minister
and Post Office Ltd are reviewing sub-postmaster remuneration. We recommend that
they take into account the vital social role that sub-postmasters are fulfilling and the
gap they will leave behind if they begin to leave the profession. We also recommend
that the Government urgently review whether they have the balance right between retail
income, Government income and fees for providing Post Office and banking services.
Support from Post Office Ltd
56. A number of sub-postmasters said that they were receiving little support from
Post Office Ltd, especially in terms of training. For example, one sub-postmaster stated
that support from the Post Office had been “non-existent” and that “there had been no-
instore support and training ... for the last 10 years”.'*? Another said that training was
“inadequate” both “initially and ongoing” with an expectation from Post Office Ltd that
sub-postmasters should pay for their own training and pay for staff to cover them if they
needed to be away from their branch.'**
57. The CWU told us that ongoing training of sub-postmasters was imperative because
“the nature of the business changes” and because there was need for “decent compliance”.
Italso noted that it was very costly and onerous if sub-postmasters were expected to pay for
their own and their staff’s training.'** The NFSP noted that it was providing support and
help through its teams and area managers for its members because “a lot of postmasters
have not seen anybody from the Post Office in years”.'**
58. The Minister told us that the Post Office was in the process of identifying training
needs,'*° and that whereas in the past, sub-postmasters had not seen Post Office area
managers, they would be seeing them in future.'*” The Minister noted that this would
include training and support on security issues.'**
59. It is imperative that sub-postmasters receive proper support and training if they
are to provide a high level of service to the public. It is troubling to hear that sub-
postmasters are sometimes expected to pay for their own training when they are
providing PO services, and that the support they do receive is often inadequate. It
should not be down to sub-postmasters’ representatives to provide such training; this
is clearly a POL responsibility. We welcome the Minister’s and POL’s commitment
to look at sub-postmasters’ training needs, especially in areas such as security. We
recommend that Post Office Ltd indicate at the earliest opportunity what weaknesses they
have identified in sub-postmaster training and how they intend to address them. We also
recommend that Post Office Ltd reports on a regular basis how much it is investing in such
training and what feedback it is receiving from sub-postmasters and how it is responding.
142 _Rajen Shah (PON0041). See also: Orleton PO Stores (PON0024); Miss Helen Walker (PON0022); Mr Samuel
Houston (PONO021).
143 Mr Jim Gordon (PON0040). See also: Mr Jonathan Follenfant (PON0035); Mrs Julie Allen (PON0037).
144 Q25, Andy Furey, National Officer, Communication Workers Ui
145 Q26 Calum Greenhow, Chief Executive Officer, National Federation of Sub-Postmasters. He noted that the NFSP_
had retail and mail teams which could offer support to its members.
146 Q242 Kelly Tolhurst MP, Parliamentary Under-Secretary of State, Minister for Small Business, Consumers and
Corporate Responsibility.
147 Q228 Kelly Tolhurst MP, Parliamentary Under-Secretary of State, Minister for Small Business, Consumers and
Corporate Responsibility.
148 As above.
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28 ‘Future of the Post Office Network
5 Consultations on Post Office Closures
and Post Office Franchising
Consultations on Post Office Closures
60. Post Office Ltd (POL) can decide to bring forward plans to change Post Office (PO)
services in a particular locality, though such changes must work within the Government's
access criteria. Previously, these changes were governed by a code of practice.'”” If
such changes involved moving a branch, POL was required by the code to notify local
communities through a formal six-week consultation process overseen by Citizens Advice,
the official consumer watchdog. If the change related to the closure of a Crown PO, the
consultation was to last 12 weeks.'*°
61. The code of practice was replaced in June 2018 by a shorter Statement of Principles
setting out when and where POL will notify, engage or consult local communities on
changes.'* If they were small changes,'* the Principles noted that POL would notify local
communities.’** If it referred to the re-opening of a temporarily closed branch in a new
location or a Crown PO, POL will engage with a local community,'** seeking the views of
locally elected representatives, consumer advocacy bodies and selected charities. Finally,
the Principles state that where there is to be a permanent closure of a PO branch or a
permanent relocation of a PO branch (including the franchising of a Crown PO to a new
site), POL will carry out a six-week local public consultation, informing customers, locally
elected representatives, consumer advocacy bodies and selected charities of the proposal.
This means that previous 12-week consultations for the closures of Crown PO have been
reduced to six weeks.'** The consultation asks specific questions on areas where POL seeks
feedback on access to PO services. POL will confirm when the change will happen, if the
decision is made to proceed and will provide clear information on any changes to services
as well as access to and into the new branch.** The move from the Code to the Principles
was agreed by Citizens Advice, who continue to be tasked with overseeing consultations.'*”
Citizens Advice told us that in their opinion local people had the opportunity to feed into
decisions about changes to their PO.'**
149 Post Office Ltd, Code of Practice on Public Consultation and Communication with respect to change in the Post
Office® network, (May 2014). The Code of Practice ran to 19 pages.
150 As above, p 11.
151 Post Office, Principles of Community Engagement on changes to the Post Office network, (June 2018). The
Principles run to three pages.
152 Small changes would include: opening hours; a temporary closure or temporary service interruption; the re-
‘opening of a temporarily closed branch in the same site; the opening a new branch unrelated to a previous
closure; a location used by Mobile Post Office within a community.
153 _ Notification would include displaying a poster in branch (or nearby if appropriate) to notify customers of
the changes, providing four weeks' notice. Where four weeks’ notice was not possible, Post Office Ltd would
provide notice as soon as possible. For temporary closures Post Office Ltd would include details of the nearest
alternative Post Offices and our customer helpline/textphone.
154 The Principles notes that where extenuating circumstances prevent a four-week period it will provide as much
notice as possible.
155 Citizens Advice (PON0058).
156 As above. The Principles more specifically note that at the end of the consultation process Post Office Ltd will
write to locally elected representatives, Consumer Advocacy Bodies and respondents to the consultation (where
practical) to confirm our decision and provide a summary of key issues raised with a clear response to each. This
information will be made available online and in branch (where possible).
157 Citizens Advice, The Post Office is changing how they inform customers of local branch changes, (June 2018).
158 Q40 Anne Pardoe, Principal Policy Manager, Postal Services and Telecoms, Citizens Advice
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62. However, the Communication Workers Union (CWU) described the consultation
process as “a sham” and arrangements as being “completely and utterly meaningless”.’*°
It contended that consultations ignored significant local opposition to the closure
or franchising of Crown POs by halving the consultation period and reducing the
consultation guidance from 19 pages to three pages. The CWU argued that this denied local
communities “any realistic hope of mobilising a strong enough campaign to challenge the
decision” and was therefore a “contemptuous and shameful exercise in driving changes
through with impunity and no meaningful engagement”.'*° The CWU suggested that the
POL’ attitude was that its proposals would only be stopped if there was a “demonstrable
reason around accessibility”.'**
63. Concerns about consultations over the closure of POs have been raised frequently
by MPs in Parliamentary debates, especially in terms of the time they take and their
limited impact in stopping closures or the refranchising of Crown POs.'* For example,
Marion Fellows, MP, noted that when the PO “consulted” people in Motherwell about the
franchising of the town centre branch, “it was merely a rubber-stamping exercise”.'®* This
was also raised by Rachel Maskell MP in evidence to us. She was critical of the limited
scope of a consultation over the closure and franchising of Lendal, in York, PO, its timing,
and the refusal of the POL Chief Executive to meet her,'®* and of misleading statements
about existing staff member's terms and conditions.'*°
64. Between October 2018 and June 2019, POL had made decisions on 39 consultations
over the franchising or closure of Crown POs, which received 26,000 responses. ‘°° Though
improvements and reassurances were agreed in 79% of the decisions, only one proposal
did not proceed due to concerns over disabled access and capacity.’®” Citizens Advice
acknowledged that it did not have a veto and that it did not consider the suitability of
who would run a PO and instead concentrated on issues such as accessibility.'** It also
accepted that because of this, it was a “fair challenge” that consultations might give false
hope that a closure or a franchise decision could be overturned.’
65. POL said that it thought that it was generally explicit that it was consulting on
whether a replacement Post Office service was acceptable and not on whether a decision
159 Q46 Andy Furey, National Officer, Communication Workers Union.
160 CWU (PONO0SO)
161 _Q45 Andy Furey, National Officer, Communication Workers Union. He argued that six weeks did not give local
councils enough time to arrange scrutiny committees to consider the POL's plans (Q52).
162 See for example: HC Hansard, Post Office Network, (25 April 2019; cols 361WH to 400WH); HC Hansard, Crown
Post Offices: franchising, (10 January; cols 206WH to 252WH).
163 HC Hansard (25 April 2019, col 366WH).
164 Rachel Maskell MP (PON0054). In terms of timing she noted that he consultation coincided with the Christmas
period which made it difficult for Post Office staff, local businesses and residents to fully engage with the
process.
165 As above. She noted that constituents concerned about jobs, were misleadingly told at the Customer Forum that
the existing staff's terms and conditions would be exactly the same under the new arrangements, when in fact
this would only be the case for the first 12-months of operation. This was also picked up by other MPs in oral
questions on Post Office Closures in November 2018 (HC Hansard, 20 November 2018; col 713).
166 Citizens Advice (PON0058). The 26,000 responses included This includes 8,233 direct responses to consultations,
18,429 signatures on 8 petitions and 194 campaign letters.
167 As above.
168 Q55 Anne Pardoe, Principal Policy Manager, Postal Services and Telecoms, Citizens Advice. Citizens advice note it
dependently reviews all feedback received during consultation and meets with POL to raise concerns directly,
seeking improvements where necessary”, Citizens Advice (PON0058).
169 _Q56 Anne Pardoe, Principal Policy Manager, Postal Services and Telecoms, Citizens Advice.
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30 Future of the Post Office Network
would be overturned to close or franchise a Crown PO.'” However, it accepted that in
some cases it had made mistakes,'”* and was concerned not to lose the trust of customers
and communities.'”* The Minister, Kelly Tolhurst MP, accepted that there might have
“been confusion in the comms as to what is actually being consulted on” and received
representations from MPs from across the House of Commons, which attested to this
point. '”* She told us that POL would be looking at how it could improve its engagement
on PO closures and franchises, including its use of social media and its interactions with
MPs.'* However, she confirmed that consultations generally sought feedback on the
strategic decisions already taken by POL.'*
66. Itis clear from the evidence we received and from the experience of many MPs and
their constituents who have taken part in PO consultations that there are high-levels
of frustration with how Crown PO closures are being run. The Minister conceded that
communication with local communities at times had been poor and POL accept that
mistakes have been made. We suggest that the main source of frustration is related
to the belief that the closure of a local PO, or its movement into another building as
part of a franchise, can be stopped. In the vast majority of cases this is not the case.
Consultations appear to be more around feedback on a decision that has already been
made. Such consultations run the danger of damaging the PO brand and wasting
people’s time. We recommend that Post Office Ltd review its consultation process and
speaks to local communities who have taken part in one to explore where mistakes have
been made and how lessons can be learnt. We recommend that, at the very least, every
consultation should be explicit about what it can achieve and be very clear on whether it
can overturn a proposed closure or the franchising of a Crown Post Office. However, we
disagree with the strategy of closing Crown Post Offices. We recommend that Post Office
Ltd and the Government reconsiders the strategy.
The Franchising of Crown Post Offices
67. As already noted, Crown branches are directly managed by POL and are usually
found in town centres and offer the full range of Post Office services.'”* However, as part
of its modernisation programme, POL has been franchising Crown PO to commercial
partners.'”” Between 2012 and 2015, 48 Crown POs were franchised to well established
retailers. Since 2016 POL has been seeking to franchise a further 135 Crown POs.'”* For
example, in January 2017, POL announced that it would close 3 Crown POs and franchise
170 Q161 Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
171 As above.
172 Q165 Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
173 Q208 Kelly Tolhurst MP, Parliamentary Under-Secretary of State, Minister for Small Business, Consumers and
Corporate Responsibility
174 Q213 Kelly Tolhurst MP, Parliamentary Under-Secretary of State, Minister for Small Business, Consumers and
Corporate Responsibility
175 Q208 and Q213 Kelly Tolhurst MP, Parliamentary Under-Secretary of State, Minister for Small Business,
Consumers and Corporate Responsibility. She noted that there were three decisions pending where POL was
reconsidering how it was approaching a decision after feedback.
176 As of March 2018, there were 262 Crown Post Offices down from 373 in 2009 and now account for about 2% of
the PO network. (House of Commons Library, Franchising of Crown post offices and effect on high streets and
local communities, January 2019), p 4.
