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‘State of the Nation’ III:
Resilience, Managing Ambiguity & Rediscovering Purpose
Introduction — the year in context
IRRELEVANT
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Once again, post offices are revealing their true value at a time of
national stress.
Just as we did throughout the pandemic, we are providing vital support to
people in all four nations of the United Kingdom.
Maintaining people’s ability to access basic services like:
Getting hold of their own money when all the banks have left town or
depositing their business takings somewhere convenient;
Or receiving the support from Government they are entitled to as they
struggle to afford the eye-watering cost of keeping their families warm;
Or keeping in touch with the friends and family who rally around when no-
one else seems to care very much.
Never has our Purpose - we are here, in person, for the people who rely
on us — been so relevant, so important, as it has been in the early part of
this decade.
And make no mistake — there simply is no other business in the UK that
can do what we do.
lam proud that we are a truly national business.
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A business which has, for decades and decades, been part of the fabric of
communities the length and breadth of the United Kingdom.
We should be immeasurably proud, then, of the resilience you and our
Postmaster colleagues have displayed over the course of the last 12
months.
Resilience — a Post Office strength
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And that is why resilience is the first characteristic of our business that I
want to highlight.
Because beyond the severe headwinds all sectors of the economy are
facing our business and our Postmasters have had to endure additional
challenges.
Challenges like the 18 days of Industrial Action affecting Royal Mail,
decimating confidence in the UK’s postal system during the most
important trading period of the year.
A loss of confidence so deep that it even provoked a House of Commons
Select Committee investigation.
If industrial action before Christmas was not enough, in the New Year the
cyber-attack against Royal Mail presented a new challenge which, almost
unbelievably, knocked out international mail in this country for weeks on
end.
Some days, you wonder what on earth would happen next?
In short — it has been and remains really tough out there.
And yet....
And yet, we are still here.
More than that, we are still making strong progress to realise our Intent
to 2025.
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Instead of being deflated and allowing these challenges to overwhelm us,
we are driven by a quiet but unmistakeable determination to bounce
back stronger as macro trading conditions improve.
Let me give you some examples.
The market challenges we have been facing in mails have been emerging
over recent years and have been exacerbated by the pressures of
industrial action and cyber-attacks affecting Royal Mail.
Make no mistake Royal Mail had already begun to display a very clear
willingness to set aside the niceties of our shared heritage where it made
cold commercial sense to do so.
Our Postmasters rightly identified this emerging pattern early on.
Now, don’t misunderstand me — that is a legitimate path for them to take,
as hard as it might be to swallow from a more emotional perspective.
And just as legitimately,
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We will announce the next stages of our strategy at our event with
Postmasters on Thursday 11 May.
So I ask the question - is this the behaviour of a company overwhelmed
by circumstances or a company which understands the importance of
forging its own path and owning its own future ?
Let me give another example.
The very words ‘Post Office’ quite rightly bring the image of your local
branch to mind.
I say quite rightly because the Post Office, its name, the essence and
value of its brand, has been built over generations and generations of
dedicated service to the public by our Postmasters and Postmistresses.
Their efforts, and no-one else’s, are enabling us to trade successfully in
digital markets.
And, what a year it has been on that score.
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IRRELEVANT
So I ask the question again — are these signs of a company short of ideas
and living on borrowed time or a company able to leverage its assets,
executing plans in online markets with confidence and agility?
Let me give you one more example.
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Over [99.9]% of offers valued at over £[97.5] million have been made
under the HSS, ahead of forecasts, and in line with the commitment I
made to the BEIS Select Committee back in January 2022.
In the considerably more complex OHC scheme, we have reached full and
final settlements in four cases and recently agreed the principles which
will govern the relevant calculations with all future cases with their legal
representatives.
This should permit a significant acceleration in the resolution of all future
cases.
In the meantime, we have ensured that all those involved are in receipt of
substantial interim payments of at least £100,000 to ensure that they face
no further hardship pending complete resolution, with over £[18] million
paid out in compensation so far.
We also continue to take every step possible - working with the Criminal
Cases Review Commission and Citizens Advice - to encourage more
potential claimants to come forward, including writing directly to those
whose appeals we would likely not oppose if brought to court and
evidence relied upon Horizon.
And so I ask the question once more: are these the actions of a business
cowed by its past and reluctant to face up to its responsibilities?
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Or the actions of a business which knows full well that those to whom it
caused harm deserve nothing less?
I know the answer. You know the answer. We should and we must ensure
that everyone affected by this scandal receive all the compensation they
are entitled to.
That means working with third parties to ensure that everybody whose
conviction relates to evidence that relied on Horizon should be
encouraged to bring their case to the Appeal courts.
That means working with the Government to ensure due and fair process
has been applied to the tax treatment of HSS offers so that claimants are
rightly compensated fully.
That means working harder to agree and accelerate the remaining
compensation due for suspension or other detriment.
Overall, this is a business whose people display an extraordinary level of
resilience day in, day out to do what is right for our Postmasters, our
customers and all those affected by the Horizon IT scandal.