177 House of Commons Library, Franchising of Crown post offices and effect on high streets and local communities,
(January 2019), p 2. Commercial partners include WH Smith, the Co-op and McColls. POL did note that the PO
has been franchising Crown POs for over 30 years, Post office Ltd (PONO051).
178 Department for Business Energy and Industrial Strategy (PON0048).
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37, with the loss of 300 jobs.'” In most cases, franchised branches have relocated to
premises nearby, with the PO often being moved to be within an existing shop.'*°
Service Levels in Franchised Crown Post Offices
68. In 2017, Citizens Advice carried out mystery shopper research into the standard of
services across different types of Post Office.'*' The results are detailed below.'*?
Box 10: Service Standards in Franchised Crown and Former Crown Post Offices
Service standards in Crown and former Crown post offices
‘Accessil re
Parking nearby (within 100 yards) 48% 41%
At least one accessible entrance 97% 99%
Clear route to serving positions / no obstacles 98% 95%
Hearing loops 46% 51%
Portable PIN pads 67% 65%
Queuing
Served immediately 38% 29%
Average waiting time when queuing 4m 12s 4m 15s
Average open counter positions a4 19
Privacy
Privacy measures provided 39% 50%
Service standards
Correct service offered initially (2nd class large letter) 24% 41%
Correct service offered after prompts (2nd class large letter) 58% 71%
Correct service offered initially (Signed For smail parcel) 52% 52%
Correct service offered after prompts (Signed For small parcel) 71% 70%
Banking
Were able to deposit cash into bank account 82% 77%
‘Source: Citizens Advice, The state of the post office network, 30 June 2017
House of Commons Library, Franchising of Crown post offices and effect on high streets and local communities, (January
2019), p4
69. Many MPs have drawn attention to issues such as reduced accessibility and the
impact it has on the high street.'** For example, Rachel Maskell MP noted that the closure
of Lendal, in York, PO and its franchising to WH Smith had raised disabled access issues
because the WH Smith shop in which the PO had moved did not have disabled parking,
unlike the former Crown PO."** Andy Furey, Assistant Secretary, CWU, highlighted that
most existing Crown POs were in prime city centre locations with great accessibility. ** The
CWU have been particularly critical of service standards in WH Smith franchises which
they argue have “resulted in longer queues and service times, inferior customer service
and advice, poor disabled access, and fewer counter positions”.'*° In terms of disabled
179 BBC News, Post Office to close and franchise more Crown branches, (January 2017).
180 House of Commons Library, Franchising of Crown post offices and effect on high streets and local communities,
Ganuary 2019), p 2.
181 Citizens Advice, The state of the post office network, (June 2017). Citizens Advice note that were there are issues
over the level of service or disability access it liaises with POL to seek improvements and monitors subsequent
progress. Citizens Advice (PON0058).
182 _ House of Commons Library, Franchising of Crown post offices and effect on high streets and local communities,
Ganuary 2019), p 4.
183 House of Commons Library, Franchising of Crown post offices and effect on high streets and local communities,
Ganuary 2019), p 3.
184 Rachel Maskell MP (PONO0S4).
185 52, Andy Furey, Assistant General Secretary, Communication Workers Union
186 CWU (PON00S0)
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32 Future of the Post Office Network
access, the CWU said that a number of WH Smith branches did not have a PO on the
ground floor and did not have internal lifts. It suggested that despite these issues “neither
BEIS nor the DWP have conducted an Equality Impact Assessment into the latest round
of franchises to the retailer”.'*” Citizens Advice said that it intended to survey customers
regarding the performance of franchised Crown POs as part of its future surveys.'**
70. While there appears to be a mixed picture in terms of service standards in
franchised Crown Post Offices, the issue of disabled access is a cause for concern.
Citizens Advice has noted that across the whole PO network access is “patchy” and it
appears that disabled access to POs in some WH Smith stores may not be as good as it
should be. We recommend that Post Office Ltd reviews disabled access in all franchised
Crown Post Offices and ensures that an Equality Impact Assessment is carried out and
published for all future franchises of Crown Post Offices.
Empty former Crown Post Office Buildings
71. Questions were also raised as to how POL was managing empty Crown Post Offices.'*°
Such empty buildings can have a negative impact on a high street, such as reducing rent
for local councils, visual environmental deterioration, vandalism, unsafe structures and
a drop in local consumer confidence.’ Alisadair Cameron, Interim Chief Executive,
POL, told us that POL actively marketed such properties.'°' He was also open to local
community groups taking over empty former Crown Post Offices to re-purpose them for
social activities.'*
72. ThePO should dispose ofits un-needed buildings ina socially and environmentally
responsible manner. The optimum solution would be to sell no-longer used buildings to
raise money that can be ploughed back into the Post Office Network. However, where this
is not possible, we recommend that Post Office Ltd should work with local communities
to repurpose buildings so that they do not remain empty for long periods of time. We
also recommend that Post Office Ltd surveys its real estate and establishes how many of
its buildings are empty and for how long and establishes what costs are being incurred
for such properties and their impact on the local environment. Such information should
be published.
WH Smith Post Office Franchises
73. One of the key commercial partners that POL have franchised Crown POs to has
been WH Smith. In April 2016, POL announced a new 10-year agreement with WH Smith
to relocate more PO branches into WH Smith stores which, at that time, operated 107
POs.'** By April 2017, another 61 POs were planned to move into WH Smith stores. Just
187. CWU (PONO050).
188 Citizens Advice (PON0058).
189 Q140.
190 See for example: Retailthinktank, What impact do shop vacancies have on towns and cities across the UK
and what can be done to address the problem?, (June 2009). See also: Environmental Audit Committee, The
Ministry of Justice: Environmental Sustainability, (HC 545; February 2018), pp 16 to 17. The report considered the
environmental impact of former Courts and Tribunals buildings and the costs of maintaining them
191 Q140 to Q141, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
192 Q142, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
193 Asabove.
Future of the Post Office Network 33
over half of those were expected to continue to be run directly by the PO..'°* In October
2018, POL announced that it would be franchising a further 41 Crown POs to WH Smith
in 2019, with a view to expanding the total number run by WH Smith to over 200.'”°
74. We have a number of concerns about WH Smith running PO branches. During our
inquiry on Small Businesses and Productivity we identified WH Smith as a late payer,
noting its use of 90 days payment terms and that they had not signed up to the Prompt
Payment Code (PPC).'’° WH Smith’s Managing Director, Carl Cowling, told us that they
paid 75% of their invoices within 30 days and 87% with 60 days, but admitted that for
some stock, it would use some extended terms, which it defended as “just the standard
economic model” for some categories. It confirmed that it did not intend to sign up to
the PPC.'*” The Minister, Kelly Tolhurst, told us that all companies should sign up to the
PPC, including WH Smith.'** As we noted in our Report on the Future of Audit and as
we found in our Report on Carillion, long payment terms can indicate underlying cash
flow problems, '”” while our Report on Small Businesses and Productivity underlined the
damage late payments can cause to Small and Medium Enterprises.*°°
75. We are surprised and disappointed that Crown POs have been franchised to a
company which has not signed up to the Prompt Payment Code and which uses 90-
day payment terms. Late payments are bad for small businesses and companies which
are awarded Government contracts should set a good example. We also worry that
such practices raise questions about the financial health of franchises that are running
many PO branches across the UK. We recommend that the Minister explains what
action she will take if WH Smith continues to use 90-day payment terms and refuses to
sign the Prompt Payment Code. We also recommend that future Post Office franchises
are not awarded to partners that are not signed up to the Prompt Payment Code and
who use excessive payment terms.
76. Which? has consistently found in recent years that WH Smith has either come bottom
or second to bottom out of over 100 high street retailers in terms of customer satisfaction.?”
WH Smith contended that the results of the survey were based on a small sample and that
this did not reflect the views of the three million customers it served each week.?”? We
are unconvinced by this because WH Smith for the last 8 years has been voted as one of
the worst two high street retailers. WH Smith noted that it had invested £20 million over
194 Post Office Ltd, Post Office and WH Smith in new ten year agreement, (13 April 2016). By April 2019, this,
brought the total number of POs run by WH Smith to 130 (HC Hansard, 9 April 2019, col. 2P)
195 Post Office Ltd, Post Office to expand number of branches in WHSmith stores, (11 October 2018). See also: WH
Smith (PON0049),
196 _BEIS Select Committee, Small Businesses and Productivity, (HC 807; December 2018), p 37 and p 43.
197 Q107 to Q109, Carl Cowling, Managing Director of High Street Business, WHSmith PLC. See also: Letters from
Carl Cowling to BEIS Committee Chair dated 7 June 2019 and 14 June 2019.
198 Q214 to Q217, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business,
Consumers and Corporate Responsibility, Department for Business, Energy and Industrial Strategy. The Minister
said she would write to WH Smith about the PPC.
199 See BEIS Select Committee, Future of Audit, (HC 1718; 2 April 2019), p 18. See also: BEIS Select Committee, Small
businesses and productivity, (HC 807; 5 December 2018), p 45.
200 _BEIS Select Committee, Small Businesses and Productivity, (HC 807; December 2018), p 37 and p 43.
201 See BBC, WH Smith voted UK's worst high street shop in Which? Survey, (May 2018); Independent, WH Smith
voted worst shop on the high street, (May 2018). This was raised in the evidence we received. See: Name
Withheld (PON0032)
202 Q113 to Q114, Carl Cowling, Managing Director of High Street Business, WHSmith PLC. WH Smith also noted that
in terms of the POs it managed within its stores, that POL research had found it had scored well on a number
of metrics: Friendly, Professional, Knowledge, Understanding, Efficient Service and Meeting Expectations, (WH
‘Smith (PON0049)).
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the past year in some of its stores, but in some cases it was not economically viable to
modernise them.?° It also conceded that its high street sales had declined over the past
year,’™ and that it did not pay rent on a small number of its stores,”°* though it confirmed
that it paid rent for stores that hosted POs.”°°
77. Itis deeply disappointing that franchises have been awarded to a company that is
consistently regarded as one of the worst two high street retailers and which admits that
they are not investing in all of their high street stores and in some cases are not paying
rent on some of those stores. We recommend that the Post Office and the Government
ensure that when franchises for Post Offices are awarded that they take account of a
number of factors, including how a potential partner is regarded by customers and the
financial position of firms hosting Post Offices. The risk otherwise is that another high
street failure takes substantial numbers of Post Offices with it.
78. WH Smith does not recognise the Communication Workers Union (CWU) for
collective bargaining purposes for former Crown Post Office workers subject to Transfer
of Undertakings (TUPE), who now work in POs run as WH Smith franchises.?°” TUPE
Regulations preserve employees’ terms and conditions when a business or undertaking, or
part of one, is transferred to a new employer.”°* The CWU maintain that such terms and
conditions should include the ability of workers to be represented by their previous trade
union.” CWU have advised us that they are currently considering legal action against
WH Smith for its interpretation of the TUPE regulations.”"° WH Smith only recognises
the Retail Book Association (RBA) for collective bargaining purposes for staff who work
in their stores, though it recognises GMB and Unite in its warehouses and distribution
centres.”"' The RBA is not affiliated to the TUC,””” though it is independent of WH Smith.?"*
We are surprised that POL did not raise this with WH Smith as part of its negotiations
over the franchising of Crown POs?" and that BEIS have not engaged with either POL,
WH Smith or the CWU on this issue.”"°
203 Q114, Carl Cowling, Managing Director of High Street Business, WHSmith PLC. WH Smith did note that they
invested on average on average £100,000 to incorporate a PO into one of its high street stores, (WH Smith
(PONO049)).
204 WH Smith also told us that covering the six months ending 28 February 2019, High Street business revenues were
1% down on the six months to 28 February 2018, which “overall, alongside making savings like a series of rent
reductions in what we pay our landlords, it was the High Street business’ second-best performance in the past
decade”, (WH Smith (PON0049)).
205 Q115 to Q119, Carl Cowling, Managing Director of High Street Business, WHSmith PLC. See also letter from Carl
Cowling Managing Director, WHSmith High Street to BEIS Committee Chair, dated 7 June 2019. Trading profit
in WH Smith stores fell from £62 million in 2017 to £60 million in 2018, See: WH Smith PLC, Annual Report and
Accounts 2018, (2019) p 12.
206 Letter from Carl Cowling, Managing Director of High Street Business, WHSmith PLC to BEIS Committee Chair
dated 7 June 2019,
207 123 to Q124, Carl Cowling, Managing Director of High Street Business, WHSmith PLC.
208 See: ACAS, Transfer of undertakings (TUPE), (accessed 27 September 2019).
209 This was supported by a number of others who submitted evidence: Mark Close (PON0036); Mr Jonathan
Follenfant (PON0035); Mr Jim Gordon (PON0040); Mrs Julie Allen (PON0037).
210 Letter from Andy Furey, Assistant Secretary, Communication Workers Union, to BEIS Committee Chair and Carl
Cowling, Managing Director of High Street Business, WHSmith PLC, dated 20 June 2019.
211 Letter from Andy Furey, Assistant Secretary, Communication Workers Union, to BEIS Committee Chair and Carl
Cowling, Managing Director of High Street Business, WHSmith PLC, dated 20 June 2019, See also: Letter from
Minister to BEIS Committee Chair, dated 9 August 2019.
212 The RBA is not listed in TUC, TUC Directory 2019, (2019).
213 See: https://rbaunion.org/.
214 Letter from Alisdair Cameron, Chief Finance and Operations Officer, Post Office Ltd to Andy Furey, Assistant
Secretary Communications Workers Union, dated 15 March 2019.
215 _ Letter from Minister to BEIS Committee Chair, dated 9 August 2019. The Minister said that she had not engaged
with POL and WH Smith on the matter because it stemmed from a commercial agreement between them both.
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79. It is deeply concerning that former Crown PO workers who have been TUPE’d to
WH Smith to run PO services have been denied the right to be represented by their
previous union, the CWU, for collective bargaining purposes. Weare equally concerned.
that such workers, along with other WH Smith staff who work in retail stores, can
only be represented by the Retail Book Association, an independent body which is not
affiliated to the TUC. It is extremely disappointing that POL did not discuss this issue
with WH Smith when agreeing the franchising of Crown POs. We recommend that
the Minister looks urgently at this issue and provides an explanation of why franchises
were agreed that did not address the collective bargaining rights of workers who were
being TUPE‘d from a public sector body to a private sector partner. This should include
an account of the role of BEIS in providing oversight of these franchises and whether it
raised any concerns over the collective bargaining rights of these workers.
80. Finally, WH Smith told us that they pay all staffaged over 25 at least the National Living
Wage, and “offer competitive pay rates in what isa very challenging retail environment”."®
But WH Smith has not been accredited by the Living Wage Foundation,”” to pay the
actual living wage which is higher than the National Living Wage.”"* Carl Cowling,
Managing Director of High Street Business, WH Smith, told us that new staff taken on to
provide PO services would be paid the same as its other staff.”'? This would mean that PO
employees with permanent jobs earning £12.40 per hour in a Crown PO could be replaced
with store staff on the “National Living Wage and National Minimum Wage, with an
uplift of roughly 6% in some locations”.””°
81. The CWU have also questioned whether such workers would “be on zero hour
contracts with no job security and little in the way of employment rights”.””" Andy Furey,
Assistant Secretary, CWU, also told us that existing PO workers were being offered
settlement agreements which would mean that WH Smith would be able to pay staff
providing PO services at a lower rate.””” He also questioned whether lower paid staff in
WH Smith PO branches would be able to provide the same levels of skills and experience
as former Crown PO staff.”?*Carl Cowling told us that WH Smith offered training and
progression to support and encourage its employees as they moved up through the
business.”**
82. It is deeply regrettable that Crown PO staff are being replaced by lower paid staff
starting on the National Living Wage, which could be as low as £6.15 for those aged
216 Letter from Carl Cowling Managing Director, WHSmith High Street to BEIS Committee Chair, dated 14 June 2019.
For current National Minimum Wages Rates see below.
217 Letter from Carl Cowling Managing Director, WHSmith High Street, to BEIS Committee Chair, dated 7 June 2019.
218 The Real Living Wage, is a wage rate voluntarily paid by over 5,000 UK businesses. It is set at £9 nationally and
£10.55 for London for all wage earners irrespective of age. See: https://wwwlivingwage.org.uk/what-real-living-
wage.
219 Q129, Managing Director of High Street Business, WHSmith PLC.
220 Letters from WH Smith to BEIS Committee Chair, dated 7 June 2019 and 14 June 2019. In terms of the National
Living Wage and the National Minimum Wage, see: GOV.UK, National Minimum Wage and National Living Wage
rates, (accessed 4 September 2019). Current rates for the National Minimum Wage are, as of April 2019: £8.21 (25
and over); £7.70 (21 to 24); £6.15 (18 to 20); £4.35 (under 18); £3.90 (apprentice).
221 CWU (PONO0S0).
222 Q61, Andy Furey, National Officer, Communication Workers Union.
223 62, Andy Furey, National Officer, Communication Workers Union.
224 Letter from Carl Cowling Managing Director, WH Smith High Street to BEIS Committee Chair, dated 14 June
2019. WH Smith also noted that new WH Smith Post Office staff would be “trained in exactly the same way as a
new member of staff who joins POL" and be required to participate in annual refresher training on the products
and services and undertake regular compliance and regulatory training, (WH Smith (PON0049)).
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36 Future of the Post Office Network
between 16 and 18 years of age. At the very least we believe that all staff should be paid
the real Living Wage, and especially those running PO services. There is a danger that
by paying off Crown PO staff and paying lower wages for new staff to replace them,
that customers will not be able to rely on the same levels of skilled and experienced
staff they would have in a former Crown PO. We recommend that Post Office Ltd and
the Government ensure that staff working in franchised Crown Post Offices are paid at
the very least the real Living Wage and that new staff in franchised Crown Post Offices
have the same levels of skills and training.
Post Office Ltd Contingencies for a Failing multi-franchise Partnership
83. Our inquiry raised concerns about the consequences if a retail partner that ran a
large number of POs decided to end its partnership with the PO. For example, McColls
runs about 600 POs,”*> and Spar 595 POs within their stores.?*° The Association of
Convenience Stores stated:
The long-term future of the network is reliant on commercial viability for
retailers—increasing operating pressures including rising employment and
property costs are causing retailers to scrutinise their provision of Post
Office services as per all other in-store services,.”””
84. Ifa large retailer were to withdraw from running its POs, this could leave large
numbers of communities without POs. Alisdair Cameron, Interim Chief Executive,
POL, told us that there had been one example of a retailer that had managed multiple PO
franchises withdrawing but that POL was “able to find homes for all those post offices
and keep the service running, because we are very embedded in the retail community”,””*
When questioned on what would happen if this affected a bigger retailer, he maintained
that because POL had relationships with the retailers and with local communities, it could
manage to find new homes for multiple POs.””? He added: “generally, you have reasonable
warning of this ... if they want to exit, they give us six months’ notice”.”*° The Minister,
Kelly Tolhurst, told us:
... [When there is a shock in the system, teams are formed. The team
takes on trying to deliver those issues. It is part of the business, rather than
something reactive. It is something the business is used to doing. Depending
on where there are shocks within franchises, there are contingency plans.
A whole range of things can be implemented by the Post Office to mitigate
any particular problems of those shocks.”**
85. Bearing in mind the volatility of high street trading conditions and the fact that
some retailers are concerned about declining revenues from providing PO services,
there is a real potential for a retail partner that runs hundreds of POs exiting its
partnership with POL. If this happened it would be devastating for many communities
225 See: https://www.mccolls.co.uk/in-store-services/.
226 See: Spar, Post Office Near Me, (accessed 25 September 2019).
227 See: Association of Convenience Stores (PON0026); Q93, Edward Woodall, Head of Policy and Public Affairs,
Association of Convenience Stores. a
228 = —Q135, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
229 Q136 to Q139, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
230 = Q137, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
231° Q218, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
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Future of the Post Office Network 37
across the UK, especially for vulnerable groups who depend on their local PO. We
found POL and the Minister’s explanation of how such a scenario would be managed
unconvincing. In terms of a major retailer going bust, as we have seen recently, this
can happen at short notice and with little warning. We recommend that Post Office Ltd
publishes its contingency plans for dealing with the failure or withdrawal of a major
retail partner. This would give reassurance that the Post Office network is not vulnerable
to such an eventuality.
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6 Post Office delivery of Government
Services and widening the Commercial
and Community Reach of the Post
Office
86. There has been a steady decline in Government transactions being delivered though
the Post Office (PO) network and an accompanying reduction in PO income derived from
those services. This decline might accelerate further should the Government decide to
cancel the PO Card. There are also concerns that the PO’s exclusive commercial relationship
with Royal Mail and the Bank of Ireland is limiting its opportunities to extend its services
and income streams. More recently the decision by Barclays Bank to partly withdraw
from the Banking Framework Agreement with POL, by not allowing its customers to
withdraw cash from POs from January 2020, threatens the comprehensiveness of the PO’s
everyday banking offer.
87. This Chapter considers these issues and how the PO can revisit its relationship with
the Government, Royal Mail, the Bank of Ireland and the major banks, to maximise its
revenue streams. It also considers how the PO can continue to embed itself as an invaluable
part of local communities by linking up with other community services and continuing to
provide social value, especially for vulnerable social groups.
Declining Government Transactions and its Impact on Post Office Ltd
Revenue
88. The PO saw a decline in revenues from Government services from £164 million in
2012/13 to £99 million in 2017/18.?* This is due in part to the Government increasingly
taking a value for money approach to the provision of such services. It argues that all
contracts for Government Services are competitively tendered or are offered online or
directly to customers, so reducing the need for members to access them through POs,
for which the PO would derive fees.”** The Minister, Kelly Tolhurst, noted that the
Government was “reacting to the changes in the way consumers and users are wanting to
interact with services”.?**
89. Provision of Government services may decline further. The PO’s contract with
the Department for Works and Pensions (DWP) for running the PO Card (POCA) is
due to expire in 2021. In October 2019 the Government stated that it was planning to
232 House of Commons Library, The Post Office, (April 2019), p 12. However, though there has been an overall
decline in revenues from Government services, there was a 7% increase in 2018/19 revenue from Identity
Services. Identity Services are provided under contract to Government departments, such as the DWP, DVLA and
the Home Office.
233 BEIS, Government response to the 2016 Post Office Network Consultation, (December 2017), p 8. Citizens Advice
note that only 1 in 10 (13%) consumers now pay vehicle tax at a post office, a two-thirds decline over the last
5 years, while there has also been a considerable decline in consumers using post offices to pay utility bills due
to the increasing use of direct debits. They also note that only 1 in 4 (27%) people who collect state pension or
benefits in cash do so from a post office - a considerable drop from the 45% of claimants who withdrew state
pensions or benefits at a post office in 2012. Citizens Advice (PON0031).
234 Q243, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
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replace PO Card accounts and would be shortly launching a competitive tender process.”**
Ahead of this, the DWP has been contacting PO Card holders to advise them to move
their payments to a regular bank account.’*® The number of POCA holders has declined
significantly, from just over 5 million in 2005 to 1.2 million in 2018,”* resulting in a
£15million decrease in revenue from DWP to the PO.”**
90. Boththe Communication Workers Union (CWU) and the Association of Convenience
Stores (ACS), were critical of this approach and have argued that the Government has
moved away from the previous Coalition Government's policy of making the Post Office a
“genuine frontoffice for government”, instead adoptinga“ digital by default’ approach”.**°
The CWU also argue that by replacing the Post Office Card account the Government is
dismantling a key service for vulnerable pensioners and other benefit claimants.**
91. The CWU and the National Federation of Sub-postmasters (NFSP) both called for
a greater range of government services to be made available at Post Offices.”4” POL told
us that it was engaging with Government departments to see what extra services it could
provide across the PO network,”** and thought that using the PO as a front office for the
Government could only be a positive thing.“* The Minister told us that she was having
internal conversations with other Government departments to see what other services
the PO could deliver, though she noted departments would need to go through normal
tendering processes.”4*
92. Over the last 25 years there has been a drastic decline in Government services
offered through the PO network, reducing footfall and retail opportunities, while
cutting income for providing such services. It has also meant that the vulnerable and
those who do not have online access to Government services are often denied a face-
to-face option via a PO. We appreciate that BEIS and the POL are liaising with each
other and other departments over making greater use of the network. However, this
piecemeal approach appears to signify a retreat from making the PO a ‘front office’
for Government services and ignores the potential for online channels to compliment
face-to-face services. We recommend that the Government considers a wide-ranging
review of how it is providing services to the public and the role that face-to-face provision
can play through the Post Office network, especially for vulnerable and hard-to-reach
customers who do not have online access.