I see colleagues who are energised by the opportunities which emerge in
difficult times.
Who are committed to being accountable and doing the right thing.
And who are proud to evolve a better Post Office for the next generation.
Dealing with ambiguity
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IRRELEVANT
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94. And, rare though it may be, here at Post Office, it seems as though we
have turned it into a foundational skill.
95. Because, let’s face it, we are not short of uncertainty.
96. At the root of that uncertainty is our financial position.
97. Plain and simple.
98. We do not have enough money to do all the things that are expected of
us in the here and now while simultaneously doing all the things we think
we need to do to for the medium and longer term.
99. Westarted the first year of a three year spending settlement with an
allocation from Government which came in substantially lower than we
had asked for.
100. That is despite our bid being externally and independently verified at the
request of Government.
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As I have said before this is particularly painful for many of today’s
Postmasters who are effectively having to contribute to pay for the.
mistakes of the past.
And, as so often, the cost of IT Transformation — in our case replacing
Horizon —is also on an upwards trajectory, not least as we have to keep
Horizon going until 100% ready to switch it off.
So the financial underpinning of the business is under considerable stress.
The situation has not been improved by what I think most people
observed as a rather chaotic year in Government.
What our sole Shareholder the Government does and does not do has an
enormous impact on us.
Yet, whatever the reasons, the Post Office has not had the benefit of a
great deal of strategic policy attention in Government over the last few
years either.
Don’t get me wrong — we have had a huge amount of attention from
Government in relation to the GLO over recent years, quite
understandably — but we have to look back to 2012 for the most recent
expression of Government’s overarching policy towards the Post Office.
But for us, the show goes on as they say — we have to run the Post Office
for today’s Postmasters and their communities, even as we seek to
resolve the past.
And we have, ever since 2012, diligently fulfilled the two principal
requirements then made of us, and which have recently been reaffirmed
by Government
A rather arbitrarily arrived at 11,500 outlets trading nationwide, meeting
a much more sensible and important set of geographic access criteria.
I do not need to tell you that a financially constrained backdrop in which
policy direction has not evolved for a decade does not immediately
recommend itself as fertile ground from which to grow and thrive.
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118. When the context in which you operate is so uncertain, there is a
tendency towards treading water.
119. Expending lots of energy, becoming increasingly fatigued, but ultimately
staying largely in the same place.
120. Well, we have been determined to avoid that response.
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When post offices sucess the count succeeds
hacen eh ow Posse sien anus nto
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Our Purpose enables Post Office to remain relevant whilst
implementing change
126. Instead, drawing strength and inspiration from our Purpose, we have
continued to make progress advancing the business , and staying relevant
in the interests of our customers, our Postmasters, and ultimately the UK
as a whole.
127. Let me turn to some of the ways in which we have demonstrated that.
128. This year we commissioned London Economics to measure the Post
Office’s social and economic value.
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The last major piece of similar research pre-dated the introduction of the
Banking Framework arrangements in 2017.
Since then, it has become ever clearer that the Post Office Network is
part of the UK’s national infrastructure, not least in helping small
businesses to thrive.
The national picture is impressive — our economic impact exceeds that of
London’s Heathrow Airport.
Our social impact shows that, for every £1 we receive in subsidy from
Government, we generate £16.50 in return.
We matter a great deal to the country, and I remind the Government of
this at every opportunity.
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These changes to the size and shape of the network will help us to
compete better with rival networks and be more consistent with how
customers live their lives and can readily meet their essential needs.
In making them, we are demonstrating that it is possible to evolve our
network so that it meets both our commercial aspirations and our social
purpose.
That is good for our longer term future, and represents an important step
in the right direction.
Our cash and banking business has also been a success story since its
introduction in 2017, when we agreed a standardised service with all of
the UK’s principal banks.
These services have enabled millions of people and small business to
continue to access free-to-use cash services despite over [5,500] bank
branch closures since 2015.
And they continue to go from strength to strength as we witness the
acceleration in banks’ closure programmes since the pandemic.
Now, thanks to the representations we and others have made to
Government, people’s right to access their cash locally and for free will
soon be guaranteed in legislation.
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When many people are rediscovering the usefulness of cash as a
budgeting tool, this is a major win for people and small businesses.
But it is also a major win for the post offices who are and want to be
here, in person, for those who rely on us.
And to those who say that our post offices are no substitute for a bank
branch, well, we have an answer to that too.
More than any other organisation, we have brought the concept of
Banking Hubs to life.
Premises in locations with no banks where, in addition to the cash
services we already provide, customers also have access to
representatives of their own bank to perform more complex transactions
or obtain financial advice.
The rollout of these Hubs has, until recently, been painfully slow as the
banks learn to work with others in finding shared solutions to shared
problems.
Despite this ambiguity, we are now at last seeing a pick up — and long
may it continue — because we are ready to operate as many as are
required to fill the gaps left by the banks themselves.
1am confident that Banking Hubs will be a common sight on the High
Streets of the future and an important part of our future business.