235 HC Written Answer (290396; 1 October 2019).
236 House of Commons Library, The Post Office, (April 2019), p 22.
237 Citizens Advice (PON0031).
238 See: House of Commons Library, The Post Office, (April 2019), p 22; CWU (PON0050).
239 See: Department for Business Innovation and Skills, Securing the Post Office Network in the Digital Age, (2010),
p3.
240 See: CWU (PON0050); Association of Convenience Stores (ACS) (PON0026). See also: Mr Jim Gordon (PON0040);
Mr Samuel Houston (PON0021).
241 CWU (PONO0S0). The CW, for example, state that the Government had decided not to renew the contract with
Post Office Limited (POL) for biometric machines to be hosted in their premises. A number of submissions were
critical of the Government's decision to close the PO Card Account: Ridgewood Post Office (PON0015).
242 See: CWU (PONOOSO); NFSP (PONO0S9) an NFSP (PONOO25).
243 Q155, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
244 POL (PONO0S1).
245 243, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
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40 Future of the Post Office Network
Widening the Commercial Reach of the Post Office
93. The PO has a number of relationships with third parties, such as Royal Mail, the Bank
of Ireland, and the major banks. For instance, the Bank of Ireland helps the PO deliver its
money offer. The agreement between the PO and the banks ensures that the PO can deliver
everyday banking services to the customers of banks, especially in communities where
banks have closed branches, for which the PO receives fees. POL notes that these long-
standing relationships help ensure the resilience of the PO network.”*° However, the POs
relationship with Royal Mail and the Bank of Ireland has been seen by some as narrowing
the ability of the PO to expand its services and revenue streams. In the case of the PO’s
agreement with the banks, the recent announcement by Barclays to partly opt out of the
agreement in terms of allowing cash withdrawals,’”’ threatens the comprehensiveness of
the PO network to deliver everyday banking services.
The PO Relationship with the Royal Mail
94. Along with POL, both the CWU and NFSP see the relationship between the PO
and Royal Mail as key.”** For instance, 35% of POL revenue comes from mails,” and
increased from £334 million in 2018 to £350 million in 2019,7°° and over half of all
remuneration paid to the sub-Post Office network in 2018/19 was for selling Royal Mail/
Parcelforce products and services (£174m of £350m total pay).”*' The agreement between
Royal Mail and POL concerning parcels - the Mails Distribution Agreement, will remain
in force until 19 January 2022, and is due to be renegotiated in 2021.7?
95. However, the exclusive nature of the relationships between the PO and Royal Mail has
not been without criticism. Firstly, both the CWU and NFSP argue that not enough of the
revenue earned from the contract with Royal Mail is being passed onto sub-postmasters
and are concerned that any new contract with Royal Mail obtains the maximum benefit
for sub-postmasters.”** The NFSP also note that despite the exclusivity of the contract,
Royal Mail solicits customers to use their services directly, circumventing the PO network
and reducing PO revenues.*** The Association of Convenience Stores (ACS) and others
also told us that the contract with Royal Mail has prevented many POs from offering
services from alternative providers, so reducing other revenue streams for POs while
reducing choice for customers and often requiring them to travel to other retailers to
pick up parcels delivered by other providers.*** However, both the NFSP and the CWU
cautioned against the PO using delivery operators that had low service standards to drive
down costs.**° The CWU also warned against companies who paid low wages and who did
246 POL (PONO0S1).
247 See BBC, Barclays blow to post office banking (8 October 2019); The Times, Barclays condemned for blocking
cash withdrawals at post, (9 October 2019); Daily Mail, Barclays bosses deliver hammer blow to struggling Post
Offices by stopping savers from withdrawing cash at branches, (8 October 2019);
248 See: NFSP (PONO025); CWU (PONO050),
249 CWU (PON00S7).
250 Post Office Ltd, Post Office Limited Annual Report & Consolidated Financial Statements 2018/19, (October 2019),
pp 8-10.
251 NFSP (PONO0025).
252 House of Commons Library, The Post Office, (April 2019), p 24.
253 CWU (PONO0S/).
254 —NFSP (PON0025).
255 Association of Convenience Stores (PON0026). See also Dorchester Post Office (PON0038); Ridgewood Post
Office (PONOO15).
256 National Federation of Sub Postmasters (PON0025). Conversation with stakeholder. See also: Ashburton Town
Council (PON0039); Mark Close (PON0036).
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Future of the Post Office Network 41
not recognise workers’ preferred trade unions for collective bargaining purposes.”*” We
would also not want the PO to enter into contracts with providers who were late payers
or who enforced lengthy payment terms on their suppliers.”** The Minister acknowledged
the concerns that the exclusive deal with the Royal Mail might place some POs in direct
competition with other retailers who could offer drop-off points for other parcel delivery
operators. She noted that conversations were ongoing between POL and Royal Mail.”
96. There is danger that the PO’s exclusive contractual relationship with Royal
Mail could begin to restrict its ability to maximise revenue from other commercial
partners. The current inability of the PO to handle parcels from other carriers is
also unsatisfactory for customers if they need to travel to another village or town
to collect it. We recommend that as the Government and Post Office Ltd look at the
Post Office’s contractual relationship with Royal Mail, which ends in January 2022, it
revisits whether its exclusivity is denying the Post Office other commercial opportunities
which would better meet the needs of its customers. It is important, however, that any
parcel delivery operators that the Post Office works with deliver high quality services
and products, are signed up to the Living Wage Foundation, recognise trade unions
and have a good record of paying their suppliers on time and not using long-payment
terms. We also recommend that the Government and Post Office Ltd ensure that any
new contract between the Post Office and Royal Mail is mutually beneficial. Post Office
Ltd and the Government should ensure that any agreement maximises remuneration
for sub-postmasters.
The PO Relationship with the Bank of Ireland
97. The partnership between the PO and the Bank of Ireland has been in operation for
over 15 years and the Bank supports PO Money, the PO’s banking offer.” The partnership
was due to run to 2023,7* but in October 2019, the PO and the Bank agreed to renew
the agreement until 2026. The Bank of Ireland helps the PO to offer more than 2.4
million UK customers access to various financial products ranging from savings to loans,
and credit cards to mortgages. It also offers 24% of the UK’s market for foreign exchange
and Travel Money cards. The Bank of Ireland also runs over 2,500 free-to-use machines
across the PO branch network.’* In terms of banking services for businesses, the PO
does not offer specific banking services (e.g. loans).°* However, it does offer access to
the following at POs, as part of its agreement with the major banks, as discussed below:
cash withdrawals; balance enquiries; cash deposits; cheque deposits; and, change giving
services.**° The maximum that can be deposited in larger POs is £20,000, while in smaller
branches the maximum is £2,000.7°°
257 Conversation with stakeholder.
258 See: BEIS, Small businesses and productivity, (HC 807; 5 December 2018), pp 37-47.
259 Q245, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
260 Bank of Ireland, Post Office Money, (accessed 21 September 2019)
261 CASS Business School, Making the Case for a Post Bank, (September 2017), p 16. The partnership between the
PO and Bank of Ireland was first established in 2003 as a joint venture and in 2007 it was renewed to 2020. In
2012, the Bank of Ireland bought out the Post Office's share of the joint venture and moved to a contractual
relationship, defined as an exclusive partnership, which runs until 2023.
262 Post Office, Post Office refreshes partnership with Bank of Ireland, (7 October 2019)
263 As above. For a full list of the services see: https://www postoffice.co.uk/money.
264 Conversation with POL.
265 Post Office, Bank of Ireland: Banking services, (accessed 7 October 2019).
266 See: Association of Convenience Stores (PON0026); Plunkett Foundation (PON0034).
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42 Future of the Post Office Network
98. In March 2019, POL wrote to its personal banking customers to announce that it was
closing its PO Money Current Accounts,” and in January 2018 removed its face-to-face
personal mortgage advisers.”**POL stated that the new agreement signed in October 2019
would focus on retail savings, residential mortgages and loans and that POL would be free
to develop new partnerships to expand its financial services offer.”
99. There have been a number of criticisms of the PO’s relationship with the Bank
of Ireland. The CWU told us that the arrangement with the Bank of Ireland was “not
delivering” and was “not ambitious enough” and pointed to the PO announcing the
closure of its current accounts.” The CASS Business School, City University of London,
has also been critical of the PO’s relationship with the Bank of Ireland. It argues that
because the Bank of Ireland is still dealing with the aftermath of the financial crisis and
subsequent issues with regulators, it is unlikely that it will be able to invest substantially
in the PO in the future.?”? The CASS Business School also contends that the POs “basic
banking services” on behalf of the main banks has been costly to the PO, in terms of staff
resources, and mostly benefits banks’ strategy of cutting branches rather than meeting the
needs of customers.?”*
100. CASS therefore supports the establishment of a PO Bank which would operate
through the PO Network. Such a bank could: improve access to finance for Small and
Medium Enterprises (SMEs),”° which as noted above it currently does not; advance
financial inclusion by reaching those who do not use banking services or who are likely
to be affected by local bank branch closures; and rebalance the UK economy away from
London and other major urban centres.’ CASS argue that the PO network and the
PO brand and its good reputation would ideally be placed to attract customers.’”> This
approach has been supported by the CWU?” and the Labour Party,?”” and by a number
of submissions we received.””*
101. However, the NFSP were concerned that a PO Bank might undermine the Banking
Framework Agreement, which could prevent customers from other banks accessing their
267 Post Office Ltd, Important information - closure of the Post Office Money Current Account, (accessed 10
September 2019).
268 Financial Times, Post Office removes in-branch mortgage advisers, (25 January 2018).
269 Post Office, Post Office refreshes partnership with Bank of Ireland, (7 October 2019).
270 ~Q13, Andy Furey, National Officer, Communication Workers Union.
271 Cass Business School (PONO055). See also: CASS Business School, Making the Case for a Post Bank, (September
2017).
272 Asabove.
273 CASS argues that SME's access to finance is currently constrained because the market is currently dominated by a
small number of banks and that a PO Bank could help address this. It suggested that a PO Bank could join forces
with those challenger banks that specialise in SME lending, in order to take full advantage of this opportunity,
acquire new technology and make sure that lending and related risks are managed prudently and in a
sustainable way. CASS Business School, Making the Case for a Post Bank, (September 2017), p 5 and pp 21-23.
274 Asabove.
275 CASS Business School, Making the Case for a Post Bank, (September 2017), p 37 and pp 39-40. CASS note that
the PO's reputation has not been damaged after the banking crisis like the main banks.
276 See: CWU, Post Bank, (September 2017). The CWU told us that the Post Bank would be very similar to the former
Girobank and would follow a model that was “hugely successful across the globe” (Q13, Andy Furey, National
Officer, Communication Workers Union). a
277 See: The Labour Party, Labour sets out plans for radical shake up of UK banking system, (31 March 2019); The
Times, Labour's Bank Plan for Post Offices, (April 2019).
278 See: Mr Jim Gordon (PON0040); The Consumer Council (PON0028); Orleton PO Stores (PON0024); Mr Robin
Stamp (PON0006); Dorchester Post Office (PON0038).
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accounts from PO branches and reduce the fees for the PO and sub-postmasters.”” The
NFSP therefore argued that the existing PO ‘everyday banking’ offer should be increased,
for example, printing statements and setting up direct debits and standing orders (which the
PO can’t currently deliver),”*° and that such banking services should be better advertised
to increase PO footfall and fees. The NFSP told us that to do more the PO would probably
need a different infrastructure from the existing LINK network and extend agreements
with other banks (e.g. Tesco and Marks and Spencer) to access people’s banks accounts
to offer more banking services.”*' This approach was supported by the Association of
Convenience Stores and others.**? The Plunkett Foundation also supported the PO
working with retailers to improve its banking offer,’** and Citizens Advice agreed that
there was a big opportunity for the PO to deliver more banking services, but maintained
that the PO first had to ensure that more customers knew about existing services and that
PO staff could deliver them.?**
102. POL told us that the PO’s banking offer was not intended to mirror the full range of
services offered by the main banksand focused mainly on offering access to cash everywhere
across the UK,”** though it also had a £14 billion savings book that PO customers could
access through a PO.”** It confirmed that it would not offer specific banking services to
small businesses, such as access to finance.”*” However, POL is in conversations with the
banks to go further than the banking framework to expand the personal banking services
that the PO network could offer,”** a move supported by the Minister.?*°
103. In terms of a Post Office Bank, POL said that it would require a major change of
direction, as it did not have a banking licence, and legislation so that it could access
sufficient capital.?°° POL’s interim Chief Executive, Alisadair Cameron stated:
It creates a lot of interesting opportunities and we are very open to the
conversation. The devil, as ever, is in the detail. Would the capital be
available and the funding available to get it started? What impact would it
have on the existing banking framework??""