And lam proud: that we are the first, and currently the only, organisation
with the capability, scale, and systems to operate them.
Of course, many of our commercial services show how essential our
Purpose is to the benefit of the UK.
For example, in partnership with energy providers and our Postmasters
we have ensured that everyone, regardless of their circumstances, was
able to access vital Government support with their energy bills.
Helping millions avoid the horrendous choice between heating and
eating.
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The same collaborative approach enabled us to win the Government
contract to get vital energy support payments to people in Northern
Ireland.
We not only got redeemable vouchers to every eligible household in
Northern Ireland in a [10] week period, but we also got them cashed or
banked over the same period.
This was a great effort and demonstrated that there is simply no other
business in the UK capable of proving support to communities at this
scale so quickly.
Looking inwardly now, the prevailing uncertainty and need to manage
ambiguity has not had any adverse impact on our determination to make
further progress on our culture and operational change programmes.
In the last 12 months, we have continued to place Postmasters at the
heart of our cultural transformation, ensuring that we address their
concerns where possible.
Chief among those is invariably remuneration.
Last August, I announced a one-off payment for all branches — thanks to
the success of our digital products - to help with the rising cost of living.
At the end of last month, we made a further announcement of a 20% rise
in remuneration for banking transactions for the financial year ahead.
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Together with the Royal Mail tariff changes this is an overall increase of
some £26m or a rise of [7]% in total remuneration.
In addition to co-operating fully with the Inquiry and making
compensation payments quickly, we continue to make changes in the
way we support Postmasters in the here and now.
We have restructured our network team to improve support for
Postmasters and their branch operations.
We increased the number of regions from nine to 12, to enable closer
focus, and introduced a North and South geographical split, each
managed by an accountable Retail Director.
We understand the importance of having the right leadership in place in
order to ensure that area managers can give their very best in supporting
Postmasters.
All of the changes we are making are reflected in successive editions of
our Postmaster guide which, since 2020, sets out commitments to
Postmasters and the support we provide to them.
Of course, all our Postmasters depend on IT to run their post offices.
In addition to continuing to make improvements to Horizon wherever we
can, we are making steady progress towards our ultimate objective of
replacing it all together.
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What we will do is be transparent about any bugs, their potential impacts
and the solutions so that everybody can have confidence in the new
system.
The thread that holds all of these positive developments together is our
determination to make progress, despite trading conditions, despite
financial constraints, and despite the uncertainty all around us.
So, if the two characteristics I have observed across all parts of the
business over the last year are resilience and an ability to navigate
ambiguity successfully, to what do I attribute this ?
There are, of course, many factors at play.
Nonetheless, boil it right down, and I think an answer does emerge.
And the answer bodes very well for the future.
There are two things, I think, driving us more than any other.
And the first is YOU - the people that work for Post Office Limited
The second, of course, those people working day in and day out as
Postmasters.
You have all shown extraordinary levels of resilience across the last 12
months.
In doing so, we have worked hard together to understand what more we
can do to support Postmasters.
Our campaign to preserve Government support for energy bills is a great
example.
As part of that campaign, I repeatedly engaged with Ministers from our
own Department and from Treasury, month in month out.
But Postmasters played a central part too, with over 2,000 of them
writing to their MPs also making the case alongside us.
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202. And while I realise that the level of support Government ultimately
announced leaves a great deal to be desired, it could have chosen to
focus exclusively on particular sectors like hospitality, with Postmasters
being left out altogether.
203. So what is powering you, powering us, to continue to make progress ?
204. It’s a question worth asking.
205. Because I am pretty sure that what is driving you is not actually new
partnerships with the likes of Evri.
206. I don’t think it’s the success of our platform products.
207. Or even the progress made to test early releases of our New Branch IT.
208. No. I think it’s more fundamental than that.
209. More applicable and relevant to all of us than that.
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220. Because there is something about the Post Office and its Purpose which
appeals to a deeper sense of service and duty in all of us.
221. Helping communities through the pandemic or with the worries of the
cost of living on the ground.
222. Or looking for new ways to make that vital support a bit better every day.
223. It unites us.
Conclusion — Journey to realise our Intent to 2025
224. I began by describing aspects of the gloom that we are all experiencing at
present.
225. And there is no doubt that these are tough times. But there is a risk that
the gloom obscures another reality.
226. And that reality is that, despite the gloom, together with Postmasters you
have demonstrated extraordinary levels of resilience in the face of these
challenges.
227. Despite the gloom, you have quietly, but very definitely, continued to lay
important foundations for this organisation’s future success.
228. It is two years since I set out our Intent to 2025.
229. Weare halfway on that journey.
230. In that time we have realised much of that Intent.
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ly
Our research with London Economics makes that economic and social
case plain.
And we have to secure routes to sustainable funding that enable our
Postmasters to be profitable in this fast changing retail market — sharing
the benefits of all that makes Post Office a great business.
lam exceedingly proud of what you have done. And I will continue to do
all I can to make sure your efforts bear fruit. Thank you.
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