279 See: NFSP (PON00S9); Q75, Calum Greenhow, Chief Executive Officer, National Federation of Sub-Postmasters.
He noted that if a customer wanted to set up a standing order or cancel one, even open a bank account or close
a bank account, a PO could not do that. He noted that PO staff were anti-money laundering trained, so it was
something they could easily do
280 _NFSP (PON0025). See also: Dorchester Post Office (PON0038).
281 Q67, Calum Greenhow, Chief Executive Officer, National Federation of Sub-Postmasters.
282 Q150, Edward Woodall, Head of Policy and Public Affairs, Association of Convenience Stores. He noted that
retailers who ran POs had make clear that they would like to offer as many banking services as they could. See
also: Mr Jonathan Follenfant (PON0035); Which? (PON0030); Mr Jaiprakash Patel (PON0020).
283 Plunkett Foundation (PON0034),
284 Q68, Anne Pardoe, Principal Policy Manager, Postal Services and Telecoms, Citizens Advice. She pointed to a
Citizens Advice mystery shopping survey that found that 23% of PO staff were unsure how to complete banking
transactions and a similar number of our mystery shoppers were unable to access services that they should
have been able to at different post offices. See also: Which? (PON0030). It noted that its research had shown
that consumers have a number of concerns around the quality of service, expertise of staff and security of Post
Offices.
285 Q145, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
286 Q148, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
287 Conversation with POL.
288 Q147, Alisdair Cameron, Interim Chief Executive, Post Office Ltd,
289 Q149, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
290 Q152, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
291 Q153, Alisdair Cameron, Interim Chief Executive, Post Office Ltd.
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The Minister said that the Government was not looking to bring forward a Post Office
» 292
Bank, but that this “was kept under review and might change in the future”.
104. The Minister did not rule out extending the range of banking services that the PO
could offer.’°* The Director of UK Government Investments”** agreed that expanding
banking services across the PO network was an aspiration that he thought everybody
shared and that the renegotiation of the agreement with the Bank Of Ireland offered
an opportunity to do that.”’* This was confirmed by the new agreement with the Bank
of Ireland, which as noted above, was announced on 7 October, though details of new
partnerships and banking services and products are yet to be announced.
105. The new agreement signed between the PO and the Bank of Ireland opens up the
possibility of expanded banking services and new partnerships that can help deliver
them. The PO should make the most of these opportunities to cement banking services
and products within the PO network. This is even more important now that Barclays
Bank has punched a hole in the new banking framework agreement that the PO has
signed with the other major banks. We look forward to the PO bringing forward
these new services and products in the coming months. We recommend that these new
products and services should be guided by the Post Office’s social remit and should aim
to tackle financial exclusion in our rural and urban communities. We also recommend
that new products and services are designed to help SMEs, which are engines of growth
and creators of jobs in our local communities. Sub-postmasters should be properly
rewarded for providing these new services and receive the necessary training and
support to deliver them to customers. Post Office Ltd should set challenging targets on
meeting these objectives. If these new partnerships cannot deliver these objectives, we
recommend that the Post Office actively considers the advantages of a Post Office Bank
and the necessary legislative changes to establish one.
The Post Office's Agreement with the Banks
106. Since 2015, it is estimated that about a third of UK bank branches have closed across
the UK,”* including 3,303 branch closures, reducing the total number of branches from
9,803 to 6,549.””” Furthermore, of those branches remaining, 300 branches have reduced
292 Q241, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
293 Q177, Kelly Tolhurst MP, Parliamentary Under-Secretary of State and Minister for Small Business, Consumers and
Corporate Responsibility, Department for Business, Energy and Industrial Strategy.
294 UK Government Investments is a government company wholly owned by HM Treasury. It is government's centre
of expertise in corporate finance and corporate governance. See: https://www.ukgi.org.uk/what-we-do/,
295 Q238-239, Tom Cooper, Director, UK Government Investments, BEIS.
296 Financial Times, More than a third of bank branches axed in past four years, (27 September 2019). The FSB notes
53% of back branches have closed since 1989 (FSB, Bank Branch Closures, (accessed 1 September 2019). See
also: House of Commons Library, Bank Branch Closures, (October 2018); Guardian, UK banks urged to justify
‘staggering’ level of branch closures, (October 2018).
297 Which?, Bank branch closures: is your local bank closing?, (September 2019).
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their hours.”** Aligned to this there has been a reduction of access to free to use ATMs,”””
especially in poorer areas.*°° Bank closures are having a regional impact. For example,
the North West, South East, Scotland and South West have experienced more closures
than other regions.*” In the Yorkshire constituency of Wentorth and Deane, residents no
longer have a bank branch and rely on branches in a neighbouring constituency.’ There
isa danger that such closures will have a disproportionate impact on small communities,**
and disadvantaged groups such as elderly customers,’ and will also pose problems for
small businesses.*®* In this absence, the Government,*** and the banks have advised
customers to access banking services through Post Office branches.*°” Post Office Limited
note that in 2018/19 the Post Office handled over 128 million banking transactions at its
counters, growing at around 12% a year.***
107. It is important to note, that while the UK’s banks have been closing branches across
the UK, they have been reporting sizeable profits. For example, Barclays Bank reported
a post-tax profit of £2.4. billion for 2018,°° while Lloyds posted £4.4 billion,*”’ and the
Royal Bank of Scotland £2.1 billion.*"
108. In January 2017, the PO signed a three-year agreement with the UK’s major banks—
the Banking Framework Agreement,*” to provide nearly all of the large banks’ personal
298 The Independent, One third of bank branches shut in last five years while hundreds more have hours slashed,
(24 September 2019).
299 See Treasury Select Committee, Consumers’ Access to Financial Services, (HC 1642; 13 May 2019), pp 33-35;
Lords Rural Economy Committee, Time for a strategy for the rural economy, (HL 330, 27 April 2019) pp 134-136.
Which? identified over 200 communities where poorer consumers could be adversely affected by poor banking
facilities or no cash machines (Which?, Cash machines: Which? warns on communities hit with lack of ATMs,
January 2019). See also: House of Commons, Impact of ATM closures on towns and communities, (November
2018). See also: Which? (PON0030).
300 See: House of Commons Library, Impact of ATM Closures on Towns and Communities, (November 2018), p
2. It must be noted that there has been a commitment by Link, the UK's ATM network, to provide a broad
geographical coverage of machines and its Financial Inclusion Programme seeks to ensure that all consumers
have free access to cash within a reasonable distance of where they live or work
301 As above. While the North West saw 424 branches closed, Scotland and the South East 396 and 400 branches
closed respectively, other regions saw less than 250 branches closed (e.g. Wales, West Midlands, East and East
Midlands) and others less than 100 closed (e.g. North East and Northern Ireland). The Financial Times noted that
North East Derbyshire and Stoke-on-Trent North had both lost four-fifths of their branches and Devon saw an
81 per cent reduction, while Wales had lost two-fifths of its network and Scotland saw a decrease of 38 per cent
(Financial Times, More than a third of bank branches axed in past four years, (27 September 2019).
302 Telegraph, First constituency in UK without a bank branch, as Which? reveals one in three has closed in past five
years, (24 September 2019).
303 See for example: House of Lords Rural Economy Committee, Time for a strategy for the rural economy, (HL Paper
330; April 2019).
304 House of Commons Library, Bank Branch Closures, (October 2018), p 9-11. See also: The Consumer Council
(PON0028).
305 See above and FSB, Bank Branch Closures, (accessed 1 September 2019).
306 For instance, on 30 September the Economic Secretary to the Treasury and City Minister, John Glen MP, in an
answer to a Parliamentary Question on bank closures noted that Post Office branches offered an alternative to
access everyday banking services (e.g. cash withdrawals and deposits). Written Question 290284 (30 September
2019). See also: The Times, Businesses turn to Post Office as banks flee, (August 2017).
307 For example, the Scottish Affairs Select Committee noted that RBS along with other banks were actively
directing consumers to use the Post Office for their banking services (Scottish Affairs Select Committee, Royal
Bank of Scotland Closures, (HC 682; May 2018), p 24). a
308 Post Office Ltd (PON0051).
309 Barclays Bank, Barclays PLC Results Announcement, (February 2019) p 53.
310 Lloyds Banking Group, Helping Britain Prosper: Annual Report and Accounts 2018, (February 2019),p 170.
311 Royal Bank of Scotland, Annual Report and Accounts 2018 Building a simple, safe and more customer focused
bank, (February 2019), p 176.
312 Financial Times, Post Office agrees deal with banks to provide counter services, (January 2017).
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46 Future of the Post Office Network
customers,*!* and 95% of their small business clients with certain face-to-face services,
including depositing cash and cheques and reviewing balances.*"* In return, the banks
paid the PO for providing these services. The Agreement therefore raised some revenue
for the PO and sub-postmasters and increased footfall as it handled transactions for the
banks.*'* The Agreement also increased the importance of the PO network and further
emphasised the role of the PO in tackling financial exclusion in both rural and urban
communities.** Importantly, the Agreement helped address the fears of those such as
Which? that vulnerable groups would suffer most in face of a ‘cashless society’.*"” These
dangers and the positive role that the PO can play has been documented in a number of
other recent reports.** However, the Treasury Select Committee concluded that POL was
making a loss on offering its basic banking services on behalf of commercial banks and
argued that “such an arrangement cannot continue in its current form” and that the Post
Office “should not be subsidising the big six banks’ lack of a branch network”.*? POL
accept that they did not make a profit through the Banking Framework Agreement but
advised that they could not reveal how much the banks paid them for banking transactions
because it was commercially confidential.°”°
109. A number of witnesses saw the agreement between the PO and the banks as an
opportunity to strengthen the PO network.*?' However, the vast majority ofsub-postmasters
who submitted evidence told us that under the Banking Framework Agreement they were
not adequately remunerated for the increased risks and the responsibilities they were
taking on in providing banking services, as banks pulled out of their communities.*”? The
National Federation of Sub-postmasters estimated that in terms of the work involved with
handling banking transactions, sub-postmasters were paid about £2 per hour.*?* One sub-
postmaster estimated that they were earning £140 a month for handling £400,000 worth
of business banking a month.**
110. However, POL told us that a new agreement—Banking Framework 2—which was
due to come into effect in January 2020, would see “a significant increase to the fees that
313 The Post Office estimate that the PO enables 99% of UK consumer banking customers to use the Po network to
access everyday banking service. See: Post Office Ltd (PONO0S1).
314 As above.
315 Post Office, Post Office announces new agreement with 28 UK banks to ensure millions of people across the UK
have national free access to everyday banking services, (8 October 2019).
316 As above.
317 See for example: Which?, 25 million Brits would struggle in a cashless society,(December 2018).
318 See for example: Treasury Select Committee, Consumers’ access to financial services, (HC 1642; 13 May 2019),
pp 25 to 32; Access to Cash Review, The Access to Cash Review — Final Report, March 2019; House of Lords
Select Committee on the Rural Economy, Time for a Strategy for the Rural Economy, (HL 330; 27 April 2019), pp
134-136. See also: House of Commons Library, Financial Exclusion and the Future of Cash, (May 2019).
319 Treasury Select Committee, Consumers’ access to financial services, (HC 1642; 13 May 2019), p 32. This was
confirmed by a stakeholder, who stated that several of the banks themselves accepted that the Banking
Framework Agreement had favoured them and not the Post Office. The view that POL was not paid enough
by the banks was also supported by the Lords Rural Economy Committee, see: House of Lords Rural Economy
Committee, Time for a strategy for the rural economy, (HL Paper 330; April 2019).
320 Conversation with POL.
321 See: Plunkett Foundation (PON0034); The Consumer Council (PON0028); Association of Convenience Stores
(PON0026).
322 See: Mr Sunil Patel (PON0018); Mr Samuel Houston (PON0021); Sub Postmaster Edward Rigg (PON0047);
Rajen Shah (PON0041); Mr Jim Gordon (PON0040); Dorchester Post Office (PON0038);; Ridgewood Post Office
(PON0O015); Mr Timothy Bates (PONO014); Mr Louis Holden (PON0O11); Mr Robin Stamp (PON0006); Mr Tim
McCormack (PON0004); Mr Paul Dawkins (PON0002). See also: House of Lords Rural Economy Committee, Time
for a strategy for the rural economy, (HL Paper 330; April 2019). —
323 National Federation of Sub Postmasters (PON0025).
324 Dorchester Post Office (PON0038).
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the Post Office will receive from the banks for processing transactions”. The Minister
told us that while under the old Framework Agreement sub-postmasters got £3.12 for
every £8,000 deposited they would, under the new Framework, get £8.12. POL informed
us that it could not confirm, as with the first banking agreement, the exact amount POL
would get from Banking Framework 2, because it was commercially confidential.*?* The
Minister told us that POL would bring forward the improved remuneration forward to
October 2019. The Minister also acknowledged that more needed to be done to ensure the
banks continued to support the Post Office in providing banking services:
We have seen an improvement, but there needs to be a continuous challenge
and conversation, not just with Post Office Ltd and through the banks,
but with BEIS and HMT, to make sure that, going forward, whatever the
changes are or particular demand is, this is kept under review. That is my
view, because you are quite right: Post Office Ltd is delivering a service for
the banks, but it should not be an easy option for the banks to pull away and
expect the Post Office to pick up the slack.*”°
111. The Minister also accepted that there was a need for training to ensure that sub-
postmasters could provide the necessary levels of service, especially in terms of banking
for small businesses, and noted that POL was looking at service levels and identifying
what training was required current to maintain a quality service.” POL also said that
the some of the increased money derived from Banking Framework 2 will be invested in
new security measures and more vans to ensure that large amounts of cash are not held
at PO Branches.***
112. On 8 October 2019, POL published details of the new Banking Framework 2
agreement.*” There was surprise when it was announced that although 28 banks had
signed up to the new agreement, Barclays Bank, who have closed at least 481 branches
since 2015,**° and posted profits of £2.4 billion in 2018,**" had decided to remove over the
counter cash withdrawals at PO branches from January 2020.**? The PO have confirmed
that because the increased money for sub-postmasters providing banking services is based
on a transaction by transaction basis, Barclays’ decision will have an impact on the fees
sub-postmasters can earn.***
325 Conversation with POL.
326 = ©Q175 Kelly Tolhurst MP, Parliamentary Under-Secretary of State, Minister for Small Business, Consumers and
Corporate Responsibility.
327 Q242 Kelly Tolhurst MP, Parliamentary Under-Secretary of State, Minister for Small Business, Consumers and
Corporate Responsibility.
328 Post Office, Post Office announces new agreement with 28 UK banks to ensure millions of people across the UK
have national free access to everyday banking services, (8 October 2019).
329 As above.
330 See: Financial Times, More than a third of bank branches axed in past four years, (27 September 2019) and
Which?, Bank branch closures: is your local bank closing?, (September 2019). They note that the figures of 481
branch closures might higher, because Barclays was the only bank to not confirm the number of branches it had
closed
331 Barclays Bank, Barclays PLC Results Announcement, (February 2019), p 53.
332 Post Office, Post Office announces new agreement with 28 UK banks to ensure millions of people across the UK
have national free access to everyday banking services, (8 October 2019). POL noted that Barclays’ customers
would still be able to continue to deposit cash, cheques and access change and balance enquiries at PO
branches. It has been reported that Barclays will save £7 million a year in transactions costs for stopping cash
withdrawals at POs. See: ThisisMoney, Post Office veto will save Barclays just £7m a year... as bank made £3.5bn
profit in 2018, (12 October 2019).
333 Discussion with stakeholder.
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113. Barclays said that in addition to stopping cash withdrawals from PO branches it
would: freeze branch closures frozen for the next two years where the branch was the
‘Last in Town’ or in a remote area, and would launch a cashback scheme for customers
to withdraw cash from businesses in remote towns and areas without a branch or ATM,
from 2020.°** There appears little detail on how these measures in practice will replace
cash withdrawals at POs for Barclays customers, bearing in mind it is estimated that there
were 15 million such transactions last year.*** Some critics have suggested that Barclays
decision is simply designed to save it money as it will not have to pay the PO and sub-
postmasters transactional fees for cash withdrawals.**°
114. The Minister expressed disappointment at Barclay’s decision,**” which has been
widely criticised.*** POL stated: “For people living in more rural or urban deprived areas
Post Office branches are a real lifeline, ensuring the financial inclusion of more vulnerable
customers by providing vital services such as cash withdrawals, bill payments and postal
services all under one roof”.**? Which? described the decision as “shocking”, stating that
it exposed “the fragility of the UK’s cash system, and blows apart industry claims that the
Post Office network was a solution to the cash crisis”.**° The Payment Systems Regulator,
which regulates cash payments, expressed concern about the impact of the decision,
and added it would be “closely monitoring the steps Barclays plans to take to make sure
there are suitable alternatives for its customers to access their cash”.**' The NFSP accused
Barclays of showing “contempt” for its customers. It highlighted that this would eliminate
more than one million monthly cash withdrawals from the system.*#* The CWU called
Barclays decision a “betrayal”. Andy Furey, the CWU’s Assistant Secretary, stated:
At a time when high street bank branches have been closing at a rapidly
increasing pace—Barclays themselves have axed 481 over the past five
334 Barclays Banks PLC, Barclays halts ‘Last In Town’ and remote branch closures for two years and launches new
cash back scheme, (8 October 2019). Barclays also said that in areas where the bank was no longer able to
maintain a physical presence, Barclays would help those communities through pop-up banking pods, providing
face to face financial support and education, showing up at 300 locations by the end of 2021. Barclays customers
will be able to use Post Office ATMs. For instance, there is no detail on which towns and villages will be included
or whether it has identified vulnerable consumers.
335 Daily Mail, Think again, Barclays! Savers made 15 MILLION cash withdrawals from the Post Office in one year - so
why IS the bank banning them from January?, (14 October 2019).
336 See: This is Money, Why is Barclays stopping its customers withdrawing cash from the Post Office - and will other
banks follow suit?, (8 October 2019).
337 ~~ Post Office, Post Office announces new agreement with 28 UK banks to ensure millions of people across the
UK have national free access to everyday banking services, (8 October 2019). John Glen MP, Economic Secretary
to the Treasury, suggested that: " Barclays customers value withdrawing cash over the counter using the Post
Office, they may wish to consider switching to an alternative bank using the Current Account Switch Service
(CASS)", (Written Answer 1792).
338 See: The Times, MPs slam Barclays’ post office retreat, (20 October 2019); ThisisMoney, Barclays’ customers will
have the ‘carpet dragged from under their feet’: More than 100 MPs urge the bank's boss to reverse Post Office
cash ban, (17 October 2019); The Times, Barclays under pressure to reverse move to block cash withdrawals
at post offices, (15 October 2019); Convenience Store, Subpostmasters’ petition urges Barclays to reverse Post
Office withdrawal decision, (14 October 2019); Daily Mail, Think again, Barclays!, (14 October); Financial Times,
Barclays criticised for Post Office banking decision, (8 October 2019); Guardian, Barclays causes outcry by
scrapping free post office cash withdrawal, (8 October 2019); Daily Telegraph, Barclays ditching the Post Office
could be the nail in the coffin for cash, (8 October 2019).
339 Financial Times, Barclays criticised for Post Office banking decision, (8 October 2019)
340. Which?, Which? responds to Barclays announcement that customers will no longer be able to access cash from
Post Office, (8 October 2019).
341 Financial Times, Barclays criticised for Post Office banking decision, (8 October 2019).
342 NFSP, NFSP statement on Barclays bank decision to end cash withdrawals at post offices, (8 October 2019).
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years, which amounts to around a third of its network—at least post offices
have been able to pick up some of the slack, by offering over-the-counter
personal services for people and small businesses.
But this sudden decision—whether driven by cost cutting or other reasons,
just abandons their own customers, while also impacting negatively on our
own members and their jobs.°**
115. The decision by Barclays Bank to stop its customers withdrawing cash from POs
from January 2020 is a highly retrograde step which will hurt its vulnerable customers
in both urban and rural areas, threaten the comprehensiveness of the PO network
and reduce revenue for the PO and its sub-postmasters. The measures Barclays has
announced, such as freezing its bank closures, after years of withdrawing its presence
from local communities to help boost its large profits, will not compensate for its partial
withdrawal from the new banking agreement with the PO. We call upon Barclays to
rethink and reverse this decision. We shall follow up on this Recommendation and
question Barclays about their decision and hold them accountable regarding their social
responsibilities.
Maintaining and enhancing the PO’s Community Role
116. In addition to the provision of essential government and banking services, the Post
Office provides a focal point for social and financial inclusion, especially for the elderly and
vulnerable.*** The Martock Community Partnership highlighted the importance of local
POs in addressing the needs of the vulnerable and tackling rural and digital isolation.***
The NFSP’s Chief Executive Officer, Calum Greenhow, noted how it helped tackle social
isolation. He said:
Isolation is increasing. That is having an impact on mental health and
physical well-being as well. The post office is a physical place that you have
to come to; you have to do what we have been designed to do since Adam,
which is to talk to someone.**°
117. Citizens Advice Scotland saw an enhanced role for the PO in this respect, for example,
in helping the homeless, especially in terms of accessing essential post.**” Citizens Advice
also suggest that going forward the PO has the potential to become a hub for those who
require face-to-face help with transactions.***
118. Many witnesses identified the need for a national discussion about the social role that
343 CWU, ‘Barclays betrayal’ of post offices sparks fury, (9 October 2019).
344 10, Calum Greenhow, Chief Executive Officer, National Federation of Sub-postmasters.
345 Martock Community Partnership (PON0033). See also: Aldbourne Parish Council (PON0044); Mr Stuart Rogers
BEM (PON0043); Ashburton Town Council (PON0039); The Consumer Council (PON0028); Miss Lesley Andrews
(PONOO19).
346 Q24, Calum Greenhow, Chief Executive Officer, National Federation of Sub-postmasters. A number
of organisations note the role that POs can play in tackling loneliness. See for example: https://
campaigntoendloneliness.org/guidance/foundation-services/. The POL also recognises the role it can play
in tackling loneliness: Post Office, Combatting Isolation and Loneliness, (February 2018). See also: House of
Commons, Tackling loneliness, (May 2019).
347 Written evidence from Citizens Advice Scotland (PON0042), See also: Citizens Advice (PON0031)
348 Citizens Advice (PON0031). See also: The Consumer Council (PON0028).
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POs played in local communities,’ and noted how POs could work creatively with other
local public services to share premises and benefit from increased footfall.**° For example,
Ashburton Town Council explained how its local Library and PO had shared premises
which had benefitted both services.**' Aldbourne PO also explained how it had worked
with a local GP surgery to accept and dispense prescriptions.***
119. A broad conversation between Government, the POL and civil society is required
to evaluate the role of POs as part of the glue that helps keeps communities together,
and how that role can best be supported and paid for if fees and revenues alone are
not enough to resource them. We recommend that the Government acknowledges the
wider community role of Post Offices, commits to long-term funding of the rural ‘last
shop in the village’ and explores whether the Post Office can help deliver its wider social
objectives, such as on loneliness, social exclusion and mental health whether they be in
rural or urban settings.
120. We further recommend that the Government explores how the Post Office network
and individual Post Offices can best serve as community hubs, working with other
community services to share resources and costs, maximising the benefits of increased
footfall driven by such an approach. Post Offices already share premises with local
libraries and work with local GP Surgeries. We recommend the Government consider
the full portfolio of public services and explore creative ways to pool resources and
deliver essential public services.
349 See for example: Devon County Council (PON0023). It argued that the social role of the PO could be explored in
terms of tackling around deprivation and regeneration working with relevant Government departments (e.g.
MHCLG, BEIS, DCMS, DoH).
350 Rajen Shah (PONO04)),
351. Ashburton Town Council (PON0039). For other examples of Libraries and POs sharing premises see: Post Office
Ltd, Bringing the Post Office into the library has created a real buzz in the High Street, (May 2019). See also:
Guardian, The entrepreneurs delivering success with a Post Office franchise, (October 2017). The House of Lords
Rural Economy Committee also noted how Post Office could work with other services. It noted that the Carlile
Institute in Meltham, West Yorkshire was home to a library, a fully accessible post office, an office for Meltham
Town Council, offices for local firms and start-ups and a dance school and three large spaces used by community
groups. See: House of Lords Rural Economy Committee, Time for a strategy for the rural economy, (HL 330, April
2019), p 65.
352. Aldbourne Parish Council (PON0044). See also: Miss Lesley Andrews (PONO019). She noticed a similar service was
offered by her PO.
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Conclusions and recommendations
The Structure and Stability of the Post Office Network
1. Though the PO network appears relatively stable at just over 11,500 branches, this
figure masks the fact that up to one in eleven branches may be closed at any one
time and that ‘temporarily’ closed can mean they are closed for over two years.
Post Office Ltd should publish regular figures to show how much of the existing Post
Office network is currently closed, for how long each Post Office is closed before it is
re-opened, and provide full details as to the reasons for closure. (Paragraph 11)
2. We accept that there is a balance to be achieved between the coverage of the PO
network and the depth of the services it provides at any one branch. However, we
are concerned that after cutting back the network to 11,500 branches, too many of
these branches are outreach or mobile PO branches which do not provide the full
level of services over and above Services of General Economic Interest. We question
how national and comprehensive the PO network truly is. We recommend that Post
Office Ltd publish regular metrics to measure the percentage of services provided
across the whole Post Office network, to identify whether service provision is truly
national and comprehensive. (Paragraph 18)
3. It is important that POL is held properly accountable by the Government for its
decisions, whether strategic or operational, and there needs to be consistency in
the criteria applied by Government in its decision of whether or not to intervene.
While we welcome the Minister’s intervention on sub-paymasters’ pay, we are not
entirely sure why this is a strategic issue and other issues such as decisions on the
franchising of POs and its retail strategy are not, when they too have implications
for the viability of the PO network. All these decisions have the potential to have a
direct impact on the health of the PO Network and should be subject to transparent
and robust challenge. We recommend that the Government undertake an urgent
review of its mechanisms for holding Post Office Ltd to account and produces a clear
statement of how it will do so in the future. This should examine how all Post Office
Ltd’s decisions, operational or strategic, are supporting the comprehensiveness and
sustainability of the Post Office network. (Paragraph 23)
4. We regret the Minister has decided not to meet with the Communication Workers
Union (CWU), who represent a number of sub-postmasters. We see no reason
why the Minister and POL cannot involve the CWU in discussions on behalf of
those sub-postmasters they represent. We recommend that the Minister invite the
Communication Workers Union to participate in the working group on sub-postmaster
pay with immediate effect. (Paragraph 26)
5. A national Post Office network provides an essential public service. It needs
Government subsidy to do this. If the Network Subsidy Payment, which supports
the operating costs of the PO network, is withdrawn after 2021, we are concerned
that the PO and many sub-postmasters and retailers who run POs will not be able
to fill the gap in funding with other revenues. Many sub-postmasters are already
struggling and thinking of leaving their POs and the removal of £50 million in
subsidies could tip many over the edge. It could also convince some retailers and
52
Future of the Post Office Network
retail chains who host POs that it is no longer viable. This would have a damaging
effect on the PO network. It should be avoided at all costs. We welcome the fact that
the Minister is making the case for the subsidy as part of the next Spending Review.
With the date for the Spending Review being put back until 2020, we recommend
that the Government urgently indicates that it will extend the Network Subsidy
Payment beyond 2021 to give long term certainty for sub-postmasters and retailers.
(Paragraph 31)
The Network Transformation Programme
While POL have met the access targets that the Government have set them, we have
reservations about what is actually being delivered. Being close to a PO that is only
open for a few hours a week and that does not offer the full level of services may not
actually benefit customers very much. We also note that progress on disabled access
is ‘patchy’, which also calls into question whether geographic proximity is on its
own a good measure of the accessibility robustness and comprehensiveness of the
PO network. We recommend that the Government produce additional criteria which
captures the level of services and level of disabled access available across the Post
Office network. (Paragraph 39)
The Network Transformation Programme (NTP) has simultaneously reduced
Government subsidies for running the PO, while also resulting in the PO posting
profits for the last three years. The POL has met basic Government access criteria and
the PO network has stabilised at just over 11,500 branches. However, this has been
delivered at a cost. First, 10% of the 11,500 branches are outreach and mobile POs
which offer a reduced level of service to permanent branches, while disabled access
is ‘patchy’. Second, the theory of modernising POs to provide retail white space to
generate income to fill the gap left behind by declining Government subsidies and
fees for Government transactions, does not appear to be delivering for many sub-
postmasters. If sub-postmasters begin to leave their POs in large numbers because
they feel they cannot make a living there is a danger that the overall PO profits being
currently delivered will either not be sustainable or will be delivered on the back
of a hollowed-out PO network. It is questionable whether profits delivered while
reducing access to a vital public service can be viewed as a success. (Paragraph 46)
It is clear to us that too many sub-postmasters are struggling to earn a living. It is also
unacceptable that many sub-postmasters feel unable to take holidays because they
cannot afford to employ staff to cover them. If large numbers of sub-postmasters
decide to give up their POs this will damage the PO network and stress customers
around the country who may lose access not just to PO services, but to everyday
banking services or even, in some communities, any retail facilities. In many cases
the theory that increased footfall and retail would replace Government subsidies
and declining fees for providing Government services was overly optimistic. This
approach for many sub-postmasters is not offering them a viable livelihood. We
suggest that the Government need to consider the wider social goals, such as social
and economic inclusion, that sub-postmasters are providing in different locations
across the country. The Minister and Post Office Ltd are reviewing sub-postmaster
remuneration. We recommend that they take into account the vital social role that
sub-postmasters are fulfilling and the gap they will leave behind if they begin to leave
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11.
12.
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the profession. We also recommend that the Government urgently review whether
they have the balance right between retail income, Government income and fees for
providing Post Office and banking services. (Paragraph 55)
It is imperative that sub-postmasters receive proper support and training if they
are to provide a high level of service to the public. It is troubling to hear that sub-
postmasters are sometimes expected to pay for their own training when they are
providing PO services, and that the support they do receive is often inadequate. It
should not be down to sub-postmasters’ representatives to provide such training; this
is clearly a POL responsibility. We welcome the Minister’s and POL’s commitment
to look at sub-postmasters’ training needs, especially in areas such as security.
We recommend that Post Office Ltd indicate at the earliest opportunity what
weaknesses they have identified in sub-postmaster training and how they intend to
address them. We also recommend that Post Office Ltd reports on a regular basis
how much it is investing in such training and what feedback it is receiving from sub-
postmasters and how it is responding. (Paragraph 59)
Consultations on Post Office Closures and Post Office Franchising
It is clear from the evidence we received and from the experience of many MPs and
their constituents who have taken part in PO consultations that there are high-levels
of frustration with how Crown PO closures are being run. The Minister conceded
that communication with local communities at times had been poor and POL accept
that mistakes have been made. We suggest that the main source of frustration is
related to the belief that the closure of a local PO, or its movement into another
building as part of a franchise, can be stopped. In the vast majority of cases this
is not the case. Consultations appear to be more around feedback on a decision
that has already been made. Such consultations run the danger of damaging the
PO brand and wasting people’s time. We recommend that Post Office Ltd review its
consultation process and speaks to local communities who have taken part in one to
explore where mistakes have been made and how lessons can be learnt. We recommend
that, at the very least, every consultation should be explicit about what it can achieve
and be very clear on whether it can overturn a proposed closure or the franchising of
a Crown Post Office. However, for this reason, and aligned to our concerns about WH
Smith, who have taken over many Crown Post Offices, we disagree with the strategy of
closing Crown Post Offices. We recommend that Post Office Ltd and the Government
reconsiders the strategy. (Paragraph 66)
While there appears to be a mixed picture in terms of service standards in franchised
Crown Post Offices, the issue of disabled access is a cause for concern. Citizens
Advice has noted that across the whole PO network access is “patchy” and it appears
that disabled access to POs in some WH Smith stores may not be as good as it
should be. We recommend that Post Office Ltd reviews disabled access in all franchised
Crown Post Offices and ensures that an Equality Impact Assessment is carried out
and published for all future franchises of Crown Post Offices. (Paragraph 70)
The PO should dispose of its un-needed buildings in a socially and environmentally
responsible manner. The optimum solution would be to sell no-longer used buildings
to raise money that can be ploughed back into the Post Office Network. However,
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13.
14,
15.
16.
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where this is not possible, we recommend that Post Office Ltd should work with local
communities to repurpose buildings so that they do not remain empty for long periods
of time. We also recommend that Post Office Ltd surveys its real estate and establishes
how many of its buildings are empty and for how long and establishes what costs are
being incurred for such properties and their impact on the local environment. Such
information should be published. (Paragraph 72)
We are surprised and disappointed that Crown POs have been franchised to a
company which has not signed up to the Prompt Payment Code and which uses
90-day payment terms. Late payments are bad for small businesses and companies
which are awarded Government contracts should set a good example. We also worry
that such practices raise questions about the financial health of franchises that are
running many PO branches across the UK. We recommend that the Minister explains
what action she will take if WH Smith continues to use 90-day payment terms and
refuses to sign the Prompt Payment Code. We also recommend that future Post Office
franchises are not awarded to partners that are not signed up to the Prompt Payment
Code and who use excessive payment terms. (Paragraph 75)
It is deeply disappointing that franchises have been awarded to a company that is
consistently regarded as one of the worst two high street retailers and which admits
that they are not investing in all of their high street stores and in some cases are
not paying rent on some of those stores. We recommend that the Post Office and
the Government ensure that when franchises for Post Offices are awarded that they
take account of a number of factors, including how a potential partner is regarded by
customers and the financial position of firms hosting Post Offices. The risk otherwise
is that another high street failure takes substantial numbers of Post Offices with it.
(Paragraph 77)
It is deeply concerning that former Crown PO workers who have been TUPE’d
to WH Smith to run PO services have been denied the right to be represented by
their previous union, the CWU, for collective bargaining purposes. We are equally
concerned that such workers, along with other WH Smith staff who work in retail
stores, can only be represented by the Retail Book Association, an independent body
which is not affiliated to the TUC. It is extremely disappointing that POL did not
discuss this issue with WH Smith when agreeing the franchising of Crown POs. We
recommend that the Minister looks urgently at this issue and provides an explanation
of why franchises were agreed that did not address the collective bargaining rights of
workers who were being TUPE’d from a public sector body to a private sector partner.
This should include an account of the role of BEIS in providing oversight of these
franchises and whether it raised any concerns over the collective bargaining rights of
these workers. (Paragraph 79)
It is deeply regrettable that Crown PO staff are being replaced by lower paid staff
starting on the National Living Wage, which could be as low as £6.15 for those aged
between 16 and 18 years of age. At the very least we believe that all staff should be
paid the real Living Wage, and especially those running PO services. There is a
danger that by paying off Crown PO staff and paying lower wages for new staff to
replace them, that customers will not be able to rely on the same levels of skilled and
experienced staff they would have in a former Crown PO. We recommend that Post
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18.
19.
Future of the Post Office Network 55
Office Ltd and the Government ensure that staff working in franchised Crown Post
Offices are paid at the very least the real Living Wage and that new staff in franchised
Crown Post Offices have the same levels of skills and training. (Paragraph 82)
Bearing in mind the volatility of high street trading conditions and the fact that some
retailers are concerned about declining revenues from providing PO services, there is
a real potential for a retail partner that runs hundreds of POs exiting its partnership
with POL. If this happened it would be devastating for many communities across
the UK, especially for vulnerable groups who depend on their local PO. We found
POL and the Minister’s explanation of how such a scenario would be managed
unconvincing. In terms of a major retailer going bust, as we have seen recently, this
can happen at short notice and with little warning. We recommend that Post Office
Ltd publishes its contingency plans for dealing with the failure or withdrawal of a
major retail partner. This would give reassurance that the Post Office network is not
vulnerable to such an eventuality. (Paragraph 85)
Post Office delivery of Government Services and widening the
Commercial and Community Reach of the Post Office
Over the last 25 years there has been a drastic decline in Government services offered
through the PO network, reducing footfall and retail opportunities, while cutting
income for providing such services. It has also meant that the vulnerable and those
who do not have online access to Government services are often denied a face-to-
face option via a PO. We appreciate that BEIS and the POL are liaising with each
other and other departments over making greater use of the network. However,
this piecemeal approach appears to signify a retreat from making the PO a ‘front
office’ for Government services and ignores the potential for online channels to
compliment face-to-face services. We recommend that the Government considers a
wide-ranging review of how it is providing services to the public and the role that face-
to-face provision can play through the Post Office network, especially for vulnerable
and hard-to-reach customers who do not have online access. (Paragraph 92)
There is danger that the PO’s exclusive contractual relationship with Royal Mail
could begin to restrict its ability to maximise revenue from other commercial
partners. The current inability of the PO to handle parcels from other carriers is
also unsatisfactory for customers if they need to travel to another village or town
to collect it. We recommend that as the Government and Post Office Ltd look at
the Post Office’s contractual relationship with Royal Mail, which ends in January
2022, it revisits whether its exclusivity is denying the Post Office other commercial
opportunities which would better meet the needs of its customers. It is important,
however, that any parcel delivery operators that the Post Office works with deliver high
quality services and products, are signed up to the Living Wage Foundation, recognise
trade unions and have a good record of paying their suppliers on time and not using
long-payment terms. We also recommend that the Government and Post Office Ltd
ensure that any new contract between the Post Office and Royal Mail is mutually
beneficial. Post Office Ltd and the Government should ensure that any agreement
maximises remuneration for sub-postmasters. (Paragraph 96)
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20.
21.
22.
23.
Future of the Post Office Network
The new agreement signed between the PO and the Bank of Ireland opens up the
possibility of expanded banking services and new partnerships that can help deliver
them. The PO should make the most of these opportunities to cement banking
services and products within the PO network. This is even more important now
that Barclays Bank has punched a hole in the new banking framework agreement
that the PO has signed with the other major banks. We look forward to the PO
bringing forward these new services and products in the coming months. We
recommend that these new products and services should be guided by the Post Office’s
social remit and should aim to tackle financial exclusion in our rural and urban
communities. We also recommend that new products and services are designed to
help SMEs, which are engines of growth and creators of jobs in our local communities.
Sub-postmasters should be properly rewarded for providing these new services and
receive the necessary training and support to deliver them to customers. Post Office Ltd
should set challenging targets on meeting these objectives. If these new partnerships
cannot deliver these objectives, we recommend that the Post Office actively considers
the advantages of a Post Office Bank and the necessary legislative changes to establish
one. (Paragraph 105)
The decision by Barclays Bank to stop its customers withdrawing cash from POs
from January 2020 is a highly retrograde step which will hurt its vulnerable
customers in both urban and rural areas, threaten the comprehensiveness of
the PO network and reduce revenue for the PO and its sub-postmasters. The
measures Barclays has announced, such as freezing its bank closures, after years of
withdrawing its presence from local communities to help boost its large profits, will
not compensate for its partial withdrawal from the new banking agreement with
the PO. We call upon Barclays to rethink and reverse this decision. We shall follow up
on this Recommendation and question Barclays about their decision and hold them
accountable regarding their social responsibilities. (Paragraph 115)
A broad conversation between Government, the POL and civil society is required to
evaluate the role of POs as part of the glue that helps keeps communities together,
and how that role can best be supported and paid for if fees and revenues alone are
not enough to resource them. We recommend that the Government acknowledges
the wider community role of Post Offices, commits to long-term funding of the rural
‘last shop in the village’ and explores whether the Post Office can help deliver its wider
social objectives, such as on loneliness, social exclusion and mental health whether
they be in rural or urban settings. (Paragraph 119)
We further recommend that the Government explores how the Post Office network
and individual Post Offices can best serve as community hubs, working with other
community services to share resources and costs, maximising the benefits of increased
footfall driven by such an approach. Post Offices already share premises with local
libraries and work with local GP Surgeries. We recommend the Government consider
the full portfolio of public services and explore creative ways to pool resources and
deliver essential public services. (Paragraph 120)
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Formal minutes
Tuesday 22 October 2019
Members present:
Rachel Reeves, in the Chair
Vernon Coaker Mark Pawsey
Drew Hendry Antoinette Sandbach
Peter Kyle Anna Turley
Albert Owen
Draft Report (Future of the Post Office Network), proposed by the Chair, brought up and
read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Summary agreed to.
Paragraphs I to 120 read and agreed to.
Resolved, That the Report be the First Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available, in accordance with the
provisions of Standing Order No. 134.
[Adjourned till Wednesday 23 October at 9.45 am
58 Future of the Post Office Network
Witnesses
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The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications
page of the Committee's website.
Tuesday 21 May 2019
Andy Furey, National Officer, Communication Workers Union, Anne
Pardoe, Principal Policy Manager, Postal Services and Telecoms, Citizens
Advice, Callum Greenhow, Chief Executive Officer, National Federation of
Sub-Postmasters
Carl Cowling, Managing Director of High Street Business, WH Smith
PLC, Edward Woodall, Head of Policy and Public Affairs, Association of
Convenience Stores, Alisdair Cameron, Interim Chief Executive, Post Office
Ltd
Tuesday 25 June 2019
Kelly Tolhurst MP, Parliamentary Under-Secretary of State, Minister of
Small Business, Consumers and Corporate Responsibility, Department
for Business, Energy and Industrial Strategy, Carl Creswell, Director,
Professional Business Services, Retail and Post, Department for Business,
Energy and Industrial Strategy, Tom Cooper, Director, UK Government
Investments, Department for Business, Energy and Industrial Strategy
Q1-83
Q84-166
Q167-245
Future of the Post Office Network 59
Published written evidence
The following written evidence was received and can be viewed on the inquiry publications
page of the Committee's website.
PON numbers are generated by the evidence processing system and so may not be complete.
1 Aldbourne Parish Council (PON0044)
2 Aldbourne Post Office (PON0029)
3 Allen, Mrs Julie (PON0037)
4 Andrews, Miss Lesley (PON0019)
5 Ashburton Town Council (PON0039)
6 Association of Convenience Stores (PON0026)
7 Bates, Mr Timothy (PON0014)
8 Bourton, Mrs Sally (PON0003)
9 Bridge Parish Council (PON0052)
10 Cass Business School (PON0055)
11 Citizens Advice (PON0031)
12 Citizens Advice (PON0058)
13 Citizens Advice Scotland (PON0042)
14 — Close, Mark (PON0036)
15 The Consumer Council (PON0028)
16 Crouch, Mr Geoffrey (PON0007)
17 CWU (PONO050)
18 I CWU (PONO057)
19 Dawkins, Mr Paul (PON0002)
20 Dawkins, Mr Paul (PON0045)
21 Department for Business, Energy and Industrial Strategy (PON0048)
22 Deuchar, Mrs Anne (PON0017)
23. Devon County Council (PON0023)
24 Dorchester Post Office (PON0038)
25 Dulieu, Mr Peter (PONO005)
26 ~—-Follenfant, Mr Jonathan (PON0035)
27. Gordon, Mr Jim (PON0040)
28 — Holden, Mr Louis (PON0011)
29 Houston, Mr Samuel (PONO021)
30 — Justice For Sub Postmasters Alliance (PON0008)
31 Kennedy Centre P.O.Ltd (PON0046)
32. Khan, Mr Imran (PON0001)
33. =Martock Community Partnership (PON0033)
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34
35
36
37
38
39
40
a
42
43
44
45
46
47
48
49
50
51
52
53
54
55
Future of the Post Office Network
McCormack, Mr Tim (PON0004)
Name Withheld (PONO012)
Name Withheld (PON0032)
National Federation of Sub Postmasters (PON0025)
National Federation of Sub Postmasters (PON0059)
Oakes, Mrs Barbara (PON0056)
Orleton PO & Stores (PON0024)
Patel, Mr Jaiprakash (PON0020)
Patel, Mr Sunil (PON0018)
PayPoint plc (PON0053)
Plunkett Foundation (PON0034)
Post Office Ltd (PON0051)
Rachal Maskell MP (PONO054)
Ridgewood Post Office (PON0015)
Rigg, Sub Postmaster Edward (PON0047)
Rogers BEM, Mr Stuart (PON0043)
Shah, Rajen (PON0041)
Singh, Cllr Bally (PON0013)
Stamp, Mr Robin (PONO006)
Walker, Miss Helen (PONO022)
Which? (PON0030)
WHSmith (PON0049)
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List of Reports from the Committee
during the current Parliament
All publications from the Committee are available on the publications page of the
Committee's website. The reference number of the Government's response to each Report
is printed in brackets after the HC printing number.
Session 2017-19
First Report
Second Report
Third Report
Fourth Report
Fifth Report
Sixth Report
Seventh Report
Eighth Report
Ninth Report
Tenth Report
Eleventh Report
Twelfth Report
Thirteenth Report
Fourteenth Report
Fifteenth Report
Sixteenth Report
Seventeenth Report
A framework for modern employment
Leaving the EU: implications for the civil
nuclear sector
The safety of Electrical Goods in the UK
Pre-legislative scrutiny of the draft Domestic
Gas and Electricity (Tariff Cap) Bill
The impact of Brexit on the automotive
sector
The impact of Brexit on the aerospace sector
The impact of Brexit on the processed food
and drink sector
Pre-appointment hearing with the
Government's preferred candidate for Chair
of the Competition and Markets Authority
The impact of Brexit on the pharmaceutical
sector
Carillion
Pre-appointment hearing with the
Government's preferred candidate for Chair
of Ofgem
Draft National Policy Statement for
Geological Disposal Infrastructure
Gender pay gap reporting
Electric vehicles: driving the transition
Small businesses and productivity
The response from business to the
Withdrawal Agreement and Political
Declaration
Industrial Strategy: Sector Deals
HC 352
(HC 966)
HC 378
(HC 881)
HC 503
(HC 920)
HC 517
(HC 865)
HC 379
(HC 1018)
HC 380
(HC 1049)
HC 381
(HC 1461)
HC 985
HC 382
(HC 1426)
HC 769
(HC 1392)
(HC 1456)
HC 1353
HC 1092
HC 928
(HC 1895)
HC 383
(HC 1881)
HC 807
HC 2017)
HC 384
HC 663
(HC 2295)
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62 Future of the Post Office Network
Eighteenth Report
Nineteenth Report
Twentieth Report
Twenty-first Report
Twenty-second Report
Twenty-third Report
First Special Report
Second Special Report
Third Special Report
Fourth Special Report
Fifth Special Report
Sixth Special Report
Seventh Special Report
Eighth Special Report
Ninth Special Report
Tenth Special Report
Executive Rewards: paying for success
The Future of Audit
Carbon Capture Usage and Storage: third
time lucky?
Energy Efficiency: building towards net zero
Pre-appointment hearing with the
Government's preferred candidate for Chair
of the Financial Reporting Council
Automation and the future of work
Industrial Strategy: First Review:
Government Response to the Committee’s
Second Report of Session 2016-17
Corporate governance: Government
Response to the Committee’s Third Report
of Session 2016-17
Apprenticeships: Government Response to
the Second Joint Report of Session 2016-17
Leaving the EU: negotiation priorities
for energy and climate change policy:
Government Response to the Committee's
Fourth Report of Session 2016-17
Pre-legislative scrutiny of the draft
Domestic Gas and Electricity (Tariff Cap) Bill:
Government Response to the Committee’s
Fourth Report
Leaving the EU: implications for the civil
nuclear sector: Government response to the
Committee's Second Report
The safety of Electrical Goods in the UK
Government Response to the Committee’s
Third Report
A framework for modern employment:
Government response to the Second Report
of the Work and Pensions Committee and
First Report of the Business, Energy and
Industrial Strategy Committee of Session
2017-19
The impact of Brexit on the automotive
sector: Government Response to the
Committee's Fifth Report
The impact of Brexit on the aerospace
sector: Government Response to the
Committee's Sixth Report
HC 2018
(HC 2306)
HC 1718
(HC 2296)
HC 1094
(HC 2644)
HC 1730
(HC 124)
HC 2531
HC 1093
HC 337
HC 338
HC 450
HC 550
HC 865
HC 881
HC 920
HC 966
HC 1018
HC 1049
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Eleventh Special Report
Twelfth Special Report
Thirteenth Special Report
Fourteenth Special Report
Fifteenth Special Report
Sixteenth Special Report
Seventeenth Special Report
Eighteenth Special Report
Nineteenth Special Report
Twentieth Special Report
Twenty-first Special Report
Future of the Post Office Network
The impact of Brexit on the pharmaceutical HC 1426
sector: Government Response to the
Committee's Ninth Report
Carillion: Responses from Interested Parties HC 1392
to the Committee's Tenth Report
Carillion: Government response to the HC 1456
Committee’s Tenth Report
The impact of Brexit on the processed food HC 1461
and drink sector: Government Response to
the Committee's Seventh Report
Electric vehicles: driving the transition: HC 1881
Government Response to the Committee’s
Fourteenth Report
Gender pay gap reporting: Government HC 1895
Response to the Committee's Thirteenth
Report
Small businesses and productivity: HC 2017
Government Response to the Committee’s
Fifteenth Report
Industrial Strategy: sector deals: HC 2295
Government Response to the Seventeenth
Report of the Business, Energy and Industrial
Strategy Committee
The Future of Audit: Government Response HC 2296
to the Committee’s Nineteenth Report
Executive rewards: paying for success: HC 2306
Government Response to the Committee’s
Eighteenth Report
Carbon capture usage and storage: third HC 2644
time lucky?: Government Response to the
Committee’s Twentieth Report
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